Author: AnswerStock

The stock is up more than 170% since early December.

Virgin Galactic Holdings, the exploratory space stock, has been on a roll over the past couple of months. The stock is currently up more than 90% since going public last October, and the company is starting to get noticed by Wall Street analysts.

According to Morgan Stanley analyst Adam Jonas, Virgin Galactic is a big topic of conversation on Wall Street. Both Morgan Stanley and Credit Suisse have initiated buy ratings on the stock. 

Virgin Galactic is a $3.4 billion company focused on the luxury space tourism market. The company expects that its revenue will grow by an astonishing 580% by fiscal 2021. 

But how likely is this to happen? Here are three things you should know about Virgin Galactic stock.

1. The company’s finances look solid

Virgin Galactic is in the early stages of building its business, but so far, the financials look pretty solid. The company is backed by the holding company Virgin Group Ltd, which is owned by billionaire Richard Branson. The company is debt-free and has a small amount of free cash flow.

2. Virgin Galactic is a speculative stock

Virgin Galatic is developing commercial spacecraft designed for space tourism. The company owns and operates two different aircrafts which are designed to carry five passengers to space. Customers can participate in this “space tourism” for the cost of $250,000 per person.

The company is still considered a speculative stock since it hasn’t yet started transporting anyone to space. But it does plan on beginning its space travels later this year. 

3. Investor interest is growing 

Virgin Galactic stock has rallied in recent months, and investor interest is slowing beginning to pick up. This process has been slow, partially since the company and the idea of space tourism is so new. 

Vanguard Group invested $90 million in the company across several index funds. Charles Schwab and BlackRock also invested in Virgin Galactic shares. 

Overall, the company is considered a moderate buy on Wall Street. We’ll know more about what’s in store for Virgin Galactic in 2020 when the company releases its fourth-quarter earnings report on Feb. 25.

During Q4, Netflix beats earnings estimates but falls short on U.S. subscribers.

Shares of Netflix are rebounding after the company announced it fell short on subscriber growth during the fourth quarter. The company released its most recent earnings report on Wednesday, and the results weren’t what investors were hoping to see.

Netflix topped earnings and revenue estimates, but its subscriber growth in the U.S. missed the mark. Let’s take a look at what happened to Netflix during the fourth quarter.

Netflix misses Q4 subscriber growth

Netflix has been under the microscope ever since Disney and Apple announced plans to launch their own streaming services. Analysts have been debating whether the company will be able to withstand increased competition in the coming years.

The fourth-quarter earnings report is the first one the company has released since the highly successful launch of Disney+ in November. And it wasn’t all bad news for Netflix.

The company beat revenue and earnings estimates during the fourth quarter. In particular, the company reported earnings of $1.30 per share, crushing previous estimates of $0.53 per share. That means Netflix’s full-year earnings were up more than 50% from a year earlier.

And globally, Netflix beat its own forecasts for subscriber growth. The company added 8.76 million subscribers during the fourth quarter, beating estimates of 7.6 million. 

However, most of the company’s subscriber growth was outside of the U.S. Domestically, Netflix fell short on its subscriber growth. The company added 420,000 new U.S. customers, missing estimates of 600,000.

Not to mention, Netflix continues to burn through cash at a rapid pace. In 2019, the company’s free cash flow hit negative $3.3 billion. The company expects to reduce this loss to $2.5 billion in 2020. 

What does this mean for Netflix?

The latest earnings report indicates that Netflix has been affected by the increased competition in the streaming market. And in March, Disney+ launches in European markets. So it will be interesting to see what effect that has on Netflix’s global subscriber growth. 

But overall, Wall Street is still pretty bullish when it comes to Netflix stock. Out of the 33 analysts currently reviewing the stock, only four recommend selling. And just two days after releasing the earnings report, the company’s shares are up by more than 15%.

The company hit a new 52-week high and finally broke past the $100 billion market cap.

Things just keep looking up for Tesla. After a rocky 2019, the company has taken off like a rocket in the New Year. Its shares are currently up 96% from a year earlier, and this week, the company hit a new 52-week high.

On Wednesday, Tesla reached $594.50 per share, finally breaking past the $100 billion market cap. This is good news both for the company and its founder Elon Musk. Musk stands to earn a nice payout if the stock is able to maintain this market capitalization.

Why Tesla stock keeps going up

Tesla’s shares have been on a roll and have risen sharply since early October. The most recent spike came on the heels of Wedbush analyst Dan Ives’ decision to upgrade the stock.

Ives maintained his hold rating on the stock but increased his price target to $550 per share. Previously, Ives held a $370 price target on Tesla. 

In a note to clients, Ives stated that he’s confident the company won’t disappoint investors at its earnings report next week. He believes the company’s delivery guidance will remain solid thanks to strong demand in Europe and China.

The positive momentum surrounding the company could be very good for its CEO and founder Elon Musk. According to Tesla’s board and shareholders, Musk stands to earn up to $346 million in options it the company’s market capitalization can stay at over $100 billion. 

Bottom line

Tesla always seems to bring out the bulls and the bears in full force. Of the 26 analysts currently reviewing the stock, Wall Street is split when it comes to the company. Seven recommend the company as a buy, seven recommend holding, and 12 recommend selling. 

Tesla does seem to have a lot going for it right now. The company opened its Shanghai plant ahead of schedule and production seems to be going well. Not to mention, the company’s deliveries are up 50% year over year. 

It remains to be seen whether the company can maintain this momentum going forward. Ultimately, we’ll know more once the company releases its earnings on Jan. 29.

The virus has already killed six people and made hundreds of people ill.

Consumers are reeling from the news that a new virus is quickly spreading across China. The coronavirus, which is also dubbed “Wuhan pneumonia” has already killed six people and has infected over 291 people. 

For many people, the virus is reminiscent of the SARS outbreak from 2003, which killed 800 people. The coronavirus is in the same family of viruses as a severe acute respiratory syndrome. 

But will the coronavirus reach the same level as the SARS outbreak? Let’s look at what is known about the virus so far.

What is happening with the coronavirus?

The virus causes a type of pneumonia and is believed to have originated at a wholesale seafood market in Wuhan. Wuhan is located at the center of China and is home to over 11 million people. 

According to the World Health Organization (WHO), the outbreak appears to have come from an animal source, though the source of the virus is unknown. The virus can spread between people and causes fever and labored breathing. 

The coronavirus has spread to other cities in China, as well as Thailand, Japan, and South Korea. And the WHO has warned that the virus will likely continue to spread.

The potential for the virus to spread is especially a concern given that the Lunar New Year holiday is approaching. This is typically a time when millions of people will travel overseas, which could increase the likelihood of transmissions. 

However, the WHO doesn’t expect the coronavirus to reach the same level the SARS outbreak did. For one thing, the coronavirus doesn’t appear to be as lethal as the SARS outbreak.

Not to mention, China has responded much more quickly to the coronavirus than it did with SARS. With the SARS outbreak, China took over four months to notify the WHO. 

In comparison, the Chinese government notified the WHO about the coronavirus last month when the outbreak began. 

Will markets be negatively affected?

Global markets will be affected by the coronavirus but analysts are expecting the impact to be minimal. According to Rory Green, an economist at the research firm TS Lombard, the impact should be short-lived, thanks to the quick response of the Chinese government.  

Other analysts speculate that travel companies could be affected by the outbreak since many people will be hesitant about traveling. The Chinese travel company Trip.com already saw its stock drop 14% after consumers began canceling their travel plans for the Lunar New Year holiday.

Green concluded that the coronavirus would likely affect retail sales and tourism, but believes that growth will stay on trend at 7%. 

The company needs the funds to deal with high costs associated with the 737 Max crashes.

CNBC reported that Boeing has been shopping around for loans to the tune of $10 billion or more. The company needs this money to deal with the rising costs associated with the 737 Max crashes last year. 

Boeing has reportedly secured $6 billion in loans and is looking for additional banks to supplement the rest. Boeing declined to comment on the story, but the information supposedly comes from a source very close to the matter.

The backstory on the 737 crashes

Boeing continues to deal with the fallout of the fatal 737 Max crashes. The first crash happened in October 2018 in Indonesia and the second happened in Ethiopia in March. 

In total, 346 people died as a result of the crashes. The 737 has been grounded ever since and the company has faced numerous hurdles with getting the airliner back in the air. 

Most recently, Boeing acknowledged a software issue with the 737 Max. During a test flight, the flight computers were not communicating with each other at takeoff. The company is unsure how long it will take to resolve the software issue. 

This prompted Moody’s Investor Service to review the company’s credit rating. Analyst Jonathan Root said that recent developments with the 737 Max indicate that the company’s recovery will be more costly than originally expected. 

The grounding of the 737 Max hasn’t just been costly for Boeing; it also cost the airlines more than $1 billion in lost revenue. Last July, the company was forced to take a $5.6 billion pre-tax charge to compensate its customers.  

Final thoughts

Citigroup, Bank of America, JP Morgan, and Wells Fargo have already agreed to contribute to the loan. But even after the loan is finalized, Boeing still faces a long road ahead. Not only does the company have to prove that the 737 Max is safe again, but it also has to find a way to re-establish trust with its customers. 

Investors will be watching closely to see what happens with the 737 Max in 2020. The past year has been full of ups and downs for Boeing and the stock is currently down more than 9% from a year earlier. 

In spite of the backlash it faced, 2019 was a year of solid growth for the company.

Facebook has been at the center of many controversies over the past couple of years. The company continues to deal with criticism over how it handles consumer privacy and was even fined $5 billion by the FTC in 2019. 

CEO Mark Zuckerberg has been called to testify in Washington about his company’s policies. And most recently, the company faced backlash over its refusal to ban political ads from its site. 

But in spite of the negative press that continues to follow the company, its stock continues to rise. Shares of Facebook are up over 49% from a year earlier and the company saw its market cap rise by more than $200 million in 2019. 

And many analysts are predicting the momentum will continue into 2020.

Facebook continues to beat analyst estimates

In spite of all the criticism that’s leveled at Facebook, it’s worth noting that it rarely seems to significantly impact the company’s user growth. The company reported its third-quarter earnings at the end of October, and its revenue beat Wall Street estimates. 

In recent quarters, the company has added new users to Facebook, Instagram, WhatsApp, and Messenger. According to Facebook, 2.8 billion people use the company’s platforms each month. 

And Facebook continues to dominate the advertising landscape with more and more businesses choosing to advertise on the company’s platform. During the third quarter, the company’s advertising revenue grew by 28% to reach $17.38 billion. 

Bottom line

Facebook is considered a strong buy on Wall Street, and the company’s most recent bull is Guggenheim analyst Michael Morris. Morris recently reiterated his buy rating on the stock and raised the price target from $230 to $275. 

In a note to clients, Morris noted that Facebook’s spending, revenue, and operating profits will continue to increase in the coming years. He said the company should continue to do well thanks to the strong performance of Instagram Stories and the e-commerce growth across its platforms.

Ultimately, we’ll know more one the company releases its fourth-quarter earnings report on Jan. 29.

Morgan Stanley hit a new 52-week high after beating Q4 earnings estimates.

Earnings week kicked off with each of the major banks reporting their end of the year earnings and revenue. JP Morgan Chase, Citigroup, Goldman Sachs, and Bank of America all reported their quarterly earnings earlier in the week.

On Thursday, it was Morgan Stanley’s turn and the firm didn’t disappoint. Shares of Morgan Stanley were up by more than 7% after the firm beat its fourth-quarter estimates. 

The firm profits and revenue came in higher than expected, and management revealed ambitious plans for 2020. Let’s look at an overview of how Morgan Stanley did during the fourth quarter, and what we can expect in 2020 and beyond.

An overview of Morgan Stanley’s Q4 results

During the fourth quarter, Morgan’s Stanley’s revenue grew 27% to reach $10.86 billion. This exceeded analyst expectations of $9.72 billion in revenue. The firm’s profits were up as well and reached $1.30 per share, beating expectations of 99 cents per share. 

In fact, Morgan Stanley exceeded Wall Street’s expectations across nearly every leg of its business. The firm’s financial securities division grew by 32%, and its wealth management leg grew by 11%.

But it was Morgan Stanley’s investment management division that really blew expectations out of the water. The division grew nearly 100% from a year earlier to reach $1.36 billion in revenue. In comparison, Wall Street was expecting this division to reach $783.2 million in revenue. 

And management expects the momentum to continue well into 2020. The firm outlined aggressive financial goals for the next two years. This included boosting the pretax margin in its wealth management business by up to 30%. And Morgan Stanley plans to lower its efficiency ratio to between 70%-72%.

What’s next for the financial firm?

Overall, it has been a good week for the banking industry. JP Morgan, Bank of America, and Citigroup all beat analyst expectations as well. But Goldman Sachs and Wells Fargo both took a hit due to ongoing legal expenses. 

Overall, Morgan Stanley is considered a moderate buy on Wall Street. The bank has had a strong year and the stock is up 28% from a year earlier.

The retailer is still up 70% from a year earlier.

On Wednesday, Target reported its holiday sales and investors were disappointed by the results. The company’s same-store sales were up by 1.4% during November and December. But in comparison, the retail giant’s same-store sales grew by 5.7% a year earlier.

This caused the company’s shares to fall nearly 9% by mid-morning. Walmart saw its shares fall slightly as well even though the company has yet to release its holiday sales numbers. 

Why did Target’s holiday sales fall short?

During the holiday season, Target saw strength in its beauty and apparel lines. Beauty product sales were up by 7% while apparel sales gained 5%. But these gains were offset by losses in the company’s electronics, toys, and home lines. 

It’s somewhat surprising that the company’s toy sales fell flat, especially since the company has been devoting more space in its store to toys. And Target recently partnered with Disney to open mini Disney shops within select stores. Not to mention, Target is handling the relaunch of Toys R Us’s website. 

The company saw the biggest dips in its electronics sales which were down 6% through November and December. And sales on home items fell 1%. However, management is confident that the company is still on track to meet its fiscal 2019 targets and chose to maintain its fourth-quarter guidance. 

What’s next for Target?

For many people, it was a surprise to see Target come up short during the holiday season. Retailers like Kohl’s, Macy’s, and JC Penney all struggled during the holiday months, but Target usually comes out on top. 

But it wasn’t all bad news for the company. Target’s digital sales rose by 19%, thanks to the company’s same-day services. Overall, Target saw its same-day services rise by 50% during the holiday months as more customers embraced options like curbside pickup and Shipt grocery delivery. 

And the company’s investments in its store remodels, a new grocery line, and its mobile updates should begin to pay off in 2020. Overall, the company is considered a moderate buy on Wall Street with a potential upside of more than 18%. 

David Calhoun steps in as CEO of Boeing as the Max 737 crisis picks up speed.

This week, David Calhoun steps into his new role as CEO of Boeing. Calhoun is replacing former CEO, Dennis Muilenburg. The board fired Muilenburg just before Christmas and announced Calhoun as his replacement. 

As a member of the Boeing board for over 10 years, Calhoun is already well-versed in the many challenges the company faces. But even still, many people are wondering whether he’s up to the task of repairing the company’s damaged reputation and culture.

The backstory on Boeing

Boeing continues to struggle with the fallout of the two Max 737 crashes over a year ago. 346 people were killed in the crashes, and the airliner has been grounded ever since.

Muilenburg was sharply criticized for his inappropriate response to the Max 737 crashes. He previously stated the federal regulators would allow the planes back in the air by the end of 2019. This statement put the company sharply at odds with the Federal Aviation Administration (FAA). 

But even more surprising, last week, Boeing released documents showing that employees hid safety concerns about the Max 737 while it was still in development. 

The documents contained over 100 pages of internal emails and messages between employees. In one exchange, two employees commented that they would never let their family members fly on a Max 737. Another employee referred to the company as having a “culture of good enough.”

Bottom line

One of the biggest criticisms of Calhoun is that he’s been on the board at Boeing since 2009. This has led many to argue that he’s too close to the problem and won’t be able to shift the company culture at Boeing. And according to a recent securities filing, Calhoun stands to earn a $7 million bonus if he can convince regulators to sign off on the Max 737. 

Overall, the grounding of the Max 737 has lowered the company’s market value by over $50 billion. And according to Treasury Secretary Steve Mnuchin, the grounded 737 could curb economic growth in the U.S. by as much as 2.5% in 2020.

The markets hit new all-time highs after tensions with Iran de-escalated.

Last week, tension between the U.S. and Iran reached an all-time high. On Tuesday, Iran attacked two military bases in Iraq that were housing U.S. troops. This caused the Dow to tumble 400 points overnight and the S&P 500 dropped 1.6%.

But the crisis quickly de-escalated once it became clear that there were no injuries or deaths stemming from the attack. Markets quickly rebounded and hit near all-time highs after comments from President Trump indicated that the conflict was resolved. 

Markets hit new all-time highs

After the crisis subsided, the S&P 500 rose 0.66%, the Nasdaq Composite rose 0.80%, and the Dow rose 189 points. Each of these indexes were nearing all-time highs; this is somewhat surprising given some of the recent international tensions. 

According to Frank Lavin, the former U.S. ambassador to Singapore, this is largely due to how President Trump handled the tensions with Iran. Lavin called it “a modest win” for the President, though he acknowledged that the problem with Iran isn’t going away anytime soon.

Instead of responding with further military action, the Trump administration chose to impose additional sanctions on Iran. Lavin seemed to agree with this move, stating, “I think they’re going to be proven to be the right set of actions.” 

What to look for in the market this week

The banks will kick off the fourth-quarter earnings season this week. JP Morgan, Citigroup, Goldman Sachs, and Bank of America are set to release their earnings beginning on Tuesday. 
And this week, investors will be paying close attention to how the trade deal between the U.S. and China plays out. China’s chief trade negotiator and a delegation are scheduled to arrive in Washington this week to sign the first phase of the trade deal. There is still a lot of uncertainty around the trade deal, but investors seem to be optimistic about it.