The Nasdaq Composite has been in a holding period over the last three months as investors have worried about a number of issues. Greece. The specter of rate hikes from the Federal Reserve. A recent slowdown in the economic data. The start of the Q1 earnings season.
In response, much of the action globally has been focused on overseas markets in Asia and Europe.
The parabolic rise of China’s Shanghai Composite, up nearly a third since March, has sucked much of the speculative juice that normally powers up the Nasdaq’s tech-focused names.
That looks set to change.
The Nasdaq has inched up to test overhead resistance near 5,050, threatening a breakout that would put the dot-com bubble record of 5,132 in play.
If it’s going to happen, these three stocks are going to be among the leaders.
Nasdaq Heavyweights: Apple Inc. (AAPL)
Investors have been cautious on Apple Inc. (NASDAQ:AAPL) over the last three months, wondering and waiting on the launch of the upcoming Apple Watch. The stakes are high: This is the first new product category under Tim Cook and the company’s first foray into the wearables segment.
While early online orders have been strong (pushing delivery dates out to the summer), reviews have been mixed. Remember that the initial response to the iPhone was mixed too. I think traders will focus on the positives — especially once the envy that Apple products seems to inspire kicks in — pushing shares up and out of their consolidation range.
As for earnings, due out Monday, RBC analyst Amit Daryanani notes that demand for the iPhone remained strong throughout Q1. He is looking for shares to hit a price target of $142, with an upside forecast of $155.
Nasdaq Heavyweights: Yahoo! Inc. (YHOO)
Yahoo! Inc. (NASDAQ:YHOO) shares have been drifting along their 200-day moving average since January, listless after all the hubbub surrounding the Alibaba Group Holding Ltd (NYSE:BABA) IPO died down. What’s incredible is that on a sum-of-the-parts valuation, the market is currently assigning a negative value to YHOO’s core business — including its award-winning mobile apps, cash on hand, and push into exclusive media content.
That seems harsh.
Morgan Stanley analysts that initiated coverage recently believe this isn’t realistic and estimate that the Yahoo’s core business should be trading at a 4.5x multiple of its 2016 operating earnings estimate of about $1 billion — a 15% discount to AOL, Inc. (NYSE:AOL) and the New York Times Co (NYSE:NYT).
Overall, Morgan has assigned a price target of $55, which would be more than 25% from current levels. In anticipation of a rally to challenge its November highs, I’ve recommended the May $46 YHOO calls to my Edge Pro subscribers.
Nasdaq Heavyweights: Microsoft Corporation (MSFT)
Microsoft Corporation (NASDAQ:MSFT) is emerging from a downtrend pattern going back to November on building excitement over its Windows 10 operating system launch later this year. Early signs are encouraging; with the company set to address missteps in its Windows 8 OS and better unify the experience across PC, tablets and mobile devices.
It’s also set to unify the experience between PC and Xbox for gamers, which is cool.
I’ve recommended the May MSFT $43 calls to my Edge Pro subscribers.
Microsoft reports Thursday after the bell.
Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters.
