All posts by Luke Lango

Four Big Reasons You Need to Stick with Microsoft Stock

At the start of this decade, there were some concerns that the innovation curve at Microsoft (NASDAQ:MSFT) was falling flat, and that the company was growing stale, resting on its laurels, and becoming increasingly irrelevant in a rapidly changing big tech landscape. As a result, there was something of a lackluster enthusiasm for Microsoft stock

microsoft stock msft stock

Source: Johannes Marliem Via Flickr

Then, just over seven years ago, in February 2014, Satya Nadella succeeded Steve Ballmer as the CEO of Microsoft. He promised change. Specifically, he promised to shift Microsoft’s focus to cloud services, and in so doing, returning Microsoft not just to big tech relevancy, but once again make Microsoft one of the most important companies in the world.

He’s done just that. Microsoft is once again one of the largest companies in the world, and its stock has risen 250% since early 2014.

Will this big rally in MSFT stock continue? Yes. For four very simple reasons.

Four Reasons to Love Microsoft Stock

First, the big cloud pivot isn’t over just yet, and Microsoft’s many cloud businesses continue to fire on all cylinders.

Second, every other business at Microsoft continues to move in the right direction, and make revenue and profit gains.

Third, the company is side-stepping big tech regulation which is threatening other tech giants like Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple(NASDAQ:AAPL), and Alphabet (NASDAQ:GOOG).

Fourth, the valuation underlying MSFT stock remains reasonable relative to long term growth prospects.

Net net, cloud growth plus tangential business growth will drive continued revenue and profit growth over the next several years. The lack of a regulation threat means that this growth trajectory has tremendous clarity. At the same time, the valuation is reasonable enough to allow for that growth to drive healthy share price gains.

The takeaway? Stick with Microsoft stock for the long run.

The Cloud Business Is Firing on All Cylinders

The first, and most important, reason to stick with MSFT stock is that the company and stock’s biggest driver – the cloud business – remains on fire.

The cloud pivot has been the core of Microsoft stock’s big 250% rally since early 2014. This pivot is far from over. Last quarter, commercial cloud revenue rose more than 40%. That’s a big growth rate. It won’t head much lower anytime soon. Only 20% of enterprise workloads have migrated to the cloud. That number will move towards 100% in the long run, meaning that the global cloud market still has a long runway for growth.

Further, Microsoft continues to innovate and expand share in that market, meaning Microsoft cloud growth rates should continue to outpace cloud market growth rates. Thus, with Microsoft, you have a leading cloud player that’s growing share in the secular growth cloud market. Ultimately, that means Microsoft’s cloud business will continue to fire off 20%-plus growth quarters for a lot longer.

All Other Businesses Are Moving in the Right Direction

Although the core cloud businesses steal the spotlight at Microsoft, the company’s other businesses are actually doing very well, and will continue to support higher prices for the stock.

On the gaming front, Microsoft just announced its next-gen Xbox console, dubbed “Project Scarlett”, which is set to be four times more powerful than its predecessor, the Xbox One X. Microsoft is also testing the waters in the cloud gaming world with its “Project xCloud” video game streaming service.

Meanwhile, on the office products front, Microsoft just incorporated real-time financial data into Microsoft Excel spreadsheets, a move that could help offset the subtle migration from Microsoft Excel to Google Sheets.

At the same time, LinkedIn has continued to expand its reach in the business networking world, and Microsoft’s PC business has made steady share gains thanks to the huge popularity of the Surface.

All in all, it isn’t just Microsoft’s cloud business which is doing really well right now. All of Microsoft’s businesses are doing well.

The Company Is Side-Stepping Big Tech Regulation

Importantly, Microsoft does not have the regulation risks which are weighing on fellow big tech stocks.

There are five big tech stocks in the U.S. which have $500 billion-plus market caps – Microsoft ($1 trillion market cap), Amazon ($930 billion), Apple ($900 billion), Alphabet ($760 billion), and Facebook ($535 billion). Of those five big tech giants, Microsoft is the only one not being probed by either the FTC or DoJ for anti-competitive reasons.

From a market psychology perspective, that’s a big deal. Investors with Amazon/Apple/Alphabet/Facebook exposure may not want that exposure anymore because of the regulatory risks, but because the tech growth narrative remains vigorous, those investors will still want big tech exposure. Where can they get big tech exposure without the regulation headwind? Microsoft is the only place.

Consequently, we could see a migration of investment dollars from other big techs stocks to MSFT stock as regulation headwinds build.

Valuation Remains Reasonable

Lastly, the valuation underlying Microsoft remains reasonable relative to the company’s long term growth prospects.

Microsoft stock trades around 29-times forward earnings. That’s as rich as the valuation has been in the past decade. But, growth is also as big as its been in the past decade. According to Street estimates, profits are expected to rise 18% this year, 11% next year, and 15% the following year.

In other words, Microsoft projects as a steady double-digit profit grower over the next several years, and that growth has tremendous visibility thanks to secular growth tailwinds in the cloud market and the lack of regulation risks. A near 30-times forward multiple for that magnitude of growth and that level of growth clarity seems reasonable.

Bottom Line on Microsoft Stock

Microsoft stock has been a big winner for the past seven years. It will continue to be a winner over the next several years, too, because the cloud business remains on the fire, the company’s other businesses are doing well, the growth trajectory has tremendous clarity, and the valuation remains reasonable.

As of this writing, Luke Lango was long FB, AMZN, AAPL, and GOOG.

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6 Red Hot Recent IPO Stocks You Should Be Following

ipo investing
Source: Shutterstock

By now, it’s fairly common knowledge among financial market observers that the 2019 IPO stocks will be big, headlined by a slew of tech unicorns that are finally ready to hit the public markets. Names in this group include Uber, which will likely debut at a $100 billion-plus valuation, and Airbnb, which will likely command a $30 billion-plus valuation. There’s also Palantir with a rumored $30 billion-plus valuation, Slack with a $10 billion-plus valuation, and WeWork with a potential $40 billion-plus valuation.

But, the first big player in this group to IPO in 2019 was Lyft (NYSE:LYFT), and the results were far from spectacular. Lyft popped on its first day of trading, but it has been nothing but down and out since then. As of this writing, LYFT stock actually trades more than 15% below its IPO price.

The ostensible failure of the Lyft IPO has some fearful about upcoming IPOs. But, the failure of the Lyft IPO is getting too much press, and investors shouldn’t read much into it. While the Lyft IPO did ostensibly fail, there have been a ton of other IPO stocks in late 2018 and early 2019 which have been huge successes, and which imply that future IPOs in 2019 will do just fine.

Which IPO stocks fall into this category of big winners so far on Wall Street? Let’s take a deeper look at 6 red hot IPO stocks that all investors should be watching.

Zoom (ZM)

Zoom Is A Great Company, But Post-IPO Pop Valuation Looks Full

Gain From IPO Price: 100%

At the top of this list is a freshly public tech company which Wall Street has fallen in love with in just a few days.

Zoom (NYSE:ZM) is a video conferencing company which priced its IPO at $36 per share, opened up 80% above that IPO price, and has continued to soar ever since en route to a 100%-plus gain from that $36 IPO price. Why the huge demand for Zoom stock? The hyper-growth tech company checks off every box growth investors are looking for. It’s growing revenues at 100%-plus rate, with a small revenue base in a secular growth and very large video conferencing market. Gross margins are sky high around 80%, while opex rates are surprisingly low for a small company, and Zoom is actually profitable already.

All in all, you have a hyper-growth video conferencing company that’s already profitable. That has investors salivating.

But, the valuation on ZM stock is pretty rich here and now, and the stock has come very far, very fast. As such, caution is warranted here, especially considering that the video conferencing market isn’t light on competitors.

Red Hot IPO Stocks: Pinterest (PINS)

Source: Shutterstock

Gain From IPO Price: 40%

Second up is a social media company with a lot reach and a ton of potential to monetize that wide reach.

Unlike digital ad IPO stocks before it, the Pinterest (NYSE:PINS) IPO has been a huge success thus far. After pricing the IPO at $19 per share, PINS stock has rallied in a big way ever since, and is now up 40% from that IPO price. The rationale behind the rally is simple. This is a company which has a ton of users (265 million monthly active users), and is monetizing those users at a low rate (ARPU of just over a $1 last quarter), so the runway for robust revenue growth through ARPU expansion is promising. Plus, margins are healthy, the international user base is growing rapidly and the valuation is reasonable.

All together, then, PINS stock has been a big winner because the fundamentals are healthy, the upside potential is good, and the valuation is cheap. So long as those three things remain true, PINS stock will stay in its IPO honeymoon phase.

Red Hot IPO Stocks: YETI (YETI)

Source: Yeti

Gain From IPO Price: 100%

Third we have an outdoors consumer product company that didn’t have a huge IPO pop, but has been a steady winner in its short life as public company.

Meet YETI (NYSE:YETI). YETI is an outdoors consumer products brand that specializes in coolers and drinkware. YETI went public at $18 per share in late 2018 without much fanfare. The stock actually traded down on its first day on Wall Street. But, YETI stock has doubled ever since as the company has reported back-to-back strong earnings reports which ultimately underscore that this company has healthy growth drivers, in a healthy market, with a healthy margin profile.

In other words, YETI is a healthy company. Under $20, YETI stock wasn’t priced for healthy. That’s why the stock rallied. Above $30, the IPO stock is priced for healthy. But, not entirely. As such, so long as the numbers remain good (which they should for the foreseeable future), then YETI stock should remain on an uptrend until valuation becomes an issue. That won’t happen until around $40.

IPO Stocks: Jumia (JUMIA)

Fundamentally speaking, there's not a lot to love about Overstock stock

Source: Shutterstock

Gain From IPO Price: 140%

Maybe the most interesting stock on this list is Jumia (NYSE:JMIA).

Long story short, Jumia is Africa’s e-commerce juggernaut, and that means this company is oozing with long-term growth potential. Africa is the last great frontier of the tech revolution. Internet penetration rates on every continent outside of Africa measure north of 50%, and ex Asia, they measure north of 60%. But, in Africa, the internet penetration rate is roughly 36%. That number won’t stay low forever. Over the next several years, thanks to a combination of factors such as urbanization, expansion of the middle class, and heavy technology infrastructure investments, Africa’s internet penetration rate is expected to surge higher, and that surge will spark enormous growth in Africa’s internet sectors.

One of those sectors is e-commerce. Less than 1% of all retail sales in Africa were conducted online in 2018. As internet penetration rates rise, online retail’s penetration will likewise rise, and that will create a huge growth opportunity for players in the market. The largest player in the African e-commerce market today? Jumia, which has 4 million active consumers and a gross merchandise value near $1 billion.

If Jumia can maintain its market leadership position as the African e-commerce market dramatically expands over the next decade, then JMIA stock is a multi-bagger in the making. But, there’s a lot of risks regarding execution and valuation, so this IPO stock isn’t for the faint of heart. Best way to look at Jumia? A high-risk, high-reward play on the potentially enormous African e-commerce market.

Tencent Music (TME)

Gain From IPO Price: 35%

One of the more interesting recent IPO stocks is the company which many people are calling the Spotify (NYSE:SPOT) of China.

Tencent Music (NYSE:TME) is the premiere music streaming platform in China. China is a huge market with a rapidly expanding digital economy. As such, the upside potential for Tencent Music to grow with the rapidly expanding Chinese digital economy is enormous. But, there are a few problems here. Namely, there’s a ton of competition, the company gets most of its revenue from virtual gifts, there’s only 25 million paying subs, and the valuation is huge.

Thus, TME stock is a high-risk, high-reward play on the music streaming market in China. If consumers in that market start paying up for music services, then TME stock will explode higher. If not, TME stock could be stuck in neutral for the foreseeable future.

Levi Strauss (LEVI)

Red-Hot Athleisure Puts Lid On Jeans-Maker Levi Strauss Stock Upside

Source: Shutterstock

Gain From IPO Price: 35%

Last (and maybe least) on this list is an older company which recently made its return to Wall Street.

Blue jeans giant Levi Strauss (NYSE:LEVI) returned to the public markets in late March. The IPO was a smashing success. The stock opened up more than 30% above its $17 IPO price. LEVI stock has since largely held onto those gains — but not added to them — as first quarter numbers were a mixed bag that implied positive but slowing growth going forward.

Ultimately, it’s tough to see the upside scenario in LEVI stock. The athleisure trend remains as hot as ever, and that trend continues to steal share from the jeans market. As such, Levi Strauss finds itself on the wrong side of the apparel tracks. To be sure, that doesn’t mean growth will flat-line. But, it will put a lid on growth, and a lid on growth will hurt LEVI stock, which currently trades at above what I peg as a reasonable 2019 price target for the stock.

As of this writing, Luke Lango was long LYFT, PINS, YETI, and SPOT, and may initiate a long position in JMIA within the next 72 hours. 

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3 Tech Stocks to Sell in March

Source: Shutterstock

Most tech stocks have staged impressive comebacks so far in 2019. However, in the next few weeks, we might witness a battle between investors and traders, where there will be considerable profit-taking in several of Wall Street’s tech darlings, including Netflix (NASDAQ:NFLX), PayPal(NASDAQ:PYPL) and Snap (NASDAQ:SNAP).

Like most tech stocks, NFLX, PYPL and SNAP are high momentum stocks. In other words, when the broader markets go up or when the company’s earnings beat expectations, both investors and momentum traders tend to hit the ‘buy’ button fast, expecting superior gains within days or weeks.

However, if markets suffer a decline or if the company cannot keep up with the rising expectations, investors’ risk appetite decreases fast and these stocks can fall much harder than less volatile stocks.

I am expecting some stock price weakness in the near-term in all these three stocks. If you already own any of the Netflix, PayPal or Snap stock, you might want to hold your position. However, within the parameters of your portfolio allocation and risk/return profile, you may consider placing a stop loss at about 5-7% below the current price point. Expect nearer-term trading in these stocks to sell to be choppy at best.

If you are an experienced investor in the options market, you may want to protect your portfolio with a covered call or possibly a put option spread with a 3-month time horizon. If you do not yet hold any of these stocks, you may want to wait several weeks to buy into the shares at the next dip.

With all of that in mind, here’s a deeper look into why these tech stocks might join many other “stocks to sell” lists in the upcoming days.

Netflix (NFLX)

Many investors have put Netflix in their sights as a possible stock to sell soon, as various headwinds have hammered down the positive sentiment surrounding its longer-term outlook.

Specifically, the price of NFLX stock went from an intraday low of $233.68 on Dec. 24 to an intraday high of $371.49 on Feb. 25. Netflix’s quarterly release on Jan. 17 showed that the company beat earnings with earnings-per-share of 30 cents per share. Although its overall numbers were strong, the company cut revenue projections for 2019.

Over the past decade, the company has increased annual revenues from $1.6 billion in 2009 to $15.8 billion in 2018.

With a trailing price-to-earnings ratio of 137, Netflix is a growth stock as well as a speculative stock. Analysts value NFLX stock on the expectation of continued high revenue growth that would lead to future profits. But whenever Wall Street fears the company is failing to meet growth or profit expectations, NFLX stock gets penalized. Hard.

Currently, the most critical metric investors pay attention to is Netflix’s subscriber growth. This number needs to remain strong every quarter to justify the high valuation. For the first quarter of 2019, NFLX is expecting to add 8.9 million paying subscribers.

However, new competitors, including Disney (NYSE:DIS), Amazon (NASDAQ:AMZN) and AT&T(NYSE:T), are increasingly entering the content distribution space. Before too long, the market might become oversaturated.

The upcoming competition from Disney is particularly daunting. Its new streaming service Disney+ will launch by the end of the year and include original movies and TV shows from Disney’s brands, including Marvel and Pixar. The platform is expected to concentrate largely on offering content for families. In preparation for this service, Disney is expected to pull its movies off Netflix. Both companies know that content is king.

Netflix’s current focus is on original content development as well as international expansion. Original content production is a costly business, as it requires the company to part with upfront cash and thus it contributes to Netflix’s negative cash flows. Therefore, as Netflix has to constantly borrow to keep on growing, it faces demanding pressure to ensure that it meets its growth targets. Otherwise, it cannot pay its debts easily.

If NFLX cannot keep up with the aggressive growth assumptions or increase its prices, especially in international markets, then its margins and the stock price would suffer. As these competitors make their mark in the marketplace in 2019, investors may decide to have a wait-and-see attitude, pressuring the recent price gains.

Disney’s ESPN+ platform — the DTC sports entertainment video service — already has over 2 million subscribers. On Apr. 11, Disney will hold an investor day when it will provide a first look at Disney+ and its original content. Meanwhile, on Mar. 25, Apple will also hold an event, where the company is expected to announce its new TV service to rival Netflix. Around both dates, I am expecting volatility in NFLX stock.

Shorter-Term Technical Analysis: Year-to-date, the NFLX stock price is up over 33%. Shorter-term momentum indicators, which describe the speed at which prices move over a given period, have become extremely overbought as a result.

Although these indicators can stay overbought for quite a long time, it would not be not surprising to see some profit-taking following the earnings report.

In other words, the excessive uptrend we have witnessed over the past month, cannot possibly be sustained. The level I’d be watching is $335. If Netflix stock approaches this level, I’d take it as an early warning that price risk is likely to increase.

If you believe in the fundamental bull case for Netflix stock, you might consider waiting for a better time to go long, such as around the low-$300’s or even upper $280’s.

For now, NFLX remains one of the top tech stocks investors are likely to sell in the upcoming weeks.

PayPal (PYPL)

Global online payments company Paypal is also one of the tech stocks that will likely be joining investors’ stocks to sell lists soon.

The price of PYPL stock went from an intraday low of $76.7 on Dec. 24 to an intraday high of $99.45 on Mar. 1.

As fintech competition is heating up, this pioneering company in the digital payments sector still dominates the first-person payments sphere. It has 267 million customer accounts, 21 million of which are merchant accounts. Unlike Netflix, PayPal is a cash generating machine.

When PayPal reported earnings on Jan. 30, it met revenue expectations for the quarter which rose 13% to $4.23 billion. Its adjusted earnings came at 69 cents per share, up 26% from a year ago. The growth in total transaction volumes and in the number of active users was behind the impressive numbers. However, its revenue forecast for 2019 was about 1% below analyst’s estimates and thus, PYPL stock went down the next day.

As a digital wallet, PayPal’s profitable business model depends on processing personal and merchant customer transactions on its global suite of payments platforms. In 2013, when PayPal acquired Braintree, which specializes in payment systems for e-commerce ventures, it also became the owner of Venmo, a peer-to-peer (P2P) mobile payment app. Sending money electronically peer-to-peer with a few taps has taken off among U.S. consumers.

In this market, which is expected to grow by double-digits in the next few years, Venmo has almost 25 million users and is ahead of its closest competitors. According to the latest quarterly report, Venmo processed approximately $19 billion of total payment volume, up 80% year-over-year. Through Venmo, PayPal is reaching a younger customer base.

However, PYPL stock may fundamentally suffer in the coming months if negative global economic and political conditions dominate the headlines. In January, the International Monetary Fund (IMF) warned of a global economic decline as China — the world’s second-biggest economy — has been slowing down considerably.

Likewise, German markets have been particularly worried about the stall in the Chinese economy, as Germany exports heavily to China.

Furthermore, if we do not have a resolution to the U.S.-China trade war in early 2019, the markets may throw in the towel in frustration and another selloff might begin.

Finally, on Mar. 29, the United Kingdom is set to leave the European Union. The U.K. now finds itself without a clear path forward on Brexit. The U.K. and European financial markets are increasingly edgy about the outcome we may have on that day.

In other words, risks for the financial markets are skewed to the downside and in case of a global slowdown, the demand from PayPal customers may soften, denting the price of PYPL stock.

Shorter-Term Technical Analysis: YTD, the PayPal stock price is up over 15%. As in the case of the Netflix technical chart, shorter-term momentum indicators are overbought, signaling potential profit-taking in the shorter term.

In the next few weeks, I do not expect any substantial positive momentum to push the PYPL stock price over the psychologically significant $100 level. Even if it goes over $100, it is not likely to stay up for long.

The two levels I’d be watching are first $95 and then $85. If PayPal approaches $85, then there is likely to be further selling.

If you believe in the fundamental bull case for PayPal stock, you might consider waiting for a better time to go long, such as around the low-$80’s or even upper $70’s.

Snap (SNAP)

Snap Inc joins this list of tech stocks to sell in March as it is also demonstrating signs of near-term volatility. But the possible pain in SNAP stock can be attributed to reasons other than those that affect NFLX and PYPL.

The price of SNAP stock went from an intraday low of $4.82 on Dec. 21 to an intraday high of $10.29 on Feb. 25.

Since its Initial Public Offering in March 2017, SNAP investors have not had much reason to be pleased with the performance of SNAP stock. After an IPO price $17, and a subsequent high of almost $30, it has not rewarded its early shareholders.

However, when SNAP reported earnings Feb. 5, investors welcomed the revenue increase of 36%. Meanwhile, it posted a loss of 4 cents per share, vs. an expected loss of 7 cents a share; its net loss also improved by $158 million to a loss of $192 million. The next day, the price of SNAP was up over 30%.

Now, analysts seem divided as to what is next for the company from a fundamental standpoint. Will it be able to continue its positive growth trend and increase its user numbers? Or will it once again disappoint investors who fear that SNAP does not have a viable business model where it can monetize the app’s popularity?

In other words, Wall Street is currently debating whether every “cool” app will become a successful publicly traded company.

I believe it will take at least a few more quarterly reports to fully appreciate the fundamental story of Snap. But until we have a better picture of the execution of management in 2019, I expect SNAP stock to be volatile.

Shorter-Term Technical Analysis: YTD the price of SNAP stock is up over 80%. In the next few weeks, I do not expect any substantial positive momentum to push the stock price over the psychologically significant $10 level once again. Even if it goes over $10, it is not likely to stay up for long.

If you believe in the fundamental bull case for Snap stock, you might consider waiting for a better time to go long, such as between $7-$8.

As of this writing, Tezcan Gecgil did not hold a position in any of the aforementioned securities.

Source: Investor Place

7 Growth Stocks Racing to All-Time Highs

Source: Shutterstock

After a brutal late 2018 selloff, financial markets have been on a healthy and stable recovery path thus far in 2019. Through the first three months of the year, the S&P 500 is up 12%, marking one of its best starts to a calendar year in recent memory.

As broader financial markets have stabilized, growth stocks have come back into favor. Indeed, one could say that they’ve done much more than come back into favor. Many of them have rushed to fresh all-time highs in 2019, and that’s after big corrections in late 2018. That means that a handful of these growth stocks have staged huge rallies over the past three months.

Which stocks fit into this category? And can these big rallies last?

These are questions investors should be asking as we head into what projects to be a more volatile time for financial markets throughout the balance of 2019. As such, let’s take a look at seven growth stocks which have raced to all-time highs in early 2019, and analyze whether or not their big rallies can continue.

 iRobot (IRBT)

Why It’s at All-Time Highs: Shares of consumer robotics giant iRobot (NASDAQ:IRBT)have run up to all-time highs prices on the back of a strong double-beat-and-raise fourth-quarter earnings report that emphasized a few positive trends, including continued robust robotic vacuum market expansion, strong margin growth and a mitigated tariff impact.

Where It’s Going Next: The long-term IRBT growth narrative is positive. This company is morphing into a consumer robotics leader with minimal competition, and as such, will be a big revenue and profit grower for a lot longer as the consumer robotics space expands. Such big revenue and profit growth will keep IRBT stock on a long-term winning trajectory. But, in the near term, the valuation seems stretched at nearly 40x forward earnings. This stock needs to trade sideways for the foreseeable future to allow the fundamentals to catch up.

Shopify (SHOP)

Why It’s At All-Time Highs: Shares of e-commerce solutions provider Shopify (NYSE:SHOP) have notched new all-time highs thanks to renewed macroeconomic confidence and a strong Q4 earnings report in which growth hardly slowed and margins continued to move higher.

Where It’s Going Next: In the big picture, Shopify stock is powered by a secular growth narrative that goes something like this: the world is becoming increasingly decentralized thanks to technology democratizing creation and distribution processes. Shopify is enabling and empower this decentralization in the retail world. As this decentralization trend continues to play out over the next several years, Shopify’s merchant base will grow by leaps and bounds. Revenues will roar higher. Profits will, too. So will SHOP stock. As such, the long-term narrative here is very bullish — bullish enough to make this a long-term buy-and-hold stock.

Cronos (CRON)

Why It’s At All-Time Highs: Shares of Canadian cannabis company Cronos (NASDAQ:CRON) have more than doubled in 2019 and run to fresh all-time highs on the back of a multi-billion dollar investment from tobacco giant Altria (NYSE:MO). Investors have interpreted this investment as a major vote of confidence from a well respected global tobacco giant, at a time when global cannabis market fundamentals are improving. Consequently, they have bid up CRON stock to new highs.

Where It’s Going Next: The cannabis market projects to be really, really big one day. With a multi-billion dollar investment from Altria in its back pocket, Cronos has the necessary financial resources, business know-how, and distribution networks to one day turn into a major player in this global market. It’s fair to say that the stock has gone too far, too fast, and needs to cool off. This is likely what will happen. But, after that cooling off period, CRON stock will resume its uptrend, because the long-term fundamentals here of Cronos turning into a global cannabis giant are quite promising.

Wayfair (W)

Why It’s At All-Time Highs: Shares of online home retailer Wayfair (NYSE:W) have surged over the past few weeks to all-time highs thanks to two things. One, confidence in the macroeconomic environments in the U.S. and Europe has dramatically improved. Two, Wayfair’s margins finally stabilized last quarter, and that stabilization coupled with continued robust domestic and international growth served as justification for what had been several quarters of big investment. Investors rallied around those numbers, and bid up W stock to new highs.

Where It’s Going Next: Wayfair is a big growth story. This company has differentiated itself as the leader in a secular growth online home retail market, and this market is very big. Management pegs it at $600 billion in the U.S. and Europe. Revenues were under $7 billion last year, and grew by over 40% year-over-year. Thus, there is lots of runway for Wayfair to remain a big growth company for a lot longer. Having said that, the valuation is a tough pill to swallow here, especially with profit margins still very weak. As such, I wouldn’t chase this rally. But, I would buy any big dips.

The Trade Desk (TTD)

Why It’s At All-Time Highs: Programmatic advertising leader The Trade Desk (NASDAQ:TTD) has exploded to all-time highs over the past few weeks thanks to a robust double-beat-and-raise fourth quarter earnings report which underscored that this company’s growth narrative is still accelerating, and that big growth is here to stay for a lot longer.

Where It’s Going Next: The Trade Desk is a secular growth company powered by still accelerating tailwinds in automation and advertising. Over time, all $1 trillion worth of global ads will be transacted programmatically. That means that Trade Desk, which had under $3 billion in gross spend last year, has a huge opportunity in front of it to grow gross ad spend towards $100 billion-plus. If management successfully executes on that opportunity, TTD stock will head significantly higher in a long term window.

Etsy (ETSY)

Why It’s At All-Time Highs: Shares of Etsy (NASDAQ:ETSY) have surged to all-time highs over the past few weeks thanks to robust holiday numbers which were strong across the board, including robust community, sales, margin, and profit growth. Investors cheered those results, and bid up ETSY stock to fresh highs.

Where It’s Going Next: Etsy is a big growth company with strong growth drivers in e-commerce. But, there’s lots of competition here, from Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY), and others. To be sure, Etsy has held off that competition, but that’s because Etsy dominates a niche of the market, meaning that growth won’t remain big forever. Eventually, it will tap out, and so will margins. That may happen sooner than most expect, and at over 60x forward earnings, a slowdown could be catastrophic for ETSY stock.

Chegg (CHGG)

Why It’s At All-Time Highs: Digital education platform Chegg (NASDAQ:CHGG) has roared to all-time highs on the back of a strong Q4 earnings report which included robust subscriber, revenue, and profit growth, as well as a healthy first quarter and fiscal 2019 guide.

Where It’s Going Next: CHGG stock will head higher from here. Why? Because the company is the unchallenged leader in the digital education market, and that market is far bigger than what the company is currently penetrating. At scale, Chegg will transform into a must-have digital education tool for all high school and college students. It is only a fraction of that today. As such, big growth is here stay for a lot longer. Such big growth is also accompanied by big margins. The combination of big growth and big margins will inevitably power CHGG stock higher in the long run.

Source: Investor Place

7 Stocks That Should Be Worried About a Data Dividend

Source: Shutterstock

Big technology companies have been under a lot of political and social pressure recently, mostly because said technology companies have become the be-all, end-all of society. The worry is that these companies are gaining too much power, and that too much power is never a good thing. Big technology companies that provide “free” services by monetizing user data have borne the brunt of it, as such companies are coming under heavy scrutiny for the way they use personal data to make money.

A lot of these concerns haven’t materialized into anything other than talk. But there’s one potential legislation which big tech investors should be aware of, if not concerned about: the data dividend.

The concept is simple: tech companies should pay you for your data. Your data is valuable. It’s being monetized broadly. Since you technically own your own data, when your data does get monetized broadly, you should get a piece of those rewards. That piece is the data dividend, and it would essentially amount to a percent of the company’s data-derived revenues.

The idea isn’t new. The academic world has been discussing the idea for some time. Washington state tried to pass data dividend legislation in 2017. But attempts to implement a data dividend have been too far and few between to mean anything. Until now. California Governor Gavin Newsom recently proposed the idea, and the proposition carries weight both because of when (amid heightened data privacy concerns) and where (California is home to many of the world’s tech giants, and is ahead of the curve when it comes to data protection laws) it was proposed.

As such, while it’s still far from a sure thing, a data dividend is now closer to reality than ever before. That’s bad news for any big tech company which uses consumer data to make money.

Which stocks are most affected by a potential data dividend? Let’s take a deeper look.

Facebook (FB)

Data-Related Revenue (% of Total Revenue): $55 billion (99%)

At the top of this list is a social-media giant which essentially makes all of its money from consumer data, meaning that essentially all of its revenues are theoretically subject to a data dividend.

Facebook (NASDAQ:FB) rakes in over $55 billion (and growing) in ad revenue per year. This money comes from advertisements across its four social media apps — Facebook, Instagram, Messenger and WhatsApp — and is all the byproduct of leveraging user data to incorporate relevant and targeted ads. Facebook is arguably the best in the business at using this data to create effective ad campaigns. They also have more data than pretty much anyone in the world.

But those positives also mean that Facebook could be a big loser if the data dividend idea gains national and global traction. Even if a data dividend amounts to just 2% of revenues, that would equate to over $1 billion per year for Facebook. And, that extra cost would come at a time when costs are dramatically rising for improved data protection.

In the big picture, the data-dividend risk isn’t a reason not to own FB stock. FB stock is a long-term winner supported by the stickiest digital ecosystem in the world. But it is something to be aware of and monitor.

Twitter (TWTR)

Data-Related Revenue (% of Total Revenue): $3 billion (100%)

The second of the possible data dividend stocks is another social media company, which makes essentially all of its money through either leveraging consumer data to create ad campaigns or just straight-up selling that consumer data.

Twitter (NYSE:TWTR) rakes in about $3 billion per year in data-related revenue. Roughly $2.6 billion of that is from ads — Twitter leverages user data to create targeted ad campaigns. The other $400 million-plus comes from Twitter’s data licensing business, which is essentially Twitter just selling user data. Thus, if a data dividend were to be introduced on a global scale, all of Twitter’s revenues would theoretically be subject to that dividend.

That’s not a great thing. But it’s not a deal breaker, either. Much like Facebook, Twitter has created an ultra-sticky digital service. That service is only getting stickier, as Twitter is increasingly becoming a go-to and irreplaceable platform for consumers of all shapes, sizes, and backgrounds to voice their opinion. Thus, while the data-dividend risk should be monitored, it isn’t a reason to sell TWTR stock.

Snap (SNAP)

Data-Related Revenue (% of Total Revenue): $1.2 billion (almost 100%)

Third of the data dividend stocks is yet another social media company that makes essentially of its money through digital advertising, which comprises leveraging user data for targeting purposes: Snap (NYSE:SNAP).

To be sure, Snap does have a hardware business through Spectacles. But that business has struggled to gain traction, and revenue from Spectacles thus far has been immaterial. Thus, of Snap’s $1.2 billion in revenue last year, almost all of it was from digital ads. That means almost all of it would be theoretically subject to a data dividend.

Again, this isn’t a deal breaker for Snap. But it is a bigger concern for Snap than it is for Facebook and Twitter. Why? Because Facebook and Twitter are already profitable, and they can absorb a 2% hit on revenues without materially impacting profitability. Snap cannot. The company is far from profitable, and needs a lot more scale in order to be profitable. Thus, the data dividend risk is much bigger for SNAP stock, than it is for FB or TWTR stock.

Alphabet (GOOGL,GOOG)

 Data-Related Revenue (% of Total Revenue): $116 billion (85%)

The first non-social media company on this list also happens to be the world’s largest digital advertiser, and therefore bears substantial exposure to a potential data dividend.

Alphabet (NASDAQ:GOOG,GOOGL) isn’t all digital advertising. The company has hardware, cloud, and AI-related businesses which aren’t built on the back of user data. But Alphabet is mostly digital advertising. Of the company’s near $140 billion in revenue last year, about 85% of it came from digital advertising through Google, YouTube, and other online ad networks and properties. Thus, if a data dividend were to be implemented, Alphabet would have to pay a large sum back to consumers.

This isn’t a big deal for GOOG stock. For starter’s, Google is the backbone of the internet, and YouTube is very sticky in the free, online entertainment world. Neither of those ad businesses will be hit that hard by a data dividend. Also, of all major digital advertising players, Alphabet is the one of the most diversified, with burgeoning businesses in cloud, hardware, and AI.

Overall, then, any negative impact on GOOG stock from a data dividend will be mitigated by growth drivers elsewhere in the business.

Yelp (YELP)

 Data-Related Revenue (% of Total Revenue): $907 million (96%)

Another company impacted by a potential data dividend isn’t known as a digital advertising giant, yet still derives a majority of its revenue from digital ads that leverage user data.

Yelp (NASDAQ:YELP) reported net revenue of roughly $943 million last year. About $907 million of that, or 96%, was from digital advertising. Thus, although Yelp doesn’t serve consumers ads in the same way that Facebook, Twitter, or Snap do, the company still runs ads based on user data, and those ads are the big driver of the company’s business. Consequently, a data dividend would theoretically be applied to Yelp’s entire business.

A data dividend is just another risk to add to the long list of things not to like about YELP stock, including valuation, competition, slowing growth, lack of scale, and lack of a moat. As such, there’s simply too much not to like here. The data dividend risk is just another reason to stay away from YELP stock.

Amazon (AMZN)

 Data-Related Revenue (% of Total Revenue): $10 billion (~4%)

Although the next company on this list also isn’t known as a digital advertising giant, it is quickly building out a giant digital advertising business which is theoretically subject to a data dividend.

Amazon (NASDAQ:AMZN) isn’t known for digital ads. The company is known as an e-commerce and cloud giant. Nonetheless, Amazon is leveraging its huge user-base and reach across Amazon, IMDb, and other digital properties to create a huge and rapidly growing digital ad business. That digital ad business generated $10 billion in revenue last year. To be sure, that’s less than 5% of Amazon’s total revenues. But it’s a much bigger portion of profits (digital ad sales have way higher profit margins than e-commerce sales).

That fact alone is why the data dividend is actually a sizable risk for AMZN stock. Amazon has been counting on ramp in the digital ad business to drive profits higher, while margins in the e-commerce business remain largely weak due to competition. If the digital ad business gets set back due to a data dividend, that would be a set back to the whole Amazon profit growth narrative. As such, while the data dividend risk isn’t a deal-breaker, it is something which AMZN investors should closely monitor.

Microsoft (MSFT)

 Data-Related Revenue (% of Total Revenue): More than $12 billion (more than 11%)

Last, but not least, is another big tech company which isn’t known for digital ads, but which nonetheless is one of America’s largest digital advertisers, and consequently has broad exposure to a potential data dividend.

Microsoft (NASDAQ:MSFT) isn’t known for digital advertising or using personal data to generate revenue. Still, the company has a big digital ad business. Microsoft’s search advertising revenues measured $7 billion last year. LinkedIn revenues were around $5.3 billion. The company also makes ad revenue through other segments, but doesn’t break that out. Thus, Microsoft’s total data-related ad revenues measured in excess of $12 billion last year, and likely closer towards $15-20 billion. That would represent about 15% of Microsoft’s total revenues.

Because Microsoft isn’t known for digital advertising, the data dividend risk isn’t a big deal for MSFT stock. The big growth narrative here is cloud, not digital ads. Thus, Microsoft can afford a set back in the digital ad business, so long as the cloud business remains healthy. At the end of the day, as go the cloud businesses, so goes MSFT stock.

As of this writing, Luke Lango was long FB, TWTR, GOOG, and AMZN.

7 March Madness Stocks to Consider for the Big Dance

Source: slgckgc via Flickr (modified)

The Big Dance is just around corner. I’m talking about March Madness, of course. The winner-take-all, single-elimination tournament to decide the champion of the 2019 NCAA Men’s Basketball season. Millions of viewers. Sixty eight teams. Dozens of venues. Six rounds. One winner.

Some call it the most exciting times of the year for sports fans. It may be. But the fact that the stock market tends to perform really well during March Madness isn’t up for debate. Stocks often tend to rise during the March Madness tournament, which spans throughout all of March and spills into April. They also tend to rise during that stretch by more than any other stretch during the year.

Maybe it’s just a coincidence. Maybe not. But, there are unarguably a handful of March Madness stocks which do directly benefit in a big way from the Big Dance.

Which stocks fall under that umbrella? Let’s take a look at seven March Madness stocks to track as the Big Dance plays out in March and April.

March Madness Stocks to Watch: Nike (NKE)

Of all March Madness stocks, the one to watch most is Nike (NYSE:NKE).

The athletic apparel giant has its fingertips all over the Big Dance. Nike consistently outfits somewhere north of 40 of the 68 teams that play in March Madness, representing about 60% of the tournament’s participants. That means that six out of every 10 jerseys, shoes, warm-ups and more in March Madness sports a Swoosh or Jumpman logo. So, for the millions of viewers who tune into March Madness every year, the Nike brand is everywhere. It also helps that this year’s top four teams (Gonzaga, Virginia, Duke and Kentucky) are all Nike schools.

Of course, this is huge for Nike basketball mind-share. That’s big for Nike’s entire business. Nike dominates the basketball market, and this dominance is a big driver behind Nike’s nearly $40 billion revenue base. As such, continued dominance in basketball will keep Nike atop the entire the athletic apparel market.

Adidas (ADDYY)

Although Nike is king in the basketball market, Adidas (OTCMKTS:ADDYY) is gradually making moves in this market which are becoming increasingly apparent during March Madness.

In 2015, Adidas outfitted just 11 of the 68 teams in March Madness. In 2017, Adidas outfitted 15 of the teams. This year, that number could very well be higher. Importantly, one of the nation’s top teams — Kansas — is an Adidas school.

As is the case for Nike, basketball is a huge market for Adidas, and a healthy presence in the Big Dance is a net positive for Adidas basketball mind-share. The benefits here are smaller than they are over at Nike, given smaller overall presence. But, if an Adidas team makes some serious noise in the Big Dance (like Kansas), then that could be a huge medium to long term win for ADDYY stock.

Under Armour (UAA)

When it comes March Madness stocks and athletic apparel brands, Nike is king, Adidas is a solid second place and Under Armour (NYSE:UAA) is the dark horse with a lot of potential.

Back in 2015, Under Armour outfitted just six of the 68 teams in the Dance. In 2017, that number doubled to 12. This year, that number could be even bigger. Texas Tech, an Under Armour school, has a fringe-top-10 basketball team this year. Meanwhile, both Maryland and Wisconsin — also Under Armour schools — are top 20 teams, and Cincinnati is a top 25 team. Thus, Under Armour has four teams this year which could make some serious noise in March.

If any of them do, that could be big for UAA stock. Under Armour has struggled in the basketball market ever since early red-hot success with NBA superstar Steph Curry faded. Surprise college basketball success in the 2019 Dance could reinvigorate the now-stalled-out Under Armour basketball growth trajectory. If it does, that could create sizable tailwinds for UAA stock.


Any discussion of March Madness stocks would be incomplete without CBS (NYSE:CBS), the network which hosts a healthy portion of the Dance’s 63 nationally televised games, including the most watched ones.

March Madness coverage averages millions of viewers per game, and most data indicates that those numbers are only going up. A healthy majority of those games air on CBS. Moreover, viewership goes up as the tournament narrows down, and some numbers point to the final games in the Big Dance averaging 15 million-plus viewers. All those final games are televised through CBS.

As such, CBS has a lot to gain through ad revenue and partnerships during March Madness. There’s reason to believe this year will have unusually large March Madness viewership, given the plethora of young talent across college basketball this year, the extreme level of parity among the teams, and the enormous hype surrounding college basketball’s best player, Zion Williamson. If March Madness does score unusually large viewership ratings this year, the biggest winner will be CBS stock.

AT&T (T)

There are 63 nationally televised games in March Madness. CBS doesn’t air all of them. In fact, a majority of the tournament’s early games are aired by Turner Sports, which is owned by AT&T(NYSE:T).

Through TBS, TNT and truTV, Turner Sports actually airs a majority of March Madness games in the first and second rounds, as well as half the games in the Sweet 16 and Elite 8. To be sure, those games average less viewers than the Final Four and Championship Game. Nonetheless, they still average millions of viewers per game, and represent a sizable ad revenue opportunity for AT&T.

As stated earlier, this year’s Dance could have unusually large viewership due to various factors, one of which is an unusually large amount of parity among this year’s field of teams. Higher parity usually lends itself to closer early round games, and also more upsets. That usually lends itself to higher viewership in the earlier rounds. As such, AT&T could actually be a big March Madness winner this year.

Coca-Cola (KO)

One company that consistently has its finger tips all over March Madness is Coca-Cola(NYSE:KO).

The beverage giant is one of the Dance’s official NCAA Corporate Champions, and that means that Coca-Cola TV ads and in-arena ads will be all over the place during March Madness. That’s a win for mind-share. It’s also worth noting that Coca-Cola owns Powerade, the sports drink brand which is typically front-and-center during the entire March Madness tournament.

This year is especially important for Coca-Cola. The company is under intense pressure regarding the health of some of its core drinks, including the staple Coca-Cola carbonated beverage. Thus, it has an opportunity this year to reduce that pressure via effective March Madness marketing. If they do, sales in North America could get a nice lift, and that could power gains in KO stock for the rest of the year.

Source: Investor Place

7 IPOs to Get Excited for in 2019

Source: Shutterstock

Calendar 2018 was a big year for initial public offerings, or IPOs. The number of IPOs in 2018 rose more than 20% year-over-year to nearly 230, the highest mark since 2014 and the third highest mark over the past ten years.

Yet, there’s reason to believe that 2018 was just the beginning of a multi-year IPO boom. Here’s the thing about the IPO market: it runs in cycles. Multiple consecutive years of low IPO volume are followed by multiple consecutive years of high IPO volume. From 2015 to 2017, we had three years of below-average IPO volume. Calendar 2018 broke that trend with 200-plus IPOs. History tells us that 2019 and 2020 should be more of the same.

Indeed, calendar 2019 should be one for the record books in the IPO market. The list of potential 2019 IPOs is long, diverse, and includes some of the biggest and fastest growing private companies. Those companies promise to make an unforgettable splash when they go public later this year.

More than that, I think many of these IPOs will be extremely successful. The batch of companies going public this year include the batch of companies that were birthed out of the Financial Crisis a decade ago. They are disruptive and innovative, and cut from a different cloth than current public companies. Most importantly, most of these companies are employing coordinated economic principles to give power back to the people, and in so doing, are aligned with the biggest trend of the century.

As such, not only does the 2019 IPO market project to be one for the record books, but it should also yield some big winners. With that in mind, let’s take a look at a list of seven IPOs that investors should be excited for in 2019.


At the head of this list is Uber, the ride-sharing company which has already entirely disrupted the transportation industry.

Investors should be excited about the Uber IPO because this company has truly optimized transportation services, and in so doing, has established a massive driver base which will be hard for anyone else to replicate, and from which multiple valuable business opportunities can be created. In a nutshell, Uber is the quintessential coordinator. Before Uber, transportation services were performed by the few (namely, taxis). Uber democratized the supply of transportation services, and said anyone with a car can now perform this service, creating a surge in supply. Uber coordinated that supply, so that it would satisfy demand-side expectations. Net result? Supply caught up to robust demand, price points fell, and convenience went up. Uber won.

Now, Uber has a driver base that numbers several million globally. Uber can use that unparalleled driver base to optimize price and convenience in other transportation-related industries, such as delivery and last-mile logistics. The sum potential of all these industries numbers in the hundreds of billions of dollars, and potentially even in the trillion dollar range if Uber wins the race to self-driving. As such, while Uber’s rumored $120 billion IPO valuation may drop some jaws, it’s worth it.


Uber isn’t the only ride-sharing company going public in 2019. In fact, before Uber ever hits public markets, its competitor Lyft should have already spent a few months on Wall Street.

Lyft is planning to launch its IPO roadshow in mid-March. That means that by the summer of 2019, Lyft should be a publicly traded company. That’s exciting news. Much like Uber, Lyft is a quintessential coordinator who has helped democratize and coordinate supply in the transportation industry to meet robust demand. In so doing, Lyft has huge opportunities in front it to not only become a solid second player in the ride-sharing market, but also the number one or number two company in a plethora of other transportation-related markets.

The attractive thing about the Lyft IPO is that the valuation is rumored to be under $25 billion. That is just a fraction of Uber’s valuation. To be sure, Uber is much bigger than Lyft in terms of total revenues and rides. But, Lyft is supposedly growing much more quickly than Uber, and the company has largely avoided negative press (much unlike Uber). Consequently, investors should be excited about the upcoming Lyft IPO, given its discounted valuation relative to Uber and that the company is apparently gaining share in ride-sharing.


The coordinated economy hasn’t just hit the transportation industry. It has also hit the accommodations industry, thanks to Airbnb, who also projects to go public in 2019.

Much like Uber, Airbnb has become a quintessential coordinator. Before, accommodation services were provided by the few (namely, hotels). Airbnb democratized supply in that market, and said that anyone who has an extra room or living space can rent it out for accommodation purposes. Supply surged. Airbnb coordinated that supply to satisfy demand-side expectations. Consequently, supply caught up to demand, prices fell, and convenience rose.

Much unlike Uber, however, Airbnb doesn’t have any big second competitor that is also set to IPO in 2019. Thus, the competition landscape for Airbnb is quite attractive for the foreseeable future. Also, Airbnb is in an optimal position to jump into other accommodation-related industries, like the travel and car rental industries, meaning the long term opportunity here is quite large.


Following in the footsteps of Uber, Postmates took those same coordinated economy principles and applied them specifically to the delivery process.

While you may be inclined to compare Postmates to food-delivery services including UberEatsand GrubHub (NYSE:GRUB), that’s not entirely accurate. Postmates will also deliver items from local stores such as groceries, alcohol, and other items–making for a nice moat. (Though for these other items, they may eventually have to compete with the likes of Amazon(NASDAQ:AMZN), which is no joke for any company, but for now, same-day delivery isn’t widespread and it isn’t under an hour or so wait time.) But the (prepared) food-delivery market will be really big one day (like $100 billion-plus big), and Postmates is maintaining steady double-digit market share. Plus, the current valuation on Postmates is reasonable ($1.85 billion).

Thus, in the big picture, Postmates is a solid growth company in a big growth industry. There’s some competition, but the valuation reflects those competitive risks, and is actually quite attractive considering the market growth potential. As such, the Postmates IPO is one to watch for later this year.


The last big social media app to IPO was Snap (NYSE:SNAP). That didn’t go too well. But, there’s reason to believe that the next big social media app to IPO, Pinterest, will have a different outcome.

Snap struggled for three reasons. The user base fell flat, engagement proved difficult to monetize, and margins were weak. Pinterest won’t have those problems. The platform has about 250 million monthly active users, and is growing that base at a fairly consistent 50 million new users per year. Also, given Pinterest’s curation focus, data indicates that engagement on the platform can be very easily monetized, as consumers are already using Pins to influence purchasing behavior. Perhaps most importantly, Pintrest’s gross margins are north of 45%.

All in all, Pinterest looks positioned for big success on Wall Street. User growth is healthy. Engagement is easily monetized. Margins are high. There’s a lot to like here, meaning that Pinterest stock will likely have a much better start on Wall Street than Snap stock.

Pinterest filed for IPO at the end of last week, seeking a valuation of at least $12 billion.


If you thought social networking was exclusive to the personal level, think again. Enterprise social networking, or ESN, is a rapidly expanding industry, and at the heart of all that growth is Slack, yet another company set to IPO in 2019.

One aspect of the cloud tech boom is the growing demand for enterprise cloud solutions tailored to addressing intra-business communication and workflow needs. ESN is the market which addresses those needs, as it includes a portfolio of platforms which allow for seamless intra-business communication and workflow sharing. The most popular of those platforms is Slack, which has gone from 365,000 daily active users to 10 million daily active users in just four years. Indeed, some say Slack is the fastest growing software-as-a-service (SaaS) company ever.

Going forward, there are two important things to note here. One, demand in the ESN space will only continue to grow. Two, Slack has beaten out competition from Facebook (NASDAQ:FB) in this space. As such, Slack has a proven ability to beat top-quality competition in a big growth market. That positions the company for robust growth for a lot longer, which roughly translates into Slack stock doing well on Wall Street. 


Peter Thiel is an important and impressive guy. He co-founded PayPal (NASDAQ:PYPL), and was the first major outside investor at Facebook. Now, his latest venture, Palantir (which Thiel founded in 2003), is set to go public in 2019.

At its core, Palantir provides solutions which enable companies of all sizes to make sense of big data. This is a very important service. Big data is of increasing importance when it comes to enterprise decision making. But, the quality of insights device from big data relies on the quality of analysis done on that big data. That’s where Palantir excels — providing the best of the best analysis on such data.

The long-term outlook for Palantir looks good. So long as data becomes increasingly important, Palantir’s services will have growing demand. The only big concern is competition. But, this market projects to be so big one day that it will support multiple players at scale. Consequently, the Palantir IPO should be successful.

As of this writing, Luke Lango was long GRUB, FB, and PYPL. 

Source: Investor Place

5 Stocks Under $5 to Buy Before They Soar

Source: Shutterstock

[Editor’s note: This story was originally published in August 2018. It has since been updated and republished.]

The stock market’s volatility in recent months has not made me less bullish on the five cheap stocks profiled in this article. Among these stocks, market movements can cause some noise. But the investment thesis on cheap stocks is predicated on huge moves higher in the long-term. Thus, in the near-term, macro-driven movements amount to nothing more than a sideshow.

From this perspective, now might be a good time to pile into some stocks under $5. These stocks are a high-risk bunch. But they do have high-reward potential, too.

With that in mind, here is a list of five cheap stocks, which I think have big upside potential.

Source: Shutterstock

Pier 1 (PIR)

PIR Stock Price: 88 cents

Furniture retailer Pier 1 Imports (NYSE:PIR) has had a tough time getting its act together for several years.

Peer Restoration Hardware (NYSE:RH) has seen its stock rise 30% over the past year thanks to a red-hot housing market and robust demand for home furnishings. PIR stock, however, has collapsed during that same stretch. These problems aren’t new. Over the past five years, this stock has lost more than 90% of its value.

Having said that, there is visibility for a turnaround in PIR stock in the near future.

At its core, Pier 1 has been killed by rising e-commerce threats creating huge pricing and traffic headwinds. Pier 1, which stands somewhat square in the middle of price and quality, doesn’t really have anything special about the business to protect against these headwinds. Consequently, sales and margins have dropped in a big way.

But, the company has a three-year strategic plan to turn the business around. The plan includes  bigger investments in omni-channel commerce capabilities and marketing.

No one knows whether this plan will actually work. But home furnishings is a market with enduring demand, so that helps.

Meanwhile, PIR stock is dirt cheap. This company used to have earnings power of $1 per share. Even half of that earnings power (50 cents) would be huge for a  stock trading under $1. At 50 cents per share in earnings power, it wouldn’t be unreasonable to see this stock hit $8 (a market-average 16x multiple).

Source: Shutterstock

Groupon (GRPN)

GRPN Stock Price: $3.50

Much like Pier 1, savings-king Groupon (NASDAQ:GRPN) feels like one of those companies that were loved yesterday but will be forgotten tomorrow. But I don’t think that’s true. I get that the savings and deals market is commoditized now. I also understand that Groupon really isn’t a household name for coupons like it used to be.

But I’m a numbers guy. And Groupon’s numbers are pretty good. Its margins are improving thanks to management’s focus on higher-margin businesses. Operating expenses are also being removed from the system, so the company’s overall profitability profile is improving.

Aside from the numbers, Groupon launched an aggressive advertising campaign last year with hyper-relevant Tiffany Haddish that scored just shy of 100 million views. I think this campaign will have a long-term positive effect on usage, which could drive the stock higher.

Put it all together, and it looks like GRPN stock could have a big-time rally in 2019.

Source: Brownpau via Flickr (Modified)

Zynga (ZNGA)

ZNGA Stock Price: $5.11

Note: ZNGA stock rose over $5 since this article was originally published.

I’m not a huge fan of the mobile gaming sector. It’s a tough space plagued with competition and low margins. Plus, competition is only building thanks to social media apps becoming increasingly multi-purpose.

But mobile gaming company Zynga (NASDAQ:ZNGA) seems to have found the key to success in the mobile gaming world.

Zynga used to be a mega-popular browser game company with tons of users. But then the company overreached by branching into games that had heavy overlap with the traditional video game market, like sports titles. They couldn’t compete in that market. Eventually, the over-extension sparked user churn, and ZNGA stock spiraled downward.

That forced Zynga to re-invent itself into something much more relevant and defensible. They did just that. Zynga has transitioned its business model from web-focused to mobile-first while narrowing its gaming title focus. This pivot has streamlined operations, re-invigorated top-line growth, cut costs and improved profitability.

Consequently, the numbers supporting Zynga are pretty good. In Q4, its revenue rose 7% year-over-year and its bookings jumped 19% YoY. Finally, its operating cash flow soared 241%.

From where I sit, this pivot appears to be in its early stages. Mobile is a secular growth narrative, and ZNGA has developed a gaming portfolio that is focused and tailored to that growth narrative. Thus, so long as mobile engagement heads higher, Zynga’s numbers should get better. Better numbers will inevitably lead to a higher stock price.


Arotech (ARTX)

ARTX Stock Price: $3.41

There is no hiding the fact that the defense sector has been hot under President Trump.

Trump came into office, upped the ante on defense and military spending, and in response, the whole world is spending more on defense and military.

Defense contractors win when this happens. That is why mega-cap defense contractors like Lockheed Martin (NYSE:LMT) and Boeing (NYSE:BA) have been on fire for the past several quarters.

But one micro-cap defense contractor that has missed out on this rally is Arotech (NASDAQ:ARTX). Over the past several years, the financials at Arotech haven’t gained any ground. Five years ago, its revenues were $103.5 million and its net income was $3.5 million. In 2017, its revenues were $98.7 million and its net income was $3.8 million.

In other words, its profits haven’t risen much in five years. When profits don’t go up, the stock tends not to go up. It is a simple relationship.

But its profits are stabilizing. When profits go from declining to stabilizing, they usually go to growth next.

And, when profits go up, stocks tend to go up.

As such, it looks like Arotech is finally joining the tide when it comes to big boosts in defense and military spending. This tide will inevitably lift Arotech’s earnings power substantially, and ARTX will rally as a result.

Source: Shutterstock

Blink Charging (BLNK)

BLNK Stock Price: $3.05

When it comes to cheap stocks, there are few as volatile as Blink Charging (NASDAQ:BLNK).

Over the past two years, BLNK stock has gone from $10 to $3, and popped from $4.50 to $8 … it now sits at a paltry $3.04. This volatility won’t give up any time soon. Thus, if you want to avoid volatility, I’d say avoid BLNK stock.

That being said, if this company’s secular growth narrative surrounding building a network of electric vehicle charging stations globally materializes within the next five years, this stock could be a 5-to-10 bagger.

It is a big risk. But, eventually, global infrastructure will need to match demand. At that point in time, there will be some huge contracts awarded to electric vehicle charging station companies.

Will Blink be one of them? Perhaps. Tough to tell. But if they do land some big contracts, this stock could have another huge pop in a short amount of time.

As of this writing, Luke Lango was long FB, PIR, GRPN and ARTX.

Source: Investor Place

Why Walmart Stock Will Rally to $115 In 2019

Pros and Cons to Buying Walmart Stock Ahead of the Holidays
Source: Shutterstock

Shares of Walmart (NYSE:WMT) rose on Feb. 19, after the big-box retailer reported fourth-quarter numbers that largely topped expectations. Management also doubled down on a healthy fiscal 2020 guide that implies continued strength across the entire business. Walmart stock traded more than 3% higher in response to the news.

Why Walmart Stock Will Rally to $115 In 2019

Source: Shutterstock

This rally has legs to keep going.

In the big picture, Walmart has rapidly transformed itself into an omnichannel retailer that is more than holding its own in the top retail dog fight with Amazon (NASDAQ:AMZN).

Many of the company’s new growth initiatives, including e-commerce enhancements and product expansions, are still in their early innings and will continue to drive healthy growth over the next several years. Plus, the company’s acquisition of Flipkart puts Walmart front and center of the world’s hottest and fastest growing consumer retail market.

Overall, there’s a lot to like about Walmart stock in the long run. Current fundamentals imply that Walmart can and will continue to grow revenues and profits at a healthy rate over the next several years. If so, then that means Walmart stock has runway to $115 in calendar 2019.

As such, buyers here won’t be disappointed. The rally in Walmart stock is far from over.

Fourth-Quarter Earnings Underscore Enduring Strengths

When it comes to retail, two things matter most: price and convenience. Those two things never stop mattering most, either. Consumers always want low prices. They also always want high convenience. Thus, so long as a retailer dominates on price and convenience, that retailer will succeed.

Walmart has been the poster child for low prices and high convenience for a long time. But, Amazon (and e-commerce in general) threatened Walmart’s dominance in those categories by making things cheaper, and by allowing consumers to buy those things from their computers or phones. Walmart naturally lost market share.

But, over the past several quarters, Walmart has adapted. They’ve slashed prices and built out a robust e-commerce business that includes things like “buy online, pick up in store”. As such, Walmart has regained a shared dominance with Amazon on the price and convenience fronts, and Walmart’s numbers have consequently improved.

In the fourth quarter, comparable sales rose 4.2%. That’s a strong mark for any retailer, especially one of Walmart’s size. On a two-year stack basis, comparable sales rose nearly 7%, and that’s the best mark in nine years for Walmart. Traffic growth is positive. Ticket growth is positive. E-commerce growth is red hot. On top of all that, margins are rising, too, for the first time in a long while, as improved top-line results are allowing for expense leverage.

Overall, through developing a robust omnichannel business, Walmart has regained dominance on the price and convenience fronts, and in so doing, has recharged growth throughout the whole business.

Walmart Stock Has More Upside Left

At current levels, Walmart stock has room to move higher over the next several months as revenues and margins move higher, too.

In fiscal 2019, comparable sales rose 3.6%, the best comp mark in years for this company. Next year, comparable sales growth is expected to slow, but not by much (2.75%). Also, revenue growth is expected to remain stable at a multi-year high of 3%-plus. Digital sales growth is guided to remain north of 30%. Margins are expected to move higher, too, excluding one-offs.

In sum, the growth narrative at Walmart is simply getting better. This is turning back into a low single-digit revenue and comparable sales growth narrative with gradually improving margins. Established market growth will inevitably slow over the next several years as current growth initiatives mature. But, such slowing growth will likely be offset by a developing market ramp, especially in India.

As such, Walmart will remain a low single-digit revenue growth company with gradually improving margins for the foreseeable future. Under those modeling assumptions, $7.80 in earnings-per-share seems achievable by fiscal 2025. Based on a historically average 20 forward multiple, that equates to a fiscal 2024 price target of $156. Discounted back by 8% per year (2 points below my average 10% discount rate to account for the yield), that equates to a fiscal 2020 price target for Walmart stock of roughly $115.

Bottom Line on WMT Stock

Walmart has regained its dominance on the price and convenience fronts. So long as Walmart maintains this dominance, the numbers will remain good, and the stock will head higher. Under reasonable growth assumptions, Walmart stock should move towards $115 over the next twelve months.

As of this writing, Luke Lango was long WMT and AMZN.

Source: Investor Place

7 Forever Stocks for Long-Term Gains

Source: Shutterstock

Trying to “beat the market” is a tough game on a day-to-day basis. Financial markets are volatile. They’ll swing higher one day and then fall the next day. Sometimes, we don’t even know why they move the way they do. They just move. And, because it’s nearly impossible to explain every day-to-day move on Wall Street, it’s equally impossible for even the sharpest minds to predict day-to-day moves in stocks with great accuracy.

Thus, trying to “beat the market” on a day-to-day basis is an uphill battle. But, if you zoom out and take a long-term approach to investing, you turn that uphill battle into an even playing field. Longer-term trends in stocks are often easier to predict because they almost always track fundamentals and narratives, and fundamentals and narratives are tangible enough that investors can — with practice and discipline — predict them with great accuracy.

As such, successful investors often tend to take the Warren Buffet approach and buy stocks of companies that have healthy long-term growth prospects, under the idea that healthy long-term growth will translate into a substantially higher stock price over time.

I have a special name for the cream-of-the-crop stocks in the long-term winners basket: forever stocks. Forever stocks are the classification of stocks that are not just long-term winners, but are also aligned with powerful and long-running secular growth trends, and have proven leadership within that trend. Thus, forever stocks project with high certainty to be long-term winners for a lot longer. Theoretically, they project to be winners “forever”.

These forever stocks are the best stocks to buy and hold for long-term investors. They will be highly volatile in the near term. But, such volatility will amount to nothing more than noise in the big picture. In that big picture, forever stocks will only head higher.

With that mind, let’s take a look at seven forever stocks to consider for the long haul.

Forever Stocks to Buy: Facebook (FB)

Source: Shutterstock

Facebook (FB)

Secular Trend: Persistent internet addiction

Big Idea: The big idea behind the forever bull thesis in Facebook (NASDAQ:FB) starts with the fact that consumers are addicted to the internet. There have been multiple calls for this addiction to break over the past several years. It hasn’t. Instead, internet usage has gone up because the internet provides the easiest, most convenient and cheapest way to perform a great number of tasks.

Consumers spend most of their internet time on the digital properties that Facebook owns. That means that an addiction to the internet and an addiction to Facebook’s digital properties run parallel to one another. This will remain true for the foreseeable future. As such, the number of users on Facebook’s properties and the volume of ad dollars flowing through those properties will only go up over time. As they do, Facebook’s revenues and profits will steadily rise, and so will FB stock.

Forever Stocks to Buy: Shopify (SHOP)

Source: Shopify via Flickr

Shopify (SHOP)

Secular Trend: Democratization of e-commerce in the coordinated economy

Big Idea: The big idea behind the forever bull thesis in Shopify (NYSE:SHOP) starts with the fact that the world is becoming increasingly democratized and decentralized. This concept is very simple. Companies far and wide are leveraging technology, which allows for unprecedented connectivity, to democratize supply and distribution processes globally. Think Uber, which democratized driving services so that anyone with a car could do it, or Airbnb, which democratized accommodation services so that anyone with an extra room could do it. I like to call this movement the coordinated economy since beyond democratizing services, these companies are also coordinating these services to create optimal outcomes on both the supply and demand side of the equation.

Shopify is doing this exact same thing in the commerce world. The company is democratizing selling services so that anyone with a product can sell it. They are also coordinating such services by creating a connected web of independent buyers and sellers. In so doing, Shopify is creating the building blocks for a new era of democratized commerce where we don’t buy everything from Amazon (NASDAQ:AMZN). As this democratization process plays out over the next several years (and it most certainly will, given that Amazon can’t control 50% of the U.S. e-commerce market forever), Shopify’s merchant volume, revenues and profits will rise by leaps and bounds. As they do, SHOP stock will rise, too.

Forever Stocks to Buy: Twilio (TWLO)

Source: Web Summit Via Flickr

Twilio (TWLO)

Secular Trend: Growing demand for cloud communication services

Big Idea: The big idea behind the forever bull thesis in Twilio (NASDAQ:TWLO) is that the world is becomingly increasingly connected, and as it does, the desire for cloud-based communication services will go from “want” to “need”. This market that involves these services is broadly defined as the Communication Platforms-as-a-Service (CPaaS) market, and it consists of companies integrating real-time communication services into their operations. Perhaps the most tangible example of this is when Uber or Lyft sends you messages to communicate that your ride has arrived.

Nuanced communication services like this will be increasingly integrated at greater scale over the next several years across various industries because, no matter the industry, one theme is constant: consumers and companies alike are becoming more connected than ever. Twilio has emerged as the unchallenged leader in this space. The customer base is growing by over 30%. Revenues are growing by nearly 70%. The retention rate is 95% and up. In other words, everything is going right for this company, and it will continue to go right as the CPaaS market goes from niche to mainstream over the next several years. 

Forever Stocks to Buy: The Trade Desk (TTD)

Source: Shutterstock

The Trade Desk (TTD)

Secular Trend: Pivot toward programmatic advertising

Big Idea: The big idea behind the forever bull thesis in The Trade Desk (NASDAQ:TTD) starts with the fact that technology is rapidly automating multiple jobs and processes across the enterprise ecosystem. This includes the process of buying and selling ads. Before, the ad transaction process was laborious, lengthy and included several human parties. Today, though, enterprises can now buy ads instantaneously and without friction or the high costs using computers.

This new method of using AI and machines to buy and sell ads is called programmatic advertising. It’s the future of advertising. Eventually, given the low-friction and low-cost advantages of programmatic advertising, all $1 trillion worth of ad spend globally will be transacted programmatically. At the forefront of this market is Trade Desk, a company which has distinguished itself as the programmatic advertising leader. As such, as the programmatic advertising method goes global over the next several years, Trade Desk will remain a huge grower and TTD stock will head higher.

Forever Stocks to Buy: Amazon (AMZN)

Source: Shutterstock

Amazon (AMZN)

Secular Trend: Nearly everything

Big Idea: The big idea behind the forever bull thesis in Amazon is that this company is at the forefront of nearly every one of tomorrow’s most important markets. E-commerce? Amazon already dominates there. Cloud? Amazon already dominates there, too. Offline retail? Amazon is rapidly expanding its presence. Automation? Amazon is already automating its warehouses, and just made a big investment into self-driving car company Aurora. AI? Amazon dominates the voice assistant market. Pharma? Amazon has all the licenses it needs to launch a nation-wide e-pharmacy business. Digital advertising? Amazon’s digital ad business is the fastest growing among major players in the space. Streaming? Amazon is No. 2 in this market behind Netflix(NASDAQ:NFLX)

In other words, Amazon has its fingertips everywhere it matters. Inevitably, one or many of these growth initiatives will turn into a multi-billion dollar business (if they aren’t already). A few big breakthroughs in automation, pharma or AI will help offset slowing growth in e-commerce and keep Amazon a big growth business for a lot longer. That will push AMZN stock way higher in the long run.

Forever Stocks to Buy: Adobe (ADBE)

Source: Shutterstock

Forever Stocks to Buy: Adobe (ADBE)

Secular Trend: Shift towards a visual and experience economy

Big Idea: The big idea behind the forever bull thesis in Adobe (NASDAQ:ADBE) starts with the idea that the world is becoming increasingly visual-centric. You can thank Instagram, Snapchat and YouTube for bringing this out recently, but the desire has always been there. The saying “a picture paints a thousand words” has been around for a long time. Now, that saying is turning into action as consumers globally are becoming increasingly obsessed with visual everything.

When it comes to visual everything, there’s one company in the world that stands out above the rest in terms of creating visual everything content: Adobe. Adobe has developed a reputation as being a second-to-none provider of visual everything solutions for creative professionals. Now, the company is leveraging that experience to create visual everything cloud solutions. These cloud solutions will be met with increasing demand as enterprises increasingly seek visual everything solutions to connect with consumers. As such, Adobe will benefit from a continued visual cloud demand surge over the next several years, and that will help keep ADBE stock on a winning trajectory.

Forever Stocks to Buy: Square (SQ)

Source: Via Square

Forever Stocks to Buy: Square (SQ)

Secular Trend: Rise in card and digital payments

Big Idea: The big idea behind the forever bull thesis in Square (NYSE:SQ) starts with the fact that cash is history. A few years ago, your average consumer almost always carried a wallet or purse that had at least some cash. Today, that’s no longer true. A majority of young, 30-and-under consumers I come across don’t carry cash. Instead, they have their phone and their payment card(s), and intend to pay for things exclusively through one of those items.

Retail shops have had to adjust to this cashless revolution, and Square has helped them. Square provides machines that facilitate cashless transactions. First, they simply helped facilitate brick-and-mortar cashless transactions. Now, they are helping facilitate e-commerce transactions, too. In other words, everywhere the consumer is, Square is there, too, helping them facilitate a cashless transaction. This is an extremely valuable position to be in for the foreseeable future, as cash truly becomes a relic in the modern economy. As it does, Square’s payment volume will surge higher, and SQ stock will stay on an uptrend.

As of this writing, Luke Lango was long FB, SHOP, TWLO, TTD, AMZN, NFLX, ADBE and SQ.