Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.
Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.
Stock number one is:
Under Armour Inc., (SYMBOL: UA) and the headline says:
First Quarter: Another Sales Beat, Though Outlook Tepid (Morgan Stanley)
Rapidly growing sports apparel company Under Armour Incorporated reported first quarter sales up 23%, slightly above Wall Street expectations. Net income decreased 47% due to planned marketing expenditures.
Morgan Stanley Research reports that sales growth is being driven by “new product innovations, new retail programs, and global expansion.” However, Morgan Stanley is concerned about stagnant margins keeping the share price in check.
Under Armour’s earnings per share are expected to grow 20 – 26% per year for the next three years. The PE is 38, in a 7-year range of 13-70. The stock has been trading between $44 ½ and $60 for 14 months.
Our Ransom Note trendline says: BUY UNDER ARMOUR BELOW $52
Stock number two is:
Amazon.com Inc., (SYMBOL: AMZN) and the headline says:
Amazon Facing Foreign Exchange Headwinds (Dow Jones Newswire)
Dominant internet retailer Amazon.com will see earnings impacted this year by unfavorable foreign exchange trends and poor European economies. However, Bank of America Merrill Lynch still expects gross profit to grow over 30% this year.
After taking a small loss in 2012, Amazon is expected to earn $1.47 per share this year, rapidly increasing to $6.97 per share in 2015. That gives the stock a PE of 177 today, and a forward PE of 37.
The stock has been trading between $252 and $284 this year. With a super-high PE and a slowly evolving earnings pattern,
Our Ransom Note trendline says: STAY ON THE SIDELINES.
Stock number three is:
Microsoft Corp., (SYMBOL: MSFT) and the headline says:
ValueAct takes $2 billion Microsoft stake (CNBC)
“Activist investor ValueAct Capital has taken a $2 billion stake in Microsoft Corp, CNBC reported on Monday.” ValueAct typically invests in companies which it deems to be fundamentally undervalued. Microsoft is a very profitable company with revenues growing annually.
Microsoft’s earnings per share are expected to be flat this year, then grow 13% and 9% in the next two years. The PE has ranged from 9 to 19 over the last five years, and is currently 11.2. The dividend yield is 3.20%.
On April 11, we reported that the stock has been trading sideways for over ten years; currently trading between $26 and $33. Based on flat earnings projections and a sideways chart,
Our Ransom Note trendline says: STAY ON THE SIDELINES.
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