Weekly Watch | 2/8/2021

Current Market & Spy QQQ:

$2 trillion in stimulus? Okay... here we go. The Spy is poised to reach all-time highs, earnings are bullish, and as they are expected to extend that way it will be reflected in the markets, which were pricing in a potential correction a few months, even weeks ago. This is a big switch, everything is on fire, but what is more important is to realize the magnified lens that has been placed upon Retail Investors by institutional pressures. This is going to be quite epic, and it appears that GameStop was the final straw for short sellers in 2020-21. This existed for a lot of highflier names this year, including Tesla which we provide coverage on, which burned short sellers badly. We know many traders personally that were short-selling the $600-$700 Calls on Tesla hoping it would add to their passive income. However, the item to remember is they are experienced, once they got exposed, they pulled out of the trade and put their money to work in a different spot. That being said, short interest on a lot of companies has been growing in the spotlight, and you will notice a lot of short-sellers unwinding their positions out of fear of being manipulated like GameStop was. This is the wild west of bullish markets. ICLN will likely be rolling quickly this week. Ark’s Innovation ETF would also be something to pay prime attention to, they have been on point with calls before, and with the flood gates open like this in terms of government spending, lookout. You cannot short this market, it’s painful, we know. It almost hurts to hold spreads at this point, that is how bullish this market is getting. But to think about it in retrospect, is this bullishness warranted? A lot of people realized the fact that the markets seem a bit frothy, frankly, we tend to agree but we’re also torn.  

There is so much pent-up demand that has been created as an effect of the pandemic. Thus, the PPP loans given to businesses were quite utile in that it allowed them to prop their books in times when they wouldn’t make any money, i.e. lockdown airlines. However, a lot of the trips that were forgone due to the restrictions were not canceled, rather postponed. We have heard from numerous travel sources that the back half of 2021 demand in the travel industry is unprecedented. There are hotels sold out in Europe through 2022. People are eager to get back to reality and use their vacation funds. A large portion of Americans remained unchanged in the pandemic and potentially benefited financially from the implications set forth by the government for the pandemic. Interest rates are already at zero and people who have money are absolutely reaping the benefits from this borrowing. This literally allows them to finance anything on credit and they retain all their capital. People are incentivized to borrow and now they’re strapped with cash. And they throw in a $2 Trillion Stimulus?? Oh my. Anyways, back to the pent-up demand and money on the sidelines. Tom Lee of FundStrat mentioned in his research that they do not see a crash in the immediate near term. Tom Lee has been known to call the S&P500 on a yearly basis, he’s usually within 5 points... he’s that good. Ultimately, we believe this bubble has a long way to go before popping.  

Bitcoin (BTC):

As it currently stands, Bitcoin is defying people’s expectations once again. It doesn’t appear to be a dead cat bounce of any type, and sequentially feels like it is about to reach all-time highs of a new dimension. Anyways, here are some quick notes on Bitcoin, the technicals look good so pay attention... Obviously, we have near term uncertainty with the tether story posing a risk to the backing of the currency. We maintain the belief that you should not have much allocated towards Bitcoin and treat it like an Acorn-esque style of investment. We currently use BlockFi wallet to store our Bitcoin where they pay us 8.6% APY on our crypto assets. Crazy, they will start lending against this and that is when it starts to get real for us. It might not be a bubble so much as it is a shift in the landscape of monetary exchange. It’s a paradigm shift, and it’s being sniffed out. 

Jamie Diamond, CEO of JPMorgan, who is incredibly bearish on EVERYTHING tech put a 150k price tag on Bitcoin, wait... what? It’s even more confusing that Jamie Diamond mentioned years ago that he’d never touch Bitcoin and now he has a sizeable prop desk for it. That’s why we’re here to help you decipher organized capital. Just think of the scope regarding how high this asset type could go. Fortune 500 companies like PayPal, Square, and MicroStrategy all have Bitcoin loaded on their balance sheet and are buying it as an inflation hedge. What happens when one of the big tech firms start doing the same? Well, the price doubles for the next big player-- Institutional FOMO. This could create the squeeze of a millennium. Now ask yourself, how unlikely is it for a company like Apple to have Bitcoin on their balance sheet or integrated into their product line? We find it highly likely, to be frank. Apple has been outlaying significant amounts of capital towards the development of their ecosystem and the Apple Wallet in particular. They have optimized a user-centric credit card facing service along with their cash solution: Apple Cash. But back to the story. If Apple decides to buy BTC for an inflation hedge, and then says, “hey since we’re already buying so let us make Apple Wallets encrypted BTC wallets too”. That would be the MOAB on Bitcoin, they would buy so much, and it would chase this price up so fast. With competitors like Google Pay and Samsung Pay, there’s just too much opportunity that exists in this field to not have some exposure to it. The institutions are here and coming. Make sure you get interest on your Bitcoin though, that’s literally free money.  

**Elon Musk has since announced that Tesla purchased $1.5 BN worth of Bitcoin in January… You might want to give this one a re-read.**

Ripple (XRP):

We will be paying close attention to Ripple along with Bitcoin. Ripple is the only cryptocurrency to base its white paper at offering specifically around a decentralized global currency. They clearly have a strong institutional client base as they are working with AMEX and Santander Bank. Full disclosure, Ripple has had an SEC lawsuit launched against them, which drew their price down in the immediate term as it was delisted on many exchanges. However, people are completely missing the fact that Ripple will likely have the case end in their favor. That is why so many Reddit Traders are seeing these Dark Pool Orders, orders with high price and volume for a fraction of a period, with Ripple because a lot of institutions use their products for optimizing the payment & money processing segments of their business.

Corsair Gaming (CRSR):

Corsair is still relatively young and is experiencing a growth phase. As the gaming sector is continuing to expand, which offers lofty secular tailwinds, Corsair’s decision to go public in September 2020 suggests the stock may still be attractive for new investors at these levels. Looking forward, we believe the stock might still have some upside left from a long-term outlook. It’s entirely possible a new generation of gaming enthusiasts are primed to up their experience. Our hold opinion is based on the significant bump the pandemic has given the video game industry, suggesting there just may be some lasting trends that carry past 2021. Corsair’s guidance for 2020 revenue is forecasted at 1.6BN, which is two times forward market capitalization. Additionally, we expect EPS to remain at low levels, but this is not entirely important for a company expanding so rapidly. However, Corsair’s positive operating cash flows will remain a key focus for the company moving forward. The numerous small acquisitions will also add share value from the growing gaming market and will only benefit Corsair as a whole. Regarding guidance, management’s latest call stated they expect revenue to increase by more than 50% for FY21. This growth stems from high demand across all product categories. Plus, the new graphics cards from Nvidia and Advanced Micro Devices should only enhance demand from those looking to upgrade their gaming PCs. 

At its core, Corsair Gaming is a growth company that provides investors exposure to the gaming and computer hardware industry. The company designs and sells gaming and streaming peripherals which include keyboards, mice, mousepads, gaming headsets, gaming chairs, video capturing hardware, video production equipment, microphones, as well as console and PC gaming accessories like controllers. Additionally, Corsair Gaming owns subsidiary brands such as Elgato, which offers premium studio equipment and accessories to content creators, SCUF Gaming, which builds customized controllers for more competitive gamers, and ORIGIN PC, a custom builder of gaming and workstation desktop PC’s. Corsair’s systems segment includes power supply units (PSU), cooling solutions including fans and liquid cooling products, computer cases, gaming PCs and laptops, along with memory components such as dynamic random-access memory (DRAM) modules. We believe gaming is a high growth business that is here to stay. Overall, Corsair is an up-and-coming brand that builds affordable quality products, which are highly customizable and yield a worthy gaming experience. While video gaming companies such as Activision Blizzard, Take-Two Entertainment and Electronic Arts may supply the “gems” of the industry, it is Corsair who sells the “picks and shovels” to the gamers. In the long run, they win regardless of who owns the hottest games. 

Corsair reports earnings before the bell on Tuesday morning, and we believe there is a lot of potential upside if CRSR can provide a blow-out quarter. Last month, Logitech’s reported that net sales increased by 75% to $1.26BN which surpassed the analysts' consensus mark of $850M. Revenues for Logitech increased 36% from the year-ago. Considering the similarities between CRSR and LOGI, we have reason to believe Corsair will have a chance to outperform in the weeks to come. We are watching for a potential run-up to the $50 resistance and a breakout to all-time highs.  

Disney (DIS):

Disney is poised for incredible growth coming out of the pandemic as theme parks and cruises re-open. People are ready to travel with friends and family and put this entire experience behind them. Although Covid-19 put a temporary hold on that side of their business, it has driven the growth of Disney+. With lockdowns keeping people in their homes and on their devices more, the subscription rate for streaming services has skyrocketed. Disney+ is expected to report around 95M subscribers on Thursday, a 21M increase over the past quarter from 74M. When the platform originally launched in November 2019, the 90M mark was not expected to be reached until 2024, proving a severe underestimation of the streaming service. Netflix, Apple TV and Amazon Prime also benefited from the lockdowns and account for substantial portions of the market share. However, we believe the content Disney+ plans to release over the coming years will draw in an ever-increasing amount of subscriptions, driving them deeper into the streaming industry’s market share that is dominated by Netflix.  

10 new Marvel series, 10 new Star Wars series, 15 new Pixar series, and 15 new Pixar movies are all expected and will help drive the stock to new highs. Star Wars is a fan favorite and a large share of the subscriptions on Disney+ come from this fandom. The Mandalorian proved to be an incredible success with everyone talking about Baby Yoda. Be on the lookout for any news concerning these new Star Wars series or when they will be released, they will prove to be an immediate key driver for the stock price.

Enphase Energy (ENPH):

Enphase Energy could prove to be an alternative energy goldmine and reach all-time highs as they head into earnings this Tuesday (2/9). The stock recently hit an all-time high of $222.43 on January 7th, and YoY growth is over 400%. Enphase seems to be consolidating between $191-$196 for the past week yet the recent pullback from its all-time high is suggesting a bullish uptrend that could drive the stock higher in the weeks to comes. Since their last quarter, there has been an uptake in demand amongst the global solar energy market, this is even more important when considering the impact of the United States rejoining the Paris Climate Accords. This quarter's revenues are expected to be $256.3 M, a 22% increase from this time last year. Their battery storage systems, along with their microinverters for the solar photovoltaic industry are expected to drive the market momentum of clean energy, further incorporating it into the world’s energy solutions. This is even more important when looking at the recent news of an expanded partnership with Momentum Solar, who is expected to promote and install home energy solutions from Enphase directly, thus expanding upon the customer reach of Enphase.  

The Biden Administration also has plans for a broad clean energy spending bill that many are calling a “green new deal.” New solar energy projects are also expected to receive a 24% tax credit in 2021/22 as more residential homes are encouraged to install solar panels and clean energy management solutions. Enphase Energy usually beats their earnings, and we expect them to do the same this time around as their suppliers have ramped up deliveries since last quarter, it topped estimates by an average of 23% the last two quarters. This earnings call has the potential to send the clean energy giant to all-time highs. With a market cap of around $24 BN and a stock price regressing 9.65% the past month, to $196.68, Enphase Energy is a great buying opportunity. 

Uber (UBER):

Uber has utilized the Uber Eats platform to make the most of the online food ordering space during this pandemic to supplement lost revenue from its normal business model. While Uber Eats is a temporary bandage, we can’t expect the food ordering apps to maintain their current user engagement levels post-pandemic. Leading into Uber’s earnings later this week (2/7), we see the company reaching a fork in the road. Uber is still not profitable in anyway; their EPS has been fluttering around -0.60 for roughly a year now, excluding Q2 where it fell to -1.02 admits the pandemic. Instead of focusing on profitability now, Uber will once again be focusing on expansion while maintaining its target of EBITDA profitability by Q4 2021. This was made apparent by Uber’s recent acquisition of the popular alcohol delivery service Drizly. The $1.1 BN buy out might be the news that causes Uber to pop post-earnings. Though this acquisition pushes Uber’s potential profits back a bit fundamentally, this market seems to be throwing many fundamentals out the window. Additionally, investors familiar with the restaurant space know how important alcohol is for breaking even. 

In terms of the technicals, we expect a big run for Uber ahead of earnings. It looks like Uber has formed a double bottom in the long run and is retesting a former high prior to its acquisition of Drizly. This means that the stocks’ fair value was at $60 before the added value of Drizly and now it’s encroaching that resistance again with a beautiful technical set-up. This thing could run, and if it beats earnings, or guides dramatically to the upside with the integration of services, Uber could really rocket. Be bullish up to earnings, hedge into straddles on earnings day or straight-up shares if that’s your style, and look to buy again in the wake.

Chegg (CHGG):

Chang has recently broken the $100 wall and has continued to run up to an all-time-high before its earnings after market close on Monday. There has been an influx of hybrid/online education during this pandemic which we see as a key driver for Chegg’s overall user adoption. There is no dispute that Chegg sits on top of the online educational services industry with its high engagement levels, which should allow it to remain above peers such as Course Hero and even leave them in the dust.