“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, April 10, 2017

by Ian Harvey

IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.


Option Trade – iShares MSCI Turkey Investable Market Index Fund (NYSEARCA:TUR) Calls

Thursday, April 13, 2017

** OPTION TRADE: Buy the TUR APRIL 21 2017 37.000 CALL at approximately $0.80. Sell price is left to your own judgment.

After being trapped in a web of difficulties over the past five years, emerging market stocks have had a torrid run over the past two months, especially the iShares MSCI Turkey Investable Market Index Fund (NYSEARCA:TUR).

iShares MSCI Turkey Investable Market Index Fund is an Equity-focused product issued by BlackRock. Its expense ratio of 0.62% makes it the #31 cheapest ETF among 77 total funds in the Emerging Markets Equities ETFs category.

TUR currently boasts $324.47M in assets under management (AUM), placing it #16 of 77 ETFs in its category, and #537 of 1922 total ETFs in the U.S. exchange traded universe.

The investment objective of the iShares MSCI Turkey ETF seeks to track the investment results of a broad-based index composed of Turkish equities.

Turkeys Q4 2016 GDP came back well above expected at 3.5% year-over-year growth versus estimates in the 1.8%-2.0% range.

Turkey’s constitutional referendum will take place on April 16 to decide whether the country should greater centralize its political power.

If Turkey's constitutional referendum is approved, this is likely to add more volatility to the country's financial markets, given the increased power that will be handed over to the executive branch, at the expense of parliament and the courts.

An approval of the referendum is also likely to delay structural economic reforms to alter the country's tax system and labor market. This may potentially benefit short-term growth.

Summary

The often controversial and volatile iShares MSCI Turkey ETF is up nearly 12% year-to-date and it is believed that the Turkish equities can continue climbing even as the country’s currency, the lira, declines.


Option Trade – Pier 1 Imports Inc. (NYSE:PIR) Puts

Wednesday, April 12, 2017

** OPTION TRADE: Buy the PIR MAY 19 2017 7.000 PUT at approximately $0.60. Sell price is left to your own judgment.

Pier 1 Imports Inc. (NYSE:PIR), a global importer of imported decorative home furnishings and gifts, will release its fiscal fourth-quarter numbers today, April 12, after the market closes. The company is expected to announce its quarterly results after the market close, with the consensus calling for earnings of $0.33 per share, up from $0.23 during the same period last year.

After enjoying massive gains during the latter part of 2016, PIR stock has cooled off in 2017, and shares gave back a lot of their gains in January and February, despite a strong quarterly report in December that showed better than expected third-quarter earnings and sales. The stock found support in late February, and has been in a sideways trend over the last month and a half.

The stock’s valuation is a bit high, with a P/E of 26.1, and analysts see earnings falling by 6.5% this year before rising 11.6% in 2018.

PIR shares have lost 17.9% on the year.

Influencing Factors

The Price to Earnings Ratio or PE for short, for Pier 1 Imports has a trailing twelve months PE ratio of 26.1. This level actually compares a bit unfavorably with the market, as the PE for the S&P 500 stands at about 20.48.

The stock's PE also compares unfavorably with the Retail - Home Furnishings industry's trailing twelve months PE ratio, which stands at 14.71. This indicates that the stock is significantly overvalued right now, compared to its peers.

Analysts Opinions

Zacks Investment Research cut Pier 1 Imports from a “strong-buy” rating to a “hold” rating in a report on Friday, March 17th. Jefferies Group LLC reaffirmed a “hold” rating on shares of Pier 1 Imports in a report on Thursday, March 16th.

Pier 1 Imports Inc. has been assigned an average rating of “Hold” from the twenty-two analysts that are currently covering the company. Five investment analysts have rated the stock with a sell recommendation, twelve have assigned a hold recommendation and four have assigned a buy recommendation to the company. The average 12-month price objective among analysts that have issued a report on the stock in the last year is $6.09.

Summary

Pier 1 was one of the market's biggest winners since bottoming out at $0.10 back in 2009. However, the same stock that would go on to peak in the low $20s in 2013 hasn't traded outside of the single digits since the fall of 2015. It will take a couple of good quarters to get back into the double digits again.

Pier 1 Imports has a 50 day moving average of $6.90 and a 200-day moving average of $6.42. The firm has a market capitalization of $576.06 million, a P/E ratio of 26.64 and a beta of 1.74. Pier 1 Imports has a 12 month low of $3.73 and a 12 month high of $9.68.


Option Trade – Delta Air Lines, Inc. (NYSE:DAL) Puts

Tuesday, April 11, 2017

** OPTION TRADE: Buy the DAL MAY 19 2017 42.000 PUT at approximately $0.70. Sell price is left to your own judgment.

Delta Air Lines, Inc. (NYSE:DAL) is scheduled to release its first-quarter numbers before the market open on April 12. The consensus calls for earnings of $0.73 per share, down from $1.32 during the same period last year. The airline missed its previous unit-revenue forecast for the period.

Stock analysts at Imperial Capital lowered their FY2019 EPS estimates for shares of Delta Air Lines in a report issued on Wednesday. Imperial Capital analyst M. Derchin now expects that the brokerage will post earnings of $2.45 per share for the year, down from their prior estimate of $2.55. Imperial Capital currently has an “In-Line” rating on the stock.

The airline sector cooled off a bit over the last six months as rising oil prices are starting to impact earnings. DAL is expected to report a drop in year-over-year earnings of 44.6%. DAL has a P/E of just 7.8, but the low valuation could still not be enough if the quarterly numbers disappoint. The company does not have the best track record when it comes to earnings, but last quarter it did report earnings that were in-line with the consensus, with sales that beat expectations. The outlook is blurry for the sector, since rising oil prices are going to have an impact, and it is unclear how much overall economic growth President Trump is going to be able to generate moving forward.

DAL shares have fallen 9.3% on the year.

Influencing Factors

Real, actual headwinds are present for Delta.

The carrier over the past several days has had to cancel more than 3,000 flights after powerful thunderstorms last Wednesday swept through Atlanta, Delta's biggest hub airport, and bad weather hit the Northeast.

Along with that weather, which the carrier described as "convective activity and storm cells, mixed with tornadic conditions," rest and work guidelines have limited the availability of flight crews, forcing more delays and cancellations.

What's more, as Wall Street pressures Delta and rivals to pull back on expanding service — constraining available seats to push up airfares and unit revenue — Delta said last week said that customer "call volumes remain high and Spring Break travel means reaccommodation opportunities are limited."

The possible dent to the second quarter follows Delta's decision last week to cut its Q1 outlook for unit revenue, a measure of sales in relation to capacity, to a roughly 0.5% decline. The company said ticket prices on flights booked closer to departure weren't as strong as they'd expected.

Analysts expect the No. 2 U.S. carrier by traffic to report net income of $579 million in the quarter, compared with $946 million a year ago. Earnings per share are expected to fall to 74 cents from $1.21.

The Atlanta-based company is expected to report revenue of $9.2 billion, essentially flat from a year ago.

Delta management last week said its March unit revenue increased 0.5% year-over-year, the first positive monthly result for the company since November 2015. But the company also said it expects its first-quarter unit revenue to dip 0.5% year over year, after estimating in mid-January that it would be flat to up 2% for the period.

Delta last week said it foresees first-quarter operating margin of 10% to 11%, down from its January expectation of 11% to 13%. The company recently agreed to a new pilot contract that added to its first-quarter costs, and said year-over-year fuel-cost pressure will peak for this year in the March quarter.

Delta is taking a hard line toward capacity increases, hoping that by keeping growth to a minimum it can boost unit revenue. Capacity is expected to be down 0.5% year-over-year in the March quarter. Some other U.S. carriers are being more bullish in their domestic capacity growth. 

Analysts Opinions

Sanford C. Bernstein restated a “market perform” rating and set a $44.00 price target on shares of Delta Air Lines in a research note on Friday, March 3rd.

Four research analysts have rated the stock with a hold rating, fourteen have given a buy rating and one has given a strong buy rating to the company. The company presently has a consensus rating of “Buy” and a consensus price target of $53.56.

Summary

Delta has shot itself in the foot twice since January, with a computer glitch and logistical failure infuriating an already skeptical customer base. Those public relations nightmares add to a binary setup ahead of this week’s earnings report, in which an enthusiastic shareholder base will compete with multiple failed attempts to break long-term resistance in the lower-50s.

Delta Air Lines has a 52-week low of $32.60 and a 52-week high of $52.76. The stock has a market cap of $32.74 billion, a price-to-earnings ratio of 7.77 and a beta of 0.75. The stock’s 50 day moving average is $47.47 and its 200 day moving average is $46.75.





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