Techical Pulse: Booking Holdings Inc (NASDAQ:BKNG) Bullish

Booking Holdings Inc (US: BKNG) has been on a rising streak and although prices have been halting at US$2454.00 region, recent technical indicate that Booking Holdings still have room for further upside:

 

  1. The stock has been trending higher highs and lows within the primary uptrend line.
  2. The formation of the ascending triangle is a sign of a continuation as prices has been testing the resistance zone at US$2454.22-US$2480.66. Furthermore, prices have been well supported previously within the ascending triangle at US$2256.11-US$2295.07.
  3. The morning star formation is well supported by the 22-day moving average and it is indicative of a shortfall rebound.
  4. Perhaps the risky factor that will plunge the stock into downside is the bearish divergence. However, should the Relative strength index break above the 60 line, then we should see an invalidation of the bearish divergence.

 

*Timeline of the trade is 4 weeks from the date issued.

*Alternatively, prices may correct slightly to US$2348.70 before rallying strongly.

 

CHART LEGENDS

 

Moving Average

Red dotted line = 200 Periods Moving Average

Blue dotted line = 50 Periods Moving Average

Green Line B= 22 periods Moving Average

Disclaimer

We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock`s risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
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Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in this research should take into account existing public information, including any registered prospectus in respect of such security.
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Analyst Disclosure: Neither the analyst(s) preparing this report nor his associate has any financial interest in or serves as an officer of the listed corporation covered in this report.
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Technical Pulse: Bilibili Inc (Bullish)

Bilibili INC (US: BILI) strong upside is set to continue after the technical indicate strong resounding bullish signal:

  1. The overall upside structure is strong as prices have been well supported by the primary and secondary uptrend line.
  2. Zooming in, the bullish engulfing candle last Wednesday has thrust above the resistance-turned-support level at US$139.64. Despite a bearish tweezer top, the piercing candle rebounded above the support at US$139.64. This indicates bullish upside ahead.
  3. All of the Ichimoku signals are showing strong bullish upside, where the bullish engulfing candle closes above the Tenkan-Sen.

*Timeline of the trade is 3 weeks from the date issued.

CHART LEGENDS

Ichimoku Kinko Hyo

Red dotted line = 9 Periods Tenkan-Sen

Blue dotted line = 26 periods Kijun-Sen

Green Line B= 52 periods Senkou Span B

Pink Line A = 26 periods Senkou Span A

Black line = 26 periods Chikou Span. Lagging line

Disclaimer

We do not base our recommendations entirely on the above quantitative return bands. We consider qualitative factors like (but not limited to) a stock`s risk reward profile, market sentiment, recent rate of share price appreciation, presence or absence of stock price catalysts, and speculative undertones surrounding the stock, before making our final recommendation
GENERAL DISCLAIMER
This publication is prepared by Phillip Securities (Hong Kong) Ltd (“Phillip Securities”). By receiving or reading this publication, you agree to be bound by the terms and limitations set out below.
This publication shall not be reproduced in whole or in part, distributed or published by you for any purpose. Phillip Securities shall not be liable for any direct or consequential loss arising from any use of material contained in this publication.
The information contained in this publication has been obtained from public sources which Phillip Securities has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in this publication are based on such information and are expressions of belief only. Phillip Securities has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in this publication is subject to change, and Phillip Securities shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will Phillip Securities be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages.
Any opinions, forecasts, assumptions, estimates, valuations and prices contained in this material are as of the date indicated and are subject to change at any time without prior notice.
This material is intended for general circulation only and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. The products mentioned in this material may not be suitable for all investors and a person receiving or reading this material should seek advice from a financial adviser regarding the suitability of such products, taking into account the specific investment objectives, financial situation or particular needs of that person, before making a commitment to invest in any of such products.
This publication should not be relied upon as authoritative without further being subject to the recipient`s own independent verification and exercise of judgment. The fact that this publication has been made available constitutes neither a recommendation to enter into a particular transaction nor a representation that any product described in this material is suitable or appropriate for the recipient. Recipients should be aware that many of the products which may be described in this publication involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made unless all such risks are understood and an independent determination has been made that such transactions would be appropriate. Any discussion of the risks contained herein with respect to any product should not be considered to be a disclosure of all risks or a complete discussion of such risks.
Nothing in this report shall be construed to be an offer or solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in this research should take into account existing public information, including any registered prospectus in respect of such security.
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Microsoft Corp – 4 Key Takeaways from 2Q2021 Earnings

  • Continued shift in revenue mix towards its Intelligent Cloud component, driven by strong momentum in Azure
  • Improving advertising and job market from positive economic outlook may continue to drive its Linkedin and Search businesses
  • Segmental guidance by the management for 3Q 2021 displays continued resilience ahead
  • Digital transformation trend is underway and Microsoft may be the beneficiary at the forefront of a continued digital transformation

4 Key Takeaways from 2Q2021 Earnings

  1. Continued shift in revenue mix towards its Intelligent Cloud component, driven by strong momentum in Azure. In its 2Q2021 results, its ‘Intelligent Cloud’ component accounted for 33.9% of total revenue, largely driven by a 50% y-o-y growth in Azure. That is a positive shift where the segment only accounted for 26.2% of total revenue back in 2017 (Figure 1), which highlighted that Azure is an increasingly important driver of Microsoft’s overall earnings and revenue growth. Operating margin for this segment continues to improve y-o-y, expanding by 2.5% compared to the previous year.

In its outlook earnings call for 3Q2021, the management mentioned that generally, due to increasing mix of large long-term Azure contracts which tends to be more unpredictable in timing of recognition, it may cause volatility in growth rate. They also mentioned a ‘sequential increase’ in capital expenditure as they continue to enhance their cloud services to meet growing global demand. We believe that this signals that we should not expect any strong growth in margin in the near term. However, we remain positive on its cloud business as this segment displays the highest growth momentum with a 3-year CAGR of 23.3%, compared to Productivity and Business Processes (14.4%) and Personal Computing (7.5%). (Figure 2)

  1. Improving advertising and job market from positive economic outlook may continue to drive its Linkedin and Search businesses. Due to Covid-19, macroeconomic weakness in the job market and lower spend on advertising has weighed on its LinkedIn and Search revenues, as revenue declined q-o-q by 5.4% in Q3 2020 and 10.4% in Q4 2020 (Figure 3). Both segments account for around 11% of total revenue.

In its 2Q 2021 results, combined revenue for these two segments grew 19.2% q-o-q, exceeding above pre-Covid levels and offsetting the negative impact from Covid-19 (Figure 3). For the quarter, Linkedin’s sessions grew 30% y-o-y to deliver record levels of engagement. We believe this validated the view that the advertising market is improving on the backdrop of positive economic outlook and demonstrated resilience in these two segments of Microsoft to weather the financial impact of the pandemic. With improving economic conditions and gradual recovery in the labour market, the management expects Linkedin revenue to continue its growth at the low 20% range.

  1. Segmental guidance for 3Q 2021 displays continued resilience ahead. In its earnings guidance for 3Q 2021, the management expects revenue for its Productivity and Business Processes segment to be between $13.35 to $13.6bn. That translated to a y-o-y growth of between 13.7% to 15.8%, higher than latest 2Q 2021 growth rate of 13.3%. This segment accounts for 13.4% of total revenue.

For Intelligent Cloud segment, the management expects revenue between $14.7 to $14.95bn. This translated to a y-o-y growth of between 19.7% to 21.7%, slightly lower than current quarter’s growth of 23%. We believe that this is due to the high demand for cloud services in Q3 2020 due to Covid-19 which has seen a 27.2% y-o-y jump. Therefore, some demand may have been brought forward in Q3 2020 and the slowdown in growth for upcoming Q3 2021 should not be a cause for concern.

Lastly, for its More Personal Computing segment, the management expects revenue between $12.3 and $12.7bn. This translated to a y-o-y growth of 11.8% to 15.5%, comparable to current quarter’s growth of 14.3%.

  1. Digital transformation trend is underway. Microsoft may be the beneficiary at the forefront of a continued digital transformation. For its latest quarter, Office Commercial products and cloud services grew 11% y-o-y for its latest quarter (Figure 4), with management noting a continued customer shift to cloud offerings from on-premises annuity. Office 365 commercial revenue grew 21% y-o-y, driven both by strong seat growth and revenue per user. The management mentioned in its earnings call that they see continued upsell opportunities which will drive growth for its Office commercial revenue. However, they note that they expect revenue for their on-premises business to decline in the ‘mid-to-high teens’ range (estimated 15-19% decline). For Office Consumer products, they expect revenue growth to be similar to last quarter with continued growth in subscribers. Microsoft 365 consumer subscription has been picking up pace over the past one year with q-o-q growth of 6.3% (Figure 5), potentially accelerated by Covid-19, and management seems to suggest that the trend will continue in the near term.

Conclusion

We are positive on MSFT. Current P/E for MSFT stands at 36.8. On first glance, it may appear expensive by trending 1 standard deviation above its 3-year historical average. However, we believe that the valuation is justified, considering that strong growth across all its business segments is expected to continue. Strong growth momentum for its Cloud segment has also been validated in this result and may potentially strengthened Microsoft competitive position in the cloud computing market, currently dominated by Amazon’s AWS.

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