Stocks Up, Apple Firm: 5 Reasons Why Google Owner Alphabet Could Rally 20%-25% | Stock News & Stock Market Analysis

The major indexes looked poised to end October on a frighteningly good note, led once again by the tech-dominated Nasdaq composite.

XAutoplay: On | OffThe Nasdaq composite, up nearly 0.4% in mid-afternoon trading Tuesday, traded as high as 6729 intraday, good for a 3.6% lift for the month. Alphabet (GOOGL) certainly helped the cause, rising as much as 9.2% in October with the help of a post-earnings blast higher on Friday.

Shares of the Google search engine operator are up 2.5% from a new 1,006.29 buy point in a well-formed flat base and thus still in buy range.

The proper buy zone, based on IBD’s time-tested buy rules, goes up to 1,056.60.

The S&P 500 and the Dow Jones industrial average lagged the Nasdaq, up around 0.1%.

Volume on the NYSE and Nasdaq was running mildly lower vs. the same time Monday.

Apple (AAPL) helped the cause, rising another 1.2% to 168.69 and getting further past a new cup with handle buy point of 160.97. The 5% chase zone goes up to 169.02.

The consumer electronics and digital services giant, which is seeing strong orders and good media reviews for the iPhone X, is now also up nearly 43% since surpassing the first base it completed in early January 2017, a 13-week cup with handle that sported a 118.12 buy point.

Apple had been featured numerous times in Stock Market Today from October through that Jan. 6-9 breakout.

Going back to Alphabet, institutions are clearly deploying more capital into the mega-cap internet-based entertainment and advertising play. Among three fundamental reasons, one is the fact that EPS growth is back on an accelerating path.

Earnings per share jumped 32% to $9.57 a share, pounding the Wall Street consensus view by nearly 15%. It was the biggest year-over-year increase in five quarters and marked a faster rate of increase vs. gains of 7%, 28% and 27% in the prior three quarters.

Two, Alphabet is showing stronger profit margins, which may indicate that the company’s tighter control on expenses over the past few years may be paying off. Net margin in Q3 hit 24.2%, up 170 basis points vs. a year ago and the highest since a 25.3% level seen in the first quarter of 2013.

Three, revenue growth has seen a mildly faster pace.

From the fourth quarter of 2014 to the first quarter of 2016, the top line saw increases of 11% to 18%. But since Q2 of 2016, the top line has grown 21%, 20%, 22%, 22%, 21% and 24% vs. year-ago levels.

Two more reasons why Alphabet could rally another 20% to 25%:

One, fund sponsorship may be stabilizing. Mutual and hedge funds owning Alphabet fell to 4,350 funds in Q3 vs. 4,408 in Q2, but the total shares owned was unchanged at 131.6 million. That total represents less than 19% of 694 million total shares outstanding.

Two, some top rated funds have increased their stake, including Fidelity OTC Portfolio (FOCPX) and Fidelity Magellan (FMAGX) in the second quarter, according to data from William O’Neil + Co.

While sports apparel firm Under Armour (UAA) dropped more than 13% in massive volume and commanded the negative headlines after posting disappointing Q3 results (EPS down 24%, sales off 4% to $1.41 billion), not all apparel firms are wilting.

Despite a negative reversal on Tuesday, Canada Goose (GOOS) has been building the right side of a new cup-type base.

The ultra-premium outerwear and cold-weather knitwear marketer went public at 12.75 a share on March 16. The stock quickly goosed up a 31% gain after a late-May breakout past an 18.50 IPO base, then peaked at 24.32.

The current base shows a normal decline of 30%, within normal range for a solid cup with handle.

Keep in mind that Canada Goose’s business is highly cyclical, with the bulk of its sales and profits coming during the holiday quarter. That said, the luxury brand play looks set to go well into the black in fiscal 2018 (ending in March next year) as analysts on consensus see profit of 43 cents, then 54 cents in FY 2019, up 26%.

Sales grew 39% to $404 million in FY 2017 (ended in March), notching a third year in a row of 30%-plus gains.

Under Armour had posted its first year-over-year top-line decline in at least four years.


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Originally posted 2017-10-31 18:01:06.


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