The Dow Jones industrial average goes up one day and down the next, confusing investors. The S&P 500 closed at another all-time high Thursday, and the jobs market provided encouraging news.
The University of Michigan Consumer Sentiment index rose for the third time in the past four months, gaining 16 percent. The index rose again in late February, but investors are not following the upward move of consumer-confidence numbers, because there are still plenty of reasons to worry until the Ukraine situation is resolved.
The Dow industrial and transportation averages have stubbornly refused to move higher together. The corporations listed in these two components are among the largest and most closely scrutinized in the U.S. Uncertain world conditions, Federal Reserve actions, Washington budgets and rough weather conditions are keeping investors confused.
Presently, we are making no market moves, but April warmth and spring flowers should provide numerous incentives to invest in the stock market.
Two local companies not on the Town Crier “50” made the news recently.
• Tesla Motors Inc. (TSLA; $239.02) designs, develops, manufactures and sells electric vehicles and power-train components. Founded in 2003, Tesla is based in Palo Alto.
Tesla entered the market with its all-electric roadster only a few years ago, and the limited-edition, high-performance vehicle immediately made car buffs take notice. With a range of more than 200 miles and a zero-to-60 time of 3.7 seconds, the vehicle was a performance car.
Tesla then developed its sleek Model S sedan to showcase its capabilities. The car was an immediate hit, selling more than 20,000 units in 2013. As of last October, the company operated a network of 42 stores and galleries in the U.S. and Canada.
Tesla is likely to grow given its innovative plans and distribution scheduling, and it needs to expand to justify its current valuation. At the current stock price, there is more risk than opportunity.
Tesla’s upgrade and downgrade history includes numerous research firms downgrading the stock from a buy to a hold, several suggesting a hold and others recommending a buy. The reason: The price is too high and could decrease before another problem arises.
The median target price for Tesla stock is $224, with a high of $325.
• Palo Alto Networks Inc. (PANW; $78.33) stock recently hit a new high on the heels of reporting better-than-expected earnings.
The Santa Clara-based company, founded in 2005, offers a network security platform that includes several in-demand firewall appliances.
The quarterly report shows that the company earned 10 cents a share, a penny above the consensus – and double earnings from the year-ago quarter. Revenue came in at $141.1 million, a 46 percent increase and well above the $135 million estimate.
The Juniper Networks and Palo Alto Networks patent infringement trial began Feb. 24, with Juniper suing Palo Alto Networks for violating seven patent rights. The suit implicates all of Palo Alto Networks’ firewall products. If the court issues an injunction barring Palo Alto Networks from selling its technology, the stock could drop sharply.
If Palo Alto Networks manages to fend off Juniper, its stock could rise sharply. Conversely, losing could become a downside risk.
Deutsche Bank and UBS have both deemed Palo Alto Networks a buy in 2014, with Gabelli issuing a downgrade to a hold. The median target price for the stock is $85, with a high of $93.
Clyde Noel is a Los Altos Hills resident and longtime investor in stocks.