Weekly Market Review: Investors Book Profits at Quarter-End

Stocks sold off sharply on Friday as investors are in the process of re-positioning portfolios for the second half of the year. The S&P 500 fell 2.9% this week, led by cyclical groups like Energy and Financials.

Coronavirus Update

While it may no longer be the top news story, the coronavirus pandemic is still with us. As testing increases, over 150,000 new daily cases are being recorded globally. Florida and Texas are seeing hospital admissions increase and have both decided to reverse re-opening plans

With so many unknowns surrounding the spread and treatment of the disease, it remains to be seen just how quickly social distancing protocols can be safely relaxed.

What to Expect Next Week

Fedex (FDX), General Mills (GIS) and Micron (MU) are all scheduled to announce quarterly results next week. Trading activity may tail off after the second quarter closes on Tuesday, as U.S. markets will be closed on July 3, for a holiday.

On the economic front, we’ll get the June employment report Thursday morning. The consensus analyst estimates call for the creation of 3.5 million non-farm payrolls and for the headline unemployment rate to fall to 12.6%.

We know that deciding what and when to buy can be challenging for any investor. This is especially true when uncertainty is high and there are questions about whether the rebound in stock prices still coincides with what’s happening in the underlying economy.

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

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

Stock of the Week: Xperi (XPER)

The company is an entertainment-based technology firm, with brand names, such as Tivo, Imax Enhanced and Digital Theater Systems (DTS).

The stock gained more than 7% this week and we believe this relative outperformance can continue into the second half of the year. Here’s why:

Xperi acquired video-recording business Tivo earlier this month in a transformative deal. The merger is expected to generate $50 million of annual cost synergies by 2021. Management has also targeted $125 million of potential new revenue by cross-selling products to the new customer base.

In addition, the company is on track to generate $280 million of annual cash flow, which management has been quick to share with investors.

First, Xperi pays a quarterly dividend of $0.20 a share (5.9% yield). Management also recently authorized the repurchase of $150 million (10.5 million shares) of the company.

Intriguing Upside Potential

At current levels, the stock appears attractively valued at just 5.2x expected 2021 earnings of $2.77.

Wall Street also sees value in Xperi. Both active analysts tracked by TipRanks rate the shares a Buy. The average price target of $28 implies 95.9% upside potential from current levels.

In fact, the company received an unsolicited takeover bid back in February. Private investor Metis Ventures LLC bid $23.30 a share, or about 64% higher than current levels.

It’s additionally worth noting that the stock carries a Smart Score of 8/10 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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