Category : Reports

$BA – The Boeing Company – 2020 Research

Last Trade Price: $168.08

Short Term Rating: Sell

Long Term Rating: Buy

Price Objective: $214.95

 

                                

Business Strategy and Outlook

Boeing is a leader in aviation, aerospace, and defense technology supporting airlines. Boeing derives its business off four segments: Commercial Airplanes, Defense/Space & Security, Global Services, & Boeing Capital. Boeing is a global leader in design, development, manufacturing, sale, and support of commercial jets, military aircrafts, satellites, missile defense, and space services. They are one of the only two manufacturers of 100+ seat airplanes and is one of the largest defense contractors in the U.S. The other major airplane maker in this category is Airbus.

Boeing’s business strategy is based off its core businesses – Commercial Airplanes, Defense & Space, and Global Services. Sales of Commercial Airplanes make up 42% of all revenue. Boeing has fixed-price contracts with the commercial airline companies and these contracts depend heavily on a healthy production and supply chain.

The other key segment in Boeing’s Core business strategy is Government Defense and Space contracts. This segment makes up over 34% of Boeing’s current revenue and has allowed them to stay afloat in the midst of the pandemic. These long-term contracts have allowed Boeing to operate while losing money. Boeing features numerous defense products that are constantly being contracted out to the Department of Defense. A key feature for this business segment is the research and development of new defense products to be bought by the Government. Boeing is on the leading edge of development for new defense products.

Product Line:

Commercial Airplanes Defense/Space
Next-Gen 737 F/A-18 E/F Super Hornet
737 MAX* F-15 Programs
747-8(F) P-8 Programs
767(F) KC-46A Tanker
777(F) T-7A Red Hawk
777X CH-47 Chinook
787 AH-64 Apache
Business Jets V-22 Osprey
*(F)Freight Planes Unmanned vehicle MQ-25 & QF-16
NASA’s Space Launch System


Performance and Risk

Tiger Wolf Capital focuses on two things: is this company profitable? Do people want to buy their product?

After taking a close look into the 10Q report of Boeing, we see that the company is operating at a significant loss. After two fatal crashes, Federal Aviation Administration (FAA) has forced the grounding of the 737 MAX, which made up 59% of Boeing’s Commercial Airline revenue back in 2019. As a direct result, Boeing faces risks include uncertainty in regulatory approvals on the return of their 737 MAX, a decrease in planned production, increased costs, and a decrease in supply chain health. The grounding of these planes has resulted in a significant reduction in their revenues, operating margins, and cash flows. In 2019, Boeing reported a 24% decrease in revenue from its prior year. Until FAA approves the return of the 737 MAX, we foresee Boeing to continue to loss growth in its year over year revenue growth.

 

 

As a direct result of COVID-19, global demand for travel as severally dropped. This is extremely concerning as Commercial Airlines make up 42% of their revenue and clients such as American Airlines, South West, and United Airlines are currently furloughing thousands of employees due to lack of demand in flights. As a result of this, the production of all their products have either slowed down or have completed been halted until 2021 / 2022. Shutting down factories in Q2, a lack of demand for new planes due to the travel ban, and massive losses from commercial airlines cancelling orders. Boeing revenue from this segment has dropped 78% since December of 2019 from December 2019.

Boeing’s defense segment has been healthy year over year and is only down -1% since December of 2019 from December 2018. Boeing was able to continuously add more Department of Defense (DoD) contracts and prop up the commercial segment of the business. Boeing’s Defense segment is very susceptible to changes in the defense spending budget. At any point with a change in defense spending the U.S. government can terminate or curtail Boeing’s contracts. Under President Trump, defense spending has continued to increase which has been extremely beneficial to Boeing. We believe that the Q3 earnings report should have a positive increase in the defense segment with the re-opening of factories and signing of new contracts.

 

 

By looking at both segments, we determine until Boeing receives approval on the 737 MAX and a continued low amount of travel, Boeing will continue to not be profitable. The increase in government spending on defense will unfortunately not offset the massive decrease in demand for commercial planes. In Boeing annual report from January 2020, we see that its total revenue has dropped 25% year over year.

Technical Analysis

 

 

The levels to watch are $144.46 and $171.39

Currently $BA is trading at $168.08. We seem to have found support around the Fibonacci level $144.46 and did quick bounce upwards towards $171.39.  I recent days, this $169 – $171.39 have proven to be an extraordinarily strong resistance level for this stock and we have not seen any change in this. We will remain bearish on $BA until we can effectively get above and hold above $171.39. Every time we get near this $171 level, we will short the stock by buying weekly put options and target $160 / 162 and then reevaluate. We believe that BA will bounce up once we hit the low $160s and give us another entry to short it once it hits $170 again. Fail to hold the $160 level, we see $BA pulling down towards $145.

The case for the bulls:

We are witnessing the 14-day and the 30-day simple moving average curl upwards as $BA continues to retest this $171.39 level. We would anticipate the 14-day moving average to cross above the 30 day, this will make the trend bullish and once we get above $171.5 we should see a fast move towards the upside. We anticipate the company to be trading at $188-$214 soon.

 

$TWLO – Twilio Inc. – 2020 Research

Last Trade Price: $238.40

Price Objective: $305

                                

Business Strategy and Outlook

Twilio is a communication platform as a service, which developers can use to facilitate communication (text,voice) in 180 countries. CPaaS platforms provide the building blocks that enable individuals or enterprises to integrate real-time omnichannel communication tools into business applications. Twilio operates as the back-end communications infrastructure for companies and provides easy to use APIs and SDKs to allow integration with a customer’s applications. Simple examples of such integrations include enabling two factors authentication for a website or enabling push notification to remind customers about upcoming events.

Twilio Flex streamlines businesses to client communication through the power of AI and cloud-based services.  By using Ominchannel customer services, Twilio enables businesses to connect with their clients through WhatApp, SMS, or WebChat, powered by automated routine customer inquires with conversational IVRS and chat box to reduce wait. We see great value and long-term growth potential for this product as more companies are switching over to remote workplaces and the need to provide greater customer satisfaction and increase brand loyalty are essential.

Earlier this year, Twilio acquired SendGrid that allow customers send mass emails to their clients. We believe this platform was the missing link in Twilio’s communications tools and should drive material cross-selling opportunities. SendGrid brings another layer of marketing and communication to Twilio’s arsenal.

Product Line:

Twilio Flex

Programmable SMS

Elastic SIP Trucking

Twilio Conversations

Programmable Vide

Phone Numbers

Twilio SendGrid Email API

Programable Voice

Programmable Wireless 

 

Performance and Risk

At Tiger Wolf Capital, we look at two things: is the company profitable? Do people want to use this product.

As of Q2 earnings earlier this year, Twilio is not a profitable company due to their cost of operation being too extraordinary high. One of the biggest concerns is that Twilio relies on network service providers and internet service providers to be able to provide their services. Twilio is currently at the mercy of these companies and must pay whatever fee that they are charged. At times, network service providers have instituted additional fees due to regulatory, competitive or other industry related changes that increase Twilio’s network costs. As well, network service and connectivity and disruption or deterioration in the quality of these services could adversely affect Twilio’s business, results of operations and financial condition. On the other hand, the company’s total revenue as increased year over year with a 46% increase from Q2 of 2019 to Q2 of 2020. For us, this looks promising if Twilio is able to keep the cost under control and increase their operating margin.

Answering our second question, Twilio’s customer growth has been growing immensely year over year. Most notable gain is the growth from 2018 to 2019 when it from having 64,286 customers to 114,714. The demand for Twilios’ service is very evident and should not be overlooked.

We are looking forward to seeing what Q3 earnings will tell us about it performance during the pandemic.

Techincal Analysis :

After recently selling off, TWLO has found support around $218.26 and has recovered back up to $242.61. We are closely monitoring how price action well develop in the upcoming days as earnings is scheduled to be released on November 4th. We anticipate that price will run up higher if and when we get above the $250. Once we get above $250, we will go ahead and begin to target $266.95, $282, and finally $305.

 

 

$QQQ – Invesco QQQ ETF – 2020 Research

Rating: Sell

Target Price: $240

Business Strategy & Outlook:

The Invesco QQQ, or better known as QQQ, is an exchange-trade fund based on the Nasdaq-100 Index. The Fund will, under most circumstances, consist of all stocks in the Index. The index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.

The top holdings for this ETF are Apple, Microsoft, Amazon, Facebook, Alphabet, Intel, Nvidia, Adobe, and PayPal. In recent days all of these names have had nice run towards the upside and have recovered all their losses from COVID 19 sell off. On average, these names have led the QQQ to be up 39% YTD after being up 62% two weeks prior.

 

Credit Updates:

For the three and six months that ended on June 30, 2020 and June 30, 2019, Square had no customer that accounted for greater than 10% of total net revenue.

As of June 30, 2020, they had an accumulated deficit of $627.7 million.

Technical Analysis: as of September 17, 2020

 

Using the 2-hour time frame, SQ has pulled back recently with the overall market. We reached a new all time high of $170.61 and pulling back down towards key support level $145. We are looking to see if we can hold this support level with secondary support at $140. We are seeking to be a buyer soon if we can maintain support levels. We seek to enter around the $145 / 140 level and start selling around $155 / 160 / 170 levels.

 

$SQ – Square, Inc. – 2020 Research

Rating: Buy

Target Price: $170

Key Ratios:

EPS:  .18

P/E:  238

Debt/ Market Cap:  4.18%

 

Business Strategy & Outlook:

Since 2009, we believe Square has found its niche by attracting micro merchants and providing a product that is reliable and affordable for the average small business.  From a scalability standpoint, Square is basing its success on future growth and the ability to retain existing sellers.

In 2017, 2018, and 2020, Square has generated significant net losses, with an accumulated deficit of $627.7 million as of June 30,2020. We believe Square is making investments in their employees, sales & marketing, and research and development, to attract new or larger sellers which may be key to higher revenue streams and market share.

We predict Square’s revenue to rise 60% YOY, as they are making significant measures to increased diversity in their revenue base.  Square’s Bitcoin revenue for 2020 June 30th six months ended has grown 520% compared to the same period in 2019, with hardware revenues remaining the same, subscription-based revenue increasing 37% and transaction-based revenue increasing only .6%.

Seeing that their debt load is only 4.18% of their market cap, we are putting a buy rating on SQ, with a price target of $170.

 

Credit Updates:

For the three and six months that ended on June 30, 2020 and June 30, 2019, Square had no customer that accounted for greater than 10% of total net revenue.
As of June 30, 2020, they had an accumulated deficit of $627.7 million.

 

Products and Services:

  • Software product offerings include
  • Square for Restaurants
  • Square Point of Sale
  • Square Appointments
  • Square for Retail
  • Square Invoices
  • Square Virtual Terminal
  • Square Dashboard Weebly
  • Square Loyalty & Marketing
  • Square Payroll

Hardware product offerings

  • Magstripe Reader
  • Contactless Chip Reader
  • Square Stand
  • Square Register
  • Square Terminal

 

 

 

Technical Analysis: as of September 17, 2020

Using the 2-hour time frame, SQ has pulled back recently with the overall market. We reached a new all time high of $170.61 and pulling back down towards key support level $145. We are looking to see if we can hold this support level with secondary support at $140. We are seeking to be a buyer soon if we can maintain support levels. We seek to enter around the $145 / 140 level and start selling around $155 / 160 / 170 levels.

 

$GOOGL – Alphabet Inc. – 2020 Research

Current Price: $1,487.04

 

Company Description

Alphabet is a global technology company focused around the following key areas: advertising, operating systems and platforms, enterprise and hardware products. Alphabet generates revenue primarily by delivering online advertising and by selling apps and contents on Google. The Company provides its products and services in more than 100 languages and in 190 countries, regions, and territories.

 

Investment Rationale

Alphabet is well positioned long-term with leading search technology, Android and YouTube. Alphabet is also an advertising industry leader and the company should generate incremental revenue growth from increasing mobile usage, video usage, Google Play activity, and connected device activity (including autos). We believe Google should trade at a premium to its peer group given shareholder friendly actions (buy backs and disclosures) and new product catalysts

 

Outlook on Google:

  • Alphabet’s focus lately has been on ad revenue growth and cloud computing services.
  • Alphabet reported total revenue of $41.2 billion, up 13% year over year, helped by growth in advertising (10%) and cloud (52%).
  • The company reported $29.95 billion in advertising revenue in 2019, a 26.1% increase from the previous year.
  • Youtube Ad revenue growth came into light in the 2nd quarter, while cloud computing revenue growth has slowed compared to the previous quarter due to not being able to gain market share from key players like Amazon and Microsoft.
  • The company has applied machine learning to its Google App (speech recognition), Gmail (Smart Reply), Google Photos, Maps, and many other products, including its cloud offerings.

 

 

Price Target:

We believe Google has a way up to go and has a fair value of around $1,700. Since Alphabet dominates the online search market with Google’s global share above 80%, we believe their cloud services will continue to grow through that and that they are an attractive buy.

 

Technical Analysis

As of September 17, 2020 GOOGL, as retracted back to our Fibonacci support level of $1,493 after hitting an all time high of $1,726.1.

In our view this pull back is not alarming, but rather a healthy pull back that was bound to happen in the overall market especially with the tech sector being such a dominant force the past 3 months.

We are currently watching the 14-day and 30-day simple moving average curve downward, indicating more potential downside lurks on the horizon. We are anticipating a pull back towards $1,439, which will present to be buying opportunity if support levels hold.

 

We will be looking to be buying around this price level, but if support does not hold we will be short selling and targeting $1386.

 

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