Live Nation Entertainment Inc. (LYV)
We’ve all heard the stories about people getting out there to travel this summer.
We’ve also heard stories about how demand for ticketed events has increased from demand. I’m here to tell you that it’s all true.
A little more than a week ago I did my latest “Walk Down Main Street”.
If you don’t follow me regularly, a Walk Down Main Street is when I get out there and do my own research while experiencing the economy at the Main Street level.
My last Walk took me through the mountains of Denver Colorado and the surrounding areas, including Red Rocks Amphitheater.
From the time I got on the Delta flight to Red Rocks and all parts in between I saw what we’ve all been hearing about. Busy travelers, spending money like it’s going out of style on experiences. It’s the battle cry for the summer of 2023, and you can make money from this trend.
Live Nation (LYV) owns live entertainment. From the venues to the bookings to the concessions, the company has turned into a turnkey operation for entertainment. We’ve all heard stories about the Taylor Swift concert ticketing fiasco in March. The pundits called it the end of Live Nation’s hold on the industry. False. Call it a brick in the Wall of Worry as the company is firing on all cylinders.
The shows have gone on, and Live Nation is busy counting the cash. It’s going to stay this way as the summer months are far from the end of the company’s promotions, and cash flow. Which is where the opportunity comes in.
LYV shares are 30% higher year-to-date, doubling the S&P 500 returns and keeping up with the Nasdaq 100.
The technicals are positive as the 50-day moving average (MA50) is locked in a bullish trend.
Additionally, the stock has just crossed back into a long-term bull market trend as LYV shares moved above their 20-month moving average.
At $92, the stock is getting ready to make a move to take out its 52-week highs around $90.
The kicker, short sellers have been adding to their positions recently, driving the stock’s short interest ratio to a reading of 7.2. That reading indicates that LYV shares are ready for a short squeeze that will accelerate the stock’s ascent.
My 4-6 week target for the stock is $100, where it should find some resistance from the round-numbered nature of that price.
Microsoft Corp. (MSFT)
With earnings right around the corner, this is one of the few stocks that I am interested in holding through the season. There are two reasons.
First, MSFT shares have a history of seeing strong “buy the rumor” activity in the two weeks ahead of their earnings. On average, the stock adds about 2.2% to its price in the two weeks leading to the earnings announcement.
The stock also rallies more than 3% after the earnings results are announced. That includes the two earnings quarters that saw Microsoft sell off after their results.
Of course, the market will be focused on Microsoft’s advancement of Artificial Intelligence (AI) since last quarter’s results, especially any indication of how this new technology will increase valuation of the company’s products.
For what its worth, the market has been buying stocks like Microsoft, Google, and Amazon based on loose guesstimates of how much value AI will add. This may be one of the first quarters that companies will start defining the actual value.
From a sentiment perspective, MSFT has seen increases in put volume on the shares. This is due to a few reasons.
One of those reasons has to do with Microsoft’s current prices.
After bottoming in November 2022, MSFT shares are in the process of trying to break out of the $340 level. This price represents the 2021 highs as well as all-time highs for the stock.
That also draws a “double top” for the stock. This is a technical pattern that often results in either a breakout to new highs or a breakdown into a “healthy correction”.
Options traders are likely nervous about the earnings report triggering some profit-taking with the stock at these lofty levels.
The options activity suggests that a “Wall of Worry” is being built as pessimism is rising.
Following my Behavioral Valuation approach, stocks exhibiting positive technical trends with growing pessimistic sentiment tend to see an extension of their rally.
My 2-4 week target for MSFT shares sits at $370, an 8% move from its current prices.
Alcoa Corp. (AA)
Global recession fears continue to grow as inflation has been combined with slowing economies to create less demand for basic materials. This outlook continues to apply pressure to stocks like Alcoa.
For the year, shares of Alcoa are trading almost 30% lower. Compared to the Materials Select Sector SPDR Fund (XLB), which is trading 10% higher for the same period, Alcoa is one of the relative strength laggards in the group.
The company has seen continued weakness on the operations side as year-over-year revenue continues to decline at an average of -5% by the quarter with last quarter’s revenue seeing an 18.9% drop compared to last year.
The outlook for materials companies continues to slide as demand for these basic materials like Steel, Aluminum, and Copper weakens due to the prolonged economic slowdown.
Technically, Alcoa shares are locked in an intermediate-term bearish trend with the stock’s MA50 declining overhead. That provides potential resistance for the shares at $35.
In addition, the stock’s 20- and 200-day moving averages are in similar declines and the stock is trading well below its 20-month moving average (also declining) which puts it soundly in a bear market.
Earnings have been inconsistent – to say the least – over the last year as Alcoa has missed earnings estimates in two of the last four quarters. The market is expecting another quarterly loss for the company, a loss that has technical costs.
With the stock sitting just above recent lows at $32, the earnings report may be the straw that breaks the tepid support we’ve seen at that same price.
In addition, the stock’s Bollinger Bands have contracted to some of their smallest widths in the last year, suggesting that a break below $32 will trigger a volatility surge that will move the stock aggressively lower.
My short- and intermediate-term target for Alcos shares sits at $30, a 13% decline from today’s prices.
July 07 2023