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Key Points
Overall Market
The Stock Market Rallied for the Second Day in A Row On The Possibility of Unmasked by Fully Vaccinated Customers
All three indices finished in the green for the second day in a row. The news broke that fully vaccinated people can take off their masks even indoors. The market took it as a sign that the COVID-19 pandemic is behind us already and rallied on the news.
The rally was despite a flattening of the retail sales in April. It seems the boost from stimulus checks has faded. Nevertheless, investors sent the stock market up, especially the Nasdaq index. What's Up
Zoom (ZM): Has It Reached The Bottom?
Shares of Zoom Video Communications (ZM) were up more than 6%. The stock is quite far from its pandemic glory days of $588 per share. Today's price jump came after a few comments and an upgrade by financial analysts who believe Zoom's stock has fallen enough and is poised for a rebound.
Even at $308 per share, the stock is overvalued considering traditional valuation ratios such as price to earnings ratio of more than 128, and price to sales ratio of more than 32. I hold some Zoom shares in my Windmill portfolio. I agree that Zoom would continue to stay an essential tool for businesses and consumers now that the pandemic has fast-forwarded the adoption of the technology.
The Walt Disney (DIS) shares dropped more than 2% today as the company released its latest quarterly earnings report. The pandemic has led to the closure of the company's parks and resorts for several months, and the impact on its revenue is still quite visible. The company's Park and Resort revenue were down by 44% year-over-year. Moreover, film and movie releases have been delayed for the same reason. The impact is visible on the company's revenue.
In contrast, Disney+ and ESPN+ streaming platforms remained the company's heroes with more than 100% and 75% annual growth in the number of paid subscribers compared to the last year. Now that vaccination is well underway and fully vaccinated customers can take their masks off, it's not too unlikely that the market celebrates the news by buying some Disney shares when the revenue shows signs of recovery in upcoming quarters. Want to receive this daily stock market recap report in your mailbox?
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Key Points
Overall market
The Lower Number of New Jobless Claims Sent The Stock Market Indices into the Green Zone.
All three indices ended the day in the green as investors celebrated the 34,000 lower number of new jobless claims compared to the previous week. The concerns over the high inflation rate gave way to the excitement over a lower number of new Jobless claims, at least for one day.
WHat's Up?
Lemonade (LMND): Time to buy?
Shares of Lemonade (LMND) were up more than 7%. This new startup provides easy to use and friendly interface to buy your home insurance, pet insurance, and life insurance while using artificial intelligence to enhance its back-office processes.
The price jump today is a response to a double-digit drop after the latest quarterly earnings report. In that report, Lemonade shared 50% growth in the number of customers and a 68% jump in its Gross Loss ratio. Investors got spooked by that higher loss rate and sent the stock off the cliff on May 11th. The jump in Groos Loss ratio results from higher claims after the Texas winter storm and freeze. That's quite reasonable. Any insurance company would see a higher rate when catastrophe hits. On the positive side, take a look at the company's opportunity. It is only growing into new product categories such as car insurance. It has a more than 80% retention rate of its existing customers. It's important to remember, the stock is priced higher than its competitors. For example, the valuation ratio of the insurance provider, Aflac (AFL), is relatively lower than Lemonade. But the growth opportunity for Lemonade is significantly higher than the likes of Aflac. What's Down
Bumble (BMBL) Dropped by More Than 14% Despite a Strong Earnings Report and Higher Guidance.
A few days ago, we spoke about Match Group (MTCH). The company is an owner of more than 40 online dating and match-making apps and platforms that has been an excellent investment in the last few quarters since it spun off from IAC/InterActiveCorp (IAC).
Today, from the list of companies that finished the day in the green, I noticed shares of Bumble (BMBL) were down more than 14% below the IPO price. Bumble is a new IPO and a small competitor to Match Group. The company released its latest earnings report yesterday. Revenue was up, so was the total number of paying users. The company also increased its full-year revenue guidance. It's tough to understand why the stock is down more than 14%. It seems analysts weren't too impressed by a slight increase in the revenue forecast. From what I gather, the market is pessimistic about new IPOs, and Bumble is falling victim. Want to receive this daily stock market recap report in your mailbox?
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Key Points
Overall market
Higher Than Expected Consumer Prices Spooked Investors and Sent The Stock Market Indices into a Deep Red.
All three indices finished Wednesday in the red. The highly-anticipated Consumer Price Index report came out and showed a more than 4% jump in all-items prices in April. The jump was higher than expected and spooked investors enough to send all three indices deep in the red.
Some of the reasons behind the high prices are temporary, including the impact of the chip shortages and backlog in shipping caused by the Suez Canal blockage back in March. Investors' sentiments still remain quite negative, and that was enough to drag the indices into the red zone for the 3rd day in a row. What's Up
ShotSpotter(SSTI) vs. Axon Enterprise (AXON): Which One is a Better Buy?
Considering the drop in the stock market indices, I was pretty curious to see which companies ended in the green today. Excluding penny stocks and OTCs, nearly 1,084 companies finished Wednesday higher than where they started.
The company that grabbed my attention in a small company called ShotSpotter Inc (SSTI). It provides technology solutions for law enforcement and security personnel. The stock price jumped more than 25% today after the company announced an excellent quarterly earnings report. This is an excellent company to watch. It's a competitor to Axon Enterprise (AXON), with more than $8 billion in market capitalization. ShotSpotter is just expanding to new cities, and has the opportunity to steal market share from Axon. Compare the two companies' Stock Cards side-by-side, and you can see both companies benefit from a growing industry and have solid operations. However, Axon is priced quite aggressively based on its more than 1000 times price to free cash flow ratio. Also, other valuation ratios are higher for Axon vs. ShotSpotter. What's Down
Trex Co. (TREX) Stock Retreated Despite an Excellent Quarterly Earnings Report
With the rise of home prices and rapidly increasing prices in home building material, I was surprised to see shares of Trex (TREX) were down more than 6% today. This company manufactures wooden alternative-decking products for your patio and deck. It's been an excellent investment in the last few years.
It seems investors are selling some shares to lock their gains after a few financial analysts maintained a hold or neutral rating. In a way, investors believe there is not much upside left to Trex's stock price. I don't think there is anything wrong with taking some profit. But, also remember, home renovation and home building, and commercial real estate are some of the foundations of a healthy economy. In my opinion, long-term investors should hold, especially if your investment horizon is a decade or longer. Want to receive this daily stock market recap report in your mailbox?
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Key Points
Overall market
Fears of a Higher Inflation Rate Dragged The Stock Market Indices For One More Day.
All three indices finished the day in the red, although the Nasdaq index almost made it into the green zone. The reason behind the sell-off is the familiar story we have been discussing for a while. Investors are worried about a higher inflation rate and a higher 10-year Treasury yield. Therefore the market is struggling to maintain its previous momentum.
What's Up
Should You Invest in Roblox (RBLX) After Today's 20% Jump?
From the list of companies reporting their earnings on Monday, shares of Roblox (RBLX) popped more than 20%. This is a new direct listing company that allows anyone to create a video game. It's a popular platform among teenagers and just put outstanding results in its first quarterly earnings report. Revenue was up by 140% in Q1, quarter over quarter. Moreover, the company's costs across four major cost categories grew slower than the revenue, signifying that Roblox's growing scale may result in higher operational efficiency.
However, I plan to stay away from Roblox for a few more months. Not because I don't believe this is a well-run company in a growing industry. Instead, because I think the company should soon experience a slower revenue and user growth. Like most entertainment companies, Roblox benefited from kids and adults staying more hours indoors. If we've learned anything from quarterly earnings reports of social media companies we discussed yesterday, they all suffer from slower growth in the upcoming quarter. There is no reason to believe Roblox would be any different. During the earnings report, the leadership mentioned that April's bookings are up 7% to 9% compared with March, which investors interpret as a good sign. I would rather have Roblox in my Watchlist 2021 for at least one more quarter before jumping in. What's DOwn
The a2 Milk (ACOPF): What to Do if The Stock You Own Has Lost Half Its Value?
I added a company to our Future of Food portfolio a while ago, called The a2 Milk (ACOPF). It's a company from New Zealand that sells baby formula mainly to China and new alternative milk that lacks Casein protein in the U.S. Alternative milk is one of those rising trends, especially in the U.S., and I invested in the stock amidst the COVID-19 pandemic assuming the company has already seen the worst. Since picking the stocks it's down another 45%. The question whether to add more or sell to cut the loss?
The company's baby formula brand in China has had a challenging year losing revenue amid tension with its Chinese reseller. This week, the company announced that its head of Asia Pacific has resigned, and it had to get rid of $90 million in out-of-date product inventory. Investors are rightfully worried that The a2 Milk has a few problematic quarters before getting back to its growing revenue. What should other long-term investors and I do? My original hypothesis was to invest in the future of alternative milk, which is still valid. However, the company's primary revenue source is the baby formula business in China which is struggling and could impact its ability to grow its alternative milk business in the U.S. One more important data point is the current negative sentiment about the stock, as you can see on the company's Stock Card. Even if I decide to sell, it's the worst time to sell now because of the highly negative sentiment right after the recent press release. I'm not ready to add more considering the challenges in China, but I'm not ready to sell either. I plan to hold for at least another quarter to see how the company manages to recover from the recent challenges and let the market's sentiment to calm down. I hope sharing this update could be helpful to you if the stock you own has lost more than half its value. GET the Daily Market Recap in your mailbox
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Key Points
Overall Market
The Stock Market Indices Fell as Investors See The Signs of Inflation in Commodity Prices and Everyday Item Shortages.
It was a difficult start to the week, especially for the Nasdaq index, falling more than 2%. The other two indices also finished the day in the red.
As we discussed last week, inflation fears due to rising prices and shortages in commodities such as lumber and everyday items, such as used cars and appliances, gave investors enough reasons to sell and lock some of their recent gains. April's Consumer Price index report is expected on May 12th. Let's keep an eye on it once the report is out and discuss the impact on investors' sentiment in future articles. What's Up
Why Did Coinbase (COIN) Stock Jump More Than 11% Today?
Excluding penny stocks and OTC stocks, about 1660 stocks ended Monday in the green. When I sort them based on return, a few interesting names pop up. Notably, shares of Coinbase (COIN) were up more than 9%. The cryptocurrency trading platform got an upgrade from Oppenheimer.
Generally speaking, Coinbase could be an excellent choice if you want to get some exposure to the cryptocurrency market without directly investing in it. You just need to be very comfortable with extreme volatility. Coinbase would move with the crypto market, and if anything happens to any of the major cryptocurrencies, you'll undoubtedly see the impact on Coinbase's stock price. What's Down
Is It Time to Buy Social Media Stocks After The Recent Price Drop?
A few days ago, we discussed how social media companies have lost their momentum and are getting more interesting by the day. The price fall continued today.
Pinterest (PINS) dropped more than 3%, as did Twitter (TWTR) by more than 4%, and Snap (SNAP) by more than 5%. I bet you Facebook (FB) didn't have a better day either, it was down more than 4%. All these companies have one thing in common: they make money from social media and online advertising. The main reason is a warning by Citigroup analysts about the slowdown in digital advertising. The digital ad spending will recover sooner than later. This industry is expected to grow by more than 15% year over year until 2027. These fluctuations tend to be short-term. The world is going digital, and none of us doubt that. The current slowdown is a reflection of higher spending last year. As I told you last time, I'm watching these companies very closely and may jump in, especially if the sell-off continues. Give Stock Card A Try!
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