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Arm takeover by U.S. chips giant Nvidia threatened by national security concerns

The pending $40 billion takeover of the British microchip designer Arm, the UK’s most…
The post Arm takeover by U.S. chips giant Nvidia threatened by national security concerns first appeared on Trading and Investment News.

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The pending $40 billion takeover of the British microchip designer Arm, the UK’s most valuable technology company, by larger American rival Nvidia is under reportedly under threat. Reports today suggest the government is getting cold feet and could block the sale of Arm, currently owned by Japanese technology conglomerate SoftBank who took it private in a $34 billion deal in 2016, on national security concerns.

Nvidia and Softbank announced agreement on the $40 billion sale of Arm to the former last September, pending regulatory approval of the takeover. Nvidia, the world’s most valuable semi-conductor company with a market capitalisation of $493.8 billion, was keen to capitalise on a booming market for sophisticated microchip designs and moved to take advantage of an Arm valuation that reflected the Cambridge-based company’s stalled growth under SoftBank’s ownership.

However, the regulatory process of gaining approval for the politically sensitive takeover has become a drawn out affair. An Nvidia spokesman yesterday neutrally commented to the speculation:

 “We continue to work through the regulatory process with the UK government. We look forward to their questions and expect to resolve any issues they may have.”

The UK’s Department for Digital, Culture, Media and Sport, declined to comment when approached by mainstream media outlets. However, the rumours were enough to send the Nvidia share price down 2.7% in early trading on Wall Street yesterday before they eventually recovered to close 0.3% higher.

Founded in 1990, Arm started life as a joint venture between Apple and Acorn Computers, the Cambridge-based British computer manufacturer that no longer exists after what was left of it was acquired by MSDW Investment Holdings, an investment vehicle of Morgan Sachs, in 2015. Arm, however, flourished and grew quickly during the smartphone boom which saw its low-power chips become an industry standard for mobile devices.

As well as approval from the UK government, Nvidia also still needs its acquisition of Arm to get the green light from regulators in the European Union, America and China.

Interest in British companies from international buyers, especially from the USA, has reached record levels over recent months. A combination of first Brexit uncertainty and then the coronavirus crisis recovery proving slower for London-listed companies than for their peers in America has left UK equities looking undervalued, which has attracted predators.

Data published this week by financial information provider Refinitiv, shows the value of combined takeover attempts of British companies has reached £156 billion so far over the first 7 months of 2021. That’s the highest value in over 14 years and a huge leap on the $58 billion bid for UK companies a year ago.

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Spread & Containment

Costco Stock Forecast and Review

When looking at a Costco stock forecast, there are a few things to watch out for. The predictions for growth continue for investors.
The post Costco Stock Forecast and Review appeared first on Investment U.

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Costco (Nasdaq: COST) is currently the world’s 3rd largest retailer by revenue (behind Walmart and Amazon) and is well known for offering wholesale prices to its members. To start with a Costco stock forecast, it’s important to understand the business…

For just $60 per year ($120 if you go with the “Executive Member” plan), Costco members can save money on gas, groceries and just about every product in between. Costco also owns the highly-coveted title for “The World’s #1 Seller of Rotisserie Chickens.”

Costco opened its first store in Seattle in 1983 and today has grown to 815 warehouses. From the get-go, its strategy has been to eliminate all the “frills” associated with retailers in order to cut costs. By cutting its operating costs to the bare minimum, it’s able to save money and pass these savings on to its customers. Common retail expenses that you won’t find at a Costco location are salespeople, fancy buildings or delivery options (groceries excluded).

Costco Saves for Customers and Investors

Over the years, Costco has become popular for saving its members tons of money. However, to shop at Costco you need to join its membership program which currently sits at just under 110 million cardholders. This equates to at least $6.6 billion in annual recurring revenue for Costco. However, the loyalty that this membership builds is worth much more than $6 billion.

When you sign up for a Costco membership, Costco automatically becomes your de facto place to purchase goods. Almost without thinking, you’ll pick Costco over Target, Walmart or Amazon because you know that you’ll save money by shopping at Costco. On top of the savings, you also want to make sure that your $60 per year commitment doesn’t go to waste. When it gets a new member, Costco wins twice. It gets $60 in annual recurring revenue and it also gets a large chunk of that person’s daily spending, potentially for the rest of their life.

Programs like Amazon Prime and American Airlines’ AAdvantage program have been successful for similar reasons. After signing up, Amazon Prime members will slowly get in the habit of ordering everything from Amazon. They want to take advantage of free 2-day shipping. Also, some diehard AA members will not even consider booking with another airline because they want to ensure that they’re getting rewarded for flying (through AA miles).

With this in mind, should you include Costco stock in your portfolio, even if you don’t have a membership card at home?

Let’s take a quick look at a Costco stock forecast as well as a few predictions for the stock moving forward.

Costco Stock Price Forecast

Note: I’m not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions.

Costco is scheduled to announce earnings on September 23, 2021.

In today’s investing environment, so much relies on the coronavirus pandemic. Did the company have a business model that thrived during the pandemic? Did it capitalize on this position? Will this success continue now that the pandemic is mostly over? In Costco’s case, these answers are yes, yes and yes.

Costco was undeniably a Coronavirus winner (check out these telemedicine stocks as well). People were prepping for the COVID-19 quarantines like it was the apocalypse and Costco’s wholesale-style business is literally designed to help people save money while prepping for the apocalypse. What’s surprising, however, is that Costco is actually getting more traffic now than it was B.C. (Before-COVID).

According to foot traffic data from Placer Labs, Costco’s monthly visits were up 13.8% in July 2021 as well as 12.8% in August 2021 (when compared to 2019 numbers). During its December 2020 earnings report, it reported that revenue from memberships rose 7%. It’s likely that many people opened a new Costco membership in hopes of saving money while it stockpiled quarantine supplies. Now, even though the pandemic is over, this buying habit remains.

Notably, Costco’s success is not an outlier within the industry. Other wholesalers like Sam’s Club and BJ’s have also experienced higher traffic.

Costco Stock Predictions

Costco is scheduled to announce earnings on September 23, 2021. Analysts are expecting EPS of $3.54 and revenue of $61.45 billion. Both of these numbers are higher than the previous quarter where analysts were expecting EPS of $2.28 and revenue of $43.28 billion.

Costco has beaten its last four revenue predictions as well as three out of four of its EPS predictions. However, since investors have set a higher bar for Costco, it may be more difficult for it to reach it. It’s very possible that Costco reports an increase in revenue but still falls short of investors’ expectations, which could result in a lower stock price.

In 2020, Costco posted total revenue of $166.7 billion and a net income of $4 billion. This completed five years in a row of growing revenues with an average yearly growth rate of 7.57%. Costco also has a dividend yield of close to 1% and razor-thin profit margins of 2.4%.

Costco’s stock was up about 30% in 2020 and is up 200% over the past five years.

Is Costco Stock a Buy?

When making a Costco stock forecast, there are a few things to watch out for.

Mainly, record inflation numbers recently could hurt Costco’s profitability in the short term. Since Costco is known for low prices, it will likely do its best to avoid raising prices even as inflation pushed its costs higher. A similar situation happened with Kroger recently. Higher costs with the same prices would mean less profit for Costco, who already operates on razor-thin margins.

If you’re looking for stocks that can profit on inflation, check out these agriculture stocks. They can pass along increasing costs to customers over time.

On the bright side, Costco was able to use the pandemic to thrive in both the short term and (potentially) the long term. Costco added more memberships during the pandemic, which should result in more loyal shoppers and higher revenues for the years to come. When looking at the long-term Costco stock forecast, the outlook certainly looks rosy. This is especially true since Costco dominates the wholesale retail industry as it faces little competition from Sam’s Club and BJ’s.

The increase in Costco’s membership is also important because Costco is due to raise the price for its membership fee. On average, Costco increases its membership fee by about 10% every 5-6 years. Its last increase was a few years ago, so this fee should be coming in the next 18 months or so. Due to the immense size of this program, even a 10% price increase would boost revenue from memberships by at least $660 million.

Its membership fee is a significant contributor to its gross margin, so this extra revenue could have a big impact on profitability as well as Costco’s stock price. Of course, this is assuming that the membership price increase doesn’t also lead to a drop in total memberships.

As usual, assigning a Costco stock price prediction in the short term is always difficult. This is especially true because there are plenty of other factors that could hurt the market overall. Market-wide moves could hurt Costco stock.

For example, there are rumors that the Federal Reserve will raise interest rates. This increases concerns over inflation, as well as a stock market that has run 90% since its March 2020 low. These are all things to keep in mind when determining whether or not to buy Costco stock in the short term. With that said, Costco stock is certainly positioned well for continued success in the years to come.

Investing Beyond Costco Stock

I hope that you’ve found this Costco stock forecast to be valuable in helping you determine a Costco stock prediction! As usual, all investment decisions should be based on your own due diligence and risk tolerance.

If you’re looking for even better investing opportunities, sign up for Wealthy Retirement. It’s a free e-letter that’s packed with tips and tricks. You’ll hear directly from bestselling author Marc Lichtenfeld. He’s an income expert who literally wrote the book on getting rich with dividends.

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Economics

MLB trade rumors and news: Padres DFA Arrieta, Severino pitches for first time since 2019

Photo by Jeff Curry-USA TODAY SportsThis could be the end of the road for the 2015 NL Cy Young winner. The MLB Daily Dish is a daily feature we’re running here at MLBDD that rounds up roster-impacting news, rumors, and analysis. Have feedback or have s…

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Photo by Jeff Curry-USA TODAY Sports

This could be the end of the road for the 2015 NL Cy Young winner.

The MLB Daily Dish is a daily feature we’re running here at MLBDD that rounds up roster-impacting news, rumors, and analysis. Have feedback or have something that should be shared? Hit us up at @mlbdailydish on Twitter or @MLBDailyDish on Instagram.

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Economics

Why Monday’s Decline Was So Shocking

It’s no secret that investors had become accustomed to a historic level of calm. We’ve been looking at this since the spring, it usually doesn’t last, and yet it did for months.Even with a late-day recovery on Monday, the loss in the most widely-benchm…

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It's no secret that investors had become accustomed to a historic level of calm. We've been looking at this since the spring, it usually doesn't last, and yet it did for months.

Even with a late-day recovery on Monday, the loss in the most widely-benchmarked index in the world was a rude awakening to those who believe that stocks only travel in one direction. Monday's session was more than two standard deviations from the average daily change over the past year. The only other day with a -2 z-score over the past year was May 12, which marked the bottom for that pullback.

It had been nearly 90 days since that "shocking" decline in May, which is a relatively long time. Over the past decade, this ranked as the 10th-longest stretch between shocking drops.

Most of us are concerned with the question of "so what?" To help give a clue, the table below shows every time since 1928 when the S&P 500 was within 5% and no more than three weeks removed from a multi-year high, then suffered its first -2 standard deviation move in at least four months. These show the times when reality paid investors an unwelcome visit.


What else we're looking at

  • Full returns after stocks suffer a shocking drop
  • What the risk/reward of all precedents suggest about the coming week(s)
  • Potentially ways to manage a couple of options trades that are now profitable
  • A quick update on copper
  • Looking at several mean reversal signals that have set up (but not yet triggered)

Stat box

Put option trading volume in equities and indexes across U.S. exchanges neared 22 million contracts on Monday. That was the 6th-highest reading in the past 5 years.

Etcetera

Heavy industry. Recent losses are weighing on sentiment in industrial stocks. Over the past 10 days, the average Optimism Index on the XLI Industrials fund has been below 25%, the 2nd-lowest in two years. These stocks tend to do well once sentiment starts to recover from a very low level.

xli industrial sentiment optimism index

Oscillators oscillate. The McClellan Oscillator for industrial stocks has plunged below -100, showing quick and severe internal selling pressure. It was above +50 as recently as the end of August. The current reading is on par with the most severe reactions in the past year.

xli industrial mcclellan oscillator

Sell (almost) everything. Heavy selling pressure is also evident in the 10-day advance/decline line for industrials. It's showing an average of nearly 20 more stocks declining than advancing, nearing the most lopsided selling pressure since the pandemic crash.

xli industrial advance decline line

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