Apple vs. Amazon: The Race to $1 Trillion Is Heating Up

Shares of Amazon.com (NASDAQ:AMZN) are on a tear so far this year, jumping 45% in just the first six months of 2018. Apple (NASDAQ:AAPL) has been marching steadily higher as well, albeit at a slower pace. The e-commerce giant's stock performance has its market cap now flirting with $900 billion as it races against the Mac maker to the mythical $1 trillion valuation that no company in history has ever achieved...yet.

Amazon's market cap is still trailing by a little over $50 billion, but this race is heating up.

AAPL Market Cap data by YCharts.

How the two tech behemoths compare

While the two companies may be similar in total valuation, they couldn't be further apart with their fundamentals. Apple is the most profitable company on earth, and oftentimes generates more net income in a single quarter than�Amazon has in its entire history. Through the first quarter of 2018, Amazon had made $9.6 billion in net income since it was founded. Apple regularly surpasses that lifetime profitability on a quarterly basis. In the fourth quarter alone, Apple's bottom line was more than twice that ($20 billion).

Data source: SEC filings. Chart by author. Amazon lifetime earnings through Q1 2018.

Here's a snapshot of each company's income statement over the past year.

Metric

Apple

Amazon

Revenue	$247.4 billion	$193.2 billion
Gross profit	$94.8 billion	$44.6 billion
Operating income	$66.1 billion	$5 billion
Net income	$53.3 billion	$3.9 billion
Gross margin	38.3%	19.6%
Operating margin	26.7%	1.7%
Net margin	21.6%	0.7%

Data source: Morningstar. All figures shown on a trailing-12-month basis.

There is one notable similarity. Any time there is speculation of either company entering into a new market, shares of incumbents in those markets often tank, as investors fear competing with either company. However, Apple doesn't enter new markets very often, usually one every few years, while Amazon continues to expand into numerous markets, leading to what's now known as the "Amazon effect."

Image source: Amazon.

The stark contrast in financials also means each company's respective valuation metrics are also worlds apart. Apple is incredibly cheap by just about any valuation metric you can think of, trading at a substantial discount to the S&P 500. Amazon, on the other hand, looks astronomically expensive. However, you can partially justify Amazon's premium valuation with much stronger revenue growth, even as Amazon's top line still lags Apple's.

Metric

Apple

Amazon

P/E ratio	17.7	290.6
P/S ratio	3.6	4.6
P/CF ratio	14.1	56.4
Revenue growth	1.5%	35.5%

Data source: Reuters. All figures shown on a trailing-12-month basis.

Investors love both profits and growth, and each company quintessentially embodies one or the other. But which one will be the first to $1 trillion?

Tesla Model 3 cancellations outpace deposits, analyst says

Tesla is finally making enough cars -- it just can't sell enough of them.

Cancellations for Model 3 orders have picked up in recent weeks. Refunds now outpace deposits for Tesla's new mass-market electric car, according to Needham & Co. analyst Rajvindra Gill.

In an analyst note delivered to clients Thursday, Gill cited extended wait times for the car, the expiration of a $7,500 tax credit, and the fact that Tesla has not yet made the $35,000 base model of the car available for purchase yet.

About one in every four Model 3 orders is canceled -- double the rate from a year ago, Gill said. Customers have to put down a refundable $1,000 deposit to reserve a Model 3, then pay another $2,500 to choose their specific version. They pay the rest when the car is delivered.

The wait time for a Model 3 is about 4 months to a year, and base model customers could wait until 2020, Gill said.

Tesla did not respond to a request for comment.

Gill called sales of the Model S and Model X "lackluster," especially with the growing amount of competition from luxury manufacturers.

He doubts Tesla will reach its target of 100,000 Model 3 deliveries by the end of the year -- to accomplish that goal would require it would have to ship 27% more cars in the second half of the year than it did in the first half. Gill said that he's also "skeptical of demand" for the sedan.

In another warning, the analyst said Tesla's capital structure is also "unsustainable," as free cash flow continues to evaporate. Gill expects Tesla to burn through $6 billion by 2020. He wrote that the Tesla stock is "still overvalued" despite falling 16% from its June 2017 peak.

He downgraded Tesla (TSLA) stock to "underperform" -- essentially a sell rating.

Tesla has been struggling with the Model 3 for several months. Separately, investors aren't thrilled with founder Elon Musk's antics on Twitter.

Tesla's stock fell nearly 3% Thursday.

Rivernorth Opportunities Fund Inc (RIV) Declares $0.21 Monthly Dividend

Rivernorth Opportunities Fund Inc (NYSE:RIV) announced a monthly dividend on Thursday, July 19th, Wall Street Journal reports. Investors of record on Wednesday, October 17th will be given a dividend of 0.21 per share on Wednesday, October 31st. This represents a $2.52 dividend on an annualized basis and a dividend yield of 12.97%. The ex-dividend date of this dividend is Tuesday, October 16th.

Shares of RIV traded down $1.26 on Thursday, reaching $19.43. The stock had a trading volume of 356,688 shares, compared to its average volume of 46,741. Rivernorth Opportunities Fund has a twelve month low of $18.97 and a twelve month high of $21.63.

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In related news, insider Rivernorth Capital Management, sold 10,445 shares of the company’s stock in a transaction that occurred on Monday, June 4th. The stock was sold at an average price of $21.37, for a total value of $223,209.65. The transaction was disclosed in a legal filing with the SEC, which is available at this link. In the last 90 days, insiders sold 38,833 shares of company stock worth $829,917.

About Rivernorth Opportunities Fund

Rivernorth Opportunities Fund, Inc (the Fund) is a diversified, closed-end management investment company. The Fund’s investment objective is total return consisting of capital appreciation and current income. The Fund seeks to achieve its investment objective by pursuing a tactical asset allocation strategy and opportunistically investing under normal circumstances in closed-end funds and exchange-traded funds (ETFs, and collectively, Underlying Funds).

See Also: Short Selling Stocks and Day Traders

UnitedHealth's Business Continues to Grow

UnitedHealth Group (NYSE:UNH) reported second-quarter 2018 financials that show sales and profit continue to improve despite its decision to cut ties to to Obamacare last year. Here's what you need to know about UnitedHealth's performance last quarter and its guidance for the rest of 2018.

The numbers

Revenue in the second quarter grew 12% year over year to $56.1 billion, and adjusted net income increased 28% year over year to $3.14. Top-line growth decelerated slightly from the 13% growth it delivered in the first quarter of 2018; however, its top line was in line with industry watchers' expectations, and its bottom line was $0.10 better than Wall Street's prediction. For perspective, earnings have beat in each of the past five quarters.

IMAGE SOURCE: GETTY IMAGES.

UnitedHealth's bottom-line performance was supported by an improvement in the company's net margin to 5.2% from 4.6% in Q2 2017. The company's�medical care ratio (MCR), a measure of the money it spends on healthcare for its members relative to the premiums it collects, improved by 30 basis points to 81.9% in the quarter, which was within the 81.5% range (plus or minus 0.5%) outlined by the company in April.

The insurer was also a big beneficiary of tax reform. Its income tax rate fell 9.5% to 22% in the quarter.

What's driving its results

UnitedHealth Group makes its money selling health insurance and healthcare solutions via its Optum business segment.

The traditional health insurance business accounts for most of its revenue. In the quarter, health insurance sales were $45.8 billion, up from $40.8 billion in the same quarter of 2017. Price increases, a better revenue mix of business tied to walking away from Obamacare, and the addition of 2.2 million new members drove the increase.

Revenue in UnitedHealth's employer & individual business climbed $742 million to $13.7 billion thanks to the addition of 50,000 members, but the insurer benefited most from improving results at its Medicare and Medicaid businesses.

Its Medicare revenue grew $2.1 billion from one year ago to $18.9 billion as Medicare Advantage memberships increased 10.4%. Meanwhile, Medicaid revenue increased $1.6 billion to $10.7 billion on the addition of 330,000 members.

Across these health insurance businesses, operating margin declined to 5.1% from 5.4% last year because of the return of the�health insurance provider fee, which is sometimes referred to as the health insurance tax. As a refresher, this fee was instituted to help pay for Obamacare. It was temporarily suspended in 2017; however, insurers have to pay it in 2018.

Although Optum contributes less to revenue, it's a higher-margin business, and unlike the insurance business, its margin improved in the last year. Optum's solutions, including managing prescriptions for employers and healthcare analytics services, contributed $24.7 billion to revenue last quarter, up 9.1% from Q2 2017, and its 7.5% operating margin was up from 6.7% last year.

Where do we go from here?

Management upped its outlook for 2018. It now anticipates non-GAAP EPS of between $12.50 to $12.75, up from guidance for between $12.40 to $12.65 previously. The previous guidance was up�from between $12.30 to $12.60 exiting Q4 2017, so clearly, the company is increasingly confident about its profit growth.

That's good news for investors, because it suggests�management will have plenty of financial flexibility to continue returning money to investors.

So far, management has spent $3.15 billion repurchasing 13.8 million shares in 2018, including�$500 million to buy back 2.2 million shares last quarter. UnitedHealth announced a new 100 million share buyback program in June, so future buybacks will occur under that plan. Also, it boosted its dividend payout by 20% to $3.60 per year last quarter, so it spent $866 million on dividends in the second quarter. Currently, its dividend yield is 1.44%.

Improving financials and shareholder-friendly activities offer tailwinds offering support to UnitedHealth's share price this year, but the company's future success will be largely determined by efforts to rein in healthcare costs. The company's cost-cutting efforts include investments to boost price transparency so patients can choose low-cost care and solutions that can allow it to benefit from�a shift away from fee-for service healthcare to value-based care.

If those efforts can keep a lid on the company's MCR, then UnitedHealth's profitability should continue improving, making it a stock worth holding in healthcare investors' portfolios.

$178.48 Million in Sales Expected for CommVault Systems, Inc. (CVLT) This Quarter

Equities research analysts expect CommVault Systems, Inc. (NASDAQ:CVLT) to report $178.48 million in sales for the current fiscal quarter, according to Zacks Investment Research. Five analysts have made estimates for CommVault Systems’ earnings. The highest sales estimate is $179.00 million and the lowest is $177.70 million. CommVault Systems reported sales of $165.97 million in the same quarter last year, which would suggest a positive year over year growth rate of 7.5%. The firm is expected to report its next earnings report on Tuesday, July 24th.

According to Zacks, analysts expect that CommVault Systems will report full year sales of $767.60 million for the current fiscal year, with estimates ranging from $763.70 million to $772.50 million. For the next fiscal year, analysts anticipate that the company will report sales of $848.14 million per share, with estimates ranging from $835.00 million to $871.50 million. Zacks Investment Research’s sales averages are an average based on a survey of analysts that follow CommVault Systems.

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CommVault Systems (NASDAQ:CVLT) last announced its earnings results on Tuesday, May 1st. The software maker reported $0.31 earnings per share for the quarter, missing analysts’ consensus estimates of $0.33 by ($0.02). CommVault Systems had a negative return on equity of 0.12% and a negative net margin of 8.85%. The business had revenue of $184.90 million during the quarter, compared to analysts’ expectations of $187.01 million. During the same quarter in the previous year, the firm earned $0.29 EPS. CommVault Systems’s quarterly revenue was up 10.9% on a year-over-year basis.

CVLT has been the topic of a number of research analyst reports. BidaskClub upgraded CommVault Systems from a “strong sell” rating to a “sell” rating in a research note on Thursday, March 8th. Zacks Investment Research upgraded CommVault Systems from a “sell” rating to a “hold” rating in a research note on Friday, March 9th. Jefferies Financial Group restated a “buy” rating and issued a $76.00 target price on shares of CommVault Systems in a research note on Monday, April 2nd. ValuEngine upgraded CommVault Systems from a “hold” rating to a “buy” rating in a research note on Monday, April 2nd. Finally, Wells Fargo & Co lifted their price target on shares of CommVault Systems from $64.00 to $75.00 and gave the stock an “outperform” rating in a report on Tuesday, April 3rd. Five equities research analysts have rated the stock with a hold rating and nine have assigned a buy rating to the stock. The stock has an average rating of “Buy” and a consensus target price of $75.10.

Shares of NASDAQ CVLT traded up $0.70 during midday trading on Thursday, reaching $68.25. The company’s stock had a trading volume of 113,358 shares, compared to its average volume of 392,869. CommVault Systems has a 12-month low of $48.35 and a 12-month high of $72.65. The company has a market capitalization of $3.07 billion, a PE ratio of -115.68, a PEG ratio of 12.43 and a beta of 1.21.

In other CommVault Systems news, VP Brian Carolan sold 5,470 shares of the business’s stock in a transaction on Tuesday, April 10th. The shares were sold at an average price of $67.90, for a total transaction of $371,413.00. Following the sale, the vice president now owns 88,404 shares of the company’s stock, valued at approximately $6,002,631.60. The sale was disclosed in a legal filing with the Securities & Exchange Commission, which is available at this hyperlink. Also, insider Gary Merrill sold 12,346 shares of the business’s stock in a transaction on Wednesday, June 13th. The shares were sold at an average price of $71.90, for a total transaction of $887,677.40. Following the sale, the insider now directly owns 31,520 shares in the company, valued at approximately $2,266,288. The disclosure for this sale can be found here. Insiders have sold a total of 62,077 shares of company stock worth $4,343,850 in the last three months. Insiders own 13.40% of the company’s stock.

Several institutional investors and hedge funds have recently added to or reduced their stakes in CVLT. ETF Managers Group LLC purchased a new position in shares of CommVault Systems during the 1st quarter valued at $62,229,000. Wells Fargo & Company MN grew its position in shares of CommVault Systems by 193.8% during the 4th quarter. Wells Fargo & Company MN now owns 545,215 shares of the software maker’s stock valued at $28,624,000 after purchasing an additional 359,612 shares in the last quarter. TIAA CREF Investment Management LLC grew its position in shares of CommVault Systems by 92.4% during the 4th quarter. TIAA CREF Investment Management LLC now owns 457,712 shares of the software maker’s stock valued at $24,030,000 after purchasing an additional 219,804 shares in the last quarter. Lunia Capital LP purchased a new position in shares of CommVault Systems during the 4th quarter valued at $10,578,000. Finally, Mesirow Financial Investment Management Equity Management purchased a new position in shares of CommVault Systems during the 1st quarter valued at $10,519,000. Hedge funds and other institutional investors own 93.53% of the company’s stock.

About CommVault Systems

Commvault Systems, Inc provides data protection and information management software applications and related services in the United States, Canada, Latin America, Europe, the Middle East, Africa, Australia, New Zealand, Southeast Asia, and China. The company offers data protection, backup, and recovery software solutions for the backup of databases, files, applications, endpoints, and virtual machines according to data type and recovery profile; and help to optimize storage with deduplication, recover data, and leverage reports.

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