News and Views

The Official Blog of WhaleWisdom.com

Apple Inc.’s (AAPL) stock had a big run in 2019, with shares rising approximately 86% versus the S&P 500’s gain of 28.9%.  Apple also had a favorable start in January 2020, but it appears that the tides are changing.

In two months, the stock has taken a turn lower due to increasing fears of the Coronavirus’s potential economic impact, falling 16% since its peak on February 12.  Apple’s value saw a decrease of about 6.9% overall from January to the end of February 2020, slightly better than the S&P 500’s decline of approximately 8.5%.  Institutions were dumping Apple in the fourth quarter, ahead of the general market sell-off and taking advantage of the stocks massive 2019 gains.

Institutions Are Selling

Institutions were selling Apple at a pace of more than two to one in the fourth quarter.  The stock fell on the WhaleWisdom Heatmap to 130 from 9, with aggregate 13F shares decreasing by approximately 2% as of December 31, 2019, to roughly 2.57 billion shares from about 2.63 billion shares three months earlier. The steep selloff may have been due to Apple’s high price to earnings ratio on a historical basis.

(WhaleWisdom)

Hedge Funds Dumping Shares Too

The number of hedge funds in the equity also fell, with their total 13F shares decreasing by approximately 1.0% to 735.8 million, from 743.4 million.  Overall there were, 32 hedge funds that created new positions, 131 adding to an existing position, 39 which sold out, and 277 which reduced their positions.

High Valuation

One reason why the stock may have taken a dive is its extremely high valuation.  Apple’s stock reached its highest levels in a year, climbing to a one-year forward PE ratio of nearly 22, higher than its historical range of 11 to 16.

A Rocky Road Paved with Optimism

Analysts look for strong earnings and revenue growth and have been raising their estimates as a result.  Sales are expected to grow by approximately 7.9% in 2020 and by 9.7% in 2021.  Earnings are predicted to increase to $13.63 per share in 2020 and $15.65 per share in 2021.

These estimates are an improvement from prior ones on January 9, with sales predictions for 2020 up by approximately 1.7% and earnings up by $0.52.  Should fears surrounding the Coronavirus be overblown, there’s a strong possibility that the stock will rebound in the months ahead.

Uber’s Comeback:  Investors Enjoy the Ride

Posted on February 24th, 2020

Uber Technologies, Inc. (UBER) had a disappointing performance in 2019, but fortunately improved performance by year-end and early 2020, indicating a potential turn around for the company.  While startling losses in 2019 gave investors concern, analysts were not as worried, and ultimately, Uber displayed an impressive rise on the WhaleWisdom Heatmap in the fourth quarter of 2019.

Uber’s comeback was made possible through improved gross individual ride bookings, and ridesharing, as well as Uber Eats, its food delivery service.  The strong rebound showed that the train was back on track, allowing investors to enjoy the ride once again.

Positive Results Pleasantly Surprise

Uber reported better than expected results on February 6, 2020, with a loss of $0.49 versus estimates for a loss of $0.52 per share.  Despite a fourth quarter loss of $1.1 billion, bookings were strong.  Revenue increased by approximately 37% year over year.  As of February 21, Uber had risen approximately 36.9% in comparison to the S&P 500’s gain of about 3.3% this year.

Strong Results

Uber rose on the WhaleWisdom Heatmap to 3 from 133, with 23 of the top 150 hedge funds, as measured by the WhaleWisdom WhaleScore, owning the stock at the end of Q4.  Looking at the top hedge funds, 19 added to an existing position as 6 reduced their holdings.  Uber’s bronze-comparable ranking of 3 is evidence that hedge funds may be starting an ongoing trend in the stock.

Institutions Are Buying

Institutions overall were buying the stock, with the number of aggregate 13F shares increasing by approximately 24.6% as of December 31, 2019, to roughly 1 billion from 805 million three months earlier.  For comparison, hedge funds increased their total 13F shares by about 57.4%, up to 217.5 million from 138.2 million.

Improved Outlook

Things are certainly looking up for Uber, as sales are predicted to grow by approximately 26.7% in 2020 and by 22.9% in 2021. Meanwhile, the company is now expected to lose $1.13 per share in 2020 and narrow its loss to $0.28 in 2021.

Hedge Funds Are on the Move

Wise hedge funds were moving into the stock in Q4, in anticipation of the shares’ advance and improving outlook.  Savvy investors are likely to follow suit, and if Uber can continue to deliver strong results in 2020, then the stock is likely to climb.

Tesla, Inc. (TSLA) has had a phenomenal past 52 weeks, with its stock rising over 162.3%, in stark contrast to the S&P 500’s gain of about 22.7%.  As fourth quarter filings begin to come out, investors are first now getting a peek at who’s been buying the shares of the electric vehicle maker.

Tesla completed a $2 billion secondary offering on February 14, 2020, combined with a $300 million underwriter option.  According to Bloomberg, Tesla’s capital raise priced at $767 per share, representing about a 4.6% discount from a closing price of $804 on February 13, 2020.  Tesla’s CEO, Elon Musk, is expected to have bought $10 million worth of stock and that Oracle’s co-founder and billionaire, Larry Ellison, purchased  $1 million worth in the offering.

Look Who’s Buying

It is now coming to light which buyers have helped to push Tesla’s stock significantly higher. According to the latest 13F filings for the fourth quarter, JPMorgan Chase & Co. purchased roughly 2.2 million shares, bringing its total position to approximately 2.5 million shares. Meanwhile, Renaissance Technologies LLC increased its holdings by almost 3.3 million shares to bring its position to about 3.9 million shares.

(WhaleWisdom)

Increasing Positions

There have also been some noteworthy long-term holders adding to their positions, with Baillie Gifford & Co. buying approximately 375,000 shares and Capital World Investors buying about 450,000 shares, bringing their positions up to approximately 13.8 million and 10.2 million, respectively.

Estimates Are Encouraging

Tesla reported fourth quarter earnings per share (EPS) at $2.14, with revenue of $7.38 billion.  However, analysts have been boosting their revenue and earnings estimates for the next two years. Analysts and investors appear drawn to the favorable probability of steady growth.  Revenue in 2020 is expected to rise by 30.3% to approximately $32 billion, and earnings are forecast to rise to $8.68 per share from $0.20 per share in 2019.  Meanwhile, that strong growth is projected to continue into 2021 with revenue increasing by an additional 28.1% to about $41 billion, and earnings growth of about 69.2% to about $14.68 per share.

Tesla’s Capital Raising Efforts Called a Smart Move

Wedbush Securities’ analyst, Dan Ives, calls the capital raise by Tesla a smart move, which will enable the company to take advantage of being back in a position of strength.  With the push still ahead for autonomous automobile technology and the manufacturing possibilities from Tesla’s new Gigafactory 3.  Wedbush sees a long-term bull case scenario on the stock of $1,000 due to Tesla’s ability to increase production for demand in China during the course of 2020 and 2021.

While the bull/bear debate over Tesla’s stock may continue, it appears, for now, the bulls may be winning. Despite calls for the stock as a bit rich for some, it seems some investors are willing to bet that with a little bit of patience there could be a huge payoff.

Nvidia Corp.’s (NVDA) stock had a significant rebound over the past year, rising by approximately 70% in comparison to the S&P 500’s gain of about 22.9%.  Nvidia is known for its innovation in artificial intelligence breakthroughs, gaming, and the datacenter.  Its leadership in these vital areas has helped to make the stock a darling among investors in recent years and has resulted in the shares soaring. Now, investors eagerly await the company’s fiscal fourth quarter results on February 13, 2020.

Despite Nvidia’s impressive gain over the past year, its status on the WhaleWisdom heatmap fell in the third quarter.  Hedge funds and institutions did not see eye to eye on the stock, as institutions increased their holdings in the company during the third quarter while hedge funds decreased their positions.

Heatmap Rating Drop

Nvidia had a disappointing drop on the WhaleWisdom Heatmap in the third quarter, its rating moving from 89 to 43 in the second quarter.  Overall, hedge funds decreased their aggregate 13F share count in the third quarter to 18.8 million from 19.5 million, a drop of about 3.5%.  Of 108 hedge funds, 25 created new positions, 35 added to existing holdings, 19 exited, and 39 reduced their positions.  Meanwhile, institutions increased their aggregate 13F holdings by approximately 0.7%, to 394.6 billion from 391.9 billion.

(WhaleWisdom)

Estimates Are Encouraging

Analysts’ consensus earnings estimates forecast earnings to have more than doubled in the fiscal fourth quarter to $1.67 per share. Meanwhile, revenue is estimated to have rebounded by 35.1% to $2.98 billion. Analysts see earnings rising by about 31% in fiscal 2021 to $7.24 per share and revenue to increase by 19.5% to $12.9 billion.

Should History Repeat

Nvidia has a history of beating earnings and revenue expectations.  Nvidia has surpassed expectations for earnings per share in seven of the last eight fiscal quarters and realized better revenue in six out of the last eight quarters.  This history should offer some practical comfort to investors.

(Ycharts)

 Must Maintain Momentum

With opportunities for growth in various industries and a history of beating analysts’ expectations, the stock once again has investors’ attention.  While Nvidia’s stock is not cheap based on a price-to-earnings ratio, there is a good potential that if they provide a healthy outlook, then there is a perfect chance the stock will continue to rise and bring more hedge funds back into the shares.

Investors Have Been Dumping Disney’s Stock

Posted on February 3rd, 2020

The Walt Disney Co.’s (DIS) stock is off to a strong start in 2020, after a less than inspiring performance in the third quarter of 2019.  Over the past year, Disney has consistently outperformed the S&P 500, as investors focused on Disney’s new streaming media product, Disney+.  The Disney+ product allows access to a vault of classic animated movies and television shows, in addition to current cable shows and company-owned films such as Star Wars.  As of January 31, the stock’s value rose by approximately 24.3% in comparison to the S&P 500’s gain of only 19.2% over the past year.

Investors will be watching Disney closely and anticipate fiscal first quarter 2020 results to be reported on February 4.

Falling Out of Favor

Disney’s stock has fallen out of favor with investors in the third quarter, with the shares failing to meet expectations and sinking on the WhaleWisdom Heatmap.  Hedge Funds and Institutions both decreased their holdings in the company during the quarter.

Heatmap Rating Decrease

Disney had a disappointing drop to 119 from 32 on the WhaleWisdom Heatmap.  Hedge Funds decreased their positions in the third quarter to 60.9 million from 72.3 million, a drop of about 15.7%.  Of 31 hedge funds, 22 created new positions, 69 added to existing holdings, 26 exited, and 99 reduced their stakes.  Overall, institutions decreased their aggregate 13F holdings by almost 7.5%, to 1.1 billion from 1.2 billion, and this contributed to the change in the stock’s Heatmap ranking, along with the WhaleWisdom Whalescore.

Estimates Aren’t Pretty

Analysts’ consensus estimates for the upcoming first quarter show negative year over year growth of about -20.8% from 2019 to 2020.

(YCharts)

Investors are excited to hear the latest subscriber metrics that Disney is anticipated to provide on February 4.  Morgan Stanley gave Disney a Buy rating and raised its price target on the stock to $170 after early reports of success for Disney+; this implies a 23% upside from the stock’s current price.  The Bank of America Corp. (BofA) also gives the stock a Buy rating with a price target of $168, implying a 21.5% upside.  Box office results have been very positive for Disney and theme park earnings are also anticipated to be healthy.  BofA expects $1.28 in EPS for Q1, up from $1.22.

Uncertain Outlook

Disney’s stock is expensive, trading at 22 times one-year forward earnings estimates.  If subscriber growth predictions should fall short, this could cause Disney’s stock to plunge. It means investors have big expectations for the new Disney+ and will be watching very closely to what the company reports.