For Immediate Release
Chicago, IL - May 15, 2018 - Zacks Equity Research highlights Mellanox Technologies MLNX as the Bull of the Day, MGM Resorts International MGM as the Bear of the Day. In addition, Zacks Equity Research provides analysis on BP PLC BP , Texas Instruments TXN and Intuitive Surgical ISRG .
Here is a synopsis of all five stocks:
Today's Bull of the Day is a company that's been on fire recently. They are in the data center infrastructure business, a huge growth area for the market. As more and more devices become connected to the internet and more data is gathered, these centers will become more prevalent throughout the globe. Powering those data centers is big business and a big reason why this stock is the Bull of the Day.
Mellanox Technologies is a fabless semiconductor company, designs, manufactures, and sells interconnect products and solutions worldwide. Its products facilitate data transmission between servers, storage systems, communications infrastructure equipment, and other embedded systems. The company offers InfiniBand solutions, including switch and gateway integrated circuits (ICs), adapter cards, cables, modules, and software, as well as switch, gateway, and long-haul systems; Ethernet solutions, such as Ethernet switch products and Ethernet adapters for use in enterprise data center, high-performance computing, embedded environments, hyperscale, Web 2.0, and cloud data centers.
Mellanox is a Zacks Rank #1 (Strong Buy) because of the recent string of positive earnings estimate revisions to the upside. Over the last 30 days, five analysts have increased their estimates for the current quarter and current year. The bullish revisions have pushed up our Zacks Consensus Estimate from 73 cents to $1.03 for the current quarter. The current year number has shot up from $3.17 just ninety days ago to $4.07 today. This year EPS growth is estimated to be 78.5%. Those are some serious EPS numbers.
Leading up to its most recent earnings report, MLNX kept running into resistance near $78. For five consecutive trading days from April 12 th to April 18 th , MLNX couldn't get over the hump. Having reported within that time period, MLNX shares retreated a bit, then found a bid just north of the 50-day in the $74 handle. Another stretch towards resistance failed during the end of April but when the calendar turned over to May, MLNX finally broke on through and now is in runaway breakout mode over $84.
If you're looking for a big winner on the gaming news yesterday, you're going to have to look at stocks like Penn National and Boyd Gaming. These regional players most certainly will benefit from the Supreme Court opening the door for states to legalize sports gambling. Today's Bear of the Day will also benefit from the ruling, but I want you to know what the earnings picture was like ahead of the recent event. It's not as rosy as you'd like to believe.
MGM Resorts International owns and operates integrated casino, hotel, and entertainment resorts in the United States and China. The company operates through two segments, Domestic Resorts and MGM China. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. Its casino operations include various slots, table games, and race and sports book wagering. The company operates 14 resorts in the United States; and MGM Macau resort and casino in China, as well as develops an integrated casino, hotel, and entertainment resort on the Cotai Strip, Macau. The company also owns and operates Shadow Creek golf course, Primm Valley Golf Club, and Fallen Oak golf course.
I certainly agree that gaming across the country could help MGM. But until analysts start changing their EPS estimates based on the ruling, MGM is likely to remain a Zacks Rank #5 (Strong Sell). Over the last thirty days, four analysts have dropped their earning estimates for the current quarter while six have dropped their numbers for the current year. The bearish sentiment has dropped the Zacks Consensus Estimate from 38 cents to 27 cents for the current quarter while current year numbers have gone from $1.45 to $1.34.
Again, analysts could very well come in an increase their estimates based on the Supreme Court's ruling. But an important benchmark for investors should be the previous consensus numbers of 27 cents for the current quarter and $1.45 for the current year.
Trade Tensions Begin to Escalate: Global Week Ahead
In the Global Week Ahead , keep your eye on the trade war ball(s).
According to Scotiabank's watchful FX team, markets will be gradually informed by developments in U.S.-China trade tensions over the coming weeks.
China-U.S. trade war tensions likely begin to escalate this week.
On Tuesday, the U.S. Trade Representative (USTR) will hold a public hearing addressing its proposed list of tariffs on $50 billion of imports from China. The comment period ends on May 22nd.
Sometime over the first half of June, the USTR may revise its list of tariffs and send recommendations to President Trump who may then decide to enact the tariffs. Mixed into the fray will be the USTR's next list of tariffs on another $100 billion of Chinese imports and more hearings in a similar process.
Also, Friday will bring the Treasury's deadline for proposals on restricting Chinese investment specifically
related to intellectual property, which seems liberally interpreted. China's potential retaliations against any U.S. moves would further inflame tensions.In addition, Reuters in London shared these five world market themes, operating across the Global Week Ahead.
These themes are what traders and investors there are watching most closely there.
(1) Fresh U.S. Retail Sales Numbers Come Out
Economists polled by Reuters see April U.S. retail sales - due this Tuesday, May 15th - growing just 0.4 percent, moderating from March's 0.6 percent rise.
But excluding the automobile sector, sales are expected to increase 0.5 percent, after 0.2 percent in March.
The recent U.S. tax changes are estimated to have reduced annual personal taxes by $115.5 billion. That means more money in the pockets of consumers, who drive two-thirds of the economy. Now that the personal income tax season has come and gone, and the bulk of taxpayer refunds has found their way into people's pockets, did consumers spend more?
Economists reckon the data will help shape the debate over how many times the U.S. Federal Reserve will raise interest rates this year. Bond markets currently are betting on at least two more increases. The combination of extra spending and tax cuts frontloaded the positives, and now we wait to see if it translates into robust economic performance. Traders see the Fed on track to raise interest rates in June after U.S. consumer prices rebounded modestly in April.
(2) Oil Prices
Oil prices are at the highest since 2014 and the surge shows no sign of waning. In fact, $80 a barrel is within sight for Brent crude.
The U.S. decision to pull out of the Iran nuclear deal and re-impose sanctions has pushed the Brent 3% higher this week, its biggest of five consecutive weekly rises. It is now up 60% over the past year.
Iranian oil exports should start falling as the new sanctions take hold. Even if other OPEC countries manage to fill that gap, the global oil market is still pretty finely balanced. Brent could reach $90 per barrel in the second quarter next year, Bank of America Merrill Lynch predicts, adding that $100-oil cannot be ruled out.
The question is now how this will impact inflation and central bank policy. Inflationary pressures in the developed world remain muted, but economic textbooks suggest not for long.
(3) European M&A
M&A action has been heating up in Europe, with April recording the highest value of monthly deals in 10 years, according to Thomson Reuters data.
This week, we've had a private equity firm agreeing to buy Zoopla-owner ZPG, sending its shares to a record high and lifting other online consumer-focused firms such as Auto Trader and RightMove.
Japan's Takeda is buying Shire for $62 billion, and U.S. cable giant Comcast is seeking approval for its bid to buy British pay-TV group Sky.
The UK, in particular, is drawing attention from foreign buyers due to the still-depressed levels of the pound and the fact that stocks trade at a discount to their long-run average on a 12-month forward PE basis.
Credit Suisse Wealth Management added UK equities to their most preferred markets, while Bank of America Merrill Lynch say they are rotating from Europe to the UK.
The Euro Stoxx index is close to fully regaining all the ground lost during the February volatility shock, while the UK's FTSE 100 is flat on the year, after being down as much as 10 percent some weeks back. Deal-making activity could provide the lift into positive territory for both benchmarks.
(4) Italy Has a New Government
After weeks of wrangling, Italy may soon get a new government made up of the far-right League and the anti-establishment 5-Star Movement.
But for markets, which have so far taken Italian political risks in their stride, a League/5-Star tie-up is the worst-case scenario; both groups are hostile to EU budget restrictions and have made electoral pledges that would cost billions of euros to implement.
No wonder the cost of insuring Italian debt against default have crept up, bond yields have hit 7-week highs and shares are set for their biggest weekly fall in seven weeks.
The Italian/German bond yield gap, a key indicator of relative risks, has also widened. But it remains below levels seen before the March 4 election; clearly some investors are still willing to look beyond the politics.
After all, a week is a long time in politics and the two parties are yet to agree on who will be prime minister. And a 5-Star member has even hinted the premier may be an independent figure not affiliated to either group.
(5) Watch What Happens in Malaysia - After a Big Election Win
Malaysian markets re-open next week after investors had two days to chew on a shock election result that saw incumbent prime minister Najib Razak lose to 92-year old Mahathir Mohamad, the end of an uninterrupted six-decade run for the ruling coalition.
Offshore markets are uneasy: the ringgit lost 4 percent on the non-deliverable forwards market and an overseas Malaysian equity fund showed a 6 percent drop. The cost of insuring against default on Malaysian debt rose to more than 90 basis points from 78 before the election.
The fear is that Mahathir, who was in power for 22 years until 2003, including during the late-1990s financial crisis, will fulfill pledges to remove the goods and services tax, scrap toll fees, reinstate fuel subsidies and renegotiate Chinese investment deals.
That would hit budget revenues. Mahathir has also vowed anti-corruption reform, but whether better governance can be achieved remains to be seen. For now, uncertainty takes center stage.
Top Zacks #1 Rank (STRONG BUY) Stocks-
BP PLC: This $151B market cap oil stock has a Zacks long-term VGM score of A. The oil price rise (or fall) story likely plays out here.
Texas Instruments: This $106B market cap semiconductor stock is always in the news. Keep an eye on this stock this week, as trade tensions on intellectual property rise between the U.S. and China.
Intuitive Surgical: This $53B Medical Device stock is front-and-center in representing key U.S. intellectual property available in surgery technology these days. The stock is richly priced at $470 a share, as this type of company is where the market is looking for growth.
About the Bull and Bear of the Day
Every day, the analysts at Zacks Equity Research select two stocks that are likely to outperform (Bull) or underperform (Bear) the markets over the next 3-6 months.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous analyst coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.