🤖📈 Top Trade Ideas for July 10
Huge upside for Unity in AR/VR, a Morningstar analyst sees 164% upside for Gap, and more...
Our AI read and summarized 183 articles today from all over the internet to find the best trade ideas to help you make more money in the stock market.
What you’ll find in this email:
🥽 Huge upside for Unity in AR/VR
🐻 The bearish v bullish case for U
📞 Morningstar analyst sees 164% upside potential for Gap
🤖📈🚗📱 Much more…
💰 Featured Trade Ideas
Unity's Unique Competitive Advantage Explained (link)
Ticker: $U | Current Price: $40.46 | Price Target: $130 (221%)
🕹️ Gaming | 🥽 AR/VR | 🏷️ Undervalued | 📈 Long Idea
The author is bullish on Unity and sees it as a good investment opportunity. They have a significant investment in Unity, which represents about 50% of their portfolio exposure. Unity's competitive advantage lies in its ecosystem and synergistic revenue model. The company has positioned itself as a comprehensive solution for creating and operating real-time 3D content. Strategic acquisitions have strengthened Unity's position in the market. Unity's partnership with AAPL provides access to a large developer base and is seen as a catalyst for growth. The author believes that Unity has several growth drivers that could help it surpass its guided $1 billion EBITDA in 3-5 years. They estimate that Unity could achieve around $2 billion in net income in the same timeframe. The author plans to invest in long-dated call options on Unity and expects the launch of the Vision Pro to be a catalyst for higher implied volatility. They give Unity a "Strong Buy" rating.
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Williams Sonoma (link)
Ticker: $WMS | Current Price: $112.70 | Price Target: N/A
🍳 Cookware | 🛍️ Retail | 📈 Long Idea
The author evaluates the fundamental health of Williams-Sonoma, a consumer retail company that sells kitchenware and home furnishings. The company meets the author's criteria and is considered a leader in high-quality cookware and tools. Williams-Sonoma has a strong digital platform and has invested in technology and supply chain to support e-commerce growth. The company recognizes the importance of physical stores and has put investments in AI, VR, AR, and 3D modeling on hold due to the pandemic. Williams-Sonoma is expanding its manufacturing and fulfillment capability and leveraging its omnichannel network to mitigate shipping constraints. The management, including CEO Laura Alber, is evaluated positively, with effective capital allocation and a sustainable dividend. The bull case for Williams-Sonoma includes aggressive share buybacks and potential long-term growth in the home industry market. However, consumer spending and competition are bearish factors that could impact the company.
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Energy Transfer: The Lake Charles Debacle And Why You Should Buy (link)
Ticker: $ET | Current Price: $12.75 | Price Target: $19.12 (+50%)
🛢️ Oil/Gas | 🚢 Shipping | 🚨 Event Driven | 📈 Long Idea
The Lake Charles project has been a problem for Energy Transfer, with setbacks due to regulatory changes by the US Department of Energy. The project has approval to export natural gas and is seen as valuable for the domestic natural gas market. However, the DOE's decision on the export license is uncertain and may be politically motivated. The timing of the final investment decision is also uncertain. The author argues that the potential upside for Energy Transfer's stock is significant, with a potential increase of over 50% if the project succeeds. The downside risk is considered minimal as the project is not heavily built into the stock price. The author believes that once the project becomes official, the stock price will significantly rise and Energy Transfer will become a global leader in natural gas exports. However, there are risks to this analysis, including the failure of the project and oversaturation of the export market. Overall, the author sees this as a strong buy opportunity with high upside potential.
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📈 More Trade Ideas
The Gap, Inc.: Much Has Gone Wrong for No-Moat Gap, but Athleta and Old Navy Have Growth Prospects and Relevance (link)
Ticker: $GPS | Current Price: $8.91 | Price Target: $23.50 (+164%)
👕 Apparel | 🛍️ Retail | 📦 E-commerce | 📝 Research Report | 📈 Long Idea
Gap’s shares rallied 14% in post-market trading after it reported an unexpected (small) profit in 2023’s first quarter. We rate it as a no-moat company and acknowledge its challenges but also think consistent profitability is achievable and that its current valuation reflects an extreme level of pessimism. We do not expect to make any material change to our $23.50 per share fair value estimate. Gap’s sales dropped 5.8% in the quarter, just below our negative 5.5% forecast. Gap Global (21% of sales) outperformed our forecast for a 3% decline with a 1% same-store sales increase. Old Navy (56% of sales) matched our estimate with same-stores sales down 1%. While spending on apparel from its low- and middle-income customer base has slowed, we think positive comparable sales are not far off after its merchandising efforts of the last few quarters. Meanwhile, Banana Republic (13% of sales) and Athleta (10% of sales) suffered same-store sales declines of 8% and 13%, respectively. While we remain skeptical of Banana Republic’s transition to upscale apparel and home goods and project sales declines, we believe Athleta should be fixable given the growth of the women’s activewear category and anticipate long-term sales growth at mid-single-digit rates. Gap outperformed our 35% quarterly gross margin forecast by about 2 percentage points as it benefited from lower freight expenses and its improved inventory situation (down 27% at the end of the quarter) allowed for less discounting. Its operating margin was a modest 0.5%, but this was better than our negative 3% estimate as its operating costs declined more than expected. Moreover, the impact of the (previously announced) $300 million in additional expense savings will not be realized until the second half of 2023 and the first half of 2024. We forecast Gap will reach gross and operating margins of 39% and 7.5%, respectively, in 2027, below historical levels but up from the last few years.
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Starbucks: Unleashing The Power Of Cold Beverages And China For Unprecedented Growth (link)
Ticker: $SBUX | Current Price: $96.05 | Price Target: $119 (+24%)
☕️ Coffee | 🥤 Food and Beverage | 📈 Long Idea
The author is bullish on Starbucks and believes it is a key holding in their portfolio. They admire Starbucks' growth potential, particularly in terms of same-store sales growth and new store openings. They highlight Starbucks' significant market potential in China and suggest that investments in cold brew will increase margin and sales growth over time. The author encourages long-term investors to consider owning Starbucks stock. Starbucks is projecting 10-12% total revenue growth and 15-20% EPS growth for FY23-FY25. They have been successful in embracing digitization and adapting to the changing retail landscape. However, Starbucks has faced challenges in Europe due to competition with local coffee culture. The author also mentions potential risks such as unionization and financial and valuation concerns. Overall, the author rates Starbucks as a 'Strong Buy' and believes their growth targets are reasonable and achievable.
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Lululemon: Underestimated Is An Understatement (link)
Ticker: $LULU | Current Price: $364 | Price Target: $638 (+75%)
👕 Apparel | 🏋️ Fitness/Sports | ⬆️ Growth | 📈 Long Idea
Lululemon's stock has seen a significant surge, proving that concerns about margin compression were unfounded. The company's first-quarter earnings beat expectations, indicating positive factors that have yet to be fully priced in by investors. Revenue rose 24% YoY, with strong growth in comparable store sales and international sales. Lululemon has expanded its net store base and improved its operating margin. The company is focusing on expanding its offerings for men, which could lead to cross-sales and synergies. Despite appearing overvalued based on price multiples, Lululemon's historical growth suggests it is a growth stock. Its core price multiples are below their cyclical averages, indicating relative undervaluation. The stock has room for more upside based on its strong performance and RSI. However, concerns remain about the performance of subsidiary Mirror and the sustainability of Lululemon's growth in the health and well-being market. Overall, key valuation metrics and qualitative factors suggest that Lululemon is a strong buy.
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Interlife The Next Davis Double Play (link)
Ticker: $INLIF.AT | Current Price: $4.25 | Price Target: $6.38 (50%)
🏦 Insurance | 🏷️ Undervalued | 🇬🇷 Greece | ✏️ Blog Post | 📈 Long Idea
The author presents a bullish argument for Interlife, a Greek insurance company. They highlight that Interlife trades at a low valuation compared to its growth and potential. The company has consistently taken market share from its competition, has a solid balance sheet, and is led by a respected CEO. Despite the Greek economic crisis, Interlife has shown strong equity growth and has been recession-resistant. The author believes that Interlife should trade at a premium to book value due to its conservative earnings power, growth potential, and ability to redeploy capital at attractive rates. They estimate that Interlife has a potential upside of 50% to 200% based on different scenarios. In the long term, the author suggests that Interlife's equity value could reach 457 million to 700 million, representing a significant increase from its current price.
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America Movil: Triumph In Restructuring (link)
Ticker: $AMX | Current Price: $21.59 | Price Target: $29.09 (+35%)
📞 Telecommunications | 🇲🇽 Latin America | 📈 Long Idea
América Móvil has completed its restructuring phase and has improved free cash flow and operating margins. The company is well-positioned to seize market share and expand in the Latin American telecoms market, which is expected to grow at a CAGR of 4.40%. The author projects this growth onto América Móvil's revenue for the future and estimates a stock price of $29.09, representing a 35.5% increase from the current price. Projecting the DCF implied stock price into 2028 suggests a target price of $51.30, indicating a substantial upside of 139% over a six-year period. América Móvil is a leading telecom company in Latin America, with a strong position in Mexico and Brazil. It faces challenges from competitors in Central America but is likely to emerge as the winner due to its restructuring and financial strength. The company has improved profit margins, strengthened free cash flow, and reduced long-term debt. The author assigns a \"buy\" rating for América Móvil but suggests waiting for a better entry point. Risks include competition from rivals and currency devaluation in Latin American countries. Overall, América Móvil appears well-positioned to capitalize on opportunities in the Latin American telecom sector.
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🐻 Bearish v 🐂 Bullish
Company: Unity ($U)
Bullish Reasons:
Dominance in Game Development: Unity is the de facto tool for game development outside of Asia, with over 70% of games built in Unity. This dominance could provide a competitive advantage and potential for growth
End-to-End Platform: Unity believes that its combination with ironSource provides a unique end-to-end platform that solves more of its customers' toughest challenges, enabling it to accelerate its revenue growth, making Unity cash flow positive and add new capabilities and amazing leaders
Pricing and Packaging Change: Unity announced and launched a significant pricing and packaging change within its Unity Pro, Unity Enterprise, and Unity Industrial Collection offerings. The company raised the price between 13% and 25% across these offerings, the first significant price change in three years
Bearish Reasons:
Securities Class Action: Unity, its CEO, CFO, and General Manager of Operate Solutions, as well as Unity shareholders, are facing a securities class action. The complaint alleges that the company and its executives made false or misleading statements and/or failed to disclose issues with the company’s product platform and the likely impact of those issues on the company’s fiscal 2022 guidance
Dependence on Customer Success: Unity's success depends in part on the ability of its customers to market and sell games that are created or operated with its solutions. If its customers’ marketing efforts are unsuccessful or if its customers experience a decrease in demand for their games, sales of Unity's Create Solutions and its Grow Solutions could be reduced
Impact of Macroeconomic Trends: Recent negative macroeconomic factors, such as inflation, corresponding heightened interest rates, limited credit availability, and the strengthening of the U.S. dollar, could have an adverse impact on Unity's business