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Weekly Market Review: Bulls Looking Past the Curve

U.S. stocks finished with a flourish on Friday, buoyed by optimism that some states would begin to re-open for business by the end of the month. On Thursday, reports that a Gilead (GILD) treatment for the coronavirus has shown early success in a Chicago hospital also added to investor confidence.

The S&P 500 moved 3% higher over the past five trading sessions, as the broader market averages posted back-to-back weekly gains for the first time in two months. Consumer Discretionary and Healthcare names led the way higher this week, while Financials lagged.

Despite investor optimism, there was still a lot of negative news to digest this week. 5.2 million new weekly U.S. unemployment claims were reported on Thursday and the price of crude oil touched a 20-year low on Friday.

Coronavirus Update

The main driver of volatility these days remains fear of the global spread of the coronavirus. At this point, there have been about 2.2 million global cases, with over 153,000 deaths reported. That figure includes more than 700,000 cases in the U.S., where around 37,000 have died.

On Thursday, President Trump laid out criteria for re-opening the U.S. economy that could lead to a handful of states easing restrictions by the end of April. At the other end of the spectrum, New York extended its business shutdown until May 15 at least.

What to Expect Next Week

IBM (IBM) kicks off the earnings parade on Monday, followed by Coca-Cola (KO) and Texas Instruments (TXN) on Tuesday. AT&T (T) headlines the reporting calendar on Wednesday, followed by Eli Lilly (LLY) on Thursday.

Analysts at Refinitiv predict that aggregate S&P 500 profits fell 13% in the first quarter, while revenue is expected to increase fractionally. To date, 68% of the companies in the S&P 500 have exceeded earnings expectations this quarter.

While there will be a close eye for any headlines related to the coronavirus, next week is expected to be relatively quiet on the economic front.  

We know that deciding what and when to buy can be challenging for any investor. This is especially true when uncertainty is high and sentiment can quickly shift from Bull to Bear.

However, the fact remains that attractive investments are out there if you’re willing to dig a little deeper.

One such Technology name is worth a closer look and is our Stock of the Week.

Stock of the Week: Digital Turbine (APPS)

The company helps some of the world’s most popular mobile applications, such as Uber and Pandora, monetize mobile content.

The stock gained more than 4% this week and we believe this momentum can continue throughout 2020. Here’s why:

Even in the midst of a pandemic, daily life revolves around one’s smartphone. As a result, Digital Turbine is expected to triple its annual earnings over the next two years.

This growth potential was on display back in February, when management announced solid quarterly results. Excluding one-time items, the company earned $0.05 a share in the December quarter, which matched expectations.

Revenue increased 18% from the previous year, to $36 million. Digital Turbines also expanded its gross margin by 300 basis points in the period, to 40%.

The company also recently acquired privately-held Mobile Posse, for $66 million in cash. Digital Turbines sees the two businesses as complementary and the purchase is expected to add meaningfully to future EBITDA.

The stock is currently trading at 21.3x expected 2021 earnings of $0.24 a share. The valuation seems reasonable given that Digital Turbines is set to triple its annual profit from just $0.08 last year.

Analysts See Upside Potential

Wall Street is also firmly behind the stock. All 4 active analysts tracked by TipRanks rate the company a Buy. The average price target of $10 represents 95.3% upside potential.

It’s also worth noting that APPS carries a Smart Score of 10/10 on TipRanks. This proprietary score utilizes Big Data to rank stocks based on 8 key factors that have historically been a precursor of future outperformance.

On top of the positive aspects mentioned already, the Smart Score indicates that the company has seen insider buying, in addition to improving sentiment from hedge funds and financial bloggers.

FYI: This is just 1 of the 20+ stocks selected for the Smart Investor portfolio. That’s where we share more detailed insights on our weekly stock picks.

You may also want to learn more about how we use TipRanks indicators to find stocks that are primed to outperform. Discover the Smart Investor portfolio here >>

Wishing you a world of investment success!


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