Up 48% YTD: This is the hottest sector on the stock market in 2015

The S&P 500 is down more than 5 percent this year. Don’t bother telling that to the Internet and Catalog Retail sector. This small sub-sector of stocks is up a scorching 48 percent this year. That beats every other industry sub-sector on Wall Street. Here’s a look at the Top 10 stocks in the sector and their performance year-to-date:

Company Ticker YTD Return
Netflix NFLX 117.0%
Wayfair W 80.6%
Amazon AMZN 67.8%
Expedia EXPE 40.5%
CTRIP International CTRP 37.5%
Nutrisystem NTRI 36.9%
JD.com JD 14.5%
1-800-FLOWERS FLWS 11.8%
Petmed Express PETS 11.6%
Priceline PCLN 9.3%

Do any of the stocks above have more upside? Let’s take a look at their current share prices and compare them to the average analyst’s price targets for the stocks:

Ticker Current Price Avg. Target Potential Upside
NFLX $106.11 $119.30 +12.4%
W $36.18 $51.44 +42.2%
AMZN $532.54 $650 +22.1%
EXPE $122.62 $128.96 +5.2%
CTRP $66.77 $88.72 +32.9%
NTRI $26.10 $31.15 +19.3%
JD $28.91 $37.99 +31.4%
FLWS $9.80 $14.25 +45.0%
PETS $16.32 $13.67 -16.2%
PCLN $1,265.68 $1,480.65 +17.0%

Wayfair and 1-800-FLOWERS both pop out. What has analysts so excited about these stocks?

The bullish case for Wayfair

Wayfair runs several online ecommerce sites geared toward home decor. Specifically, they operate Wayfair.com, Joss & Main, AllModern, DwellStudio and Birch Lane. The company blew away analyst expectations in Q2. Quarterly revenue surged 66 percent year-over-year to $491.8. That bested analyst estimates by more than $50 million. On top of that, the company lost less money than analysts expected (woo-hoo!). They reported a $0.15 loss. Analysts were expected a non-GAAP loss of $0.29. Wayfair is at least growing its customer base. The number of active customers on their properties rose 53 percent year-over-year to 4 million. I’m on the fence here. The stock’s gone up so quickly, I’m wary momentum could snap the other way. I’d play it safe and buy shares in a company that’s actually profitable.

The bullish case for 1-800-FLOWERS

The online flower-delivery company, 1-800-FLOWERS also crushed earnings estimates for Q2. It beat estimates by posting a smaller loss than expected ($0.13 per share instead of $0.19 per share). That loss isn’t all bad. The company’s very seasonal and so is its latest acquisition, Harry & David’s. If it weren’t for Harry & David, the company would have posted adjusted earnings of $0.01 per share. That’s not enough to get me overly excited.

Of course, not every stock in the sector has fared so well. Here are the bottom five stocks in the Internet and Catalog Retail sector:

Company Ticker YTD Return
CNOVA CNV -61.8%
EVINE LIVE EVLV -61.7%
Groupon GRPN -60.6%
Light In the Box LITB -58.0%
Land’s End LE -50.2%

The overall market is down, but there are stocks out there that are out-performing. With a little homework, you can find them.

Photo Credit: Tanel Viksi

Is Apple really going to manufacture an Apple Car?

Speculation’s running rampant that Apple’s angling to get into the automotive industry. There are two theories here:

  1. Apple wants to make its own car.
  2. Apple’s working on software for autonomous or semi-autonomous vehicles.

On the face of it, the idea of software for self-driving or partially self-driving cars seems more likely. But it’s unclear if Apple’s content to stop there. Let’s look at the facts we do have.

Continue reading “Is Apple really going to manufacture an Apple Car?”

Twitter price plunged so dramatically it literally flowed off its chart

When I looked at Twitter’s share price on Google Finance this afternoon, the price had fallen so quickly that it flowed right off Google’s chart.

Twitter Inc.’s (TWTR) shares fell like a stone today after a lockup expired. Suddenly, holders of nearly 500 million shares of TWTR were allowed to sell their stock, and that’s exactly what they did. The price of Twitter shares fell nearly 18 percent today wiping billions off the company’s market cap.

The funny thing was, when I looked at Twitter’s share price on Google Finance this afternoon, the price had fallen so quickly that it flowed right off Google’s chart. Click for a larger version:

twitter-price

Why are search queries trending down?

I was drinking coffee and reading Investor’s Business Daily this morning, when I came across some interesting graphics. The paper reports that “U.S. search queries fell 10 percent in February from January. That’s the biggest one-month decline in the last six months.”

I was drinking coffee and reading Investor’s Business Daily over the weekend, when I came across some interesting graphics. The paper reports that “U.S. search queries fell 10 percent in February from January. That’s the biggest one-month decline in the last six months.”

The number of search queries were down across the board: at Google, Yahoo and Ask.com. Here’s one of their charts showing the overall trend in search queries across all the major search engines:

google-search-trends

The total number of search queries in the U.S. spiked in January, but has otherwise been trending down since October (when there were approx. 19.25 billion searches). February saw 17.75 billion searches.

What IBD didn’t address is why there’s a downtrend in the search queries. Have we reached the search saturation point? My speculation? People are spending more time browsing on smartphones and tablets. There, apps rule, and the web experience is more passive – driven by content discovery rather than proactive web searches. I’d be interested to hear your opinions on why search queries are declining, though! Please use the comments section below.

Amazon (AMZN) stock price targets

Last week, UBS listed Amazon at the top of its list of “oversold tech stocks.” That’s hard to believe when the stock’s already trading at P/E of 578. A closer look at the company’s growth prospects, though, indicates Amazon just might be a very strong buy.

Analysts are very bullish on Amazon’s (AMZN) prospects for growth. A poll of 36 analysts at Yahoo shows that the average earnings estimate for the company stands at $1.92 in 2014. That would be an increase of 225 percent over 2013’s $0.59 per share! What’s even more amazing is the fact that analysts believe Amazon could more than double its earnings again and bring in $4.23 per share in 2015. One analyst actually expects the company to have earnings of $9 a share in 2015!

Overall, analysts expect the company to grow at 49 percent per year over the next 5 years. It’s hard to believe that an online book seller has morphed itself into one of the world’s most formidable online retailers, content providers and internet services companies (thanks to its cloud hosting business).

Analysts are bullish on Amazon’s growth for several reasons:

  • Rapid growth in the company’s cloud-hosting business.
  • A 25 percent price increase for Amazon Prime (from $79 to $99 a year)
  • Strong tablet sales (with Amazon capturing 24 percent of recent tablet orders)
  • Increasing use of Amazon video streaming as the company announced plans to make more content free for all users (a brilliant marketing move that should entice users to buy more premium streaming content) (Amazon has since denied reports by the Wall Street Journal that the company would start offering a free, ad-supported streaming network)

Last week, UBS listed Amazon at the top of its list of “oversold tech stocks” (per 24/7 Wall Street). That’s hard to believe when the stock’s already trading at P/E of 578. Thomson First Call lists a price target of $433.45 for the stock. That would be a 31 percent increase over the current share price of $338. Thomson’s highest price target for the stock (per Yahoo) is $500. The lowest? $330.

3 signs Amazon’s (AMZN) stock is oversold

With the Nasdaq in a near-term downtrend, Amazon’s shares look they’re entering oversold territory. Here’s why…

1) Innovations aren’t priced in. Analysts expect Amazon (AMZN) to announce a “streaming device” at an event in New York City this week (per GainingGreen). Little is known about the device, but I suspect it will compete with Google’s Chromecast and Roku’s new Streaming Stick. That means it will probably be a small HDMI dongle users can plug into their TV’s HDMI ports. From there, users can access free and premium web-based content on their TVs via a remote control or a web page.

2) The experts call it a buy. Last week, UBS put Amazon at the top of its list of the most oversold tech stocks (per 24/7 Wall Street). Others on the list include CA Technologies (CA), Google (GOOG), Infosys (INFY) and Salesforce.com (CRM).

3) Tablet anyone? The Kindle family doesn’t necessarily pop to mind when someone says the word “tablet,” but Amazon’s tablets are actually capturing 24 percent of tablet market share. That’s probably because you just can’t beat Amazon’s prices. A brand new Kindle Fire HDX costs just $199 and has specs that are on par or nearly on par with leading tablets from Apple (AAPL), Microsoft (MSFT) and Samsung.

34% of U.S. consumers said they’re unsure if they’d purchase a tablet in the coming year. Of those, “47% stated high prices to be the reason for their uncertainty,” per TabletPCReview. The average price for a tablet is $326. That makes the Kindle Fire HDX look particularly attractive as its nearly 40 percent cheaper than the average tablet. New and existing Kindle owners are a cash cow for Amazon as they purchase a steady stream of online content from the company in the form of ebooks, movies and TV shows.

Netflix (NFLX) shares in a bear market?

Netflix (NFLX) shares have been streaming downward over the past month with shares shedding 20 percent of their value in 30 days. What’s the standard definition of a bear market? A price decline of 20 percent or more.

Netflix (NFLX) shares have been streaming downward over the past month with the stock shedding 20 percent of its value in 30 days. What’s the standard definition of a bear market? A price decline of 20 percent or more.

What gives? There’s been a barrage of issues plaguing the stock, but I pin the rapid decline on four factors:

1) Profit-taking. Netflix was the best-performing stock in the S&P 500 last year rocketing up more than 300 percent. Weakness in 2014 means big investors are taking profits.

2) Apple + Comcast + Amazon. Rumors about Netflix’s competitors continue to swirl. Apparently, Apple (AAPL) in talks with Comcast (CMCSA) to form a joint video-streaming service. In addition, Amazon’s planning to offer free (yes, free!) streaming content to all web users.

3) Market correction. It’s been risk-off in the market this month, and the Nasdaq in particular has gotten hit hard. While conservative stocks have held up relatively well, tech leaders and biotechs plummeted (Netflix included).

4) New expenses. In the near-term, it looks like net neutrality is going out the window. The two companies that are going to get hit harder than any others by that are Google (thanks to YouTube) and Netflix. Exact costs are unclear, but they won’t be trivial.

These factors have some forecasters poo-pooing Netflix. Wedbush, for instance, just reiterated its $175 price target for Netflix over the next year. That would be a decline of more than 50 percent from current levels.

How Oculus Rift could transform Facebook (FB) into tech juggernaut

Rift presents some unique business opportunities that could transform Facebook’s core business away from advertising. Here’s how.

Facebook just dumped $2 billion ($400 million of it in cash) into its acquisition of virtual reality headset maker Oculus Rift. The news took some time to sink in for me. First, I thought about the possibilities. There are myriad applications for the device: gaming, education, shopping, communication and entertainment to name a few. Then, I thought about the business opportunity Rift presents and how it might impact Facebook’s stock price. A few things clicked:

1) Advertising is just one of many revenue opportunities. Sure, advertising will be possible: from commercials in the middle of immersive tv shows, sporting events and movies to in-game ads. I don’t think that’s key, though. Facebook already generates 90 percent of its revenue from advertising. Ultimately, the company views itself as a connection platform, not an ad agency.

2) Rift as a communication platform. Facebook CEO Mark Zuckerberg touts rift as a communications platform. That idea has potential, but it’s a long way off. After all, to use it as a communication platform you and the people you want to communicate with will need Rifts, too. It took a decade for cell phones to fully penetrate the developed world (from 18 percent adoption in 1997 to 97 percent adoption in 2007). I would guess that Rift-to-Rift communication is a long way off – at least five years.

Here’s where I really think Facebook could make money off Rift:

3) The Rift app store. Apple’s App Store generated $10 billion in revenue for Apple (AAPL) last year and made the company $1 billion in profit. Most of that money was generated by low-cost games and productivity apps. If Facebook enhances and helps develop Rift’s app store, I suspect it could quickly eclipse App Store sales (if not in the number of apps sold then definitely in the amount of revenue generated). The App Store models works so well for Apple that Microsoft (MSFT) copied it with the launch of its own app store in Windows 8. Droid has an App Store, Kindle’s got a store, xBox has a Marketplace, etc. A Rift app store would generate lots of cash, and, best of all, outsource the development of apps to others. If Rift apps catch on, Facebook’s $2 billion acquisition will look cheap in the years to come.

Twitter (TWTR) closes below IPO price; it’s time for acquisitions!

Twitter needs rapidly-growing revenue to keep stockholders happy, and acquisitions are a great way to do that.

Twitter’s (TWTR) stock got hammered today along with a raft of other leading technology stocks. The blue bird’s in need some of some serious momentum, and I have a feeling Twitter’s CEO feels the same way. The usual pattern for a tech IPO goes like this:

1) Raise tons of cash.

2) Go on an acquisition spree.

3) Sell bonds or more stock to raise even more cash.

4) Buy more companies.

Facebook (FB) is in phase 2. The company’s rumored to be buying a drone company to spread internet access in Africa. They’re also buying virtual reality headset-maker Oculus Rift.

I have no doubt that Twitter’s going to follow suit. They need rapidly-growing revenue to keep stockholders happy, and acquisitions are a great way to do that. The company’s also just yanked it’s music app from iTunes. The speculation is they’ll bundle music streaming services in with their core app. I doubt that’ll bring in much revenue since they’re going up against titans like Pandora, Spotify and iTunes itself. My advice? Buy Spotify!

50 ways Microsoft’s (MSFT) new CEO can revolutionize the company and take down Apple (AAPL)

Here are 50 paths Microsoft could take to build revenue, delight customers and begin telling itself (and the world) a fresher, more fascinating story.

The best corporations tell themselves stories that are persistent and unyielding. They’re filled with twists and turns, but they move inexorably ahead toward a faraway goal.

I believe that Microsoft’s (MSFT) story has morphed into a tale of incremental improvements. Yes, the giant still marches the face of the earth slaying foes, but his steps have gotten heavy. His shoulders are sore and his eyes have drooped.

We must hoist up to him a 5-Hour Energy the size of an oil drum. We must drink with him to some spectacular new future where Microsoft takes a moonshot and succeeds; one where the company is rechristened as the greatest technology company on the face of the planet.

Here are 50 paths I’d love to see the company explore; 50 ways Microsoft might build revenue, delight customers and begin telling itself (and the world) a fresher, more fascinating story. Particularly radical ideas are in bold:

  1. Invest in lip-reading technology that could rival Siri and be used to compose emails and other text in a corporate setting.
  2. Build a spherical (omni-screen) gaming system; a ball-shaped 360-degree, ceiling-mounted pull-down screen that works in conjunction with two projectors and immerses the player in his or her gaming environment.
  3. Build the world’s first high-powered mobile IDE for developers with a cloud-based subscription model running on virtual machines.
  4. Build a flying Bluetooth-controlled camera that can take photos of it’s owner based on the location of his or her phone. The device could constantly record (similar to a head-mounted camera), and it would follow or travel in front of the owner in the air.
  5. Buy spotify to take on Apple (AAPL) as the king in mobile music. Partner with radio news apps (i.e. Stitcher) to cut into Apple’s stranglehold on the podcast market.
  6. Develop smart glasses, or, at the very least be aggressively developing apps for Google’s hardware.
  7. Develop apps for the iWatch with an emphasis on integration with Outlook.
  8. Make Outlook web-based, and expand its social networking, content delivery and calendar functionality.
  9. Integrate voice commands into all desktop applications. There’s the potential to use a freemium model for this service (10 free minutes a month, for example).
  10. Explore how to integrate gaming with live television. For example, Jeopardy viewers could be competing directly with the contestants on TV. Or Madden fans could be competing nationwide as they attempt to call plays in live games before they’re run. The most accurate play-callers would win.
  11. Embed Kinect in laptops and monitors to integrate gestures with core Microsoft software.
  12. Aggressively pursue Bloomberg’s audience in the financial data space. It’s time that world-class financial data get pumped out over the web — not on proprietary terminals. Investors have deep pockets (just check out Michael Bloomberg’s net worth).
  13. Push all of Microsoft’s flagship applications onto the cloud. If you don’t catch up with Google Docs and Google Spreadsheets, you’re going to lose serious revenue.
  14. Consider buying Adobe to deepen your stranglehold on development software. Adobe also has a nice cloud-based software-delivery system (though, eventually, programs like Photoshop will be running in the cloud, not on local machines).
  15. Re-imagine Excel as a web tool that can publish beautiful embeddable reports on the web with the click of a button. Currently you can make nice charts, but users should be able to make online, interactive data tables and charts just as easily. Excel’s data should be beautiful and highly interactive, even if you’re not a programmer.
  16. Buy Basecamp, Trello or another up-and-coming software collaboration site, then port that usability into TFS. Or at least give TFS a serious re-design that makes it faster to roll-out and test software.
  17. Expand virtual box services for software testing. Testing is extremely difficult now that developers have to support so many devices (tablets, desktops, phones, TVs, watches, glasses, etc.). The only – ONLY – way this is going to be doable is with virtual test environments. Developers will pay serious cash for serious emulators.
  18. Build a “business marketplace” where corporations can easily outsource things like testing, and integrate it with TFS (or the next iteration of TFS).
  19. Integrate Kinect and voice-to-text with smart glasses to destroy the smartphone.
  20. Build a Roku competitor that ships free with Microsoft computers. Make a deal to deliver premium sports content over the network. Any Roku competitor should be extremely easy to control with a laptop, tablet or phone, and it should allow users to run apps on the screen (especially social apps) while also watching TV.
  21. Make Word, PowerPoint and SharePoint themes much easier to install, and then create an online marketplace for buying/selling them.
  22. Build a theme marketplace for Microsoft’s OS, phones, tablets and Xbox.
  23. Buy Fitbit and integrate it into Microsoft’s cross-platform operating systems.
  24. Invest more in help documentation and tutorials to make coding on Microsoft’s platforms easier. Common functionality in Surface apps, for instance, should have drag-and-drop interfaces and very extensive code libraries.
  25. Stop being afraid to make a true Surface/laptop combo that ingrates touch screen with standard inputs.
  26. Create a simple interface for controlling drones. Allow consumers and small businesses to purchase and schedule drone usage time through a national network of Microsoft-branded drones.
  27. Capture and store user data across devices (phone, mobile and tablet), then feed that data back to users so they can see their activities over time and look for ways to increase their productivity.
  28. Release free, ad-supported mobile phones.
  29. Rollout Stackoverflow-style forums that are integrated with Microsoft’s core apps.
  30. Rollout an aggressive venture capital program to fund start-ups (and grab an equity stake in the process).
  31. Create a marketplace for resume templates in Word.
  32. Create a marketplace for code plugins.
  33. Develop easy-to-install circuits for home electrical appliances, and release apps to control them.
  34. Build a social network into windows 9, something that provides optionally shareable data on a user’s computer activity. This would be great for social and professional purposes (i.e. Microsoft-certified “Time in Application”). There’s so much activity that we do on our computers that’s never quantified or analyzed.
  35. Build a freemium-model API for voice-to-text services so programmers can integrate Siri-style services into Surface and xBox apps (and maybe some of them will even pursue programming conversational robots).
  36. Develop a holographic TV that works using Pepper’s Ghost. Theoretically, this could be done if video broadcasts shot two layers of film: background and foreground. For example, if a station were broadcasting a football game, the field would be sent as one layer (the background for Pepper’s Ghost), and the foreground layer would contain the 3D players.
  37. Improve Windows Phones so they can guess what you’re doing all day. It would work by asking you what you’re doing when it’s not sure. Each activity would leave a signature based on time of day, geo-location and movements. Then, this information could be sent back to users for analysis.
  38. Award grants for app development. The apps would then be exclusively developed for Windows for a predetermined amount of time.
  39. Build the worlds first mainstream 3D printer.
  40. Integrate face-time messages/recordings in Outlook.
  41. Create a premium newsletter feature (ala ConstantContact) that’s integrated in Outlook and allows users to broadcast messages to thousands.
  42. Rethink email. Static text emails should be a thing of the past. We need embedded polls, to-do lists, videos, text-to-voice readers that let you listen to emails on the go, etc. The messages would automatically downgrade for text devices (similar to responsive web design).
  43. Buy Dropbox to take SkyDrive mainstream.
  44. Integrate second screens in laptops or Surface keyboards that show metadata on open apps, alerts and/or give you the ability to quickly switch between open applications.
  45. Use SkyDrive to make publishing to the web easy for anyone. A Word doc that’s on SkyDrive should be elegant on any device (think of Amazon’s Reader, which can be used across platforms).
  46. Make an easy way for users to do repetitive tasks on a computer. In essence, the OS should have a “record button” I could use to teach my computer how to do a task or series of tasks.
  47. Build “Application Analytics” that run on the OS level and allow corporations to identify where employees are spending their time and how they can improve efficiency.
  48. Develop a smart-screen or smart-glass augmented reality gaming system that attaches to the wearer’s head and can integrate with the real world by overlaying opponents in your actual environment.
  49. Add NFC to future Microsoft phones.
  50. Create a secure payment-processing platform for Bitcoin.

Got any additional ideas for Microsoft?

Please add them to the comment section below, and I’ll repost them.