Options Trade of the Week
Williams-Sonoma, Inc. (NYSE:WSM) Calls
Monday, March 09, 2015

**OPTIONS TRADE OF THE WEEK: Buy the WSM May 2015 80.000 call (WSM150515C00080000) at or under $2.70, good for the day. Place a protective stop limit at $1.00 and a pre-determined sell at $5.00.

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by Ian Harvey

Monday, March 09, 2015

Introduction

**Williams-Sonoma, Inc. Gets A Boost From Housing Market Improvement!**

Williams-Sonoma, Inc. (NYSE: WSM), a multi-channel specialty retailer of products for the home, will report its fourth-quarter results after the market closes on March 11. Analysts expect the company to post earnings of $1.51 per share, up from $1.38 last year. The stock is up 5.2% on the year.

It is believed that improvements in the overall housing market will continue to work in WSM's favor. As the housing market improves, homeowners are more likely to put money into their homes, which has analysts forecasting 14% earnings growth for the company next year.

Technical Oulook

Williams-Sonoma has a one year low of $58.18 and a one year high of $82.12. The stock’s 50-day moving average is $78.52 and its 200-day moving average is $71.34.

The company has a market cap of $7.509 billion.

Earnings

Williams-Sonoma last issued its quarterly earnings data on Wednesday, November 19th. The company reported $0.68 EPS for the quarter, beating the Thomson Reuters consensus estimate of $0.63 by $0.05. The company had revenue of $1.14 billion for the quarter, compared to the consensus estimate of $1.20 billion.

During the same quarter in the prior year, the company posted $0.58 earnings per share. The company’s quarterly revenue was up 8.7% on a year-over-year basis. On average, analysts predict that Williams-Sonoma will post $3.20 earnings per share for the current fiscal year.

Short Interest

The short interest in Williams-Sonoma, Inc. has increased from 3,146,205 on January 30,2015 to 3,463,480 on February 13,2015. The change was measured at 317,275 shares or 10.1%. The leftover shorts were 4.1% of the floated shares. The days to cover are 6, given the average daily volume of 577,304 shares.

Analysts Opinions

In a research note released to the investors, Piper Jaffray downgrades its rating on Williams-Sonoma, Inc.. The analysts at the brokerage house have a current rating of Neutral on the counter. Earlier, the shares were rated a Overweight by the brokerage firm. In recent information released to the investors, Piper Jaffray maintains the price target of $84 per share.

A number of other research reports have been presented recently, these are as follows:-

• Analysts at Deutsche Bank reiterated a “hold” rating and set a $72.00 price target (up previously from $69.00) on shares of Williams-Sonoma in a research note on Thursday, January 8th.

• Analysts at Citigroup Inc. reiterated a “buy” rating and set a $90.00 price target (up previously from $86.00) on shares of Williams-Sonoma in a research note on Monday, January 5th.

• Finally, analysts at Goldman Sachs upgraded shares of Williams-Sonoma from a “neutral” rating to a “conviction-buy” rating in a research note on Tuesday, December 30th.

According to 16 Analysts, the short term target price has been estimated at $76.69.

One analyst has rated the stock with a sell rating, eleven have assigned a hold rating, ten have given a buy rating and one has issued a strong buy rating on the company. The average twelve-month target price among brokerages that have updated their coverage on the stock in the last year is $73.37.

Conclusion

WSM has a solid earnings track record, having posted better than expected numbers seven of the last eight quarters, and the one instance where it did not; it reported results in-line with the consensus estimate. The valuation is a slight concern, with the stock trading with a P/E of 25.8, but that is still lower than the industry average of 28. Look for an upbeat report, with the stock trending higher on the news.

Therefore, based on the facts above the following options trade is recommended…..


**OPTIONS TRADE OF THE WEEK: Buy the WSM May 2015 80.000 call (WSM150515C00080000) at or under $2.70, good for the day. Place a protective stop limit at $1.00 and a pre-determined sell at $5.00.


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