NEW YORK (TheStreet) -- Momentum stocks have been a major focus in the stock market in 2014, and leadership has been shifting back and forth. With markets trading lower the past two sessions, it appears that investors now have their eyes on valuations.
On June 26 I wrote, "Tesla Easily Beats Amazon, Netflix in the Latest Momentum Race," but since then Apple (AAPL) has been the best performer among the five momentum stocks I track. Apple has a 12-month trailing price-to-earnings ratio of 15.7, which is significantly lower than the other stocks on the list.
The momentum race since June 25 was clearly won by Apple, with a gain of 5.5%. Tesla (TSLA) moved from first place to last place with loss of 7.5%. The other three had only fractional moves after my June 26 post.
We crunched the numbers to help you decide when to invest. Here are the five profiles, followed by today's "Crunching the Numbers" tables.
Apple ($95.35) is up 5.5% since June 25, setting a new 2014 intraday high at $96.80 on July 8. Apple is above all five key moving averages in our first table with a 12-month trailing P/E ratio at 15.7.
The weekly chart is positive but overbought with the five-week modified moving average at $90.66 with its split-adjusted all-time intraday high at $100.72 set in September 2012. Monthly and annual value levels are $90.23 and $81.33, respectively, with a semiannual pivot at $95.32 and weekly and semiannual risky levels at $98.12 and $102.39, respectively.
Apple reports quarterly results after the closing bell on July 22.
Amazon (AMZN) ($323.81) is down 1.1% since June 25 and remains below its 200-day SMA at $347.24. Amazon has a ludicrous P/E of 629.
The weekly chart is neutral with its five-week MMA at $324.44 with rising 12x3x3 weekly slow stochastics. An annual value level lags at $259.67 with an annual pivot at $334.95 and semiannual and weekly risky levels at $344.38 and $354.05, respectively.
Amazon reports quarterly results after the closing bell on July 24, and analysts expect the company to report a loss of 12 cents a share.
Google (GOOGL) ($578.40) is down 1.3% since June 25 and is above all five key moving averages with a P/E of 29.8.
The weekly chart is positive with its five-week MMA at $571.19. Annual value levels are $522.17 and $489.53 with a semiannual pivot at $589.86 and weekly and monthly risky levels at $614.81 and $615.68, respectively.
Google reports quarterly results after the closing bell on July 17 and analysts expect the company to report EPS of $5.16.
Netflix (NFLX) ($445.05) is up just 0.2% since June 25 after setting an all-time intraday high at $475.87 on July 2. The stock is above all five key moving averages but has an a crazy high P/E of 139.2.
The weekly chart is positive but overbought with its five-week MMA at $427.19. Semiannual value levels are $359.04 and $341.57 with a monthly pivot at $463.61 and quarterly and weekly risky levels at $472.26 and $528.22, respectively.
Netflix reports quarterly results after the closing bell on July 21, and analysts expect the company to report EPS of $1.14.
Tesla Motors ($219.07) is down 7.5% since June 25 after trading as high as $244.49 on June 30, well shy of its all-time intraday high at $265.00 on Feb.26. Tesla is below its 21-day SMA at $224.96.
The weekly chart is positive with its five-week MMA at $218.35. The 200-day SMA is $188.42 with a monthly pivot at $225.09 and quarterly and weekly risky levels at $227.65 and $249.80, respectively.
Tesla reports quarterly results on Aug. 6, and analysts expect the company to report a loss of 24 cents a share.
Crunching the Numbers With Richard Suttmeier: Moving Averages & Stochastics
This table provides the technical status for the stocks profiled in today's report.
There are five columns with moving average titles: Five-Week Modified Moving Average; 21-Day Simple Moving Average; 50-Day Simple Moving Average; 200-Day Simple Moving Average; and the 200-Week Simple Moving Average.
The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with a reading of oversold, rising, overbought, declining or flat.
Interpretations: Stocks below a moving average are listed in red.
Five-Week Modified Moving Average (MMA) is one of two indicators that define whether a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.
A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.
A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.
A stock with a neutral technical rating has a profile that is not positive or negative.
The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance level and as a "reversion to the mean" over a rolling three- to five-year horizon.
The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three- to five-day horizon and vice versa.
The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.
The 200-Day Simple Moving Average is another technical support or resistance level, and I consider this level as a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon.
Crunching the Numbers With Richard Suttmeier: Earnings & Where to Buy & Where to Sell
This table presents the EPS estimates including date and before or after the close, and where to buy on weakness and where to sell on strength.
"EPS Date" is the day the company reports its quarterly results.
"EPS Estimate" is the EPS estimate from Wall Street analysts.
Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.
Investors who wish to buy a stock should use a good-'til-canceled limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff
Now let's look at TheStreet Ratings' take on some of these stocks.
TheStreet Ratings team rates APPLE INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate APPLE INC (AAPL) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, expanding profit margins and good cash flow from operations. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- AAPL's revenue growth has slightly outpaced the industry average of 2.2%. Since the same quarter one year prior, revenues slightly increased by 4.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Although AAPL's debt-to-equity ratio of 0.14 is very low, it is currently higher than that of the industry average. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.32, which illustrates the ability to avoid short-term cash problems.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Computers & Peripherals industry and the overall market, APPLE INC's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
- 43.45% is the gross profit margin for APPLE INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.39% is above that of the industry average.
- Net operating cash flow has slightly increased to $13,538.00 million or 8.26% when compared to the same quarter last year. In addition, APPLE INC has also modestly surpassed the industry average cash flow growth rate of 5.28%.
- You can view the full analysis from the report here: AAPL Ratings Report
TheStreet Ratings team rates TESLA MOTORS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TESLA MOTORS INC (TSLA) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- This stock has managed to rise its share value by 94.72% over the past twelve months. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- TSLA's revenue growth trails the industry average of 21.8%. Since the same quarter one year prior, revenues rose by 10.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- TESLA MOTORS INC's earnings have gone downhill when comparing its most recently reported quarter with the same quarter a year earlier. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TESLA MOTORS INC continued to lose money by earning -$0.71 versus -$3.70 in the prior year. This year, the market expects an improvement in earnings ($1.21 versus -$0.71).
- Net operating cash flow has declined marginally to $60.64 million or 5.36% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Automobiles industry. The net income has significantly decreased by 542.7% when compared to the same quarter one year ago, falling from $11.25 million to -$49.80 million.
- You can view the full analysis from the report here: TSLA Ratings Report