The superhighway that Tesla Motors, Inc. (NASDAQ/TSLA) is building across the United States appears to be taking shape with consumers and investors.
The maker of the quick-charge electric-battery vehicle has recovered since taking a hit on growth and valuation concerns. The stock is still not cheap, but based on what is developing and its longer-term prospects, a stock like Tesla may be worth a closer look as an investment opportunity.
Back in April, I suggested picking up some shares of Tesla as an investment opportunity at a price tag of $193.00. The stock closed at $253.00 last Wednesday, representing a hefty quick gain of 28%.
Chart courtesy of www.StockCharts.com
Now after reporting a decent quarter, Tesla has been receiving kudos from Wall Street. Brad Erickson at Pacific Crest issued an Outperform rating and assigned a price target of $316.00. This price is high, given the stock is already trading at 80-times (X) its 2015 earnings per share (EPS) and an extremely high price-to-earnings growth (PEG) ratio of 5.34. For Internet and social media stocks, the valuation likely wouldn’t be given a second look, but for an automaker, there clearly are some heads shaking.
While I continue to like Tesla as an investment opportunity, I would be more likely to accumulate shares on price weakness than to chase the stock price higher.
In my view, Tesla needs to produce more unit sales of its vehicles in order to reduce the fixed overhead charges per vehicle made, thereby pushing up the operating margins.
We are seeing Tesla vehicle sales steadily rise, but the numbers still pale in comparison to the major automakers, … Read More
Simply put, if Russia is held accountable, the downing of Malaysian Airlines flight ML17 in eastern Ukraine could destabilize the situation in the region and filter into the eurozone and Europe. That’s bad news.
When the conflict first surfaced regarding the possible annexation of the Crimea region and the influence of Russia, there were concerns after economic sanctions were levied on Russia. The following vote in Crimea that indicated a desire to leave Ukraine has further raised the geopolitical stakes in the volatile area and intensified the fighting between the pro-Russian rebels and Ukraine.
It’s a mess, and the shooting down of ML17 made the situation much worse. We are seeing increased economic sanctions on Russia, and this will likely impact the eurozone and Eastern Europe. There is also news of a Russian steel company selling some properties in the United States.
Of course, we are also hearing that the rich Russians who count on business in Russia and the global economy are also feeling the economic pinch and are not happy. The problem is that they won’t say anything towards the situation, assumedly due to their fear of President Putin and the Kremlin.
And while Europe is intensifying the pressure on Russia to do something, there’s also a need for the flow of oil and natural gas to continue into the eurozone and Europe, which gets about 40% of its energy needs from Russia.
While the impact on the Russian embargo has yet to be fully felt by the eurozone and Europe, it could worsen if the Ukraine conflict intensifies. In the first quarter, gross domestic product (GDP) growth … Read More
Small-cap stocks made a sweet rebound in June after the Russell 2000 previously declined below both its 50-day and 200-day moving averages. The index actually had been down 10% earlier in the year, prior to staging a nice rally, based on my technical analysis.
While the risk with the higher-beta growth and technology stocks continues to be higher than the S&P 500, the weakness has provided a decent trading investment opportunity for the more aggressive speculators looking for above-average risk-to-reward trades.
In my view, there is no better area as an investment opportunity for speculative trades than technology due to the immense upside; but at the same time, the associated risk is also higher due to the downside.
If you are searching for a beaten-down small-cap technology investment opportunity that could return some quick money, take a look at a stock like Extreme Networks, Inc. (NASDAQ/EXTR), which currently sits at a stock price around $4.27 and a market cap of $412 million. The stock traded as high as $8.14 in January, but it has lost nearly half of its value since then, so I see an investment opportunity here.
Chart courtesy of www.StockCharts.com
Some see Extreme Networks as a stay-away stock, but I view it as a contrarian investment opportunity at a time when the stock has been beaten up and tossed around by the stock market. Now, I’m not saying it’s easy money, but I like the trade risk to reward here; there’s more upside potential than downside risk, which makes it a good investment opportunity.
Extreme Networks develops network infrastructure equipment and services that cater to enterprises, data … Read More
The situation in Crimea should be closely monitored as it pertains to Europe and the eurozone. Russia is a major trading partner with the eurozone as well, supplying about 40% of the energy requirements in the area. That is why an escalation in Crimea could devastate the region, especially at a time when the economy is finally growing in the eurozone.
I’m carefully watching the stand-off in Crimea and, more importantly, what Russia is doing. Whether it’s simply geopolitical posturing or a plan to enter into Crimea is unclear. The Russians really don’t want a conflict, as it would likely push the country into a recession.
And a recession in Russia would also impact Europe and could drive the region’s economies down. Now, Russia is currently setting up meetings with the United States and United Nations (UN), so there’s some optimism that a peaceful resolution could emerge from the crisis.
The reality is that a healthy Russia also means better times for Eastern Europe, including some of the area’s strongest economic regions, such as Poland.
I view Europe and the eurozone as a potential investment opportunity if the Russia-Ukraine situation is resolved.
The market in Europe and the eurozone is massive and includes more than 800 million people who demand goods and services.
The eurozone’s gross domestic product (GDP) expanded at a rate of 0.3% in the fourth quarter, according to Eurostat. The eurozone is estimated to report GDP growth of 1.2% this year and 1.5% in 2015, according to the International Monetary Fund (IMF). Of course, these numbers could decline if a conflict surfaces in Ukraine.
A look at … Read More
The current drama surrounding Malaysia Airlines Flight 370 has been riveting and indicative of how the superlative growth in travel in the airline sector has encompassed Asia along with the world.
For years now, since the recession hit in 2008, I have been increasingly bullish on the airline sector across the globe, but especially in the emerging markets like China, India, Eastern Europe, and Asia. Helping to drive up the demand for travel in the airline sector has been the upward push in wealth creation in many of these regions, which has given more people the ability to afford air travel.
The industry stats don’t lie. The airline sector is on target for its second straight year of higher profits, according to research by the International Air Transport Association (IATA).
According to the research, North America continues to be the biggest airline sector market with profits estimated at around $8.6 billion in 2014. Asia-Pacific airlines are entrenched in second place with an estimated $3.7 billion in profits, more than the $3.1 billion predicted for Europe. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)
Take a look at the Dow Jones U.S. Airlines Index in the chart below. Notice the beautiful uptrend since November 2012 and the bullish golden cross on the chart, based on my technical analysis.
Chart courtesy of www.StockCharts.com
To play the airline sector in the United States, I like discount carrier JetBlue Airways Corporation (NASDAQ/JBLU). The company was formed in 1998 and currently serves markets in the … Read More
While the U.S. economy is hardly on solid footing, the fact remains that as the world’s biggest and most influential economy, the U.S. doesn’t have to be running optimally to keep the global economy chugging along. Though, it would be nice if the U.S. economy would gain sustainable traction. Until then, we will have to be content with its glacial pace of recovery.
And it is slow. In 2012, gross domestic product (GDP) growth was 2.8% and in 2013, it slowed to just 1.9%. Things are expected to get better over the next two years. U.S. GDP growth is forecast to hit 2.8% in 2014 and an even three percent in 2015.
The rest of the world will be playing catch-up. Well, save for the Chinese economy, which has a 2014 growth forecast of 7.5%. GDP growth in the eurozone picked up 0.3% in the fourth quarter of 2013—the third quarter of growth since the end of an 18-month recession. (Source: “Eurozone GDP growth gathers speed,” BBC News web site, February 14, 2014.)
The International Monetary Fund (IMF) forecasts that India’s GDP growth will hit 4.6% this year and climb to 5.4% in 2015. Brazil recently revised its 2014 GDP growth rate from 3.8% to 2.5%—which is still higher than analysts’ GDP growth forecasts of 1.79%. (Sources: Mishra, A.R., “IMF says India needs more rate hikes to bring inflation down,” Livemint.com, The Wall Street Journal, February 20, 2014; “Brazil cuts 2014 budget, GDP estimate,” Buenos Aires Herald web site, February 21, 2014.)
For investors who have been waiting for a broadly based global recovery, these are encouraging signs. It also … Read More
Every time I drive my SUV, especially when I have to fill up the tank with premium gas, I quiver and think about downsizing to a smaller gas-efficient vehicle or some sort of hybrid.
I remember back more than a decade ago when Canadian upstart Ballard Power Systems Inc. (NASDAQ/BLDP) was all the rage on Wall Street, with traders driving up the stock price to above $100.00 in early 2000 on anticipation the company could develop the first hydrogen-powered cell for vehicles. Of course, as my stock analysis indicates, that failed, as Ballard was unable to develop a battery small enough to power the everyday car. The rest is history. Ballard is still hanging around, but it’s a non-factor in the alternative power sector for vehicles, based on my stock analysis.
As many of you already know, my stock analysis favors Tesla Motors, Inc. (NASDAQ/TSLA) as the big winner in the alternative power sector for vehicles. In a few short years, Tesla has become the next big technological innovation with its fully electric-powered vehicles. The Tesla vehicles look sharp and sporty and are gaining a wide acceptance based on the sales we are seeing.
I drove by a Tesla charging station the other day, and it looks impressive and innovative. Tesla is aiming to build a “Supercharger” network to cover about 98% of the United States by 2015. The Supercharger network can charge up a Tesla car via the changing of the battery pack and is free if you buy the more powerful battery. The whole process to automatically change the battery takes less than 90 seconds, according to the … Read More
When troubles first started in the eurozone years ago, they stemmed from the credit market. The amount of bad loans increased and as a result, banks needed to be bailed out. Greece and Ireland were the first in the eurozone to come under scrutiny, followed by Spain and Portugal; concerns later grew over whether Italy needed a bailout, as well. In 2012 and 2013, we saw a little calm in the eurozone. One of the main factors behind this was the European Central Bank (ECB). It said it will do whatever it takes to save the eurozone. This sent a wave of optimism through the global economy.
Now, we are starting to hear the problems—bad loans—remain in the common currency region…and they’re increasing.
The Bank of Spain’s data showed that bad loans in the country grew to a record-high in November. They stood at 13.08% then, compared to 12.99% just a month earlier. Month-over-month, bad loans in the fourth-biggest eurozone economy grew by 1.5 billion euros. (Source: “CORRECTED-Spain’s bad loans ratio reaches new record high at 13.08 pct in Nov,” Reuters, January 17, 2014.)
This isn’t all for Spain. Recently, after posting a loss in its fourth quarter, the Banco Popular S.A.—the biggest bank in Spain—said that at the end of 2013, 6.8% of all loans at the bank were 90 days overdue. In 2012, this rate was 5.1%. (Source: Neumann, J., “Spanish Banks Still Battling Bad Loans,” Wall Street Journal, January 31, 2014.)
Banks in Italy—the third-biggest economy in the eurozone—are going through something similar. Standard & Poor’s expects bad loans at the Italian banks to increase to 310 … Read More
After years of easy money and a failure to secure a well-executed exit plan, it looks as though the emerging markets are getting a taste of the Federal Reserve’s economic tapering. Over the last five years, the emerging markets have benefited from low interest rates and listless growth in developed countries.
But, with the U.S., Japan, and Europe—the three biggest economies globally—all expanding for the first time in four years, the tables are turning and the sheen is beginning to wear on the emerging markets.
In an effort to help kick start the U.S. economy after the financial crisis in 2008, the Federal Reserve enacted it’s overly generous bond buying program (quantitative easing). All told, the Federal Reserve dumped more than $3.0 trillion (and counting) into the markets and has kept interest rates artificially low.
The ultra-low interest rates might have been great for home buyers, but income-starved investors had to look elsewhere to pad their retirement portfolio. Many retail and institutional investors went to the emerging markets, where the interest rates were higher and there was a real opportunity for growth.
In December, the Federal Reserve said it was going to begin tapering its $85.0-billion-per-month quantitative easing strategy to $75.0 billion a month in January. Just yesterday, the Fed announced it will be reducing that number to $65.0 billion a month in February. While the amount is negligible, it signals the eventual end of artificially low interest rates. The cheap money that propped up asset prices in emerging markets, like India, China, and Indonesia, is beginning to crumble.
The Argentinean peso, Indian rupee, South African rand, and Turkish lira … Read More
We expect American consumers to do a lot in this country; not least of which is to be the nation’s economic engine, after all, 70% of our gross domestic product (GDP) comes from consumer spending.
After years of strong stock market gains, America is still being bogged down with stagnant wages, high unemployment, and near-record-high food stamp usage—not the best formula for a nation that relies on consumers to spend, spend, spend. However, it is also contingent upon us being able to continually pay our bills. It’s the ebb and flow of consumerism.
But that flow is becoming more and more constricted. While banks are more than willing to increase high-interest credit card and loan limits to maxed-out consumers, they’re beginning to fear that this money might never be paid back.
According to the latest quarterly survey, American and Canadian bank managers’ expectations for delinquencies on auto sales loans have hit their highest level since the end of 2012; expectations for delinquencies on credit cards reached a two-year high; and 34% of respondents expect auto sales loan delinquencies to climb in the next six months, while 28% expect delinquencies on credit cards to rise.
Despite these findings, the report also found that consumer borrowing (and spending) shows no signs of slowing down! In fact, 58% of bankers said they expect the average credit card balance to increase over the next six months—only six percent expect balances to go down. On top of that, 44% of polled bankers say they expect the amount of credit extended to consumers to increase—only 14% think it will decrease.
These findings run in step with … Read More
If you listen to mainstream media, the power struggle in Washington is over. The left and right came together valiantly, raising the debt ceiling and ending the U.S. government shutdown. At least, they temporarily did; they basically just put a glow-in-the-dark “SpongeBob SquarePants” band-aid on a compound fracture.
Washington voted to temporarily fund the government through January 15, 2014, and extend the $16.7-trillion debt ceiling through February 7. Then it starts all over again—and if it’s a repeat of the last three weeks, it isn’t going to be pretty.
The self-inflicted U.S. government shutdown, according to one estimate, took at least $24.0 billion out of the U.S. economy; this is after the Federal Reserve reported modest growth in September. (Source: Johnson, L., “Government Shutdown Cost $24 Billion, Standard & Poor’s Says,” Huffington Post web site, October 16, 2013.)
How the January/February deadlines will impact the U.S. and global economy is anyone’s guess in 2014. Or rather, it depends on who you ask; according to the Canadian Imperial Bank of Commerce (CIBC), the global economy is expected to turn a corner in 2014, thanks to economic improvements in the U.S. and Europe. World growth could accelerate more than four percent in 2014, while U.S. growth will climb to 3.2% in 2014 from 1.5% this year. (Source: Quinn, G., “Global economy set to ‘turn a corner’ in 2014, CIBC’s Shenfeld says,” Financial Post web site, October 17, 2013.)
This, of course, is in sharp contrast to the International Monetary Fund (IMF), which said that, as a result of the U.S. government shutdown and slow international expansion, the global economy will grow at … Read More
After a strong July, the S&P 500 is looking like it is in correction mode, trading down more than three percent since the beginning of the month and effectively erasing the last two months’ gains. It’s quite possible that the corrective phase could last until early October—that is, if history, looming economic news, and geopolitical issues have anything to say about it.
And that could present a number of interesting opportunities for investors who like to bet against the stock market.
Since 1940, the stock markets have generally performed the worst in September; that doesn’t just include the U.S., but also Germany, Japan, and the U.K. In fact, for the S&P 500, September has posted the worst monthly returns going all the way back to the 1920s. September is even crueler on the Dow Jones Industrial Average, showing a negative bias going back to 1896.
Historical metrics aside, there is a lot of economic news coming out, and a number of looming global events that could add insult to injury. The Federal Reserve could begin tapering its $85.0-billion-a-month quantitative easing policy sooner than later, especially in light of last Thursday’s encouraging economic news that saw U.S. jobless claims drop to their lowest level in six years.
Negative overarching economic news continues to plague the U.S., but chances are that the Federal Reserve will focus on the positive to justify the pullback—it’s what they do. Since many believe the quantitative easing has been fuelling the U.S. bull market, too much good economic news could put a damper on things. That could translate into a further correction on the S&P 500 and … Read More