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The Facts and Figures on Alibaba Group Holding Ltd. ADR (NYSE: BABA)

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In the spirit of strong objective analysis, we are going to take a close look at Alibaba Group Holding Ltd. ADR (NYSE: BABA) from a technical chartist point of view today.

In short, technical analysis assumes that all publicly available facts about a stock are already discounted by knowledgeable buyers and sellers. And it is from there that the real work begins: examining the stocks behavior on the chart.

As such, we will begin with a quick check of the primary oscillators: the 14-day Relative Strength Indicator (RSI) and the 20-day fast stochastic. Both of these measures report on the degree to which a security is overbought or oversold ie, whether it has gone too far too fast in one direction or the other, and some kind of mean-reversion is called for. In each case, an indicator score of above 75 is considered overbought, while a score under 25 is considered oversold. In the case of Alibaba Group Holding Ltd. ADR, the 14-day RSI stands at 62.86%, while the past month of action shows a score of 87.53% on the fast stochastic.

Well, what if we now look away from mean-reversion and towards the concept of trend That comprises our next step. To do this, we will start off by examining the most common systematic technical method of determining the direction of long-term trend in a stock: moving averages.

In the most basic sense, we can see that BABA has recently been exhibiting a bearing on the chart that suggests an overall bullish mode of behavior. This read comes from a look at the relative positioning of the 50-day and 200-day simple moving averages: if the 50-day is trading above the 200-day, momentum is to the upside making a bull case for trend; if the 50-day is trading below the 200-day, momentum is to the downside, making a bear case for trend. In this example, that system makes a bullish case, which naturally implies a positive money flow scenario for the stock.

So, we’ve spent some time looking at price as a factor. But what about volume In fact, many technicians view volume as more important than price. Volume defines the total level of participation involved in a stock. Its a coefficient of meaning that should be metaphorically multiplied times price action to equal conviction. In this case, we want to examine relative volume measures to get a feel for interest in the stock of late. Right now, this stock has been showing weak relative volume, which indicates lack of interest among those making a market for shares of the stock.

Next, we will turn to key levels. We always like to start this with a look at the key Fib levels. Fib refers to Fibonacci, which is the number series that works toward a ratio limit of the Golden Ratio, often found as a key in nature as well as markets. In this case, the critical 38.2% level drawn off the 52-week high of $188.88 sits at $149.58. BABA also has additional resistance above at the stocks 200-day simple moving average, which sits at $ 136.82.

While price action, trends, and volume are important, for traders, volatility may be as important as anything in defining the potential opportunity in a stock. Hence, we want to take a moment and consider this stocks overall range of movement, as well as its relative performance.

BABA has moved $+6.79 over the past month or so. Over the trailing 100 days, the stock is outperforming the S&P 500 by 27.61%. This movement has come on a more volatile bearing from one day to the next relative to the broader market, according to the stocks 36-month beta. Similarly, we can see that the stocks recent action has come on a historical volatility score of 26.61%. To get that score, one has to take the standard deviation of returns for a random trading input assuming buying the stock at a given average price during the specified period.

On a more basic level, one might look at the 20-day ATR as a percentage of its 20-day moving average. That measure gives us a volatility score of 2.27%. Naturally, we will continue to keep close tabs on the stock and update this picture again soon.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Business

Sirius XM Holdings Inc. (SIRI) A Bull’s Tale of the Day

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In the ever-evolving process of understanding what a stock is truly worth, we are going to look at Sirius XM Holdings Inc. (SIRI) today from the standpoint of its EV/Rev ratio to see just what the company’s current market valuation implies about its worth as a take-out candidate. The EV/Rev ratio is also known as the Enterprise Value-to-Revenue ratio. It’s an alternative to price-to-sales that offers advantages by accounting for cash and debt.

In fact, one might suggest that the best way to achieve this is through taking a look at the company’s price-to-sales ratio (in this case, we are talking about 5.17). However, the problem with this measure, as noted above, is that it doesn’t consider the balance sheet as a tangible item.

For example, if you were to walk into company headquarters tomorrow and negotiate a deal to outright purchase Sirius XM Holdings Inc, you would know you were going to own the company’s cash, and also take on its liabilities as your own. So, the balance sheet is part of the value of the company, and there’s no getting around it.

That’s why we might consider the company’s enterprise-value-to-revenue ratio as a superior means of valuing its current operational flows than price-to-sales. And in today’s innovation-driven market, operational flows seem to rule the day.

In this case, Sirius XM Holdings Inc is currently in possession of an enterprise value of 34.66B. That number is derived from the company’s market cap (which is currently at 28.074B) minus its cash and equivalents (which currently sit at roughly 69.02M) plus its outstanding debt (now at 6.75B). Occasionally, you will see this number include minority interest and preferreds. However, let’s keep it simple today.

That gives us one half of the equation. The other half is the trailing-year revenues. For Sirius XM Holdings Inc, we are talking about 5.43B. We use the trailing revenues to avoid having to consider potential inflections in the environment or flaws in company or analyst outlooks. 

When we put them together, we get an EV/Rev ratio of 6.39.

It has been suggested that this method of valuing stocks struggles with unproven names such as penny stocks because they often have a checkered history in terms of operational success, and therefore, can end up with negative enterprise value. In other words, they have such small market caps that the balance sheet becomes the principal factor in the equation. And balance sheets can be highly variable from stock to stock in ways that may be misleading when trying to chase down the concept of “intrinsic value”.

Otherwise, investors may prefer other means of attempting to nail down the value of Sirius XM Holdings Inc, including standard forward P/E (which comes in at 22.32), trailing P/E (which comes in at 44.64), price-to-sales, as we noted above (coming in at 5.17, price-to-book (which currently sits at N/A), and enterprise value-to-EBITDA (17.46) — which represents the ratio of the EV to the company’s earnings before interest, taxes, depreciation, and amortization.

In any case, however you choose to nail down the valuation of a company, you are probably first going to need to admit that there is no one perfect answer.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Could this be a game changer for Telefonaktiebolaget LM Ericsson (publ) (ERIC)

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In the ever-evolving process of understanding what a stock is truly worth, we are going to look at Telefonaktiebolaget LM Ericsson (publ) (ERIC) today from the standpoint of its EV/Rev ratio to see just what the company’s current market valuation implies about its worth as a take-out candidate. The EV/Rev ratio is also known as the Enterprise Value-to-Revenue ratio. It’s an alternative to price-to-sales that offers advantages by accounting for cash and debt.

In fact, one might suggest that the best way to achieve this is through taking a look at the company’s price-to-sales ratio (in this case, we are talking about 1.05). However, the problem with this measure, as noted above, is that it doesn’t consider the balance sheet as a tangible item.

For example, if you were to walk into company headquarters tomorrow and negotiate a deal to outright purchase Telefonaktiebolaget LM Ericsson (publ) (ERIC), you would know you were going to own the company’s cash, and also take on its liabilities as your own. So, the balance sheet is part of the value of the company, and there’s no getting around it.

That’s why we might consider the company’s enterprise-value-to-revenue ratio as a superior means of valuing its current operational flows than price-to-sales. And in today’s innovation-driven market, operational flows seem to rule the day.

In this case, Telefonaktiebolaget LM Ericsson (publ) (ERIC) is currently in possession of an enterprise value of 19.78B. That number is derived from the company’s market cap (which is currently at 25.104B) minus its cash and equivalents (which currently sit at roughly 5.07B) plus its outstanding debt (now at 3.96B). Occasionally, you will see this number include minority interest and preferreds. However, let’s keep it simple today.

That gives us one half of the equation. The other half is the trailing-year revenues. For Telefonaktiebolaget LM Ericsson (publ) (ERIC), we are talking about 23.98B. We use the trailing revenues to avoid having to consider potential inflections in the environment or flaws in company or analyst outlooks. 

When we put them together, we get an EV/Rev ratio of 0.82.

It has been suggested that this method of valuing stocks struggles with unproven names such as penny stocks because they often have a checkered history in terms of operational success, and therefore, can end up with negative enterprise value. In other words, they have such small market caps that the balance sheet becomes the principal factor in the equation. And balance sheets can be highly variable from stock to stock in ways that may be misleading when trying to chase down the concept of “intrinsic value”.

Otherwise, investors may prefer other means of attempting to nail down the value of Telefonaktiebolaget LM Ericsson (publ) (ERIC), including standard forward P/E (which comes in at 24.03), trailing P/E (which comes in at N/A), price-to-sales, as we noted above (coming in at 1.05, price-to-book (which currently sits at 2.13), and enterprise value-to-EBITDA (-27.08) — which represents the ratio of the EV to the company’s earnings before interest, taxes, depreciation, and amortization.

In any case, however you choose to nail down the valuation of a company, you are probably first going to need to admit that there is no one perfect answer.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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Why are Investors Eyeing Netflix, Inc. (NFLX) Before the Earnings ?

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The Klein Law Firm Reminds Shareholders of a Class Action Filed on Behalf of Netflix, Inc. Shareholders and a Lead Plaintiff Deadline of May 1, 2017 (NFLX)

In the previous trading session, stock of Netflix, Inc. (NFLX) opened at $306.37 and last traded at $310.50 x 400. More than 14,360,568 shares exchanged hands compared to an average daily volume of 11,946,866 shares. At the current pps, the market capitalization stands at 132.901B. Analyst are currently predicting a target of $286.62 for Netflix, Inc.

Investors try to use stocks with high beta values to quickly recoup their investments after sharp market losses. Netflix, Inc. (NFLX) currently has a Beta value of 1.38 . Beta is a measurement of a stock’s price fluctuations, which is often called volatility and is used by investors to gauge how quickly a stock’s price will rise or fall. A stock with a beta of greater than 1.0 is riskier and has greater price fluctuations, while stocks with beta values of less than 1.0 are steadier and generally larger companies. Beta is often measured against the S&P; 500 index. An S&P; 500 stock with a beta of 2.0 produced a 20 percent increase in returns during a period of time when the S&P; 500 Index grew only 10 percent. This same measurement also means the stock would lose 20 percent when the market dropped by only 10 percent.

Next, let’s take a look at Netflix, Inc current P/E ratio. Netflix, Inc. (NFLX) currently has a PE ratio of 205.21 . PE ratio is an important parameter to look at when trading a stock mostly because it is easy to calculate. There are a couple of ways to calculate PE ratio either by dividing share price by earnings per share or dividing the market cap by net income. It is important to note that the earnings are usually taken from the trailing twelve months (TTM). Nevertheless, P/E tells us how much an investor is willing to pay for $1 of a company’s earnings. The long-term average P/E is around 15, so on average, investors are willing to pay $15 for every dollar of earnings. Another useful way to look at this: Turn the P/E ratio around to look at the E/P ratio, which when expressed as a percentage gives us the earnings yield. For instance: 1/15 gives us an earnings yield of 6.67%.

While we have already looked at Netflix, Inc beta and P/E ratio, the EPS cannot be ignored. Netflix, Inc EPS for the trailing twelve months was 1.25. Traders and investors often use earnings per share (TTM) to determine a company’s profitability for the past year. So in essence, EPS is the amount of a company’s net income per share of common stock. Earnings per share equal the company’s net income less any dividends paid on preferred stock divided by the weighted average number of common stock shares outstanding during the year. Netflix, Inc is estimated to release its next earnings report on Jul 16, 2018 – Jul 20, 2018. It would be interesting to see how the earnings fair out considering the recent developments.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of argusjournal.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please click HERE

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