Market Outlook: Netflix, Flying Food and Tesla

Recent markets have been wobbling following rising interest rates and trade disputes that pressed investors to sell tech and fast-growing companies. According to the American Association of Individual Investors, the percentage of investors who expect stocks to fall over the next six months rose to its highest level in three months. Basically, bringing more uncertainty into the market. 35% of the reporting S&P 500 companies have missed sales forecasts this quarter and the index has shed over 5% in the past month.

In the entertainment industry, Netflix reported adding around 7 million new users in the third-quarter, but shares fell shortly after due to decreased optimism. Stock is still up 73% this year, but due to growing competition and the majority of their new users being overseas, I don’t see them doing well in the near future. This is due to everyone in the U.S. either already having Netflix or using a different subscription. Netflix is currently used in 75% of homes in the U.S. trailed by YouTube and Amazon, but I see their competitors merging in the near future, to overcome Netflix’s market share.

Moving onto Tech, while competitors like Amazon and Google are working on drones Uber is planning on making a fleet of food-delivery drones within the next few years. This opens up a whole new market for food-delivery, considering bankers valued UberEats at $20 Billion, this plan has the potential to take-off literally. Amazon is far ahead of Uber in drone development, but for now they’re focused on Alexa. Amazon is attempting to make Alexa smarter with AI, to hold their place at the top of smart-speaker sales with google, holding 51% share of the smart-speaker market. Their goal is to make Alexa more valuable, doing this will expand its capability to charge users for special skills.

Now Tesla. Over the past few months they’ve been wobbly due to Musk’s SEC investigation, but now that its over we can focus on their future. Beijing raised their tariffs on new car imports from 25% to 45% in July, Tesla’s cars are only made in the U.S., meaning a Tesla sold in China is now 60% more expensive. Vehicle imports to china have decreased from around 1,500 a month to 260 in July and August due to this new tariff. Tesla plans to build its first factory in China, it’s second largest market, accounting for 17% of sales last year. Tesla recently purchased 210-acres in Shanghai that has the potential to build 500,000 cars a year, this would be the first car maker to have an exclusively owned factory in China. Even though Musk says it will cost around $2 Billion for the new factory, Goldman Sachs says it will cost around $4-$5 Billion. Tesla will need to raise this cash on top of dealing with their $4.3 Billion existing debt due in 2020. I see Tesla having some trouble in the near future, but definitely going upwards in the long run, all relying on the building of this factory.

JPMorgan Now Offers Free Trades!

JPMorgan is now offering 100 free trades to anyone that opens a brokerage account with them. This announcement has sent the online brokerage market into chaos on Tuesday, with TD Ameritrade down 7%. They're obviously aiming to gain investors from competitors, but more importantly they're more attractive to new and young investors. This service will offer any of their customers to receive 100 free trades (Stocks & ETF's) in their first year with no minimum account balance, while getting  charged $2.95 for every trade after that. Now if you have an account balance of $15k or more, you will receive 100 free trades a year, and Chase Private Client members get unlimited free trades.
Almost a year ago, I made my first blog post,(http://tipsandtricksforinvestors.blogspot.com/2015/04/trading-for-free.html), the post was about how Robinhood was such a great and free interface for young people to start investing, and I can't believe it's even easier to get access to zero-commission trading now through JPMorgan! This is all great news for JPMorgan, due to the potential clients that they would be taking from their competitors, and most importantly attracting the millennials.

LUVing Southwest Airlines

Southwest Airlines has been outperforming their competitors since I’ve recommended them in early June. (http://tipsandtricksforinvestors.blogspot.com/2018/06/southwest-airlines-is-very-attractive.html?m=1) Their stock has gained over 18% since than, compared to their competitors, such as American Airlines (AAL) -15% since early June. This is mostly thanks to President Trump’s new tax cuts; historically Southwest pays the most taxes out of any airline and is the largest airline only operating in the United States. Therefore, they can take advantage of this extra money to buy a new fleet of planes or buyback stock. Overall, I would keep Southwest Airlines as a buy, considering Warren Buffett’s boost in LUV investments and their potential buy back in stock.(https://www.bloomberg.com/news/articles/2018-08-14/buffett-s-berkshire-adds-to-bets-on-goldman-sachs-southwest)

Artificial Intelligence & Cloud Computing Are The Future

Tech is the future of our economy, and the industry that has been outperforming everyone else. Companies like Apple and Facebook use cloud computing and artificial intelligence to their advantage. Cloud computing is the new buzz in the finance world because of the crazy profits from companies like (BOX), (WDAY), (VEEV), and especially Salesforce.com (CRM). Salesforce.com’s shares have risen over 30% this year-to-date and there’s a big and obvious reason why this is occurring. Cloud computing is a cheap and easy way to store your company’s data. Their consumer retention rate is 110%, this means that not only do their customers stay with them, but they also buy more products on top of it. Now even though it seems like a great investment, there’re some downsides. CRM has many competitors as mentioned earlier in this post, but what makes them stand out is their track record with customer relations. 
Artificial Intelligence is the next generation of technology due to this new machine learning method called “Deep Learning.” This is when the computer learns from it’s mistakes and keeps on getting smarter and smarter, even passed the point of human intelligence. Now that you know that, you can obviously understand that there’s a massive value in this new learning method. Due to this massive value, there has been a high demand in semiconductors recently and there is potentially a lot more that could be needed. Micron (MU), is up over 40% year-to-date and their price is still a cheap stock according to it’s price ratios. It’s as simple as the demand is high and the supply is low for memory chips. Demand is rising because the arrival of new technologies like cloud computing, artificial intelligence has increased data production, creating unique memory needs.