S&P 500 INDEX – CBOE

Intercontinental Exchange Stock Is Quite Expensive

Its stock is in sync with the S&P 500 index, as the company has profited from higher trading volumes in the securities market due to the Covid-19 crisis.

After a 50% rise since the March 23 lows of this year, at the current price of around $100 per share we believe Intercontinental Exchange’s stock (NYSE: ICE) looks fully valued based on its historic P/E multiples. Intercontinental Exchange, one of the largest exchange operators and clearing houses in the world, has seen its stock rally from $67 to $101 off the recent bottom compared to the S&P which also moved around 50%. Its stock is in sync with the S&P 500 index, as the company has profited from higher trading volumes in the securities market due to the Covid-19 crisis. Notably, its revenues grew by 7% y-o-y in the second quarter, mainly driven by 33% growth in total transaction and clearing revenues. Further, its stock is still 10% above the levels seen in late 2019.

Intercontinental Exchange’s stock has bested the level it was at before the drop in February due to the coronavirus outbreak becoming a pandemic. This seems to make it fully valued as, in reality, trading volumes in the securities market are likely to normalize over the next few months.

Some of the rise of the last 3 years is justified by the roughly 15% growth seen in Intercontinental Exchange’srevenues (revenue minus transaction-based expenses) from 2016 to 2019, which translated into a 35% growth in Net Income. The Net income figure was higher in 2017 due to the one-time effect of the U.S Tax Act.

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While the company has had stable revenue and earnings growth over recent years, its P/E multiple has seen some increase. We believe the stock is unlikely to see an upside after the recent rally and the potential weakness from a recession-driven by the Covid outbreak. Our dashboard Why Intercontinental Exchange Stock moved 88% between 2016 and now has the underlying numbers.

Intercontinental Exchange’s P/E multiple has changed from just above 22x in 2016 to about 27x in 2019. While the company’s P/E is around 29x now, there is a downside risk when the current P/E is compared to levels seen in the past years – P/E of close to 27x at the end of 2019 and around 22x as recently as late 2016.

So what’s the likely trigger and timing for the downside?

Intercontinental Exchange (ICE) owns exchanges for financial and commodity markets. It generates more than 62% of its revenues from Transaction and Clearing Fees which are charged on a per-transaction basis for trading in derivatives, cash equities, fixed income, equity options, etc. The Covid-19 crisis and economic uncertainty have resulted in high market volatility, leading to a significant jump in trading volumes. This, in turn, means that the exchange would generate more revenue in terms of transaction and clearing fees. However, as the economic condition improves in the coming months, market volatility is likely to decline, normalizing the trading volumes. This implies that the Intercontinental Exchange’s revenue growth rate is likely to decrease in Q3 on a sequential basis.

Additionally, over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to buoy market expectations. Following the Fed stimulus — which helped to set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view, with investors now mainly focusing their attention on 2021 results. Though market sentiment can be fickle, and evidence of a sustained uptick in new cases could spook investors once again.

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New Developments In Metals

Until such time, I remain cautious as the b-wave triangle is still a valid interpretation. As far as GDX is concerned, we seem to be striking a target for a d– …

The reason I am sending out a mid-week update sooner than normal is because GLD has an important update I needed to highlight.

As of the weekend, the GLD only had 3 waves up off a potential wave iv low, so I said I had no reason to consider it having competed. Today, the GLD is making a higher high which MAY be considered as a leading diagonal for wave 1 of v.

But, I still have to caveat this with the fact that I do not wholeheartedly trust leading diagonals as strong trading cues. Therefore, in order for GLD to prove to me it has completed wave iv, we MUST see a corrective retrace from this rally, followed by a break out over the level at which this potential wave 1 tops out. That would strongly indicate that wave v has likely begun.

Until such time, I remain cautious as the b-wave triangle is still a valid interpretation.

As far as GDX is concerned, we seem to be striking a target for a d-wave in the wave [4] triangle we have been tracking for the better part of the last few weeks. And, in coming this high, I have to now say that the c-wave bottom is the MUST HOLD level to maintain this triangle count. So, as long as we hold over the 39.29 level, I view the next pullback as an e-wave of this triangle. And, right now, resistance is 44-44.50.

As far as silver is concerned, I can consider this rally a 5-wave structure in the same way I see it in GLD. Therefore, the slow struck on the 8th of September is the MUST HOLD level in silver, with a break out over the pivot suggesting we are on our way to the 36+ region.

In summary, the last lows struck in each of this charts on September 8th should be used as a strong stop for anyone trading the shorter term in these charts. As long as we hold over that support, I am looking higher to begin the next rally phase. However, any break down below those levels suggests that this correction has not yet completed, and a c-wave down is a reasonable expectation in each chart, as outlined in all my prior recent updates.

See charts illustrating Avi’s wave counts on the GLD, GDX and Silver.

Avi Gilburt is a widely followed Elliott Wave analyst and founder of ElliottWaveTrader.net, a live trading room featuring his analysis on the S&P 500, precious metals, oil & USD, plus a team of analysts covering a range of other markets.

This article was originally published Tuesday morning, September 15, for members of ElliottWaveTrader.net:

Dow Futures, Snowflake, Oracle-TikTok – 5 Things You Must Know Thursday

Dow Futures, Snowflake, Oracle-TikTok – 5 Things You Must Know Thursday. Stock futures tumble after the Federal Reserve says it will keep interest …

Here are five things you must know for Thursday, Sept. 17:

1. — Stock Futures Retreat After Fed Signals Rates to Remain Near Zero

Stock futures tumbled Thursday after the Federal Reserve said it would keep interest rates low through at least 2023 and Fed Chairman Jerome Powell said the U.S. economy would continue struggling without help from Congress.

Contracts linked to the Dow Jones Industrial Average fell 245 points, S&P 500 futures were down 38 points and Nasdaq futures dropped 157 points.

Stocks ended mixed Wednesday, with tech stocks leading the retreat, as the Federal Reserve held interest rates at near zero and indicated they would remain there for the near-term future to assist the economy during the coronavirus pandemic.

The Dow ended higher by 36 points, or 0.13%, to 28,032. The S&P 500 finished down 0.46%, ending its three-day winning streak, and the Nasdaq dropped 1.25%.

Powell said Wednesday a U.S. economic recovery would depend largely on how well the country controls the coronavirus pandemic.

“A full economic recovery is unlikely until people are confident that it is safe to re-engage in a wide variety of activities,” Powell said.

The Fed chairman reiterated that further fiscal stimulus was needed after additional unemployment benefits expired.

Congress has been deadlocked on the size of the next coronavirus aid bill.

“When I look at where the stimulus talks are, the odds of something getting done are very, very slim,” said Joyce Chang, JPMorgan Chase’s global head of research. “Both sides are far apart.”

2. — Thursday’s Calendar: Jobless Claims and Housing Starts

The economic calendar in the U.S. Thursday includes weekly Jobless Claims at 8:30 a.m. ET, Housing Starts and Permits for August at 8:30 a.m. and the Philadelphia Fed Manufacturing Index for September at 8:30 a.m.

Economists put the number of Americans filing for first-time unemployment benefits at 850,000 for the week ended Sept. 12. Claims came in at 884,000 in each of the prior two reports.

3. — Oracle Reportedly Will Get Access to TikTok Code

Oracle (ORCL) – Get Report will get full access to review TikTok’s source code to ensure there are no back doors used by TikTok’s Chinese parent ByteDance to gather data on the video-sharing app’s American users, Bloomberg reported, citing people familiar with the matter.

ByteDance and Oracle submitted these details in their proposal to the Trump administration with a goal of averting a sale of the app or a shutdown of its U.S. operations by the Sept. 20 deadline.

However, Bloomberg reported, the terms of the agreement seem to fall short of meeting national security concerns expressed by administration officials.

President Donald Trump said Wednesday he wasn’t happy with terms of the agreement that would allow ByteDance to retain a majority of TikTok’s assets, with Oracle acquiring a minority stake.

“Just conceptually, I can tell you I don’t like that,” Trump said.

“I’m not prepared to sign off of anything,” Trump said. “I have to see the deal.”

4. — Snowflake Cools Off After Blockbuster Debut

Snowflake (SNOW) – Get Report shares were down 6.15% to $238.32 in premarket trading Thursday after the stock soared as much as 166% in its stock market debut.

Snowflake closed at $253.93 on Thursday after beginning trading Wednesday at $245 a share, well above its already increased initial public offering price of $120. The stock reached a high of $319 on Wednesday.

Snowflake’s initial public offering of $3.36 billion was the largest software-focused IPO ever and the biggest IPO in the U.S. this year.

According to TheStreet’s Eric Jhonsa, Snowflake is worth about $95 billion after accounting for outstanding stock options, restricted stock units and warrants. After backing out the roughly $4.5 billion in cash Snowflake possesses following its IPO and share sales to Berkshire Hathaway (BRK.A) – Get Report and Salesforce (CRM) – Get Report, the company has an enterprise value of around $91.5 billion.

Snowflake’s Extraordinary Post-IPO Valuation Warrants Some Caution

Such an enterprise value spells a valuation of 227 times Snowflake’s revenue of $403 million during its last four quarters. This valuation also is more than seven times higher than the $12.4 billion valuation Snowflake received in a February funding round.

5. — Southwest Grounds 130 Boeing 737-800 Jets

Southwest Airlines (LUV) – Get Report temporarily has grounded 130 Boeing (BA) – Get Report 737-800 aircraft after it discovered discrepancies in aircraft weight data.

Southwest said in a statement that “out of an abundance of caution, we have temporarily ceased flying the respective aircraft to enter the correct weights of the aircraft in question into the system and reset the program.”

Southwest said the discrepancy in weight data was 75 pounds, according to a report from Reuters.

The airline said the temporary halt to flights would “cause some delays and/or cancellations; however, we anticipate the impact to our operation to be minimal.”

Don’t Let Recent momentum Confuse Your Outlook on NVIDIA Corporation [NVDA]

NVIDIA Corporation [NVDA] stock is down -1.46 while the S&P 500 has risen 0.49% on Tuesday, 09/15/20. While at the time of this article, NVDA ATR …

NVIDIA Corporation [NVDA] stock is down -1.46 while the S&P 500 has risen 0.49% on Tuesday, 09/15/20. While at the time of this article, NVDA ATR is sitting at 27.61, with the beta value at 1.58. This stock’s volatility for the past week remained at 5.51%, while it was 4.82% for the past 30-day period. NVDA has fallen -$7.6 from the previous closing price of $519.64 on volume of 6.34 million shares.

Analyst Birdseye View:

The most recent analyst activity for NVIDIA Corporation [NASDAQ:NVDA] stock was on September 02, 2020, when it was Reiterated with a Buy rating from The Benchmark Company, which also raised its 12-month price target on the stock from $540 to $600. Before that, on September 15, 2020, Needham Recapitulated a Buy rating and elevated its amount target to $700. On September 02, 2020, RBC Capital Mkts Reiterated an Outperform rating and boosted its price target on this stock from $528 to $610. On September 02, 2020, Mizuho Reiterated a Buy rating and increased its price target from $520 to $575. On September 02, 2020, Goldman Reiterated a Buy rating and increased its price target to $585. On September 02, 2020, Credit Suisse Reiterated an Outperform rating and boosted its amount target on this stock to $620. On September 02, 2020, BofA Securities Reiterated a Buy rating and boosted its target amount on this stock from $600 to $650. On August 20, 2020, Wells Fargo Reiterated an Overweight rating and improved its amount target to $535.

In the past 52 weeks of trading, this stock has oscillated between a low of $169.32 and a peak of $589.07. Right now, according to Wall Street analyst the average 12-month amount target is $553.93. At the most recent market close, shares of NVIDIA Corporation [NASDAQ:NVDA] were valued at $512.04. According to the average price forecast, investors can expect a potential return of 3.4%.

FUNDAMENTAL ANALYSIS

NVIDIA Corporation [NASDAQ:NVDA] most recently reported quarterly sales of 3.87 billion, which represented growth of 49.90%. This publicly-traded organization’s revenue is $792,595 per employee, while its income is $202,976 per employee. This company’s Gross Margin is currently 62.80%, its Operating Margin is 27.10%, its Pretax Margin is +27.20, and its Net Margin is +25.61. Continuing to look at profitability, this corporation’s Return on Assets, Equity, Whole Principal & invested Principal is sitting at 18.27, 25.95, 22.09 and 21.44 respectively.

If looking now at the Principal structure of this organization, it shows its whole liability to the whole Principal at 17.80 and the whole liability to whole assets at 15.26. It shows enduring liability to the whole principal at 17.19 and enduring liability to assets at 0.15 while looking for an extended time period.

Readers are usually of view to make a close observation to the indicators that support and make resistance before moving to any particular stock. As of now, the company’s stock is sitting at 511.18 points at 1st support level, the second support level is making up to 502.73. But as of 1st resistance point, this stock is sitting at 530.02 and at 540.41 for 2nd resistance point.

NVIDIA Corporation [NVDA] reported its earnings at $2.18 per share in the fiscal quarter closing of 7/30/2020. The Analysts for Wall Street were expecting to report its earnings at $1.97/share signifying the difference of 0.21 and 10.70% surprise value. Comparing the previous quarter ending of 4/29/2020, the stated earnings were $1.8 calling estimates for $1.69/share with the difference of 0.11 depicting the surprise of 6.50%.

Important Ratio’s To Watch

Meanwhile, turning our focus to liquidity, the Current Ratio for NVIDIA Corporation [NASDAQ:NVDA] is 6.10. Likewise, the Quick ratio is also the same, showing Cash ratio at 6.11. Now if looking for a valuation of this stock’s amount to sales ratio it’s 14.18, it’s amount to book ratio is 12.56 and showing 95.28 of P/E (TTM) ratio.

Insider Stories

Shifting our attention to insider trading activity, in the last 3 months, 5 insider purchases representing 251,252 shares. The most recent insider trade was by HUANG JEN HSUN, President and CEO, and it was the sale of 49999.0 shares on Sep 01. HUANG JEN HSUN, the President and CEO, completed a sale of 100000.0 shares on Aug 17. On Jul 24, Puri Ajay K, EVP, Worldwide Field Ops, completed a sale of 12692.0 shares.

The Zacks Analyst Blog Highlights: NVIDIA, Advanced Micro Devices, Intel, Apple and QUALCOMM

Stocks recently featured in the blog include: NVIDIA Corporation NVDA, Advanced Micro Devices, Inc. AMD, Intel Corporation INTC, Apple Inc. AAPL …

For Immediate Release

Chicago, IL – September 16, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: NVIDIA Corporation NVDA, Advanced Micro Devices, Inc. AMD, Intel Corporation INTC, Apple Inc. AAPL and QUALCOMM Incorporated QCOM.

Here are highlights from Tuesday’s Analyst Blog:

NVIDIA-Arm Deal Revs Up Chip Industry: 4 Stocks in Focus

The coronavirus crisis has compelled companies globally to alter their spending strategies, and SoftBank Group isn’t immune to the trend. Recently, NVIDIA inked a deal to acquire Arm Holdings for $40 billion from its existing owner Softbank Group.

Also, semiconductor companies need to be significantly large in scale in order to compete effectively in this coronavirus induced volatile environment. Therefore, resorting to massive M&A in a bid to grab more market share, cut costs, boost productivity and improve investment returns through scale economies is a compelling proposition.

Nevertheless, NVIDIA’s Arm acquisition is not just another semiconductor M&A deal. In fact, it holds potential to guide the chip industry to new highs. To quote NVIDIA’s CEO, Jensen Huang “We’re uniting NVIDIA’s leading AI computing with Arm’s vast ecosystem.”

Investor excitement following the deal was palpable with shares of NVIDIA gaining 5.8% on Sep 14, closing at $514.89. The company currently carries a Zacks Rank #3 (Hold).

The transaction, which has been approved by the boards of directors of NVIDIA, SoftBank and Arm, is expected to be immediately accretive to its non-GAAP gross margin and non-GAAP earnings per share. (Read More: NVIDIA Stock Is Cheap and Arm Is a Big Deal)

Are AMD & Intel at Risk?

The massive consolidation with far reaching effects has caused ripples across the semiconductor industry.

Previously, NVIDIA’s limited scope to provide full stack CPU-GPU offering had impeded prospects and enabled Advanced Micro Devices to gain market share. NVIDIA is now well poised to upscale its inference technology, robust drivers, and accelerators by utilizing Arm’s robust architecture and chip designs.

Arm acquisition is expected to aid NVIDIA in offering end-to-end ecosystem of technology across the data center, IoT, autonomous vehicles and mobile domains.

With continued innovation over the decades, the enhancement of inference capabilities of chips has gained prominence. Additionally, momentum in Internet of Things (IoT), fueled by accelerated deployment of 5G, is believed to add an extraordinary volume in sales of electronic devices, which in turn favors the prospects of NVIDIA.

Ongoing momentum of Arm-based devices coming to the market and synergies from NVIDIA’s AI expertise are likely to intensify competition in the mobile segment, which is a headwind for AMD.

Nevertheless, robust adoption of 7 nanometer (nm) based Ryzen, Radeon and latest second-generation EPYC server processors, courtesy of increasing proliferation of AI and ML in industries like cloud gaming and supercomputing domain, favors prospects of AMD. The company currently carries a Zacks Rank #3.

Moreover, Intel has been witnessing stiff competition in the server, storage and networking markets. Arm’s strengthening position in the fast-growing micro server segment and solid uptick of its advanced designs at several Intel competitors, is a constant risk.

Also, NVIDIA’s alliance with IBM poses stiff competition in the high performance computing (HPC) accelerator segment. The company has been also facing the brunt of delay in 7 nm process-based chips.

However, robust mix of high-performance second-generation Xeon Scalable processors and solid demand from Cloud service providers are expected to boost Intel’s growth. Further, strong momentum for 10 nm mobile CPU bodes well for this Zacks Rank #3 stock.

What’s in Store for QUALCOMM & Samsung?

Arm is a notable supplier of designs and intellectual property to most of the global semiconductor industry, licensing its technology to customers including Apple, Intel, QUALCOMM and Samsung.

Although NVIDIA has stated that it will maintain Arm’s customer neutrality, it is likely that the deal will see strong opposition from the company’s rivals, including Intel, QUALCOMM and Samsung.

QUALCOMM, currently carrying a Zacks Rank #2 (Buy), utilizes Arm-based CPU design architecture to offer customers advanced levels of compute performance at low power. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Samsung, meanwhile, leverages Arm’s designs to power Exynos chipsets and boost performance of its Cortex CPU and Mali GPU. The Korea-based tech biggie was reportedly looking to acquire a small stake in Arm, in 3- 5% range.

It remains to be seen how dynamics with customers evolve over time, especially whether Arm’s customers look for alternatives in RISC-V. Notably, RISC-V is a royalty free open standard instruction set architecture based on established principles. Moreover, if or whether NVIDIA raises royalty fees also remains a concern, and might invite hindrance to the acquisition process.

Further, the acquisition is subject to customary closing conditions, including the receipt of regulatory approvals from U.K., China, the European Union and the United States. Markedly, within hours of the deal’s announcement, there have been murmurs of protest emerging in South Korea and China. Completion of the transaction is expected to take place in approximately 18 months. (Read More: NVIDIA Clinches Deal to Acquire Softbank’s Arm for $40B)

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