Business & Real Estate
- Published on Wednesday, 11 June 2014 01:04
- Written by Clyde Noel
Last week resulted in another good run for the market. Thursday ended with record highs, with the Dow Jones industrial average up nearly 0.60 percent, the Nasdaq up 1.05 percent and the S&P 500 index up 0.65 percent. By noon Friday, more records shattered as the Dow edged up another 0.40 percent.
With the indexes reaching all-time highs, the majority money opinion is positive, but investors’ enthusiasm may be exhausted and a correction could be coming.
Fair value can be tough to pin down, but investors should think twice before they sell in this market. Following are guidelines for gauging whether the time to sell has arrived.
• If the reason you purchased the stock is no longer valid or if you can’t remember why you bought the stock.
• If you need that money within three or even 10 years.
• If you’re hanging on for emotional reasons while overlooking a dividend that may be cut or eliminated.
• The No. 1 reason: If you’re considering the tax effects.
Two local companies are drawing attention.
• Palo Alto Networks Inc. (PANW; $77) announced last week that it settled its patent litigation with Juniper Networks Inc., with the company making a one-time payment to Juniper of $75 million in cash and $100 million in shares of common stocks and warrants.
The Santa Clara-based Palo Alto Networks, founded in 2005, offers a network security platform in the Americas, Europe and Japan. The platform comprises a next-generation firewall that delivers application, user and content visibility and control.
Palo Alto Networks last week reported that it earned 11 cents per share on higher-than-expected revenues that rose 49 percent over the previous year. While multiple tech stocks are experiencing trouble, Palo Alto Networks has been rebounding. Since March, the stock has dropped from $80 to $58, but in the past three weeks it bounced back to $77.
Zacks Equity Research cautioned that there could be trouble on the horizon for Palo Alto Networks because the stock is now in overbought territory. Zacks issued a strong sell, which puts Palo Alto Networks into a negative position among its peers.
Since the litigation, research firm Oppenheimer upgraded Palo Alto Networks stock to an outperform. The median target price is $90, with a high of $98. Although Palo Alto Networks is not listed on the Town Crier “50,” this information is provided for investors’ consideration.
• Tesla Motors Inc. (TSLA; $206.90) is a stock Wall Street is watching, especially after CEO Elon Musk told stockholders that he intends to stay on as CEO for at least four or five more years. That’s important, because Tesla’s next car will be a mass-market model selling in the $35,000 range.
Among the negatives cited in regard to Tesla stock is the fate of the company’s Gigafactory if new technologies render Tesla’s current battery technology obsolete.
Musk said that if the new technology comes from somewhere other than batteries, such as hydrogen fuel cells, it may have merit, but Tesla may have more flexibility than investors think and may already have better batteries in its pipeline.
Tesla’s third-generation car, the Gen 3, depends on the Gigafactory for battery production. The Model S battery is built into the floor of the vehicle.
Speaking at the Computer History Museum in Mountain View, Musk said Tesla will begin production in two or three states, and California is not considered a long shot.
In the past month, some research firms have considered Tesla stock a strong buy, while the majority deemed it a hold. The median target price is $221, with a high of $325.
Tesla is not included on the Town Crier “50” because it was founded after the Town Crier created the list.
Clyde Noel is a Los Altos Hills resident and longtime investor in stocks.