News and Views

The Official Blog of WhaleWisdom.com

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.

Hedge Funds Jump on The Salesforce Band Wagon

Posted on January 27th, 2020

Salesforce.com Inc.’s (CRM) stock had a strong finish to 2019, and it has continued into 2020. The shares have steadily outperformed the S&P 500 over the past two months, rising by approximately 28% in comparison to the S&P 500’s gain of about 10%.

Hedge funds were actively buying the stock in the third quarter ahead of the company’s strong performance, which also resulted in the equity being added to the WhaleWisdom Heatmap, ahead of the company’s better than expected fiscal third quarter results and analysts boosting their outlooks.

Strong Results

Salesforce’s third quarter subscription and support revenue were up 34% to $4.24 billion, with professional services revenue up 22% to $274 million. Fiscal third quarter earnings of $0.75 beat forecasts by $0.09, while revenue of $4.5 billion beat estimates by $60 million. For the fiscal year 2020, the company maintained its revenue guidance of $16.9 billion to $17 billion and increased its earnings guidance to a range of $2.89 to $2.90 per share.

Hedge Funds Are Active

Hedge funds were buying the shares in the third quarter, helping it to land on the WhaleWisdom Heatmap with a ranking of 21.  During the quarter, the aggregate 13F shares held by hedge funds increased to 65.9 million from 41.5 million, an increase of almost 59%. While not quite as eye-popping as the hedge fund increase, overall institutions increased their aggregate holdings by nearly 10%, to 708.4 million from 646.5 million. Overall, 46 hedge funds created new positions, 69 added to an existing holding, 15 sold out, and 37 reduced their shares.

Analysts Provide Positive Outlooks

RBC Capital Markets upgraded Salesforce to a Top Pick from Outperform and raised its price target to $215 from $200. Cowen, Inc. views Salesforce as having a highly attractive valuation, with the company’s software creating a strong position in the technology sector. Cowen maintains an Outperform rating and a $195 price target. Additionally, Jeffries Group LLC raised its price target on the stock from $195 to $210.

Currently, analysts’ consensus estimates forecast Salesforce to grow earnings by 25.7% and revenue to rise by 19.4% from 2021 to 2022.  It means that Salesforce’s stock isn’t cheap, trading with a one-year forward PE ratio of 59. But when adjusting for growth, it may prove to be a bit rich for some investors. However, should the company continue to deliver strong results, there is potential for the stock to go on to rise and for shareholders to be rewarded.

Taiwan Semiconductor Manufacturing Co. Ltd.’s (TSM) stock has outperformed the S&P 500 by a wide margin over the past year  Taiwan Semi has risen by approximately 63% during this period, an impressive gain when compared to the S&P 500’s increase of around 27%.

Taiwan Semi’s fourth quarter net profit beat estimates at $3.9 billion, with a healthy outlook, driven by the strong consumer demand for high-end smartphones and the fifth generation of wireless technology known as 5G ramping up.  For the quarter ending in March 2020, revenue is forecast to reach approximately $10.2 Billion, up from the prior year’s 7.1 Billion.

Placement into the WhaleWisdom 100

Given Taiwan Semi’s impressive performance, it’s no surprise that investors started buying the stock in the third quarter.  This resulted in the equity being added to the WhaleWisdom WhaleIndex 100 index in the middle of November and is a sign that investors recognize the opportunities that Taiwan Semi presents.

Hedge Funds Acquire More

At the end of the third quarter, 77 hedge funds held the stock, with 11 holding the shares among their top ten.  The number of 13F shares rose as 15 hedge funds created new positions and eight funds reduced their holdings. Meanwhile, 30 funds added to their positions while 26 reduced them.  Overall, the aggregate 13F shares held by hedge funds increased by approximately 6.5% to 159 million shares from 149 million shares in the prior quarter.

Earnings and Revenue Growth Continue

One reason why investors may be looking to get involved in Taiwan Semi is an upward trend in revenue and earnings growth. Currently, analysts’ estimate earnings growth of 20.3% in 2020 to $2.87 per share and revenue growth of 20% to $42.9 billion.

Despite strong earnings and revenue growth, the stock isn’t cheap on a historical basis, trading for roughly 18.5 times one-year forward earnings estimates, its highest valuation since 2016.  Over that time, the stock has historically traded in a range of 9 to 15. However, if the earnings and revenue growth persist, when adjusting that earnings multiple for growth, the shares appear to be a bargain, trading with a growth adjusted PEG ratio of less than 1 and making shares cheap. However, it also means that for the stock to maintain that upward momentum, the company will need to continue to deliver impressive growth, perhaps even at an accelerating pace to keep the stock price moving higher in the future.