Nasdaq Markets

Image source: The Motley Fool.

Image source: The Motley Fool.

Charts, just like looks, can be deceiving. Since bottoming out on March 20 during COVID-19’s peak destruction of the market, shares of chipmaker Micron (MU) have appreciated by 43%. You would think those are some excellent returns but dig a little deeper and you find Micron has underperformed. Compared to the SOX (the Philadelphia SE Semiconductor Index) - the sector’s barometer for overall performance - Micron is down by 18% in the period.

However, Needham analyst Rajvindra Gill doesn’t expect Micron to underperform for long. Over the next few years, several tailwinds associated with the ramping up of 5G networks should provide a boost for the memory chip specialist.

One of these concerns China’s 5G base station deployments. During 2020 and 2021, China is expected to establish 600,000 base stations, but peak deployments will occur further down the line. During 2022 and 2023, Gill expects 1.35 million base stations to be deployed each year.

Why does this benefit Micron? According to Gill’s checks, these units will bring with them a significant increase in memory consumption and therefore a need for DRAM (memory), which Micron will provide.

But that only tells half the story, and what Gill considers the smaller half of Micron’s 5G opportunity. The smartphone 5G cycle is heating up and as a provider of both DRAM and NAND (storage), Micron stands to gain.

As the 5-star analyst said, “We continue to view 5G handsets as the area of 5G where MU will see the biggest benefit. We expect the transition to 5G to drive significant growth in NAND and DRAM content in smartphones, with the biggest content growth in low-to-mid range handsets.”

With the 5G cycle kicking off this year, Gill expects “strong unit growth” in 2021, with further growth each year, all the way through to 2024. The trend is already gathering speed as demand for 5G units is outstripping consumers’ demand for other phones.

“For instance,” Gill noted “According to recent data, 40% of mobile phones sold in China in April were 5G phones. We expect 200-250MM 5G handsets in 2020 and ~450MM 5G handsets in 2021.”

Gill’s confidence in Micron is rewarded with the reiteration of a Buy rating and a $70 price target. Upside from current levels is 36%. (To watch Gill’s track record, click here)

Looking at the consensus breakdown, 18 Buys, 7 Holds and 1 Sell coalesce to a Moderate Buy consensus rating. There’s potential for 28% of upside, should the $66 average price target be met over the next 12 months. (See Micron stock analysis on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

(RTTNews) - Indian shares opened on a positive note Thursday, tracking mixed global cues as investors keep an eye on surging coronavirus cases around the world, rising U.S.-China tensions and the slow progress being made by U.S. lawmakers in drafting a new stimulus package.

Image source: The Motley Fool.

Image source: The Motley Fool.

(RTTNews) - Asian stock markets are mixed on Thursday as the positive cues overnight from Wall Street was offset by worries about rising tensions between the U.S. and China after the U.S. asked Beijing to close its diplomatic consulate in Houston within the next 72 hours. Chines

HONG KONG (Reuters Breakingviews) - Hong Kong and London could soon have more in common. The recently enacted national security law reduces the relative appeal of the Asian financial hub, just as Brexit has done to the British capital. Deutsche Bank’s new regional chie

Outperforming comes with a price, too. In the months leading up to Snap’s (SNAP) 2Q20 earnings call, shares of the disappearing photo app had been on a supercharged run up, increasing since the March meltdown by a massive 200% and boosted by a strong Q1 earnings report. But Tuesday’s Q2 print failed to impress and following the quarterly statement’s release, a selloff ensued.

More than any other social media platform, Snap has benefited the most from COVID-19’s disruption. And that success is partly to blame for the deflated reaction to the latest report; Simply put, Snap couldn’t match Q1’s outstanding results.

So, what spooked investors? Snap beat top line estimates by bringing in revenue of $454 million, a year-over-year increase of 17% and ahead of the Street’s call for $444.5 million. Snap also increased the all-important DAUs (daily active users) in Q2 by 17% - up to 238 million. But this is where Snap becomes a victim of its own success.

During Q1’s earnings call in April, management called for 239 million DAUs in Q2, so the figure reported didn’t quite make the cut (while also coming in just below the Street’s 238.5 million estimate). Additionally, the 17% growth is below the previous quarter’s 20% increase. So, basically Snap’s growth rate is slowing down.

Add into the mix a net loss expanding from last year’s $255 million to $326 million and EBITDA dropping from -$79 million to -$96 million, and you can see why some might be worried.

However, for Rosenblatt Securities analyst Mark Zgutowicz, the mixed results are no reason to ring the alarm bells. Buoyed by Snap’s “resilient”  DR (direct response) ad mix, the 5-star analyst is not overly bothered about DAU growth, and said, “While some concerns were raised with near-term DAU growth, we ultimately see scale driven by more advertisers and more creative ad units, which Snap continues to bring to the table… Snap’s ads platform is benefitting from non-seasonal ecommerce advertiser strength, which appears to be sustaining, if not gaining, momentum in 3Q.”

Accordingly, Zgutowicz reiterated a Buy along with a $30 price target. Investors could be pocketing gains in the shape of 30%, should Zgutowicz’s target be met over the next 12 months. (To watch Zgutowicz’s track record, click here)

Now, what about the rest of the Street’s thoughts on Snap? A Moderate buy consensus rating is based on 19 Buys, 8 Holds and 1 Sell. The analysts’ average price target hits $26.34 and implies potential upside of nearly 13% in the year ahead. (See Snap stock-price forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

(RTTNews) - SL Green Realty Corp. (SLG) reported net income attributable to common stockholders for the second-quarter ended June 30, 2020 dropped to $56.4 million or $0.74 per share, from $161.1 million or $1.94 per share last year.

Image source: The Motley Fool.

Image source: The Motley Fool.

(RTTNews) - Indian shares are seen opening higher on Thursday after Pfizer Inc. and BioNTech signed a $2 billion deal to supply their experimental coronavirus vaccine to the U.S. government.

(RTTNews) - Sun Communities Inc. (SUI) reported that its second-quarter net income attributable to common stockholders rose to $58.9 million or $0.61 per share, from $40.4 million or $0.46 per share last year.

(RTTNews) - Suncor Energy Inc. (SU, SU.TO) reported a net loss of C$614 million or C$0.40 per share in the second quarter of 2020, compared to net earnings of C$2.729 billion or C$1.74 per share in the prior year quarter.

Image source: The Motley Fool.

(RTTNews) - The Thai stock market has alternated between positive and negative finishes through the last six trading days since the end of the two-day slide in which it had fallen more than 20 points or 1.7 percent. The Stock Exchange of Thailand now rests just above the 1,355-p

With the Q2 earnings report, Delta Air Lines (DAL) reported some huge under the surface improvements in the business. The market remains highly negative on the airline stock as quarantines slapped on passengers going to New York stall the traffic rebound.

The airline has been able to reduce the daily cash burn rate to levels that are no longer dire. With a huge liquidity position, investors can start playing the normalized earnings game in the next couple of years.

Eliminating Cash Burn

Not long ago, airlines like Delta panicked the market with discussions of daily cash burn levels of $100 million. The airline sector had seen an unprecedented collapse in traffic due to a virtual shutdown of the economy and the majority of tourist destinations.

It didn’t help that airlines provided prognoses based on zero-revenue environments. Now, Delta reported the June daily cash burn dropped down to $27 million, representing a 73% improvement. The domestic cash burn rate is down to only $17 million, with the ongoing shutdown of international routes accounting for $10 million in costs.

The airline has amazingly achieved this goal with revenues only approaching 20% of 2019 levels. The amount doesn’t even factor in the impact of excess payroll costs due to the grant from the Payroll Support Program, which required the airline to keep all employees on the payroll while only flying 10% of 2019 capacity for most of Q2.

Delta now forecasts breakeven cash burn rates by year end. The airline isn’t even optimistic about a surge in traffic.

Liquidity Machine

The airline ended Q2 with $15.7 billion of cash and cash equivalents on the balance sheet, with additional access to a $4.6 billion loan via the U.S. Treasury from the CARES Act. The airline now has too much liquidity for a forecast of average daily cash burn rates in the $15 million range for the rest of the year. The airline might only burn $2.5 billion the rest of the year.

While Delta didn’t even forecast a bullish end to the year, the airline should end the year with up to $12.5 billion in cash plus access to other loans. Previously, it wasn’t clear whether the company had enough cash to survive the COVID-19 crisis, now it might have too much cash.

The airline suggested that the $15 billion raised since March has a blended interest rate of only 5.5%. At such a rate, Delta is paying an incredible $825 million for access to cash the airline doesn’t need.

Naturally, excess cash isn’t necessarily a bad thing considering the risk surrounding weak travel in the sector. Ultimately though, Delta is spending over $200 million a quarter on additional interest costs, with a large portion of that debt unnecessary.

For the airline to return to 2019 levels, Delta needs to cut interest expenses dramatically. Delta earned $7.31 in 2019, so even similar traffic levels in 2021 would see the EPS cut to $6.00 based on these higher interest expenses.

Takeaway

The key investor takeaway is that Delta Air Lines is a cheap stock, with the company now boasting plenty of cash to survive the current weak traffic environment. As treatments improve or a vaccine becomes available, passengers will return to flying at 2019 levels. At $26.25, the stock is just too cheap with normalized EPS potential of $6-plus.

Out of 11 total analyst reviews published in the last three months, 8 analysts rated the stock a Buy, while 3 said Hold. Meanwhile, the $37.80 average price target suggests shares could rise 44% in the next twelve months. (See DAL stock-price forecast on TipRanks)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclosure: No position.

In this episode of MarketFoolery, Chris Hill chats with Motley Fool analyst Bill Barker about the latest news from Wall Street. They discuss an all-stock buyout in the oil and gas sector. And there is news of a spinoff, as an e-commerce giant continues with its shedding of nonco

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