The market is chugging along this morning on better than 2 to 1 breadth as stocks around the world are higher following the biggest bounce in over two years in the Shanghai market.
China vigorously denied that the trade war is impacting their markets but they announced a massive stimulus program that helped to turn the Shanghai index which has been in a strong downtrend since it hit a high back at the end of January. Trump critics and Chinese officials say that the poor action has nothing to do with trade but it is difficult to see how the pressure has not been a contributing factor to the Shanghai bear market.
The trade war issue is on hold today. The focus is on good momentum and positive reaction to earnings.
One of the strongest reports today is Twilio (TWLO) . The stock is up about 18% after reporting a $0.02 profit in the latest quarter. That doesn't sound like much, but expectations were for a loss and the more important metric is that revenue rose 54% over last year. The company increased its guidance as well and has finally delivered on the momentum that it has promised for a long time.
Back in late 2016 I suggested that Twilio would be a stock to watch for a rebound in 2017. My timing was terrible as the stock finished the year lower than it started but it finally started to live up to its promise starting this past February. The company has technology that allows application developers to embed voice, messaging and videos into web sites.
One problem that TWLO faced was the potential that big clients like Amazon would develop similar applications in house. That weighed on the stock for at least a year but has finally been overcome.
The question now is whether the stock can run higher from here. It is extended and this is still a revenue story rather than an eps story. Analyst targets are in the $75 to $85 range so there isn't a lot of upside from here but the momentum money will be watching it closely and will provide good support.
Another stock of interest today is Turtle Beach (HEAR) . They make headphones for the extremely popular Battle Royale games like Fortnite and have seen an explosion in sales. Revenues were up 218% and they earned $0.40 per share in the latest quarter versus a loss last year. The company now expects to earn $1.95 in 2018, up from its $0.95 guidance in May. The stock is trading with a trailing PE of just 18
HEAR has been one of the best performing stocks in the market this year and I expect it to continue. I'm a buyer on dips and will be looking for further entries.