“Cut-to-the-Chase” Recommendations
-  Week Beginning -
Monday, June 05, 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 - JD.Com Inc. (ADR) (NASDAQ:JD) Calls

Friday, June 09, 2017

** OPTION TRADE: Buy the JD JULY 21 2017 43.000 CALL at approximately $1.00. Sell price is left to your own judgment.

Online direct sales company, JD.Com Inc. (ADR) (NASDAQ:JD), belonging to the Retail-Wholesale sector, has surged 2.49% and closed its last trading session at $41.18 on the back of Alibaba’s (BABA) surge yesterday when they forecast the largest quarterly increase in revenues since its 2014 IPO - 45% to 49%, up to $34.3 billion, for this year, fiscal 2018.

JD.com is a distant No. 2 in online retailing in the world’s second-biggest economy. It sells about $95 billion a year in goods online, compared to Alibaba’s $450 billion. But it is working hard to close that gap. In May JD.com turned in its first quarterly profit since going public three years ago, reporting net income of $35 million. Analysts had been bracing for a roughly $125 million loss.

The big swing was backed by robust sales of electronics and home appliances, and rising orders via smartphones. As everyday Chinese become wealthier, they’re more frequently replacing, or upgrading, these sorts of goods. This arguably benefits JD.com more than Alibaba, as Chinese consumers are wary of counterfeit goods sold over Alibaba’s shopping platforms.

JD.Com posted its quarterly earnings results on Monday, May 8th. The information services provider reported $0.08 EPS for the quarter, topping the consensus estimate of ($0.05) by $0.13. The business had revenue of $76.20 billion during the quarter, compared to the consensus estimate of $73.59 billion. JD.Com had a negative return on equity of 28.18% and a negative net margin of 4.18%. The company’s revenue for the quarter was up 41.2% compared to the same quarter last year. During the same period last year, the firm earned ($0.15) earnings per share.

Many analysts have provided their estimated foresights on JD.com, Inc. Earnings, with 15 analysts believing the company would generate an Average Estimate of $0.08.

Whereas they predicted High and Low Earnings Estimate as $0.15 and $0.03 respectively. While in the same Quarter Previous year, the Actual EPS was $0.04.

Analysts are also projecting an Average Revenue Estimate for JD.com, Inc. as $13.06 Million in the Current Quarter. This estimate is provided by 18 analysts.

The High Revenue estimate is predicted as 13.38 Million, while the Low Revenue Estimate prediction stands at 12.88 Million. The company’s last year sales total was 9.58 Million.

For the Current Quarter, the growth estimate for JD.com, Inc. is 100%, while for the Next Quarter the stock growth estimate is 200%.

Influencing Factors

Traders have bid up JD.com’s New York–listed American depositary receipts almost 10% since the earnings report. “JD.com had a great quarter,” says Kevin Carter, founder of the EMQQ Emerging Markets Internet & Ecommerce exchange-traded fund (EMQQ). He tells Barron’s the most impressive facet was the company’s 40% spike in new users. He reckons the stock has further upside, thanks to its finance arm, which it plans to spin off in a separate public offering. JD.com wants to plow the returns from that listing back into its logistical networks, which will eventually use drone technology to make deliveries.

It’s hard to overstate how crucial delivery networks are in the race for Chinese e-commerce supremacy: In a vast emerging market that’s home to 1.3 billion consumers, being as close as possible to your customers is a key strategic advantage. Carter adds that while Alibaba remains bigger and more profitable, JD.com will gain ground. Investors appear to agree: Shares in Beijing-based JD.com have returned a staggering 55% since the start of the year, compared to 18% for the MSCI China Index.

Also, Moody's Investors Service has confirmed JD.com, Inc.'s Baa3 issuer and senior unsecured ratings and changed their outlook to positive from ratings under review.

The rating action concludes Moody's review of the ratings for upgrade initiated on 7 March 2017 when JD.com disclosed in its 4Q 2016 results announcement that it had entered into definitive agreements to dispose of its 68.6% equity stake in JD Finance.

"The positive outlook reflects Moody's expectation that JD.com will sustain the profitable level of operations reported in 1Q 2017," says Lina Choi, a Moody's Vice President and Senior Credit Officer.

"The positive outlook also considers the improvement in JD.com's financial position, if it completes the disposal of its equity stake of 68.6% in JD Finance," adds Choi who is the Lead Analyst for JD.com.

The change to profitable operations after years of losses reflects the consideration that the company's business model has reached a scale that can sustain a profitable business for the years ahead.

Moody's expects JD.com's operations will stay profitable after the planned disposal of its equity interest in its finance business. The company's revenue -- which will then mainly reflect its core retail business -- is expected to grow 22% in 2018, and continue to generate positive profit before tax.

Analysts and Hedge Funds Opinions

HSBC’s Chi Tsang expects the company to get more market share in sales of items like cosmetics, baby products, and food and beverages. If it gets more scale in selling these goods, JD.com will start to enjoy more rebates from suppliers as its orders get bigger. That should help margins down the line. His target price for the stock is $45, or more than 10% higher.

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

  • JD.Com had its price target increased by Cowen and Company from $30.00 to $40.00 in a research report released on Tuesday, May 9th. They currently have a market perform rating on the information services provider’s stock.
  • Jefferies Group LLC restated their buy rating on shares of JD.Com Inc in a research note issued to investors on Wednesday, May 10th. Jefferies Group LLC currently has a $40.00 target price on the information services provider’s stock.
  • Benchmark Co. reissued their buy rating on shares of JD.Com Inc in a research report released on Tuesday, May 9th. The brokerage currently has a $48.00 target price on the information services provider’s stock, up from their prior target price of $40.00.
  • Vetr upgraded JD.Com from a sell rating to a strong-buy rating and set a $40.00 price target on the stock in a research note on Tuesday, April 18th.
  • Finally, Pacific Crest assumed coverage on JD.Com in a research note on Wednesday, March 22nd. They issued an overweight rating and a $40.00 price target on the stock.

Among 16 analysts covering JD.com, 12 have Buy rating, 0 Sell and 4 Hold.  

Summary

JD.Com is up 62% and finds itself in an epic uptrend. It finally broke out of its post-IPO trading range and notched new all-time highs in the process, and appears to still have plenty of steam left according to the bullish technical, which can't be denied.

JD.Com has a one year low of $19.51 and a one year high of $43.80. The firm has a 50-day moving average price of $38.30 and a 200-day moving average price of $31.25. The firm’s market capitalization is $59.50 billion.


Option Trade – The CBOE Volatility Index (.VIX) Calls

Thursday, June 08, 2017

** OPTION TRADE: Buy the VIX JUNE 21 2017 11.000 CALL at approximately $1.10. Sell price is left to your own judgment.

The CBOE Volatility Index (.VIX), better known as the VIX and the most widely followed barometer of expected near-term stock market volatility, may see quite a bit of movement today or in the near future.

Therefore, it seems prudent to cover this eventuality by using VIX call options, which benefit from a jump in volatility and are used as a hedge against a stock market sell-off.

While the S&P 500 has churned near record highs in the last few weeks, the CBOE Volatility Index briefly fell below 10 to its lowest in more than a decade. To many, the complacency in the market is a warning sign. Events like todays could be the trigger.

These events, which we talked about in today’s newsletter, are as follows:- 

1.            The European Central Bank is scheduled to announce its decision on monetary policy at 7:45 a.m., ET, followed by ECB President Mario Draghi's press conference at 8:30 a.m. Any changes in the inflation forecast or indications on when the central bank will begin cutting back on its asset purchase program may cause volatility.

2.            Former FBI Director James Comey is scheduled to begin his testimony before the Senate Intelligence Committee at 10 a.m., ET. If Comey says President Donald Trump allegedly obstructed justice in the investigation of former national security advisor Michael Flynn there may be a lot of market reaction. Such action could lead to impeachment. Comey said in written testimony released Wednesday afternoon that Trump told him regarding the Flynn investigation, "I hope you can let this go."

3.            The UK is set to vote in a snap election Prime Minister Theresa May called in April in an effort to increase Conservative control in Parliament as the country negotiates its exit from the EU. Stakes have risen in the last few weeks as the Labour Party gained momentum, and terrorists attacked the UK last weekend for the third time this year.

4.            As well, declines in oil prices could weigh on stocks Thursday. U.S. crude oil futures fell 5.1 percent Wednesday, sending energy nearly 2 percent lower as the worst S&P 500 performer in afternoon trade.

5.            That said, a quick read of headlines or misinformation can lead to false interpretation by markets. On the afternoon of May 18, the U.S. dollar index spiked as currency traders misinterpreted a video of Comey from earlier that month as clearing Trump.

Any surprises in the European and U.S. events could reignite volatility in currencies, bonds and stocks after months of relative calm.

Near-term price volatility may be heightened by Congressional testimony from former FBI Director Comey and may even place the S&P 500 at risk of slipping into a decline of 5 percent or more.

Every one of these events could generate a real jolt to volatility.

Other market-moving events in coming days include an expected vote on the Financial Choice Act, which would roll back some restrictions on financial institutions, and the Federal Open Market Committee meeting scheduled for next week.


Option Trade – Vail Resorts, Inc. (NYSE:MTN) Calls

Wednesday, June 07, 2017

** OPTION TRADE: Buy the MTN JUNE 16 2017 220.000 CALL at approximately $1.90. Sell price is left to your own judgment.

Analysts expect Vail Resorts, Inc. (NYSE:MTN) to report $4.98 EPS tomorrow, June, 8.They anticipate $0.75 EPS change or 17.73% from last quarter’s $4.23 EPS. MTN’s profit would be $196.06 million giving it 10.70 P/E if the $4.98 EPS is correct. After having $3.63 EPS previously, Vail Resorts, Inc.’s analysts see 37.19% EPS growth.

Vail Resorts, Inc. has risen 61.08% since June 7, 2016 and is up trending. It has outperformed by 44.38% the S&P500.

Vail Resorts, Inc. operates through three segments: Mountain, Lodging and Real Estate. Its Mountain segment operates over 10 mountain resort properties and approximately three urban ski areas, as well as ancillary services, primarily including, ski school, dining, and retail/rental operations.

Influencing Factors

Vail shares are trouncing the market so far this year -- up 33% compared to an 8% increase for the S&P 500 – due to the resort owner's improving operating results. With a big assist from its recently acquired Whistler Blackcomb properties, Vail overcame weak weather conditions last quarter to post a 25% jump in lift revenue along with higher ski school sales and a healthy uptick in the dining segment. Net income benefited from increased ski lift prices to jump nearly 30%, to $149 million.

CEO Rob Katz and his executive team in late April issued preliminary ski season results that showed growth across its key resort categories despite a 3% weather-driven decline in skier visits. Management credited the company's diverse geographic footprint and its season pass offerings for keeping growth on track.

Analysts and Hedge Funds Opinions

Janney Montgomery Scott boosted their target price on Vail Resorts from $195.00 to $220.00 and gave the stock a “buy” rating in a research note on Monday, March 13th.

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

Zacks Investment Research upgraded Vail Resorts from a “hold” rating to a “buy” rating and set a $224.00 target price on the stock in a research note on Tuesday, May 16th.

Wells Fargo & Co restated an “outperform” rating and issued a $207.50 target price on shares of Vail Resorts in a research note on Monday, March 20th.

Finally, Stifel Nicolaus boosted their target price on Vail Resorts from $181.00 to $205.00 and gave the stock a “hold” rating in a research note on Monday, March 13th.

Shares of Vail Resorts, Inc. have earned an average rating of “Buy” from the nine research firms that are covering the stock. One equities research analyst has rated the stock with a hold recommendation and eight have given a buy recommendation to the company. The average 12 month target price among brokerages that have issued a report on the stock in the last year is $193.31.

Summary

CEO Rob Katz will provide the latest spring season pass figures on Thursday and the company is likely to hit the high end of its guidance, which called for adjusted earnings of between $577 million and $597 million.

Vail Resorts, Inc has a market cap of $8.50 billion, a price-to-earnings ratio of 45.60 and a beta of 0.47. The firm’s 50-day moving average price is $200.96 and its 200-day moving average price is $180.23. Vail Resorts, Inc. has a 12 month low of $131.46 and a 12 month high of $215.82.





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