Under Armor (NYSE:UAA) is now trading at 52-week highs. ~2 years ago, UAA reached our topidea list because the stock lost its way and sales kept falling. Now, business is so good that the sports apparel maker is looking at adding blood pressure sensors in its shoes. This distraction could prove a negative turning point, suggesting peak sales. Still, look at Garmin (NASDAQ:GRMN) to measure the success of a company getting into this market.
Fitbit (NYSE:FIT) is the opposite: the fad for cheap wearables measuring pulse rate and steps came and went.
In the Q1 report, Under Armor grew revenue by 2%. Small growth rate but enough to satisfy investors. Still, North America’s sales fell 3% due to service level costs and improved service levels. Asia Pacific revenue grew 25% while EMEA was up 3%. Clearly, if trade wars end or do not change, UAA stock could trade at new highs.
Valuations are unfavorable but UAA stock is liked by markets.
Magna (NYSE:MGA) is an auto parts supplier I watched back in 1999 or so. I did not look at it since then. Valuations of 6 times earnings and the 2.9% dividend yield looks compelling. As timing would have it, AutoNation (NYSE:AN), Autolive (NYSE:ALV), are just a few auto stocks SPIKING higher following strong results. Used car and car parts demand is strong. So, should investors include Magna as a stock to buy?
Let’s start with Magna’s first quarter. The company made $347M in FCF even though net sales fell 2% overall. EPS fell from $1.84 last year to $1.63. Looking ahead, Magna will supply new body exteriors for Mercedes-Benz G-Class, Ford Ranger, BMW x3. Power and vision has significant launches for Audi A6, BMW X5l, RAM 1500 pickup, and the DCTs for various Daimler vehicles.
Outlook
Magna lowered its 2019 sales forecast to $39.1 - $41.3, down from $40.2B - $42.4B issued in February. The 2021 outlook is sharply lower. With downward revisions, why is the stock in an uptrend? Strong FCF and continued return on capital to investors is supporting the stock. The China JV is to blame for the 2021 outlook. Again, if trade wars end, Magna stock could continue its uptrend.
Arista Networks (NYSE:ANET) issued a weak outlook in May and yet the stock erased half of the losses. The company has a moat with EOS - extensible operating system software. New customers may migrate to its 100GB EOS and ethernet products for the second half of the year. And with the stock sustaining its uptrend, markets expect growing demand for the higher margin Enterprise Campus.
ANET reports results on Aug. 1. The stock’s drop in the last quarter created a 15% discount. This could set up a strong rally after the earnings report, if the company beats expectations and reports a resumption in revenue growth. Chances are good that the strong product offering will attract more customers.
Intra-Cellular Therapies (NASDAQ:ITCI) traded in a range for all of 2019. That broke down last week when the stock closed at $8.37. On July 23, the FDA cancelled the ad com meeting for lumateperone, a drug for treating schizophrenia.
Do you buy the dip?
ICTI made a public statement that reversed some of the drop. It provided additional clinical data to the FDA, which delayed the meeting. It may also push back the Sep. 27 PDUFA target date. If the extra information reaffirms the drug’s safety, the stock could bounce back to its $10.
I am already heavily weighted in drug stocks – AbbVie (NYSE:ABBV), Innoviva (NASDAQ:INVA) – so I won’t invest in ITCI. I would trade ITCI stock and bet on a sharp bounce on the way in the short-term.
