Alphabet reported a massive gain in its free cash flow for Q2, up 73% YoY and even 26.5% higher than in Q1. This implies that GOOG stock is still too cheap despite a recent runup prior to the earnings.
Microsoft (NASDAQ: MSFT) was founded in 1975, and it has remained at the very top of the technology industry ever since. The company has amassed a $2.5 trillion market valuation which makes it the second-largest in the world behind its rival, Apple.
Below is Validea's guru fundamental report for MICROSOFT CORP (MSFT). Of the 22 guru strategies we follow, MSFT rates highest using our Patient Investor model based on the published strategy of Warren Buffett. This strategy seeks out firms with long-term, predictable profitabili
A resilient U.S. economy and expectations of a nearing peak in the Federal Reserve’s monetary policy tightening cycle are emboldening stock investors, even as worries persist over rising valuations and the potential for inflation to rebound.
The stock market has rallied so far this year, particularly in the period between the last earnings season and this one. Companies now have to prove to Wall Street that their higher stock prices are justified.
Today, I'm sharing the top stocks in my $1.5 million growth stock portfolio. I believe we are in a new industrial revolution that could supercharge your long-term investing portfolio. Megatrends, such as artificial intelligence (AI), autonomous driving, robotics, and the Internet
This year has been a pleasant surprise in the stock market for many investors. While many stock market projections for 2023 included a continued down period, this hasn't been the case though we're almost seven months through the year.
Markets rallied to end the week after the latest reading on the Personal Consumption Expenditure (PCE) Index showed that prices were rising at the slowest pace in nearly two years. However, the Federal Reserve made it clear that this is no time to declare a victory over inflation
Teladoc Health (NYSE: TDOC) started this year with a goal of improving its efficiency and making progress on its path to profitability. So far, it has been delivering on its promises. It reported earnings that met or beat its forecasts in the second quarter, and raised the lower
Fintel reports that on July 28, 2023, Oppenheimer reiterated coverage of Microsoft (NASDAQ:MSFT) with a Outperform recommendation. Analyst Price Forecast Suggests 3.56% Upside
With a massive
11.3% dividend yield, the
Global X NASDAQ 100 Covered Call ETF (
NASDAQ:QYLD)
immediately catches the eye as a tempting option for dividend investors. Even better, it pays out its dividend on a monthly basis. There is certainly a lot to like about this ETF for income investors. However, before investors get too excited about QYLD, there are a few other factors that they would be wise to consider as well.
What is QYLD’s Strategy?
QYLD is an $8.25 billion ETF from Global X that was launched in December 2013. According to Global X, QYLD “follows a ‘covered call’ or ‘buy-write’ strategy, in which the Fund buys the stocks in the Nasdaq 100 Index and 'writes' or 'sells' corresponding call options on the same index."
In other words, QYLD owns the mega-cap and large-cap growth stocks that populate the Nasdaq 100 (
NDX
), and it generates income for investors and achieves its outsized dividend yield by selling covered calls against these holdings.
QYLD's Holdings
QYLD’s underlying index is the Nasdaq 100, so the fund is made up of many of the mega-cap tech stocks and large-cap growth stocks that investors know and love. The fund is fairly diversified, holding 102 stocks. Its top 10 holdings account for just under half of its assets. See below for an overview of
QYLD’s top holdings from TipRanks’ holdings screen.
As you can see above, QYLD’s top holdings skew heavily towards the "magnificent seven" stocks that have led the market higher in 2023 -- Apple (
NASDAQ:AAPL
), Microsoft (
NASDAQ:MSFT
), Amazon (
NASDAQ:AMZN
), Nvidia (
NASDAQ:NVDA
), Meta Platforms (
NASDAQ:META
), Tesla (
NASDAQ:TSLA
), and Alphabet (
NASDAQ:GOOG
) (
NASDAQ:GOOGL
).
It’s hard to argue with this portfolio of blue-chip tech and growth stocks, and TipRanks’ Smart Score system agrees, assigning eight of QYLD’s top 10 holdings outperform-equivalent Smart Scores. The
Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. A score of 8 or above is equivalent to an Outperform rating.
QYLD features an Outperform-equivalent ETF Smart Score of 8.
Is QYLD Stock a Buy, According to Analysts?
Turning to Wall Street, QYLD has a Moderate Buy consensus rating, as 67.71% of analyst ratings are Buys, 28.58% are Holds, and 3.70% are Sells. At $19.73, the
average QYLD stock price target implies 9.4% upside potential.
QYLD's Long-Term Performance
To see how QYLD has performed over time, we can look at it over the years from a total-return perspective, which captures both price appreciation and returns from dividends. As of the end of the most recent quarter in June, QYLD has a one-year total return of 14.6%. Meanwhile, it has a three-year annualized return of 6.9% and a five-year annualized return of 5.7%.
Keep in mind that these returns include what investors gain from the large dividend payouts, so they suddenly look a lot less exciting. Since its inception at the end of 2013, QYLD has returned a slightly better 7.2% on an annualized basis.
While these returns are positive, they are somewhat lackluster, especially when compared to just investing in the Nasdaq 100, which the fund uses as its underlying index. Investors can do just that with an ETF like the
Invesco QQQ Trust (
NASDAQ:QQQ)
, which invests in the plain vanilla Nasdaq 100 without a complex strategy of selling covered calls like QYLD.
Over the past year, QQQ has had a one-year return of 32.8%, more than double that of QYLD. QQQ’s three-year annualized return is also far superior to that of QYLD at 15%. On a five-year basis, QQQ again easily surpasses the total return of QYLD with a far better 17.9% annualized return, more than tripling QYLD’s return. Finally, over a 10-year timeframe, QQQ investors have made a stellar 18.9% on an annualized basis.
So, while QYLD looks tempting with its 11.3% dividend yield, investors would have been far better off simply investing in QQQ over the years, which has vastly outperformed QYLD, even when this yield is taken into account.
The dividend yield is nice to have, but QQQ investors have grown their wealth to a far higher level than QYLD investors. Because QYLD sells covered calls against its positions (a strategy that caps upside while slightly reducing downside), it leaves upside on the table as these holdings get called away if the covered call gets hit. You can see it playing out in real time this year, as the Nasdaq has surged, which is why QQQ has more than doubled QYLD’s year-to-date total return.
Fees & Expenses
There’s also the matter of fees -- with an expense ratio of 0.60%, QYLD investors are paying a fairly high $60 on a $10,000 investment. This is higher than QQQ, where investors pay a lower 0.20%, which comes out to $20 on a $10,000 investment.
This disparity becomes more pronounced over time -- if the fees remain consistent over time and both funds return 5% per year, after a decade, the QYLD investor would pay $750 in fees, while the QQQ investor would only pay $255 over the same time frame.
Below, you can take a look at
a comparison of QYLD and QQQ created with TipRanks' customizable ETF Comparison tool, which allows investors to compare up to 20 ETFs at a time across a variety of inputs.
The Takeaway
The idea of being able to combine these blue-chip tech stocks with an 11.3% dividend yield certainly has its appeal. Receiving dividend payments on a monthly basis is also appealing, and QYLD deserves credit for its rock-solid track record of paying out a monthly dividend every month for nine years and counting, so I can certainly understand why some investors like QYLD.
However, as the comparison to QQQ shows, QYLD’s strategy can leave a lot of upside on the table, and investors historically would have been far better off investing in a simple Nasdaq 100 fund like QQQ. QQQ is clearly the superior investment choice in this comparison, and it's the ETF I would choose to invest in.
Nonetheless, if an investor understands QQQ's superior value proposition and still wants the monthly income that QYLD offers, they could consider initiating a position in QQQ and a smaller position in QYLD in order to get the monthly dividend payments.
Disclosure
On July 27, 2023 at 15:13:13 ET an unusually large $18,522.00K block of Put contracts in Microsoft (MSFT) was bought, with a strike price of $390.00 / share, expiring in 1 day(s) (on July 28, 2023). Fintel tracks all large options trades, and the premium spent on this trade was
On July 27, 2023 at 15:13:13 ET an unusually large $18,522.00K block of Put contracts in Microsoft (MSFT) was bought, with a strike price of $390.00 / share, expiring in 1 day(s) (on July 28, 2023). Fintel tracks all large options trades, and the premium spent on this trade was
A resilient U.S. economy and expectations of a nearing peak in the Federal Reserve’s monetary policy tightening cycle are emboldening stock investors, even as worries persist over rising valuations and the potential for inflation to rebound.
Several
tech stocks have recovered strongly this year in hopes of better business conditions and growing expectations about the prospects in generative
artificial intelligence (AI). The recently reported results for the June quarter indicate the resilience of the business models of many tech giants. We used
TipRanks’ Stock Comparison Tool to place Alphabet (
NASDAQ:GOOGL,
GOOG
), Microsoft (
NASDAQ:MSFT
), and Netflix (
NASDAQ:NFLX
) against each other to find the most attractive tech stock as per Wall Street analysts.
Alphabet (NASDAQ:GOOGL, GOOG)
This week Alphabet impressed investors with its
upbeat second-quarter results. The
Q2 earnings per share (EPS) increased 19% to $1.44, driven by a 7% rise in revenue to $74.6 billion and an improvement in operating margin.
The Google parent attributed the Q2 2023 performance to continued resilience in Search, acceleration of revenue growth in both Search and YouTube, and momentum in Cloud business.
In particular, Google Cloud’s revenue increased 28% year-over-year to $8 billion, with the segment generating an operating income of $395 million compared to an operating loss of $590 million in the prior-year quarter. This marked the second consecutive quarter of operating income for Google Cloud.
Is GOOGL Stock a Buy or Sell?
Several analysts raised their price target for Alphabet following the results. On Wednesday,
Truist analyst Youssef Squali increased his price target for GOOGL to $160 from $122 and maintained a Buy rating on the stock after the Q2 print. Squali believes that the second quarter reflected faster recovery for Search and YouTube and sustained momentum in Google Cloud.
The analyst added that the improvement in Alphabet’s business came in as the management is focusing on controlling costs and directing its investments toward its highest growth priorities. The analyst expects to see further growth acceleration in the second half of this year along with margin expansion.
Wall Street has a Strong Buy consensus rating on GOOGL with 30 Buys and five Holds. The average price target of $149.45 implies 15.5% upside.
Shares have rallied about 49% since the start of this year.
Microsoft (NASDAQ:MSFT)
Microsoft has gained a lot of attention this year due to its aggressive initiatives to capture generative AI opportunities and significant investments in OpenAI, the start-up behind
ChatGPT.
Earlier this week, the company reported an
8% growth in its fiscal fourth-quarter revenue to $56.2 billion and a
21% rise in EPS to $2.69. Still, shares declined following the results as the company’s guidance fell short of expectations due to persistent weakness in the PC market. Moreover, Azure and other cloud services’ revenue growth of 26% surpassed estimates but marked a deceleration from the 27% growth seen in the fiscal third quarter.
Looking ahead, the company assured that it remains focused on three key priorities – driving further adoption of Microsoft Cloud, investing to lead in the ongoing AI platform shift, and driving operating leverage.
Is Microsoft a Buy, Sell, or Hold?
On Wednesday,
RBC Capital analyst Rishi Jaluria increased the price target for Microsoft to $390 from $350 and reiterated a Buy rating on the stock. Jaluria noted that the company delivered strong results and outlook despite the ongoing macro challenges.
However, he thinks that the reason for the stock's decline following the results lies in investor optimism. Jaluria suggests that investors were too optimistic about the timeline for cloud spending optimization headwinds to fade away and AI benefits to commence.
Nonetheless, Jaluria contends that Microsoft's multi-year reacceleration story remains intact and will likely start to reflect in the second half of this year.
Microsoft scores a Strong Buy consensus rating based on 28 Buys, one Hold, and one Sell. At $391.69, the average price target implies 18.4% upside.
MSFT shares have risen 39% year-to-date.
Netflix (NASDAQ:NFLX)
Streaming giant Netflix’s Q2 2023
adjusted EPS increased 2.8% to $3.29 and handily surpassed analysts’ estimates. However, the company’s
revenue of $8.2 billion, which grew 2.7% year-over-year, lagged expectations.
Nonetheless, the company assured investors that it expects its top-line growth to accelerate in the second half of 2023, as it anticipates seeing the full benefits of its paid sharing plans and continued growth in its ad-supported plan.
Netflix expects its Q3 2023 revenue to grow 7% to $8.5 billion, driven by growth in average paid memberships. The company projects its Q3 paid net additions to be similar to the Q2 2023 figure of 5.9 million. Further, Netflix expects its Q4 2023 revenue growth to accelerate “more substantially,” due to a rise in ad revenue and a further crackdown on password sharing between households.
What is Netflix Stock Prediction?
Earlier this week,
Baird analyst Vikram Kesavabhotla upgraded his rating on NFLX to a Buy from Hold and boosted the price target to $500 from $340, citing increased confidence in the company’s execution, primarily related to the company’s ad-supported plan and paid sharing, and a strengthening financial profile.
The analyst highlighted certain encouraging details provided by the management, including higher per-user economics being generated by the ad-supported plans compared to the basic ad-free plans globally, healthy early results from paid sharing, and the decision to remove the basic ad-free plan for new and returning users in key markets.
While the analyst acknowledged that NFLX’s valuation is “rich,” he feels his rating upgrade is justified due to the underlying momentum and unique features of the business.
Wall Street’s Moderate Buy consensus rating on Netflix is based on 19 Buys, 12 Holds, and two Sells. The average price target of $466.39 implies about 13% upside.
NFLX shares are up 41% year-to-date.
Conclusion
Wall Street is more bullish on Alphabet and Microsoft than on Netflix. Currently, the Street’s average price target indicates a slightly higher upside for Microsoft than Alphabet. Microsoft is well-positioned to drive higher revenue through its Azure business and the integration of AI into its products.
Disclosure
Megacap tech’s leadership role in the markets has done much of the heavy lifting for markets this year. Concentration risk in the S&P 500 has risen higher than it was at the start of the dot com bubble in 2000. The five largest stocks tracked in the S&P 500 make up almost one-fourth of the [...]
Read more at ETFtrends.com.
With nearly half of the stocks in the Nasdaq 100 Stock Index ($IUXX ) (QQQ ) having reported Q2 earnings, more and more company executives are optimistic about a soft landing for the U.S. economy. According to a Bloomberg analysis, tech executives are less frequently using words like headwinds, inflation,...
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