Feeling Lucky? Take a High-Risk Gamble On Lucid

If you would invest in a new growth stock, it would be one that has reported at least two quarters’ worth of revenue as a public company and isn’t facing hostile competition from everywhere. Lucid Group, Inc. (Nasdaq: LCID) isn’t any of these. Why then is there a lot of noise behind this stock, with investors being highly optimistic?

Feeling Lucky? Take a High-Risk Gamble On Lucid 01

Source: Lucid

Lucid operates in the Electric Vehicle (EV) manufacturing industry, and many investors are pitching it to be a tremendous competition for Tesla in the coming years. While there’s no way to be certain about that, we know why investors are optimistic about the stock.

The EV manufacturer made its shares tradable to investors in the US in late July, but nothing really happened until the EPA gave its longest-ever EV range rating (520 miles) to Lucid’s Air model in September. The Tesla product with the highest rating, Tesla Model S, falls short by an entire 100 miles. An EV’s mile per kWh is one of the major yardsticks with which the technology of the manufacturer is measured. And having been redesigning, re-engineering, and remaking their batteries since the company was established in 2007, the achievement of this feat isn’t surprising.

Lucid recently made its first set of customer deliveries of Lucid Air, and the customers are full of praise for their purchases. Wall Street called it a “worthy Tesla opponent”, and Fortune said it “blows Tesla away.” Even Motor Trend had a lot of positives about the EV before eventually awarding the car the Motor Trend Car of the Year award.

The EV manufacturer intends to build enough capacity to produce 20,000 units of the Lucid Air model by 2022, and be able to produce 500,000 electric vehicles by 2030. The manufacturer also plans to add three more launches to its collection in 2022.

Everyone looks forward to seeing how Lucid scales going forward. But if the company can match the success it’s had with the Air model, the stock could be valued much more than it is now.

Technical Analysis

The recent cascade of good news has caused the Lucid stock to leap in recent weeks. The stock hovers between the $61 – $65 resistance level and the $28 – $32 support level. Whatever happens here could determine what happens to the stock in the near future. A breakout from the resistance level could mean a continuation of the bullish trend, while the breakout from the support level could send the stock price even lower.

But whether you buy at a breakout or a return to a support level, we hold a long-term bullish outlook on the stock provided the fundamentals remain steady.

The Case For Pubmatic: The Doubted AdTech Company

Digital advertising has long taken over from where traditional advertising methods seemed to have peaked. Our smartphones and personal computers have now become what billboards, prints, radios, and TVs of those days were to advertising. And it is in this new dispensation of advertising that Pubmatic, Inc. (Nasdaq: PUBM) makes its living.

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Source: Mikael Blomkvist

The Million-Dollar Question

Pubmatic owns a cloud infrastructure that automatically connects potential advertisers to ad spot owners (content creators). This way, content creators can get the best price for their ad spots. Soon after it went public in December, Pubmatic soared by over 200% to $77. However, the stock has returned to a more humble $38. But is there more to this stock than the spike in price?

The Case For Pubmatic

The financial reports Pubmatic has been dishing in the recent quarters have been nothing short of being impressive. In its most recent quarter, Q3 FY21, the adtech company raked in $58 million in revenue and $13.5 million in GAAP net income. The former was a 54% increase year-on-year, making it the fourth consecutive year the company would make 50%+ year-on-year growth in revenue.

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Source: Pubmatic

For small companies, gaining customers may be an issue. But it doesn’t seem Pubmatic has such problems. With a net dollar-based retention rate of 157%, Pubmatic has not only succeeded in getting new customers, but it has also given them reasons to spend more in their second year of dealing with the company.

The digital advertising market where Pubmatic dwells is touted to be a gigantic one in the coming years. In 2020 alone, the spending in the industry summed up to $378.16 billion, according to Statista. And by 2023, this figure is estimated to have risen by 71% to $646 billion by 2024. Although Pubmatic faces fierce competition in Magnite, the company has a larger room to grow than its opposition judging by the market cap.

With those strong figures in financial reports, customer retention rate, and market opportunity, it isn’t hard to see why many investors favor this stock.

Technical Analysis

Having been on the volatile side for the first 6 months after it went public last December, PUBM has been rather uninteresting for most of the remaining 6 months. All its price movements were within the $21 – $23 support and $42 – $44 resistance levels.

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It is closer now to the resistance level than it is to the support level, looking to orchestrate a breakout. If this breakout is successful, it could see the stock rise by 50% to the $57 – $59 resistance level. Otherwise, the price may return to the $21 – $23 support level. Technically, the return to this support level or the breakout from the resistance level would make good position entry points for Pubmatic.

BHP For Dividend and For Value

Portfolio diversification might sometimes require that you invest in seemingly “boring” stocks that most likely won’t double your capital within the next few years. But these stocks make up for it with their dividend payouts. They also become undervalued from time to time, offering value investors opportunities to get in. BHP Group Limited (NYSE: BHP) is an example of such stock.

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Source: Pixabay

BHP Group deals in the production of natural materials needed to drive global economic growth. Some of its products include copper, iron ore, nickel, and metallurgical coal. Founded in 1851, the Australia-based company has spread its business wings to all continents, excluding Africa.

Shareholders of BHP can always look at the company’s payout ratio of almost 70% and a dividend yield of 10.78% and plaster a smile on their faces. The companies also raked in $37.4 billion in the full year that ended in June 2021 with net debt reducing by 66% to $4 billion.

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Source: BHP

BHP has made most of its wealth in FY21 from the manufacture of iron ore, the price of which has dropped. This would be a sign to dump BHP if the company depended on this commodity alone. However, the company boasts of other materials that can keep it afloat. It also plans to expand into potash production, a material that is very useful in the agricultural sector.

With a price-to-earnings ratio of 12.54, we believe BHP is undervalued, making it a good value stock. Its reasonably high dividend yield also passes it as a dividend stock worth keeping.

Technical Analysis

Although BHP has fallen by slightly over 30% from its year-to-date peak, we don’t think it’s out of the woods yet.

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The reason for this is that it has fallen below the $56 – $58 support level and now retests it as a resistance level. Usually, what happens from here is that the stock falls even further to the  $43 – $46 support level, where it would make a better buy than where it is at the moment. And this is the most probable scenario.

However, if it resurfaces above the support level, that might give us something new to think about. Then, we would have to figure out if a bullish run is beginning, or it was merely a fakeout.

Previously Soared. Then Came A Dip. Now Is the Time To Buy Chewy.

Pets have been a part of our lives since forever. And while we find solace in the companionship of these non-human friends, many have also based businesses on it. An example is the online pet product retailer, Chewy, Inc. (NYSE: CHWY).

Now Is the Time To Buy Chewy. 01

Source: RODNAE Productions

What Has Happened?

Chewy’s is a story that is already very familiar across stocks that benefited from the global lockdown the pandemic enforced on us. The online pet product retailer made huge profits from pet parents, who turned to it to keep their pets fed and occupied during the pandemic.

The chewy stock soared by almost 400% but has lost about half of the growth to a dip. This dip is majorly fueled by investors’ uncertainty about what’s going to happen to the stock in a post-pandemic world.

Why It Matters

This dip matters because we believe it is a minor setback, especially with the strong fundamentals of the company. Net sales grew by 26.8% year-on-year in the second quarter of FY2021 to $2.16 billion. Active customers shot up by 21.1% to 20.1 million from the previous year. In addition, Chewy recorded that its net loss dropped by half to $16.7 million over the year.

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Source: Chewy

These fundamentals are actually so steady that we believe the dip on the stock is quite overrated. The tech stock sell-off at the beginning of the year didn’t help matters, though.

What Next?

Six words: Buy the dip! Buy the dip!!

We believe the Chewy stock still has a large room for growth. Just 8% of pet product sales were done through eCommerce in the US in 2015. This figure is touted to increase to 53% by 2050. And with a market share of 41% among online pet retailers, Chewy is positioned to reap more profits going forward.

Technical Analysis

The CHWY stock rests on the $60 – $64 support level. What it does here determines where the stock is headed in the near future.

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A breakout from this level to the downside could doom the stock to a further drop to the $42 – $46 support level. However, a bouncing off of this level will bring the stock closer to the descending trendline that keeps the stock in a downtrend.

But all these are the near future projections. Long term, we believe Chewy is headed for higher price levels, which makes the current $62.9 price a bargain.

Invest In The Future of Retail With MercadoLibre

If it isn’t already obvious to you, eCommerce is the future of retail. With what were merely science fiction fantasies about the metaverse gradually getting closer to reality, physical retailing is only going to dip. And eCommerce companies like MercadoLibre, Inc. (Nasdaq: MELI) would likely have bigger and bigger stakes in our retailing experience going forward.

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Source: Los Muertos Crew

Often tagged “the Amazon of Latin America,” MercadoLibre has dominated the eCommerce space in the Latin America retail space. Not only has it dominated the space through eCommerce, but the company also offers other services that give it a strong and diversified root in the region. Some departments in its ecosystem include a logistics service, a payment platform called Mercado Pago, and, of course, the eCommerce department.

MercadoLibre has momentum on its side, as it has reported consistently impressive results in its last three quarters. This recently concluded third quarter in FY21 saw the company’s net revenue increase by 73% year-on-year to $1.8 billion. The net profit from its Fintech department, MercadoLibre Pago, was $630 million. eCommerce accounted for most of what was left.

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Source: MercadoLibre

Taking a look at the growth opportunity ahead of MercadoLibre, we believe the eCommerce and online payment platform company still has a huge runway. According to pre-pandemic statistics, online buyers are only 29% of the total population in Brazil. And in Mexico, Colombia, and Argentina, the percentage of the banked adult population is less than 50% in each country. With MercadoLibre being one of the major companies servicing these niches in the region, we believe there’s more room to grow for the company.

Technical Analysis

We’re going to get this out of the way first. MELI looks bearish in the short term as it approaches the $1250 – $1325 support level. It hit this level once before and it looks like it might do the same again. And having soared by over 300% to new highs, thanks to the propellent from the pandemic, this correction is long overdue. So, it’s possible that the price even breaks the support level to somewhere below.

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For investors in it who are in for the growth, however, this is the best time to buy the stock at a discount and hold on to it for the future.

A Reversal Or A Correction? What’s Happening to Upstart?

The journey has been one fraught with literal ups and downs for Upstart Holdings, Inc. (Nasdaq: UPST). But we believe it’s a smart growth stock to have in your portfolio.

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Source: Andrea Piacquadio

Here’s What Happened

The stock had its IPO late last year. It then soared by a thumping 900% to a peak in October. But it has lost about half of what it gained in a month. This dip was fueled by headwinds in the form of a major investment bank, Jefferies, lowering their ratings on the stock. And more ironically, an exceedingly strong expectation for the coming quarter.

Why This Matters

The Artificial Intelligence lending platform gathers loan demands from its customers and matches them to bank partners that’ll give out the loans. Since its IPO in December, Upstart has soared and hardly looked back. Well, until October, anyway.

Although the company recorded a year-on-year increase of 250% in revenue to $228 million in Q3 FY 21, some investors still believed it could have done better. And this underperformance might have taken the ultra-shine off.

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Source: Upstart

With these financial results, it is obvious that there’s something worth watching out for in Upstart Holdings. And this dip may only be a slight inconvenience when you look back to it many years from now.

What’s Next?

Despite the temporary dip the UPST stock is experiencing, its room for growth is still massive.  First off, its market cap of just $500 million leaves a lot more money to be made. Transaction volume on the platform also more than tripled to 363,000 transactions over the last year.

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Source: Upstart

In spite of these, the company is not taking a break. The company acquired an auto loan software company to target that niche which has a market of $672 billion. UPST also claimed to have its eyes set on mortgage loans by 2022, exposing the company to an enormous market of $4.5 trillion.

Technical Analysis

It only took a month for UPST to lose everything it gathered in 8 months. But then, that’s what dips usually look like. Despite this emphatic dip, however, the stock is still in an uptrend, as it remains above an ascending trendline.

Right at the top of the reversal, the stock formed a Head-and-Shoulders pattern that sentenced the price to a 35% drop. The stock has more or less served this sentence, and it currently hovers close to the $178 – $191 support level. And coincidentally, the ascending trendline just happens to be close by.

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With these, it looks like UPST may rally at this support/ ascending trendline level and challenge for another bullish run. If the stock defies the support level and the trendline, this confirms a further dip to the lower $103 – $114 support level.

But from wherever, we hold a bullish sentiment on Upstart Holdings.

Option Positioning

Currently there are about 116K calls and 81K put options. Of those options, about 20% are expiring on the Dec. 17 op-ex. So there is no short term pressure in terms of monetization going forward. But there is likely put protection increasing during this sell-off which may have helped exacerbate this drop.

TBH, I think UPST had overshot over the last few months and am happy to see it back down on Earth. We’re not ready to buy yet, but we’re getting there.

FULL DISCLOSURE: Chris Capre currently has no positions in $UPSST. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.

CrowdStrike Is Firing On All Cylinders And Is Worth Buying

That the world has gone digital is no news. And if any company was having doubts about going digital, the pandemic has sure cleared those doubts. But the more establishments go online, the more targets hackers and cyber threats have. Enter CrowdStrike Holdings (Nasdaq: CRWD)

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CloudStrike majors in cloud-based cybersecurity. It helps companies protect their online data from cyber threats and potential data breaches without any on-site appliance installations. All the client needs to do is to install security modules from the cloud and make sure to update them regularly.

Its flagship product, Falcon, is a cloud-based platform that offers quick threat detection across multiple platforms. Falcon relies on machine learning and the 1 trillion signals it monitors daily to get smarter the more it’s being used, and it also uses artificial intelligence to detect potential threats.

Already, CrowdStrike has grown its customer base by 81% year on year from over 7,000 to 13,000 in the second quarter of FY 2022. Of the company’s subscribers, 66% have subscribed to four or more modules. And with a customer retention rate of 98%, it’s obvious that this product is loved by anyone who touches it.

The financials of the cyber security company is red-hot, as the company claimed a 70% year-on-year revenue increase in Q2 FY22 to $337 million.

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Being a leader in the cloud-based cybersecurity space, the market opportunity for CrowdStrike is vast. As long as there are cyber threats, which continue to soar to new highs annually, CrowdStrike would always have new customers and bigger opportunities to grow.

Technical Analysis

CRWD has been climbing up a steep ascending trendline it embarked on shortly after its IPO in 2019. And it doesn’t look like it’s out of gas yet.

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It recently touched the trendline with the wick of its latest candlestick. This point of contact also coincides with where the price makes contact with the $236 – $247.5 support level. These two suggest that the price is likely going to continue its strong bullish run and break its ATH of $298

It’s obvious that Crowdstrike is not cheap at $262 per share. But we can only see this stock getting more expensive in the near future.

Option Positioning

Currently option traders have about 126,000 calls and 188,000 put options on $CRWD with about 35% of them expiring this Friday.

That suggests short term, there could be headwinds as we get closer to the expiry. Option positioning and open interest suggests there is support around $250, which we traded and shared with our trading masterclass yesterday. Today, the stock closed at $262, $12 above our $250 bottom call yesterday.

FULL DISCLOSURE: Chris Capre currently had live trades in $CRWD till today, and now just has pending orders on $CRWD. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.

Diversify Your Portfolio With This High Dividend-Paying Stock

Not everything is about growth stocks. It is always smart to diversify your portfolio with the relatively safe dividend-paying stocks. And Rio Tinto Plc (NYSE: RIO) rightly fits into this category.

Diversify Your Portfolio With This High Dividend-Paying Stock 01

Source: Tom Fisk

Since it was founded in 1873, Rio Tinto Groups has made its daily income from exploring, mining, and processing of mineral resources. Some minerals it sells are gold, copper, aluminum, and iron ore.

Here’s why we think it’s a dividend stock worth watching:

Rio Tinto Group has a history of at least 5% dividend yield in the 5 last years. Although it slightly dipped below that earlier this year, it has recovered and has even risen to as far as 10.99%. We don’t expect RIO to sustain this high dividend yield. But if the dividend yield falls, we expect it to return to its 5% base level, which still makes a relatively high dividend yield.

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Source: Rio Tinto

The consistently high shareholder returns of 40 – 60% of its underlying earnings is another reason to consider adding RIO to your portfolio. If up to 60% of the company’s profit if going into shareholders pockets as dividends, you might as well say that RIO exists for the dividend pockets of its shareholders.

Other financial metrics that are looking up for Rio Tinto in its H1 FY 2021 report include sales revenue, which was up by 71% to 33.1 billion year on year, and free cash flow (up by 262% year on year to $10.2 billion).

The only potential risk is the company’s over-reliance on iron ore. Revenue gained from iron ore made up about 64% of its total revenue in H1 FY 2021. If iron ore prices keep dipping, as they have in the past months, it may hurt RIO.

Technical Analysis

There isn’t much going on in the RIO chart apart from a majorly ranging market that has lasted for about a decade.

It broke out of the resilient $62 – $65 resistance level late in 2020 to reach the highest price levels in 13 years. The only other time it broke out of the range in the last 5 years was when it formed a bear trap in March 2020. But now it looks to be taking a dip back below the same resistance (now support) level.

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If the price, however, bounces back from the support level, you may buy and set your target at $85. Otherwise, the price may return to the lower $44.5 – $47 support level.

But ultimately, it’s its reasonably high dividend yield history that makes the RIO stock attractive to us.

Option Positioning

$RIO has about 92K calls and 32K put options, so a heavy call bias. About 26% of those options are rolling off this Friday so we may see a pullback from this rollout.

Option positioning is suggesting there is solid open interest between the high 40’s and low 50’s.

FULL DISCLOSURE: Chris Capre currently has no orders in $RIO. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.

Or you can get access to Chris Capre’s entire trading portfolio by becoming a subscriber to Benji Factory.

This Value Stock Should Be On Your Radar

This stock is not the flashiest. We can’t promise it will 2X or 10X your investment in the next year or even the next decade. But for value investors, Jazz Pharmaceuticals PLC (Nasdaq: JAZZ) is definitely worth giving a second look.

This Value Stock Should Be On Your Radar 01

Source: Pietro Jeng

Jazz Pharmaceuticals is a researcher, developer, manufacturer, and seller of medicines for rare ailments. The company focuses on neuroscience and oncology niches. Some of the most popular drugs in the company’s inventory include Xyrem, Zepzelca, and Xywav.

While Zepzelca raked in $55.9 million in net product sales in Q2 FY21, Oxybate (a combination of Xyrem and Xywav) only saw a 3% increase to $458.3 million at the same time from what it was the year before. JAZZ made $751.8 million at the end of Q2 FY, a 34% increase year on year.

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Source: Jazz Pharmaceuticals

Perhaps, the brightest star in the galaxy of Jazz Pharmaceuticals Plc. is its acquisition of GW Pharmaceuticals, a CBD-based drug maker. With this acquisition, Jazz Pharma can claim the revenues coming from Epidiolex, a drug that treats seizures because of scarce forms of epilepsy. This drug helped JAZZ make up to $109.5 million in sales.

Europe and the US also gave Epidiolex regulatory approval to treat seizures induced from a rare tumor called tuberous sclerosis complex (TSC). This approval exposes the company to up to 50,000 patients in the US and about 2 million patients in the world.

This drug may be what drives the revenue growth for JAZZ in the coming years,

Technical Analysis

To help us understand what the JAZZ stock is telling us through the chart, we pulled up the stock on the monthly chart.

PS: If you’re a growth investor, look away, please.

On the monthly chart, we noticed that the stock has been in consolidation for the past eight years. And honestly, we don’t think it is breaking out of the range soon, as it is right in the middle of the range after bouncing off the longstanding $181.8 – $191 resistance level. In fact, the stock might very well dip some more before it sees its next bullish run.

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For entry levels, we advise that investors err on the side of caution. The best entry point is to wait for the stock to bottom out at the $90.8 – $100 support level. From there, you may claim the potential 80%-plus ride to the resistance level.

However, if you’re not so patient, you may delve into the weekly chart to seek potential entry levels. Each of the following levels may be a good buy level:

  • $155.8 – $159.5
  • $142.5 – $145.7
  • $127.5 – $130.8
  • $114 – $117.5

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Don’t forget, however, that you would be buying in the of a range, and the price could go either way from this position.

Option Positioning

There is not many options or open interest in JAZZ with only 12K call options and 9K puts, so nothing to write home to mama about and thus we take our option data with a large grain of red sea salt.

Be that as it may, there is strong open interest around $130 which lines up with the technical support level above.

FULL DISCLOSURE: Chris Capre currently has no orders in $JAZZ. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.

Or you can get access to Chris Capre’s entire trading portfolio by becoming a subscriber to Benji Factory.

Buying Unity Stock May Be Your Smartest Investment Decision Yet

Not all growth stocks can bring you huge returns. But with patience and proper research, you can find those that are likely to get you those triple percentage digit returns. We believe Unity Software, Inc (NYSE: U) to be such stock.

Buying Unity Stock May Be Your Smartest Investment Decision Yet 01

Source: Jeshoots.com

Unity software is a leading platform for the development of real-time 2D and 3D graphics content. It is very popular among game developers as the tool with which they develop their games. But as you’ll soon see, it has grown to be much more than that.

One thing the company has going for it is the loyalty of its customers, especially in the gaming space. The company boasts of over 1.5 million monthly creators. And you could attribute this level of loyalty to the company’s market approach. Once game developers build their games on the platform, they can deploy them to various platforms, including Android, iOS, and gaming consoles. Otherwise, game developers would have to write new code for every platform they want to make their games for.

Q2 FY 2021 was good for Unity Software. The company gathered a revenue of  $273.6 million, a 48% increase from what it reported at the same time last year, beating its guidance. The revenue gathered this quarter made it the 11th consecutive time Unity Software would make a minimum of 30% increase.

Despite the company’s dominance in the gaming space, Unity software is expanding into other sectors. For instance, Unity launched a platform that allows users to create virtual worlds where self-driving cars are trained. The autonomous cars market alone is estimated to be about $3.2 trillion by 2030, according to GlobeNewswire. When we did the maths, all we saw was an expansive room for growth for Unity Software Inc.

Technical Analysis

The U Stock finds itself in a nicely sloped ascending channel. What this means is that it is climbing healthily up the chart as it approaches its all-time high of $175. It looks to have broken out of the $138.2 – $145.2 resistance level that might have been a challenge to its momentum, and it is currency retesting this level.

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With the solid fundamentals that back the stock up, we have good reasons to be optimistic about this stock. We have a very strong bullish sentiment for the Unity Software stock, and we believe it may 5X your investment in the coming years.

Option Positioning

Unity has a decent amount of options out there with 133K call options and 87K put options. We do have about 30% of these options rolling off this Nov op-ex (19th) which should cause a pullback around the expiry.

Option positioning suggests support around $160 and then around $135.

FULL DISCLOSURE: Chris Capre currently has pending orders in $U. If you’d like to learn more about Chris’s trades and positions, you can get access via the Trading Masterclass where he shares his live trades, further investment ideas and daily market analysis.

Or you can get access to Chris Capre’s entire trading portfolio by becoming a subscriber to Benji Factory.