When the Market Breaks
If they keep on buying, the market’s going to break.
If they keep on buying, the market’s going to break.
When the market breaks, I’ll have no place to stay…
Buying? Did you not just see the market correction, Mr. Great Stuff?
Correction? What correction? I saw the market righting itself after the SoftBank debacle. I saw a mild fit of profit-taking on heavily overbought technology stocks. Correction? Oh, you sweet summer child.
You keep thinking like that, and the mean old market will teach you to weep and moan. It’s enough to make a market bull leave his home. Oh well…
The market bounced back today — a bit. Wannabe opportunists came in and bought the dip. And, yes, it was just a dip. From their “pre-correction” highs to yesterday’s lows, the Dow shed only about 6%, the S&P 500 roughly 7% and the Nasdaq a healthy 10%.
By the numbers, only the Nasdaq neared the edge of official correction territory. And given the ridiculous run-ups in many tech stocks this year, it earned every single percent of that drop and more.
In a normal market, I’d argue that more selling will come. It’s the economy, stupid … except when it isn’t, which is right now.
Right now, we’re all flying high on Fed stimulus. Wall Street normalized the pandemic and is ignoring economic warning signs — even those delivered by Federal Reserve Chairman Jerome Powell.
Now, lest I be called a permabear with no faith in America, there are signs of economic growth.
We’re nowhere near as bad off as earlier this year. I’m also hopeful for a continued recovery. We definitely don’t need to sell everything in sight. It’s not the end of the world.
But, when it comes to record stock prices, you have to ask yourself: “Are things really better off today than this time last year?”
The three Wall Street musketeers (Dow, S&P 500 and Nasdaq) said: “Yes!” when they hit or neared all-time highs recently. I solidly disagree. So do the more than 20 million Americans still out of work.
Don’t it make you feel bad when you’re tryin’ to find your edge … you don’t know which way to go? If you’re gonna trade stocks, they got no work to do if you don’t know about trading options.
Volatility-beating options, at that. (And no, cryin’ won’t help you; prayin’ won’t do you no good.)
Want to know more? Course you do — click here to know what to do when volatility’s levee breaks.
The Good: Persistently Peddling Peloton
You can almost tell when a stock will pop following earnings by how analysts treat it prior to the event. Almost … too much hype, and you get a sell-the-news event.
Peloton Interactive Inc. (Nasdaq: PTON) skirts the hype line ahead of tomorrow’s trip to the earnings confessional. The consensus expects Peloton to post a profit of $0.10 per share on revenue of $578.2 million — a 150% year-over-year surge. The whisper number rests at $0.13 per share, according to EarningsWhispers.com.
Last week, J.P. Morgan lifted its price target on PTON from $58 to $107 due to rising demand.
Today, Telsey Advisory Group followed suit, boosting its target from $82 to $105. According to Analyst Dana Telsey: “Once COVID-19 is behind, we expect the high adoption rate of digital fitness to persist and consumers to return to in-person group fitness classes and gyms in lesser frequency than in the past.”
In short, Telsey believes that Peloton’s pandemic gains are here to stay. And the company is working toward making that happen by cutting prices on its entry-level Bike and Tread offerings.
Furthermore, Peloton introduced new Bike+ and Tread+ offerings at higher prices with additional features, including integrated speakers and more compact designs.
But the billion-dollar question is: “Can Peloton live up to the hype?”
After the recent market sell-off, I’d think a better-than-expected quarterly report could send PTON soaring once again. However, one slip-up in the confessional and PTON could see all this hype evaporate.
Let’s wait until the numbers are officially released tomorrow, OK?
The Bad: And Peggy!
Look around, look around … Slack Technologies Inc. (NYSE: WORK) dropped off quickly today.
Investors were looking for a stock at WORK (Work), but what they got was a sell-the-news event … and Peggy. There’s a lot of those going around lately. Must be all that volatility.
Don’t let WORK’s 16% plunge fool you. The company’s quarterly report knocked it out of the park:
- Earnings: Breakeven versus an expected loss of $0.03 per share.
- Revenue: $215.9 million versus targets for $209.1 million.
Earnings skyrocketed from a loss of $0.98 per share last year, while revenue spiked 49% from a year ago. Furthermore, paid customer growth surged 30% by the same measure.
So why did WORK fall after such stellar numbers? Blame it on billings growth, which only rose 25% compared to Wall Street’s expectations for 33% growth.
Talk about nitpicky … and Peggy.
With WORK (Work) up about 72% from its March lows, Wall Street clearly looked for any reason to take profits. This is doubly true after the recent tech rout.
If you hold WORK (Work), you’re gonna be fine. The stock will come back after this round of panic selling. So, don’t join in the mayhem.
If you weren’t already holding WORK (Work), today’s drop may be the entry point you’ve been waiting for.
The Ugly: A 7 Vaccine Army?
AstraZeneca PLC (NYSE: AZN) was gonna fight ‘em all.
Seven other vaccines couldn’t hold it back. But illness can.
Just like that, another light in the vaccine village goes out … at least for now. Today, AstraZeneca paused its vaccine trials after a volunteer in the U.K. trial came down with transverse myelitis — spinal cord inflammation, as if you needed one more thing to be anxious about when trawling WebMD.
“However, the timing of this diagnosis, and whether it was directly linked to AstraZeneca’s vaccine, is still unknown,” The New York Times said.
As it stands, the trial data will go under review for safety by an independent committee. Fun times for all, huh?
Complications and unexpected illnesses were, well, expected when you have eight different homebrews all cooking up their golden vaccine goose. And if you’re looking for a bout of confidence for AZN in the race, this isn’t it.
Details are still sparse, but that doesn’t matter anymore, and the other biotechs rallied in short order. That’s just the vax-eat-vax race AstraZeneca finds itself in. You and I know those other vaccine makers will still have to slice up an ever-shrinking profit pie when these vaccines actually hit the market.
But real AZN investors weren’t banking on the vaccine to begin with. There are a plethora of other reasons to snap up AZN stock — the vaccine is just one of them. It’s why the shares were down less than 2% today.
AstraZeneca may not be the purest of vaccine trades, but it might be the safest over the long run.
Tuesday’s gone with the wind … my market’s gone with the wind. And if you’re still waking up from the long weekend, Wednesday went and brought back the green again.
Judging by a few of your emails, some market newbies out there (howdy, by the way!) are on pins and needles watching the market weather change this week. What can I say other than: “Welcome to the black parade!”
Now, we’ve mentioned trading around volatility before, and even how to use it to your advantage.
What? You can do that?!
My young Padawan, in time you shall learn that options are not just for YOLO gains or portfolio protection. They can also help you dive headfirst into the changing market streams and come out with a profit!
So, in today’s Poll of the Week, tell us: How do you roll on down the line, finding that sweet volatility relief?
Now, if I wrote any more about my love for options, this would easily turn into some graphic Bizarro world fan fiction, so let me turn it over to our resident rocket surgeon and all-around options pro. He’s been flicking a finger in the face of volatility long before this shebang began. Click here to see how you can too!
In completely different news … if you wondered what your fellow Great Ones felt about the looming Amazon Prime vs. Walmart+ match-up, it’s an all-out brawl in the retail steel cage.
More than half of you are sticking with Prime, the Bezos OG, beating out Wally World’s subscription service twofold. And I sincerely appreciate the 20% of you for whom the only stuff that matters is the ‘Stuff right here in your inbox.
For Those About to Great Stuff … We Salute You!
Thanks for tuning in! Before you go…
We need to talk. Now, I didn’t want things to go down like this. We had so much positivity going for us today, but there’s this thorn in my pride (and it ain’t The Black Crowes).
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Until next time, stay Great!
Joseph Hargett
Editor, Great Stuff