Two New Trades ($AAPL vs $ORCL & $NFLX vs $P)

By: ispeculatornew
Date posted: 05.19.2014 (3:00 am) | Write a Comment  (0 Comments)

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Ah, the last week was a brutal one as one of my short positions (RAX) exploded higher which as you might have seen in my previous post, ended up being a costly trade. No real lessons to learn here, these things happens and overall, my returns so far this year have been very solid for these trades. As always, you can see my 2014 picks here:

http://www.intelligentspeculator.net/livetrades

I generally only open 1 position on these posts but I’ve been closing positions rather quickly in the recent past and saw 2 good opportunities so why not try this today?:)

You can see the numbers for both companies involved in today’s first trade here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
AAPLApple Inc597.5114.0712.316.179.24.21139.460.86184.741.2353.24
ORCLOracle Corp41.6917.5813.1410.270.164.049.971.137.812.0919.3

$AAPLLong Apple (AAPL)

The message here is fairly simple. I am a very strong believer and last week’s trade failure (AAPL/RAX) was not because I missed out on Apple. Not much here has changed except that there is very little news in terms of new products with WWDC only a couple of weeks away? Bad sign? Time will tell but as I’ve said over and over, even without new products, Apple is a great value at these levels.

AAPL Chart

AAPL data by YCharts

Next earnings release: July 23rd 2014

$ORCLShort Oracle (ORCL)

I am what you’d generally consider a believer in Oracle and would certainly consider it one of the blue chips to hold when looking at the tech sector. That being said, it makes little sense to me to see Oracle being traded at a comparable valuation to Apple’s. Let’s face it, they face fairly similar downside risk but Apple’s upside seems much higher making this trade extremely attractive.

ORCL Chart

ORCL data by YCharts

Next earnings release: June 20th 2014

You can see the numbers for both companies involved in today’s first trade here:

TickerNamePricePE RatioPE Next YearReturn YTDSales GrowthAnalyst ratingBook ValueBetaRevenue/ShareSales 5Y Avg GrowthEPS 5Y Avg Growth
NFLXNetflix Inc349.88129.3946.27-6.5121.23.4424.661.275.1726.73N/A
PPandora Media Inc23.43N/A48.92-11.17132.524.062.471.943.54N/AN/A

$NFLXLong Netflix (NFLX)

I love Netflix as a user but I’m not as convinced about buying the stock. I do think NFLX has great management, an amazing business and has everything you’d hope for in order to remain a long term established player. It does trade at a rather high P/E which makes me hesitate but when I compare its valuation to a company like Pandora, it becomes a rather easy trade. They are trading at very similar forward P/E’s despite NFLX giving me much more confidence in its ability to deliver across all metrics.

NFLX Chart

NFLX data by YCharts

Next earnings release: July 22nd 2014

$PShort Pandora (P)

I’ve generally been very negative about Pandora mainly for 2 reasons:

-it depends on other ecosystems (Apple, Google, etc)
-the competition is so fierce that pricing will always make it very challenging for Pandora to significantly improve its profitability

I remain as convinced as ever about both of those points and do think that it makes little sense for Pandora to trade at such high P/E ratios.

P Chart

P data by YCharts

Next earnings release: July 24th 2014

Disclaimer: Long Apple (AAPL)

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