“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, July 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 - Apple Inc. (NASDAQ:AAPL) Calls

Friday, July 14, 2017

** OPTION TRADE: Buy the AAPL AUG 18 2017 160.000 CALL at approximately $0.50. Sell price is left to your own judgment.

Tech heavyweight Apple Inc. (NASDAQ: AAPL), a company that designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications, is on the move, threatening to lift out of its two-month consolidation range as it coils up beneath its 50-day moving average. Shares have been languishing near $145, a level first reached back in May, after the technology stocks got hit with selling pressure back in early June.

Apple stock is up almost 30% this year, closing yesterday at $ 147.77 per share. AAPL stock now changes hands at slightly more than 17 times earnings.

The catalyst for the rebound is “buy-the-dip” particularly with confidence gained after Federal Reserve Board Chair Janet Yellen wrapped up her two-day semi-annual testimony to Congress.

The company will next report results on Aug. 1 after the close. Analysts are looking for earnings of $1.57 per share on revenues of $44.99 billion. When the company last reported on May 2, earnings of $2.10 per share beat estimates by eight cents on a 4.6% rise in revenue.

Apple is likely to beat earnings when it reports. While many are considered about China declining, it is actually China’s slowing decline that will help the company produce an earnings beat.

Influencing Factors

Three product segments posted double-digit growth: services, Mac, and other products will likely be the driving force behind the next earnings report. These three segments achieved second-quarter revenue growth of 18%, 14%, and 31%, respectively. And two of these segments -- services and Mac -- look poised to deliver more growth in Q3 (Apple's "other products" segment, which accounted for about 5% of Apple's second-quarter revenue, is difficult to predict).

Apple's services segment should continue to benefit from the company's fast-growing App Store revenue. In a recent update on its App Store, Apple revealed that both App Store downloads and revenue is soaring. With trailing-12-month App Store downloads up 70% year over year as of June 1, app revenue doesn't look like a catalyst ready to slow down yet.

And the Mac business is looking hot as well. Not only was Apple still benefiting from its October 2016-released redesigned MacBook Pro in its most recent quarter, but the company launched an array of new Mac products with about three weeks left in Q3. Apple made its updated iMac, MacBook, MacBook Pro, and MacBook Air available online and in stores in early June.

Together, Apple's services and Mac segments accounted for a notable 24% of Apple's revenue in Q2. If these segments can grow in at the robust rates in Q3 that they did in Q2, Apple should be able to easily achieve its guidance for overall revenue growth of about 5%. Add in the possibility of Apple's recent iPad lineup refresh serving as a growth driver during the quarter, and there's definitely good reason for investors to expect Apple's return to growth to persist.

Analysts and Hedge Funds Opinions

Apple Inc.‘s stock had its “buy” rating reissued by equities research analysts at Drexel Hamilton in a note issued to investors on Tuesday, June 13th. They currently have a $202.00 target price on the iPhone maker’s stock. Drexel Hamilton’s target price would indicate a potential upside of 36.70% from the stock’s current price.

Several other analysts have also recently commented on the company…..

UBS AG increased their price objective on shares of Apple from $165.00 to $200.00 in a report on Sunday, April 2nd.

Bank of America Corporation reaffirmed a “buy” rating and set a $180.00 price objective (up from $155.00) on shares of Apple in a report on Friday, May 12th.

Finally, Goldman Sachs Group, Inc. (The) set a $170.00 target price on Apple and gave the company a “buy” rating in a research report on Saturday, May 20th.

Eleven investment analysts have rated the stock with a hold rating, forty have issued a buy rating and two have given a strong buy rating to the stock. The company currently has a consensus rating of “Buy” and a consensus price target of $162.97.

Some institutional investors are…..

Hefty Wealth Partners increased its position in Apple by 27.6% in the second quarter. Hefty Wealth Partners now owns 804 shares of the iPhone maker’s stock valued at $115,000 after buying an additional 174 shares during the last quarter.

 American Beacon Advisors Inc. purchased a new stake in Apple during the first quarter worth about $117,000.

State of Alaska Department of Revenue purchased a new stake in Apple during the second quarter worth about $149,000.

As a matter of interest, Warren Buffett bought shares in Apple last year, and increased his stake earlier this year. As of March 31, Buffett’s firm, Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) held 133.65 million Apple shares, about 2.6% of the total outstanding.

Summary

Apple has a market cap of $770.45 billion, a price-to-earnings ratio of 17.34 and a beta of 1.31. Apple has a 52-week low of $96.05 and a 52-week high of $156.65. The company has a 50-day moving average of $150.30 and a 200-day moving average of $137.42.


Option Trade - Visa Inc (NYSE:V) Calls

Wednesday, July 12, 2017

** OPTION TRADE: Buy the V AUG 18 2017 97.500 CALL at approximately $1.30. Sell price is left to your own judgment.

Visa Inc (NYSE:V), a payments technology company that connects consumers, merchants, financial institutions, businesses, strategic partners and government entities to electronic payments, will report its fiscal third quarter 2017 financial results on Thursday, July 20, 2017.

Many analysts are providing their Estimated Earnings analysis for Visa Inc. and for the current quarter 33 analysts have projected that the stock could give an Average Earnings estimate of $0.81/share. These analysts have also projected a Low Estimate of $0.78/share and a High Estimate of $0.84/share.

In case of Revenue Estimates, 28 analysts have provided their consensus Average Revenue Estimates for Visa Inc. as 4.36 Billion. According to these analysts, the Low Revenue Estimate for Visa Inc. is 4.23 Billion and the High Revenue Estimate is 4.49 Billion. The company had Year Ago Sales of 3.63 Billion.

These analysts also forecasted Growth Estimates for the Current Quarter for V to be 17.4%. They are projecting Next Quarter growth of 9%. For the next 5 years, Visa Inc. is expecting Growth of 17.03% per annum, whereas in the past 5 years the growth was 16.48% per annum.

Visa Inc sports one of the most iconic brands in the world.  The 2017 BrandZ Survey of Top 100 Global Brands determined Visa had the world's seventh most valuable brand.

Since going public on March 19, 2008 -- just five days after JPMorgan Chase offered to buy what was left of Bear Stearns -- Visa's returns have trounced the market! Nor do the company's shares show any sign of slowing down either as, year-to-date, Visa's stock price is up 22%.

The 2016 U.S. elections was a massive catalyst for the financials. Visa Inc had a 27% rally off the December lows with very few red days. But for Visa, it actually rallied behind improving fundamentals. V stock spiked 10% on the results from February and hasn't looked back since.

The sector has been rallying from a base of good fundamentals. Add to it that, the future's looking rosy thanks to Trump promises.

Influencing Factors

Visa Inc has a strong rating from the Street with eight back-to-back "buy" ratings in the past three months.

Investor’s sentiment increased to 1.05 in Q4 2016, up 0.12, from 0.93 in 2016Q3. It is positive, as 86 investors sold Visa Inc shares while 540 reduced holdings. 132 funds opened positions while 525 raised stakes. 1.69 billion shares, or 1.50%, more from 1.66 billion shares in 2016Q3 were reported.

Analysts and Hedge Funds Opinions

Investment analysts at Mizuho started coverage on shares of Visa Inc. in a research note issued on Tuesday, June 27th, Marketbeat.com reports. The firm set a “buy” rating and a $115.00 price target on the credit-card processor’s stock. Mizuho’s price target would indicate a potential upside of 19.57% from the stock’s current price.

Mizuho Securities' Thomas McCrohan says: "We anticipate sustained high-teen EPS growth over the next several years as a result of new markets (India), growing digital acceptance, and pricing (Europe)."

According to Zacks Investment Research, "The shares of Visa have gained 19.8% year to date outperforming the Zacks categorized Financial Transaction Services industry’s gain of 16.7%. This outperformance is likely to have been driven by the company’s strategic acquisitions and alliances, technology upgrades and effective marketing efforts that have paved the way for long-term growth. The company’s inorganic story remains impressive with strategic buyouts. Visa is well poised to gain from the growing electronic payment processing and strong international business. A solid balance sheet position ensures effective capital deployment in pursue growth initiatives. Over past sixty days, the Zacks Consensus Estimate has revised upward for both 2017 and 2018. However, higher expenses, forex volatility, increased client incentives,  global economic uncertainty and legal headwinds remain concerns." (6/14/2017)

Wedbush analysts commented, "We are assuming coverage with an OUTPERFORM rating and $96 price target (25x our FY18E adj. EPS), reflecting the company's attractive business model, growth prospects, and outlook for increasing shareholder returns. We point to a host of growth/scale catalysts, including the disintermediation of cash/checks by electronic payments, networks' increased dominance in the payments eco-system, incremental revenue opportunities from European regulations, incremental catalysts from hyper-growth mobile payments, ACH-based revenue growth opportunities, and positive contributions from the VE combination." (1/20/2017)

Several other analysts have also recently commented on the company…..

  • Jefferies Group LLC set a $96.00 target price on shares of Visa and gave the company a “buy” rating in a research note on Saturday, March 25th.
  • Deutsche Bank AG restated a “buy” rating and issued a $103.00 target price on shares of Visa in a research note on Tuesday, March 14th.
  •  Zacks Investment Research upgraded shares of Visa from a “hold” rating to a “buy” rating and set a $98.00 target price for the company in a research note on Wednesday, March 1st.
  • Finally, Instinet restated a “buy” rating and issued a $105.00 target price (up from $103.00) on shares of Visa in a research note on Sunday, April 23rd.

Four investment analysts have rated the stock with a hold rating, twenty-eight have given a buy rating and one has assigned a strong buy rating to the company’s stock. Visa currently has an average rating of “Buy” and an average price target of $98.60.

The top three institutional investors are…..

  • Fisher Asset Management, LLC reports that it raised its stake in Visa Inc. by 452,183 shares in the quarter ending 06/30/2017. Its position was valued at $1,464,483,000; an increase of 8.7% as of quarter end.
  • As of the end of the quarter Vontobel Asset Management Inc had bought 457,764 shares growing its position 9.0%. The value of the investment in (V) went from $466,310,000 to $530,630,000 a change of $64,320,000 since the last quarter.
  • As of quarter end Gateway Investment Advisers LLC had acquired a total of 3,331 shares growing its stake by 0.3%. The value of the investment in Visa Inc. increased from $110,112,000 to $116,507,000 a change of 5.8% for the reporting period.

Summary

Visa has a 50-day moving average of $94.45 and a 200 day moving average of $88.30. Visa has a 12-month low of $74.79 and a 12-month high of $96.60. The stock has a market capitalization of $221.83 billion, a price-to-earnings ratio of 47.99 and a beta of 0.93.


UPDATE for Option Trade - Barracuda Networks Inc (NYSE:CUDA) Calls

Tuesday, July 11, 2017

** OPTION TRADE 1: Buy the CUDA JULY 21 2017 25.000 CALL at approximately $0.05 to $0.10.

** OPTION TRADE 2: Buy the CUDA AUG 18 2017 25.000 CALL at approximately $0.20 to $0.30.

At 5.40am this morning cybersecurity company Barracuda Networks Inc. (NYSE:CUDA) was down $0.60, or 2.50%, at $24.00.

However, shares of Barracuda Networks Inc. fell more than 5% late Monday even though expectations were in-line or better.

As you are aware our option is for July 21 25.000 call.

The market is suffering a bit this morning.

And, Barracuda Networks is extremely volatile!

Here are the Earnings Results

After the close of the market yesterday CUDA reported fiscal first-quarter profit of $2.7 million.

On a per-share basis, the Campbell, California-based company said it had profit of 5 cents. Earnings, adjusted for one-time gains and costs, were 18 cents per share.

The results met Wall Street expectations. The average estimate of 13 analysts was also for earnings of 18 cents per share.

The cloud-based security and storage services provider posted revenue of $94.2 million in the period, beating Street forecasts, increasing by 9% compared with $86.7 million in the first quarter of fiscal 2017. Subscription revenue grew to $73.9 million, up 13% from $65.3 million in the first quarter of fiscal 2017, representing 78% of total revenue, and appliance revenue was $20.3 million, compared with $21.3 million in the first quarter of fiscal 2017. Nine analysts expected $91.3 million.

Quarterly gross billings for its first quarter tallied up to $105.2 million, which was higher than the $98.2 million Barracuda Networks posted in the year-ago period.

Barracuda shares have risen 12 percent since the beginning of the year. In the final minutes of trading on Monday, shares hit $24.05, an increase of 30 percent in the last 12 months.

Barracuda Networks, Inc. had this to say……..

"We delivered a strong first quarter exceeding our guidance on both revenue and billings, driven by continued momentum with our email security, public cloud and MSP solutions, which led to 20% core product billings growth year-over-year. We also had strong customer renewals in the quarter that contributed to an annualized renewal rate of 93% and included expanding a multi-year public cloud engagement with a Fortune 500 customer," said BJ Jenkins, president and CEO. "We are excited by the progress we are making in our core focus areas as a growing number of customers turn to Barracuda for our email security and management, network and application security and data protection solutions. We plan to continue to invest in the growth opportunities we see in the market and provide new easy-to-deploy and manage solutions that help customers navigate the evolving threat landscape safely and affordably."

HOW TO PLAY THIS NOW

I would suggest looking at this situation two ways.

Double up on the previous option recommended as this will be very cheap – and if the stock bounces before expiry of the option then some capital (hopefully all with some profits) will be regained.

So,  

** OPTION TRADE 1: Buy the CUDA JULY 21 2017 25.000 CALL at approximately $0.05 to $0.10.

Buying an option with a further-out expiry date……

** OPTION TRADE 2: Buy the CUDA AUG 18 2017 25.000 CALL at approximately $0.20 to $0.30.


An Added Bonus Option Trade -- Delta Air Lines (NYSE:DAL)

Tuesday, July 11, 2017

You may not have opened your email, or are not subscribed to receive our free newsletter, but this option trade, being an open recommendation, was sent on Sunday July 09, 2017; and is quite applicable to execute if you so desire.

The title is “Delta Keeps Flying Higher!

Ready to Breakout Further – Earnings Due Thursday, July 13, 2017”

The Recommendation is……….

** OPTION TRADE: Buy the DAL Sept 15 2017 55.000 CALL at approximately $2.65. Place a pre-determined sell at $5.30.

Note: Add a protective stop loss of $1.05.


Option Trade - Yum! Brands, Inc. (NYSE:YUM) Calls

Monday, July 10, 2017

** OPTION TRADE: Buy the YUM AUG 18 2017 75.000 CALL at approximately $1.20. Sell price is left to your own judgment.

Yum! Brands, Inc. (NYSE:YUM), engaged in the restaurant business, is expected to release its earnings report on Wednesday, July 12.

Analysts forecast EPS of $0.63, down exactly $0.12 or 16.00 % from 2014’s $0.75 EPS. The expected YUM’s profit could reach $220.61M giving the stock 28.91 P/E in the case that $0.63 earnings per share is reported.

Yum! Brands, Inc. has risen 21.70% since June 16, 2016 and is up-trending. It has outperformed the S&P500 by 5.00%.

Yum! Brands shares have trimmed -2.78% since hitting a peak level of $75.45 on Jun. 26, 2017. Meanwhile, due to a recent pullback which led to a fall of almost -0.86% in the past one month, the stock price is now outperforming with 15.82% so far on the year — still in a strong zone. In this case, shares are 23.47% higher from $59.40, the worst price in 52 weeks suffered on Nov. 04, 2016, and are keeping their losses at 15.82% for the past six months.

The good news is there’s still room for Yum! Brands, Inc. (YUM) to grow with analysts expecting the company to see its earnings go up by 14.09%, annually.

Influencing Factors

Yum! Brands, Inc.’s ROA is 13.15%, while industry’s average is 6.29%. As with any return, the higher this number is the better. However, it, too, needs to be taken into the context of a company’s peer group as well as its sector. The average return on assets for companies in the same sector is 7.17. The return on assets (ROA) (aka return on total assets, return on average assets), is one of the most widely used profitability ratios because it is related to both profit margin and asset turnover, and shows the rate of return for both creditors and investors of the company. ROA shows how well a company controls its costs and utilizes its resources.

Yum! Brands recently said it intended to grow its Taco Bell chain into a $15 billion business over the next few years. While a lot of new restaurants will be opened in the U.S., at least 100 restaurants will be sited in Brazil, Canada, China, and India.

The restaurant operator's stock is up 50% in the past three months, but Wall Street still anticipates it being able to expand earnings per share at a rate of 13% annually for the next five years. The forecast likely doesn't include the Taco Bell potential since that was only just recently announced. Although Yum! Brands has had a tough time getting Taco Bell to successfully grow in India, its long, proven track record in China suggests it will hit the ground running.

Analysts and Hedge Funds Opinions

  • BidaskClub cut shares of Yum! Brands from a “strong-buy” rating to a “buy” rating in a research note on Saturday, June 10th.
  • Several other analysts have also recently commented on the company…..
  • Argus upgraded shares of Yum! Brands from a “hold” rating to a “buy” rating and raised their target price for the stock from $69.95 to $80.00 in a research note on Tuesday, May 16th.
  • Zacks Investment Research upgraded shares of Yum! Brands from a “hold” rating to a “buy” rating and set a $72.00 price objective for the company in a research note on Wednesday, April 12th.
  • Instinet reiterated a “buy” rating and issued a $78.00 price objective on shares of Yum! Brands in a research note on Sunday, May 28th.
  • Finally, Royal Bank Of Canada reiterated a “buy” rating and issued a $75.00 price objective on shares of Yum! Brands in a research note on Thursday, June 15th.

One research analyst has rated the stock with a sell rating, fifteen have given a hold rating, thirteen have issued a buy rating and one has assigned a strong buy rating to the stock. Yum! Brands has a consensus rating of “Hold” and an average target price of $77.70.

The top three institutional investors are…..

  • Vanguard Group Inc owns $1.61 billion in Yum! Brands, Inc., which represents roughly 6.28% of the company’s market cap and approximately 8.41% of the institutional ownership.
  • Price T Rowe Associates Inc /Md/, which owns 21,546,608 shares of the stock are valued at $1.59 billion.
  • The third largest holder is Blackrock Inc., which currently holds $1.48 billion worth of this stock and that ownership represents nearly 5.75% of its market capitalization.

Summary

Yum! Brands, Inc. stock’s 50 day moving average is $72.48 and its 200-day moving average is $66.98. The firm has a market capitalization of $25.59 billion, a PE ratio of 18.51 and a beta of 0.82. Yum! Brands, Inc. has a 52-week low of $59.40 and a 52-week high of $75.45.


Option Trade - Barracuda Networks Inc. (NYSE:CUDA) Calls

Monday, July 10, 2017

** OPTION TRADE: Buy the CUDA JULY 21 2017 25.000 CALL at approximately $0.90. Sell price is left to your own judgment.

As already mentioned in the article “Stock Market Correction Completed!”, one area to consider on Monday is “cybersecurity”, a fast growing business; by 2021, it is estimated that the market size will reach $202 billion, a 65% increase from 2016.

This is not a surprising prediction with worldwide ransomware attacks being more frequent -- WannaCry, took control of the computers of an estimated 10,000 companies and 200,000 individuals, resulting in massive downtime for companies, most notably for England's National Health Service – and there are no signs that cybersecurity attacks will slow down any time soon.

One such cybersecurity company is Barracuda Networks Inc. (NYSE:CUDA), which designs and delivers security and data protection solutions, and is set to report earnings after the close Monday 10.

Equities research analysts expect that Barracuda Networks will report $0.18/share on sales of $91.31 million for the current quarter. Nine analysts have made estimates for Barracuda Networks’ earnings. The highest sales estimate is $91.89 million and the lowest is $90.05 million. Barracuda Networks posted sales of $86.65 million in the same quarter last year, which suggests a positive year over year growth rate of 5.4%.

CUDA shares continue to trade atop a trendline of higher lows that's been in place since mid-April. Moreover, CUDA stock's intraday low is $22.61, which corresponds with a 23.6% retracement of its 2016 low and 2016 high. This level has served as support on several occasions since last August.

Influencing Factors

Barracuda Networks latest reading places the stock above the Ichimoku cloud which indicates positive momentum and a potential buy signal.

The most basic theory of this indicator is that if the price is above the cloud, the overall trend is bullish while below the cloud is bearish, and in the cloud is non-biased or unclear. Lastly, when the price is above the cloud, then the top of the cloud will act as a general support level, and when price is below, the cloud base will act as resistance.

Media stories about Barracuda Networks have been trending positive last week, Accern Sentiment Analysis reports. The research firm rates the sentiment of news coverage by reviewing more than 20 million blog and news sources in real time. Accern ranks coverage of public companies on a scale of -1 to 1, with scores closest to one being the most favorable. Barracuda Networks earned a media sentiment score of 0.40 on Accern’s scale. Accern also assigned media stories about the communications equipment provider an impact score of 80 out of 100, meaning that recent news coverage is likely to have an effect on the stock’s share price in the near term.

Analysts and Hedge Funds Opinions

Pacific Crest reiterated an “overweight” rating and set a $30.00 target price on shares of Barracuda Networks in a research report on Wednesday, June 28th.

Several other analysts have also recently commented on the company…..

  • Northland Securities restated a “buy” rating and issued a $28.00 price target on shares of Barracuda Networks in a research report on Friday, June 30th.
  • Rosenblatt Securities restated a “buy” rating and set a $30.00 target price on shares of Barracuda Networks in a research report on Wednesday, April 19th.
  • Needham & Company LLC restated a “buy” rating and set a $28.00 target price on shares of Barracuda Networks in a research report on Wednesday, April 19th.
  • Robert W. Baird restated a “buy” rating on shares of Barracuda Networks in a research report on Tuesday, April 18th.
  • Finally, Piper Jaffray Companies dropped their target price on shares of Barracuda Networks from $32.00 to $29.00 and set an “overweight” rating for the company in a research report on Wednesday, April 19th.

Analysts are very bullish on the stock with 11 of 16 rating CUDA stock a "buy" or "strong buy," with zero "sell" recommendations on the books. As well, the shares have an average 12-month price target of $28.56 -- representing annual-high territory. 

Summary

There are no signs that cybersecurity attacks will slow down. Recent IDC research estimates that by 2019, 70% of major multinational corporations will face significant cybersecurity attacks aimed at disrupting the distribution of commodities.

Bear in mind that CUDA stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong.

Barracuda Networks has a 52-week low of $14.48 and a 52-week high of $26.69. The stock has a 50 day moving average of $22.41 and a 200 day moving average of $22.65. The company has a market cap of $1.20 billion, a price-to-earnings ratio of 118.95 and a beta of 3.33.





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