“Cut-to-the-Chase” Recommendations
- Week Beginning Monday, May 29, 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 – Five Below Inc (NASDAQ:FIVE) Calls

Thursday, June 01, 2017

** OPTION TRADE: Buy the FIVE JUNE 16 2017 55.000 CALL at approximately $1.00. Sell price is left to your own judgment.

Five Below Inc. (NASDAQ:FIVE), a specialty retailer offering a range of merchandise for teen and pre-teen customers, posts results today, after the market closes, that should be highlighted by strong sales growth.

Five Below's own guidance back in March is calling for $228 million to $232 million in net sales with earnings per share clocking in between $0.12 and $0.14. The chain's outlook would represent 19% top-line growth at the midpoint and marginal improvement over the $0.12 a share it posted a year earlier. Five Below also sees same-store sales coming in flat to up 2% for the period, an important metric since one of the reasons that the stock commands a healthy market multiple is that it's defying the fickle nature of its retailing peers by posting 11 consecutive years of positive comps.

Due mainly to a quickly expanding store base, Wall Street is expecting revenue to jump 20%, to $230 million. Five Below paired a similar revenue boost last year with increased profitability as operating income rose 23%.

"Our performance in 2016 once again illustrates the strength, consistency and broad appeal of the Five Below model," CEO Joel Anderson told investors in late March.

Influencing Factors

Five Below has an ambitious "20/20 through 2020 strategy" where it's targeting 20% annual growth at both ends of the income statement through at least 2020.

Expansion is obviously the key to Five Below's top-line growth. After opening 71 net new stores in fiscal 2015 and 85 units last year, the chain is eyeing 100 new locations going up this year. Its mid-March forecast was calling for 26 new stores opening by the end of April, a goal it clearly hit since it announced that it opened its 555th store -- meaning 33 stores since its fiscal 2017 began in late January -- on May 5.

Wall Street generally likes what it sees. Research analysts at Jefferies Group increased their Q1 2018 EPS estimates for shares of Five Below in a research note issued on Tuesday. Jefferies Group analyst D. Binder now anticipates that the specialty retailer will earn $0.14 per share for the quarter, up from their previous estimate of $0.13. Jefferies Group currently has a “Buy” rating and a $62.00 target price on the stock. Jefferies Group also issued estimates for Five Below’s FY2019 earnings at $1.87 EPS.

This would mean accelerating growth in terms of both comps (same-store sales rose just 1% during the holiday-including fiscal fourth quarter) and net sales.

Analysts and Hedge Funds Opinions

Zacks Investment Research raised shares of Five Below from a hold rating to a buy rating and set a $59.00 target price on the stock in a research report on Tuesday, May 23rd.

Other research analysts have also recently issued reports about the company……

  • Royal Bank of Canada reiterated a “buy” rating and set a $50.00 target price on shares of Five Below in a report on Monday, May 15th.
  • Jefferies Group LLC upped their target price on Five Below from $55.00 to $62.00 and gave the stock a “buy” rating in a report on Tuesday, May 9th.
  • Gordon Haskett initiated coverage on Five Below in a report on Tuesday, May 9th. They set an “accumulate” rating and a $57.00 target price on the stock.
  • Finally, Loop Capital reiterated a “buy” rating and set a $54.00 target price on shares of Five Below in a report on Wednesday, May 3rd.

One equities research analyst has rated the stock with a sell rating, six have issued a hold rating and thirteen have issued a buy rating to the company’s stock.

Summary

Five Below stock is trading 31% higher so far in 2017, and as long as it's able to stick to the "20/20 through 2020" game plan, those gains should stick.

Five Below has a 12 month low of $35.03 and a 12 month high of $54.13. The stock has a market capitalization of $2.78 billion, a price-to-earnings ratio of 38.95 and a beta of 1.02. The company’s 50 day moving average is $49.81 and its 200-day moving average is $42.69.


Option Trade – Ciena Corporation (NYSE:CIEN) Calls

Wednesday, May 31, 2017

** OPTION TRADE: Buy the CIEN JUNE 16 2017 25.000 CALL at approximately $0.60. Sell price is left to your own judgment.

Ciena Corporation (NYSE:CIEN), a provider of communications networking equipment, software and services that support the transport, switching, aggregation and management of voice, video and data traffic, is scheduled to release its fiscal second-quarter numbers before the market opens on June 1. Analysts forecast earnings of $0.37 per share, up from $0.34 during the same period last year.

Ciena reported disappointing first-quarter earnings in early March, which was the second straight quarter that the company failed to hit the street’s profit forecast. However, the street expects Ciena to break its short streak of earnings misses this quarter, and has a whisper number of $0.38 for the quarter, a penny above the consensus.

When Ciena hits the whisper number, it would translate to 11.7% year over year growth, and then push the stock back into positive territory for the year.

The stock’s P/E is a bit high at 38.9, but the stock has trended higher over the last month, and traders are expected to drive shares higher on better than expected quarterly report.

For the full year, analysts expect the company to grow earnings by 21.7%, and over the next five years they see earnings growing by 22.1% per annum, so the current valuation is not high enough to prevent the stock from moving higher.

Analysts and Hedge Funds Opinions

Ciena‘s stock had its “outperform” rating reissued by investment analysts at Cowen and Company in a note issued to investors on Tuesday. They currently have a $35.00 target price on the communications equipment provider’s stock. Cowen and Company’s price objective suggests a potential upside of 47.06% from the company’s current price.

Also, analysts at Stifel Nicolaus upgraded the stock to "buy" from "hold" while also raising its price target to $28 from $24. At the time the price target represented a potential 22% upside from the stock's previous closing price of $22.95.

Other research analysts have also recently issued reports about the company……

  • BMO Capital Markets reaffirmed a “buy” rating and set a $30.00 price objective on shares of Ciena in a research report on Thursday, April 27th.
  • Bank of America Corp cut shares of Ciena from a “buy” rating to a “neutral” rating but raised their target price for the company from $26.39 to $28.00 in a research note on Friday, March 3rd. They noted that the move was a valuation call.
  • B. Riley reissued a “buy” rating and issued a $33.75 price objective on shares of Ciena in a research note on Monday, March 6th.
  • Cowen and Company reissued an “outperform” rating and issued a $35.00 price objective on shares of Ciena in a research note on Monday, March 6th.
  • Dougherty & Co reaffirmed a “buy” rating and set a $26.00 price target on shares of Ciena in a research note on Monday, March 6th. Finally, MKM Partners reaffirmed a “buy” rating and set a $30.00 price target on shares of Ciena in a research note on Wednesday, February 22nd.

Seven research analysts have rated the stock with a hold rating, fifteen have given a buy rating and one has issued a strong buy rating to the company. Ciena presently has a consensus rating of “Buy” and an average price target of $28.13.

DekaBank Deutsche Girozentrale purchased a new position in shares of Ciena Co. during the first quarter, according to its most recent filing with the SEC. The fund purchased 140,000 shares of the communications equipment provider’s stock, valued at approximately $3,322,000.

Summary

It is believed that the company's geographic and portfolio diversity, as well as low exposure to the Chinese market and the possibility of branching out into new markets, will act as catalysts for Ciena going forward.

Ciena Co. has a 12-month low of $16.78 and a 12-month high of $26.84. The stock has a market capitalization of $3.36 billion, a P/E ratio of 39.08 and a beta of 1.66. The stock has a 50 day moving average of $22.88 and a 200 day moving average of $23.58.





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