🤖📈 Top Trade Ideas for June 28
Including why Enphase Energy is posed to benefit from solar power's rising popularity, a short report on $VICR, and more...
👋 Hello!
Our AI read and summarized 168 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:
☀️ Why Enphase Energy will benefit from solar power’s popularity
🐻 The bearish v bullish case for $MELI
🔋 [Premium] Why $VICR is going to fall 50%
🤖📈🚗📱 Much more…
Vicor Short Thesis: AI CHIP MANIA ACCELERATES VICOR’S COMPETITIVE DEMISE & PROVIDES AN ASYMMETRIC SHORT OPPORTUNITY (link)
Ticker: $VICR | Current Price: $56.24 | Price Target: $28.12 (-50%)
🤖 AI | ⚡️ Semiconductor | 📉 Short Idea
Vicor is facing serious challenges and has lost its competitive advantage in the AI datacenter market. The company's technological lead has eroded, leading to a loss of business to competitors like Monolithic Power. Vicor's poor quality control and manufacturing issues have also impacted its financial potential. As a result, Vicor is expected to experience a decline in revenue over the next two years. The company's stock is predicted to fall by 30%-50% due to its immediate challenges and loss of competitive advantage. Vicor has lost key customers like Nvidia to Monolithic Power and is losing market share in the hyperscale datacenter market. The company's manufacturing problems and lack of investment in human capital have further hindered its performance. Vicor's competitive position has been eroded, and it is no longer considered a leader in its industry. The author advises caution when investing in Vicor's stock and suggests that the company's competitive erosion will lead to negative surprises for investors. The author has shorted the stock and believes that Vicor's demise will be accelerated by current developments in the sector. Overall, the outlook for Vicor is bearish, with concerns about its manufacturing issues, declining competitive position, and credibility.
Bayer: Easy Deep Value Pitch (link)
Ticker: (OTC: $BAYRY) | Current Price: $13.59 | Price Target: $21.06 (+55%)
💊 Pharmaceuticals | 🩺 Healthcare | ✏️ Blog Post | 📈 Long Idea
Bayer stock is currently trading at a cheap valuation level and is seen as a long-term winner in key life science verticals. There is an estimated close to 55% upside for Bayer stock based on an implied target price. Despite reporting mixed Q1 2023 results, with a decline in revenue and profitability in the Crop Science division and a contraction in revenue in the Pharmaceuticals unit, Bayer's revised earnings estimate is still considered an attractive value proposition for investors. The company's Crop Science Innovation Summit highlighted its long-term product strategy and business potential, with an estimated peak sales potential of approximately €30 billion. The favorable outcome in the Gordon trial and Bayer's long-term product strategy provide reasons for optimism. The author reiterates a "Strong Buy”
MercadoLibre: The More It Falls, The More I Buy (link)
Ticker: $MELI | Current Price: $1,162 | Price Target: $1,453 (+25%)
🇦🇷 South America | 📦 E-commerce | 🏦 Payments | 📈 Long Idea
MercadoLibre is a fast-growing eCommerce and Fintech giant in Latin America. The company offers exposure to fast-growing international markets and is undervalued by at least 25%. It has a highly diversified business with different segments, including logistics, payments, and advertising. The company saw significant growth in all key geographies except Argentina, which is struggling with inflation. MercadoLibre's logistics segment dominates the market, and its fintech services are also growing steadily. The company achieved strong EPS in the first quarter of 2023 and has shown encouraging trends in profitability. It has the potential for further growth and profitability in the future, particularly in the fintech and logistics spaces. However, it faces competition and geopolitical risks in the region. Analysts expect MercadoLibre's growth and profitability to continue trending upwards, and valuation metrics suggest that it is undervalued. Technical analysis suggests a potential buying opportunity in the coming weeks. Overall, MercadoLibre is considered a high conviction pick for investors looking to gain exposure to the growing economies of Latin America.
Nordstrom, Inc.: Narrow-Moat Nordstrom Is Struggling, but Its Brand Advantage Provides Confidence in a Turnaround (link)
Ticker: $JWN | Current Price: $19.30 | Price Target: $40 (+107%)
🛍️ Retail | 📦 E-commerce | 👕 Apparel | 📈 Long Idea
Nordstrom, a major player in the U.S. apparel market, operates both full-price and discount fashion stores and maintains a strong online presence, recording nearly $6 billion in online sales in 2022. Despite challenges such as a decrease in physical retail popularity and direct-to-consumer brand competition, Nordstrom's brand value, strategic positioning in top-tier malls, and customer loyalty with approximately 15 million club members provide a competitive edge. The company's new strategic plan emphasizes e-commerce and diversifying its off-price offerings, which includes Nordstrom Rack that has struggled to return to pre-pandemic sales levels, yet attracts a significant number of new customers. Although Nordstrom faces competitive pressure from e-commerce businesses and other department stores, it is projected to generate over $1 billion annually in operating cash flow post-2024, and digital sales are expected to comprise nearly 50% of its annual sales in the next decade.
Dave & Buster's: Time To Play The Growth (link)
Ticker: $PLAY | Current Price: $43.82 | Price Target: $60 (+37%)
🥤 Food and Beverage | 🕹️ Entertainment | 🏷️ Undervalued | 📈 Long Idea
Dave & Buster's Entertainment (PLAY) is seen as attractively priced with several growth opportunities. The company operates entertainment and dining establishments and has two concepts: Dave & Buster's stores and Main Event. Amusement revenue accounts for the majority of PLAY's revenue, followed by food and beverage. PLAY has opportunities for growth through store expansion, both domestically and internationally, as well as driving more traffic to existing locations and remodeling stores. The recent merger with Main Event provides cost-saving opportunities. However, risks include the economy, competition, and consumer trends. Despite the risks, PLAY stock is trading at a lower valuation compared to peers, and the author sees upside potential with a price target of $60+ based on FY25 estimates.
Buy Enphase Energy (link)
Ticker: $ENPH | Current Price: $160 | Price Target: N/A
☀️ Solar | 🔋 Batteries | 📈 Long Idea
Enphase Energy is a company specializing in microinverters and battery hardware for solar energy. They are expected to benefit from the expansion of solar power, with a projected annual growth rate of nearly 20% through 2028. The company has several growth catalysts, including international expansion and the potential to enter utility-scale installations. Near-term headwinds in Enphase's largest market have led to a sell-off in their shares, creating a buying opportunity. Enphase has a lead in their niche and has expanded their hardware offerings. They have seen favorable trends in microinverters shipped and megawatt hours deployed. The majority of sales come from North America, indicating untapped potential in other regions. The battery business has also seen growth. Enphase's free cash flow has grown significantly, allowing them to pursue growth opportunities without taking on more debt. They have established a moat through high switching costs and brand value. However, the biggest threat to Enphase is commoditization, which could impact their gross margins. They also have a significant customer concentration, which could be concerning if that customer decides to switch to a competitor. The adoption of solar power is influenced by incentives and subsidies, which could impact Enphase's revenue. Overall, Enphase may be a suitable investment for those interested in the renewable energy industry and strong cash flow, but may not be suitable for those concerned about the long-term adoption of residential solar power or the commoditization of inverter products.
RCM Technologies: COVID Boost Gone But 2023 EBITDA Expected Above $20 Million (link)
Ticker: $RCMT | Current Price: $18.41 | Price Target: $22 (+20%)
💾 IT | 📊 Consulting | ✏️ Blog Post | 📈 Long Idea
RCM Technologies exceeded expectations with EBITDA for 2022 coming in at $29.9 million, but the share price has declined since its peak in June 2022. The author believes the company had a weak start to 2023 but expects EBITDA for the year to remain above $20 million. The market capitalization has declined due to share buybacks. The author now rates the stock as a strong buy, considering it undervalued based on fundamentals. RCM Technologies specializes in business and technology solutions, with three operating segments. Q1 2023 financial results were underwhelming, with revenues shrinking and EBITDA and net income declining. The decrease in revenues was most significant in the specialty health care segment. The engineering segment is expected to improve in Q2 2023, and the life sciences and information technology segment expects sequential growth throughout the year. The author is optimistic about RCM Technologies' quarterly EBITDA and expects the company to continue buying back shares. The major risk is the decline in revenues in the specialty health care division. RCM Technologies is a thinly traded stock with share price volatility. The boost in financial performance during the pandemic may no longer be present, but annual EBITDA is expected to remain above $20 million. The share price could receive a boost from further share buybacks.
Betting Big On Natural Gas With Antero And Tourmaline (link)
Ticker: $AR / ($TOU:CA) | Current Price: $22.03 / $61.26 | Price Target: N/A
💨 Natural Gas | ✏️ Blog Post | 📈 Long Idea
The author believes that natural gas presents attractive opportunities in the mid-term and long-term. They will update their bull case for natural gas using supply and demand dynamics. They highlight two top-tier natural gas plays, Antero Resources Corporation (AR) and Tourmaline Oil Corporation (TOU:CA), as potential investments with tremendous total returns. The United States has seen a decline in natural gas prices due to increased production, causing gluts in the market. However, natural gas is considered a cleaner fossil fuel and a bridge technology between coal and renewables/nuclear. The power generation sector has shifted towards natural gas, and globally, natural gas is becoming increasingly important due to its low pollution and wide range of applications. Long-term predictions suggest that natural gas demand will increase significantly, primarily in the power generation and industrial sectors. The US has increased its LNG export capacity, which will alter the supply/demand balance and potentially lead to higher prices. The author notes that any supply or weather-related headwinds could cause LNG prices overseas to skyrocket, which would be bullish for US-based Henry Hub and put more pressure on exports. The growth rate of natural gas supply has decreased since 2020, and natural gas producers are facing challenges with pipeline capacity and declining rig numbers. Despite economic weakness, natural gas prices have shown strong upside momentum since mid-June. The author agrees with Mr. Jamie Heard's findings on natural gas scenarios and believes that drillers with high-quality resources and strong margins are the best investment option. They prefer to buy North American drillers due to their cost advantage. The timing is favorable to start buying natural gas drillers as free cash flow estimates approach the longer-term average, natural gas prices have come down significantly, demand is improving, and supply growth has rolled over. Antero Resources is considered one of the best trades in the natural gas industry, with a focus on the Marcellus basin and a significant amount of liquids production. Tourmaline Oil Corp. is the largest natural gas producer in Canada and has a healthy mix of hedges and exposure to LNG export markets. Both companies have strong fundamentals and potential for significant outperformance.
🐻 Bearish v 🐂 Bullish
Company: MercadoLibre ($MELI)
Bullish Reasons:
Diversified Ecosystem: MercadoLibre offers an ecosystem of six integrated e-commerce services and digital financial services, including the Mercado Libre Marketplace, the Mercado Pago Fintech platform, the Mercado Envios logistics service, the Mercado Ads solution, the Mercado Libre Classifieds service, and the Mercado Shops online storefronts solution. This diversified ecosystem can provide multiple revenue streams and growth opportunities.
Expansion of Mercado Pago: Mercado Pago, the fintech solution, enables individuals and businesses to send and receive digital payments. It has expanded beyond facilitating Marketplace transactions and now offers a full ecosystem of financial technology solutions both in the digital and physical world. This expansion could drive further growth.
Strong Moat: The company has a wide economic moat, benefiting from a quickly growing network of buyers and sellers on its platform, privileged access to consumer transaction data, and switching costs as sellers and buyers increasingly depend on the firm's broadening suite of services.
Bearish Reasons:
Intense Competition: MercadoLibre faces intense competition in the e-commerce and digital payments sectors. Competitors include traditional retail businesses, numerous online e-commerce and classifieds businesses, and several digital payments companies. This competition could impact the company's market share and profitability.
Increased Operating Expenses: MercadoLibre's operating expenses, including product and technology development, sales and marketing, provision for doubtful accounts, and general and administrative expenses, have increased. This could impact the company's profitability.
Currency Risk: The functional currency for each country’s operations is the country’s local currency, except for Argentina, where the functional currency is the U.S. dollar due to Argentina’s status as a highly inflationary economy. This exposes the company to currency risk.