“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, July 17, 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 - Centurylink Inc. (NYSE:CTL) Puts

Thursday, July 20, 2017

** OPTION TRADE: Buy the CTL AUG 18 2017 22.000 PUT at approximately $0.50. Sell price is left to your own judgment.

Centurylink Inc. (NYSE:CTL), an integrated communications company, is expected to report earnings on Wednesday, August 2, 2017 after market close; and will be missing earnings expectations for the third time in a row this upcoming quarter. The report will be for the fiscal Quarter ending Jun 2017. Based on 8 analysts' forecasts, the consensus EPS forecast for the quarter is $0.48. The reported EPS for the same quarter last year was $0.63.

Also, equities analysts expect that CenturyLink, Inc. will announce sales of $4.09 billion for the current fiscal quarter. Seven analysts have issued estimates for CenturyLink’s earnings. The lowest sales estimate is $4.07 billion and the highest is $4.13 billion. CenturyLink reported sales of $4.40 billion in the same quarter last year, which indicates a negative year over year growth rate of 7%.

UBS analyst Batya Levi notes expectations for second quarter results to achieve the low-end of guidance fueled by incremental pressure on revenues and limited cost cutting, while recent lawsuits have weight shares, reflecting lower second quarter and 2017 estimates.

Over the past three months, share price of CenturyLink moved down 3.26%, while the categorized Wireless National industry fell 6.25%.

Influencing Factors

CenturyLink, Inc. saw a large growth in short interest in the month of June. As of June 15th, there was short interest totaling 114,948,833 shares, a growth of 4.3% from the May 31st total of 110,180,043 shares. Currently, 21.1% of the company’s shares are short sold. Based on an average daily volume of 10,233,550 shares, the days-to-cover ratio is presently 11.2 days.

CenturyLink Inc. already facing a $12 billion lawsuit alleging that consumers were saddled with costly unwanted services, now must deal with a complaint by Minnesota, the first state to sue the telecommunications company over its billing practices since the class action was filed. 

The state attorney general's suit, filed Wednesday, accuses CenturyLink of consumer fraud and deceptive trade practices. "CenturyLink has regularly misquoted the price of its internet and television services to Minnesota consumers," it alleges. "In a response to a complaint from the Minnesota Attorney General's Office on behalf of a consumer, a CenturyLink employee stated that, of the sales recordings she reviews, 'maybe 1 out of 5 are quoted correctly or close enough.' "

Century Link has had a negative revenue growth in the last 4 years (total -1.2% CAGR). This decrease is a consequence of firm’s weaker broadband net additions and ongoing legacy TDM service losses. Its costs and operating expenses as a percentage of revenues have shown a very stable behavior, which speaks well for the firm’s cost and expense structure management. The firm has tried to reduce costs by divesting some of its PPE, but with no success. Nevertheless, it is not easy for mature firms to successfully decrease costs. Thus, real earning’s issues have been a consequence of firm’s revenue’s negative behavior.

Both consumer and enterprise segments have caused revenues to decline. Level 3 Communications acquisition is intended to improve firm’s enterprise segment, which accounts for almost 60% of firm’s revenues. When the deal was announced, market didn’t take it very well. Stock price plunged, since it is said that both firms will have a lot of integration difficulties.

EBIT’s fundamental growth has been negative in the last 5 years. The firm is not growing and this has evidently caused it to divest its assets, looking for more efficiency. EPS growth has had the same downward trend, as a consequence of earning’s numbers decline in the past years.

Analysts and Hedge Funds Opinions

Goldman Sachs Group, Inc. (The) reaffirmed a “sell” rating and issued a $19.00 price target on shares of CenturyLink in a research note on Saturday, March 25th.

A number of other research firms have also weighed in on CTL……

  • Morgan Stanley reaffirmed an “overweight” rating and issued a $27.00 price target on shares of CenturyLink in a research note on Wednesday, March 29th.
  • Zacks Investment Research raised CenturyLink from a “sell” rating to a “hold” rating in a research note on Tuesday, April 11th.
  • BidaskClub lowered CenturyLink from a “hold” rating to a “sell” rating in a research note on Wednesday, July 12th.
  • Cowen and Company reaffirmed a “hold ctl” rating on shares of CenturyLink in a research note on Thursday, July 6th.
  • Royal Bank Of Canada reaffirmed a “hold” rating and issued a $25.00 target price on shares of CenturyLink in a research note on Thursday, May 25th.
  • Finally, ValuEngine lowered CenturyLink from a “buy” rating to a “hold” rating in a research note on Friday, June 2nd.

Four analysts have rated the stock with a sell rating, seven have assigned a hold rating, five have assigned a buy rating and one has assigned a strong buy rating to the company’s stock. The company presently has a consensus rating of “Hold” and an average target price of $26.22.

Summary

The firm is currently in a very complex situation. Revenues and earnings are decreasing and costs and expenses are increasing. The firm is trying to be more efficient by divesting data centers and other owned real estate, but its financials are currently not improving.

CenturyLink has a 12 month low of $22.26 and a 12 month high of $33.45. The company has a market cap of $12.45 billion, a P/E ratio of 22.24 and a beta of 0.88. The company has a 50-day moving average of $24.67 and a 200-day moving average of $24.63.


Option Trade - Groupon Inc. (NASDAQ:GRPN) Calls

Wednesday, July 19, 2017

** OPTION TRADE: Buy the GRPN AUG 18 2017 4.000 CALL at approximately $0.30. Sell price is left to your own judgment.

Groupon Inc. (NASDAQ:GRPN), an online operator of local commerce marketplaces around the world that connect merchants to consumers by offering goods and services at a discount, will report earnings on Wednesday, August 2, 2017; and is poised for an earnings beat.

The stock has been upbeat for quite some time as is up 22.36% for the last 20 trading days, and now the firm’s performance is turning out to be bullish.

Groupon enjoyed a 35.86% run-up in share price since hitting record low of $2.90.

Groupon’s previous earnings report was ugly. The company beat on EPS but missed on revenue, sending the stock down by 12%. Since then, the stock has recouped almost all of the lost gains and trades near the level of the 1Q17 earnings release.

Influencing Factors

The company previously provided a full-year guidance of $200 million to $240 million in adjusted EBITDA. Further important guidance metrics were:

  • Revenue of roughly $2.9 billion
  • Gross profit of around $1.3 billion

Another important point is that management is extremely focused on improving gross margins. Management has even stated that it is willing to “tolerate near-term revenue fluctuations so long as the changes we're making drive improvements in the long term gross profit performance.”

B. Riley upgraded shares of Groupon, Inc. from a neutral rating to a buy rating. The firm currently has $5.50 price target on the coupon company’s stock, up from their previous price target of $4.20.The reason for the upgrade was Groupon Inc’s increasing profitability and customer growth. The firm is also expecting the company to increase marketing due to these factors.

B. Riley analysts also note that Groupon Inc’s international business could be a large boon to the stock. The firm estimates that the business could bring an additional value of $1 per share in the event of a sale.

Analysts and Hedge Funds Opinions

Vetr raised shares of Groupon from a buy rating to a strong-buy rating and set a $5.28 price objective on the stock in a research note on Wednesday, March 1st.

A number of other research firms have also weighed in on GRPN......

  • Citigroup Inc initiated coverage on shares of Groupon in a report on Monday, March 27th. They issued a neutral rating and a $5.00 target price for the company.
  • Finally, Piper Jaffray Companies restated an overweight rating and set a $6.50 price objective on shares of Groupon in a report on Saturday, April 22nd.

Five equities research analysts have rated the stock with a sell rating, twelve have assigned a hold rating, four have given a buy rating and one has given a strong buy rating to the company. The stock presently has an average rating of Hold and an average price target of $4.61.

A number of hedge funds have recently added to their stakes in the company......

  • Russell Investments Group Ltd. purchased a new position in shares of Groupon during the fourth quarter valued at approximately $670,000.
  • State Street Corp raised its position in shares of Groupon by 6.2% in the fourth quarter. State Street Corp now owns 6,593,331 shares of the coupon company’s stock valued at $21,890,000 after buying an additional 386,179 shares in the last quarter.

Summary

Groupon is set for an earnings beat and a nice upswing as well.

Groupon, Inc. shares were last seen up 1.55% at $3.94, which is 9.28% higher than the previous trading session. The 52-week range is $2.90 to $5.94 and the consensus target price is $4.24. The company has a market cap of $2.18B and its 12 month revenue was almost $3.09B. The stock’s 50 day moving average price is $3.40 and its 200-day moving average price is $3.67.


Option Trade - Verizon Communications Inc. (NYSE:VZ) Puts

Wednesday, July 19, 2017

** OPTION TRADE: Buy the VZ AUG 18 2017 44.000 PUT at approximately $1.00. Sell price is left to your own judgment.

Verizon Communications Inc. (NYSE:VZ), a provider of communications, information and entertainment products and services to consumers, businesses and governmental agencies, will report earnings on Thursday, July 27, before the market opens, and is expected to disappoint based on the pricing environment and CFO commentary.

Continuing pressure in the postpaid segment will cause Verizon (VZ) to report lower-than-expected revenues. Add to this fact that there is no material margin improvement expected in the second quarter and an EPS miss also becomes likely.

Shares of Verizon have been laggards over the past year -- the stock is down -22.1% over the past 12 months vs. AT&T's -15.6% decline and the +13% gain for the S&P 500 index. Verizon's underperformance reflects the market's concerns about the company's muddled strategy in the digital media domain and rising competitive pressures in its core U.S. wireless business.

Verizon's stock continues to slide as more and more people start getting queasy about Verizon's dividend safety.

Influencing Factors

Verizon's Q1 2017 was, by all means, disappointing. Total wireless operating revenue declined 5.1%. The CFO called it a change in trend:

    “Total Wireless operating revenue declined 5.1% in the first quarter. We experienced the change in the service revenue trend, which had been improving sequentially. Service revenue declined 6.1% year-over-year compared to the 4.9% decrease in the previous quarter. The service revenue pressure was a result of decreased overage revenue, lower postpaid customers in the quarter and promotional activity.”

Naturally, analysts were curious if the CFO had just confessed that investors should expect further declines.

So, Q2 2017 will be accompanied with similar revenue pressures. It is expected that this pressure will cause a year-over-year decline of 2.5%, putting revenue estimate at $29.77B.

Another item that needs to be incorporated is the fact that VZ sold some of its assets to Frontier for roughly $10B. Of course the cash influx is nice, but it also comes with a diminished earnings power, effectively trading long-term cash flows for short-term cash flows. These assets were worth $0.10 a share in earnings.

Verizon operates in a highly competitive and saturated wireless market. In such market conditions, spectrum crunch has become a major issue in the domestic telecom industry. The company's wireline division has been struggling with persistent losses in access lines due to competitive pressure from voice-over-Internet protocol (VoIP) service providers and aggressive triple-play (voice, data, video) offerings by cable companies. Moreover, operating expenses, marketing costs associated with attractive discounts, regulatory norms and union issues act as major headwinds.

A legal notice from the city of New York in Mar 2017 in relation to its FiOS (Fiber Optic Service) rollout in the city came was a major setback. This shows the company's failure to stand up to its commitments.

Analysts and Hedge Funds Opinions

Verizon Communications Inc. had its price target cut by investment analysts at Barclays PLC from $49.00 to $47.00 in a note issued to investors on Friday. The firm currently has an “equal weight” rating on the cell phone carrier’s stock.

 TheStreet downgraded shares of Verizon Communications from a “b-” rating to a “c” rating in a research note on Thursday, April 27th.

Royal Bank Of Canada restated a “hold” rating and issued a $48.00 price target on shares of Verizon Communications in a research note on Sunday, July 9th.

In other Verizon Communications news, EVP Marni M. Walden sold 16,362 shares of Verizon Communications stock in a transaction on Monday, May 1st. The shares were sold at an average price of $46.08, for a total transaction of $753,960.96.

 Also, EVP Craig L. Silliman sold 610 shares of Verizon Communications stock in a transaction on Tuesday, June 27th. The stock was sold at an average price of $45.00, for a total transaction of $27,450.00.

As well, Brown Advisory Securities Llc decreased its stake in Verizon Communications by 12.15% based on its latest 2016Q4 regulatory filing with the SEC. Brown Advisory Securities Llc sold 11,858 shares as the company’s stock declined 7.66% while stock markets rallied. Brown Advisory Securities Llc who had been investing in Verizon Communications Inc for a number of months, seems to be less bullish on the $177.29B market cap company.

One analyst has rated the stock with a sell rating, twenty-six have issued a hold rating, five have given a buy rating and one has given a strong buy rating to the company’s stock.

Summary

Verizon’s stock is officially in correction territory.

What’s more, it seems more downside could be in the cards as the downward spiral is showing no signs of relenting.

On top of all this, Verizon's list of potential content partners is drying up rapidly.

Verizon Communication’s 50 day moving average price is $45.84 and its 200 day moving average price is $48.85. Verizon Communications has a 52-week low of $42.80 and a 52-week high of $56.25. The firm has a market cap of $176.88 billion, a P/E ratio of 14.50 and a beta of 0.54.


Option Trade - Advanced Micro Devices, Inc. (NASDAQ:AMD) Calls

Tuesday, July 18, 2017

** OPTION TRADE: Buy the AMD AUG 18 2017 14.000 CALL at approximately $0.85. Sell price is left to your own judgment.

Advanced Micro Devices, Inc. (NASDAQ:AMD), a global semiconductor company, is likely to deliver blow-out top-line numbers because of Ryzen.

Ryzen (pronounced RYE zen) is an AMD CPU aimed at the server, desktop, workstation, media center PC and all-in-one markets. ... Codenamed Zen in development, Ryzen is the first major architectural change for AMD since Bulldozer.

Advanced Micro Devices is set to report earnings next week, Tuesday July 25, after the market closes, with the Street’s estimates right now standing at a 1- to 3-cent loss on revenues of $1.16 billion, and the “whisper number” is for a gain of 1 cent.

Last quarter saw Advanced Micro Devices’ shares get absolutely annihilated following both a revenue miss and lowered guidance.

With AMD now at an inflection point on the charts, expect another big post-earnings move this quarter, and a more bullish stance is expected. Major options players are expecting a 14 percent move.

AMD stock is rallying as analysts and investors continue to get more bullish on the company and its products. For example, earlier last week Baird analyst Tristan Gerra suggested that AMD could be positioned to gain market share in the data center space-which is dominated by Intel Corp. (NASDAQ: INTC ) - thanks to its recently-launched EPYC architecture.

And that's not the only place where AMD is gaining market share. According to a recent  report  from PC benchmarking site PassMark, tests involving AMD central processing units accounted for almost 26% of all x86-compatible tests submitted in the most recent quarter, up from 21% in the prior quarter and 18% last year.

These results could indicate that AMD's Ryzen chips are helping the company snag some share in the important x86-compatible market, another space that is currently dominated by Intel.

All of this is on top of the fact that manufacturers of graphics chips, such as AMD and rival Nvidia (NASDAQ: NVDA ) have reportedly been benefitting from crypto-currency miners who are using the technology to pump out new bitcoins and ethereum.

Influencing Factors

Shares of Advanced Micro Devices have exploded since bottoming out in early 2016, gaining an astonishing 650% since hitting its lowest point 17 months ago. Anticipation has been the main driver of these gains, with investors betting that a slate of new products would return the company to its former glory.

Ryzen, AMD's new line of PC CPUs, launched in March , with high-end chips coming first and mainstream chips coming later. EPYC, AMD's latest foray into the server chip market, was detailed last month. And Vega, the company's first serious attempt at a high-end GPU in years, is now available in a professional card, with gaming cards coming soon.

The stock has been volatile in 2017, with the price swinging up and down due to product launches and for various other reasons.

Both high-end Ryzen 7 and mainstream Ryzen 5 desktop chips are already available. Threadripper, AMD's 12 to 16 core flagship high-end CPUs, will be available in August, and the low-end Ryzen 3 chips are expected to launch soon. Ryzen Pro CPUs aimed at enterprise users launched earlier this month, and the first laptops featuring Ryzen Mobile chips will be available during the second half of this year.

Fundamentally, AMD's Ryzen chip refresh will contend favorably over Intel's Kaby Lake. Further, Intel's gap will narrow further this year when positive reviews for Ryzen 5 and 7 CPUs convince customers to buy AMD chips instead. At similar price points, customers get more cores and better performance with Ryzen.

OEM suppliers, notably Dell and HP Inc (NYSE: HPQ ), will start selling AMD-powered desktop solutions. Looking ahead to later this year, the OEM market will start selling Ryzen mobile processors.

Markets are right in expecting AMD to reach profitability later this year. The company just completed investing in its chip supplies. The sale of high-end chips will more than offset those fixed-cost investments. As sales volumes ramp up, especially for the high ASP (average selling price) products, profit margin will expand. This will happen slowly at first but will then accelerate.

OEMs are central to the strategy of growing chip sales in the next few years. By the time AMD is cash flow positive, Ryzen chips on mobile will give AMD's revenue another boost.

Analysts and Hedge Funds Opinions

Over the trailing year, the stock is outperforming the S&P 500 by 156.28, and it's gotten there by action that has been more volatile on a day-to-day basis than most other stocks on the exchange. The firm now has a "buy" rating on the semiconductor manufacturer's stock.

Vetr upgraded shares of Advanced Micro Devices, Inc. from a buy rating to a strong-buy rating in a research report released on Monday, June 26th. They currently have $15.99 price objective on the semiconductor manufacturer’s stock.

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

  • BMO Capital Markets reaffirmed an outperform rating and set a $15.00 target price on shares of Advanced Micro Devices in a research note on Wednesday, May 17th.
  • Mizuho reissued a buy rating and set a $14.00 price objective on shares of Advanced Micro Devices in a research note on Wednesday, May 17th.
  • Rosenblatt Securities initiated coverage on Advanced Micro Devices in a report on Wednesday, February 22nd. They set a buy rating and a $16.50 target price on the stock.
  • MKM Partners reiterated a neutral rating and set a $13.00 target price on shares of Advanced Micro Devices in a report on Thursday, February 23rd.
  • Bank of America Corporation reiterated a buy rating and set a $16.50 target price on shares of Advanced Micro Devices in a report on Friday, March 3rd.
  • Finally, Canaccord Genuity increased their target price on Advanced Micro Devices to $17.00 and gave the company a buy rating in a report on Thursday, March 9th.

A number of institutional investors have recently added to their stakes in AMD. ….

  • Chevy Chase Trust Holdings Inc. increased its stake in shares of Advanced Micro Devices by 0.4% in the second quarter. Chevy Chase Trust Holdings Inc. now owns 667,585 shares of the semiconductor manufacturer’s stock valued at $8,332,000 after buying an additional 2,574 shares in the last quarter.
  • National Pension Service increased its stake in shares of Advanced Micro Devices by 10.5% in the second quarter. National Pension Service now owns 885,866 shares of the semiconductor manufacturer’s stock valued at $11,162,000 after buying an additional 84,271 shares in the last quarter.

Summary

Ryzen's sales are on full throttle. Sales of Epyc, the server chip, will ramp up. AMD already signed Hewlett Packard Enterprise Co (NYSE: HPE ), Dell , Samsung Electronics (OTCMKTS: SSNLF ) and others .

In the graphics card market ("GPU"), AMD announced details of Vega. A leaked benchmark shows that the card will outperform GTX 1080, made by Nvidia Corporation (NASDAQ: NVDA ).

Advanced Micro Devices has a 50 day moving average price of $11.98 and a 200 day moving average price of $12.33. The stock’s market cap is $13.15 billion. Advanced Micro Devices has a 52-week low of $5.10 and a 52-week high of $15.55.


Option Trade - Harley-Davidson Inc (NYSE:HOG) Puts

Monday, July 17, 2017

** OPTION TRADE: Buy the HOG AUG 18 2017 50.000 PUT at approximately $1.40. Sell price is left to your own judgment.

Harley-Davidson Inc (NYSE:HOG) will release its Q2 2017 results tomorrow, July 18, 2017, before the market opens. The company is facing a continuous decline in its sales as it does not find favor with the highest spending generation in the U.S. - the millennials.  According to Alliance Bernstein, this younger generation is "adopting motorcycling at a far lower rate than prior generations," leading to the decline in sales of Harley-Davidson.  Consequently, consensus revenue and EPS (earnings per share) estimates for the company for Q2 2017 are lower than those for the same period last year.

Brokerages expect Harley-Davidson, Inc. to announce earnings per share of $1.37 for the current fiscal quarter. Eight analysts have provided estimates for Harley-Davidson’s earnings, with the highest EPS estimate coming in at $1.43 and the lowest estimate coming in at $1.29. Harley-Davidson reported earnings per share of $1.55 in the same quarter last year, which suggests a negative year-over-year growth rate of 11.6%.

Harley-Davidson, Inc is the parent company for the groups of companies doing business as Harley-Davidson Motor Company (HDMC) and Harley-Davidson Financial Services (HDFS). The Company operates in two segments: the Motorcycles & Related Products (Motorcycles) and the Financial Services. The Motorcycles segment consists of HDMC, which designs, manufactures and sells at wholesale on-road Harley-Davidson motorcycles, as well as motorcycle parts, accessories, general merchandise and related services.

Influencing Factors

Harley-Davidson continues to expect stiff competition, which may hurt its retail sales as competitors rely on discounts and product introductions to boost the same. The weak demand in Asia Pacific is expected to continue through the second half of 2017. Also, retail inventory in the U.S. is expected to lie low in the second quarter.

Based on end of quarter dealer checks Longbow Research estimates that there could be a 1-3% decline in the company's U.S. sales for this quarter; this is disappointing since the comparative number - Q2 2016 was soft when the sales had declined by more than 5%. The overall outlook for this quarter indicates a declining revenue and earnings trend.

Harley-Davidson anticipates motorcycle shipments in 2017 to be either at the same level or slightly lower than 2016. In second-quarter 2017, the company hopes to ship 80,000 to 85,000 motorcycles, compared with 88,160 motorcycles shipped in the year-ago period.

The company's Financial Services segment is also expected to show a downtrend in operating income mainly due to higher borrowing costs and credit losses. In the previous quarter, the segment's operating income declined 6.6% year over year.

Harley-Davidson will be paying $15 million as settlement charges to the Environmental Protection Agency (EPA) due to its "super tuners" releasing harmful emissions despite bolstering power. Of the total amount, $3 million will be spent to replace conventional woodstoves with cleaner-burning in the faulty models to mitigate air pollution. Per the deal, it will buy back all the devices and discontinue future sales of the product. These actions will add to its expenses.

Analysts and Hedge Funds Opinions

Shares of Harley-Davidson, Inc. have been given a consensus recommendation of “Hold” by the twenty-seven ratings firms that are covering the firm. One equities research analyst has rated the stock with a sell recommendation, twenty have given a hold recommendation and six have given a buy recommendation to the company. The average 12-month price objective among brokerages that have issued ratings on the stock in the last year is $55.75.

Harley-Davidson, Inc.‘s stock had its “hold” rating reiterated by equities researchers at Jefferies Group LLC in a research report issued on Tuesday, July 4th. They currently have a $49.00 target price on the stock. Jefferies Group LLC’s price objective points to a potential downside of 5.06% from the company’s current price.

Also, Harley-Davidson, Inc. was downgraded by analysts at Sanford C. Bernstein from an "outperform" rating to a "market perform" rating. The Bernstein analyst covering the name cited a so-called secular erosion on demand for motorcycles, and noted sales of new model bikes have been disappointing. They lowered their price target from $62 to $55.

And, Goldman Sachs came in with a neutral rating and an even lower $51 price target. They cited that its channel checks for Q2 sales show at best a flat performance, although I am expecting declines.

As well, Caxton Associates LP lowered its stake in Harley-Davidson, Inc. by 89.1% during the first quarter, according to its most recent Form 13F filing with the SEC. The fund owned 35,000 shares of the company’s stock after selling 285,000 shares during the period. Caxton Associates LP’s holdings in Harley-Davidson were worth $2,118,000 at the end of the most recent reporting period.

Summary

Harley-Davidson has a 52 week low of $45.34 and a 52 week high of $63.40. The firm has a 50 day moving average price of $53.81 and a 200-day moving average price of $57.40. The stock has a market capitalization of $9.08 billion, a price-to-earnings ratio of 14.72 and a beta of 0.86.


Option Trade - Bank of America Corp (NYSE:BAC) Calls

Monday, July 17, 2017

** OPTION TRADE: Buy the BAC AUG 18 2017 25.000 CALL at approximately $0.35. Sell price is left to your own judgment.

A U.S. banking giant Bank of America Corp (NYSE:BAC) is scheduled to release earnings before Tuesday's open. The stock hit a record high of $55.08/share in 2006 and is currently trading near $24/share. The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong.

The stock is looking primed for a breakout after rallying for the past two weeks, driven higher by a 60% dividend hike and a $12 billion stock repurchase program.

Technically, Bank of America has been itching to break above key short-term resistance at $25 for the better part of the past week. BofA shares last tested this region just prior to their first-quarter earnings report back in March, which saw BAC soar to highs last seen in early 2008.

According to analysts when Bank of America reports second-quarter earnings tomorrow, investors can expect its earnings to rise on both a sequential and year-over-year basis.

Wall Street is expecting a profit of 43 cents per share from Bank of America, up about 4.8% from the same quarter last year. Revenue is expected to rise 5.4% year over year to $21.91 billion. However, expectations appear to be considerably higher, as EarningsWhispers.com puts the second-quarter whisper number at 48 cents per share, 5 cents better than the consensus.

Influencing Factors

Investment analysts at Jefferies Group issued their Q3 2017 earnings estimates for shares of Bank of America Corporation in a note issued to investors last Tuesday. Jefferies Group analyst K. Usdin forecasts that the financial services provider will post earnings per share of $0.45 for the quarter. Jefferies Group currently has a “Buy” rating on the stock. Jefferies Group also issued estimates for Bank of America Corporation’s Q4 2017 earnings at $0.49 EPS.

In June, Bank of America Corp easily passed the stress tests of the Federal Reserve. As a result, the bank can now give back loads of capital to its shareholders through dividends and stock buybacks. The bank also authorized a $12 billion worth of stock buyback over the next 12 months.

Bank of America Corp is planning to increase its dividend payout to 44 cents per share by next year. This would be the biggest per-share payout by the bank since 2008. Bank of America has also announced to increase its quarterly cash dividend by no less than 60% from $0.075 per share to $0.12 per share.

Bank of America is also expected to benefit heavily from the possible tax cuts and bank-friendly policies of President Trump. Experts think that the Trump administration will announce these policies in the second half of this year.

Bank of America future is also bright amid the company’s CEO Brian Moynihan’s plan of drastic cost cutting. The bank is already on its track to meet its target of $53 billion of expense-savings by 2018.

The Bank is also attractively valued. The stock is priced at less-than 12 times fiscal 2018 estimates of $2.15 per share, which makes it look like a bargain when compared to its rivals like Citigroup, JPMorgan and Wells Fargo.

Several reports suggest that legendary investor Warren Buffett, who is one of the biggest shareholders of Bank of America, will convert his 6% preferred shares to common stock after the Bank’s investors conference later this month. The Oracle of Omaha invested $5 billion in the bank in 2011. That stake is now valued at over $18 billion.

BAC is currently 12.1% above its 200-period moving average and is in an upward trend. Volatility is low compared to the average volatility over the last 10 periods. Volume indicators reflect volume flowing into and out of BAC at a relatively equal pace. The trend forecasting oscillators are currently bullish on BAC and have had this outlook for the last 9 periods.

Investor sentiment increased to 1.1 in 2016 Q4, up 0.09, from 1.01 in 2016Q3. It is positive, as 62 investors sold Bank of America Corp shares while 560 reduced holdings. 207 funds opened positions while 479 raised stakes. 6.48 billion shares or 6.26% more from 6.10 billion shares in 2016Q3 were reported.

Analysts and Hedge Funds Opinions

Vetr raised Bank of America Corporation from a “sell” rating to a “hold” rating and set a $23.99 target price for the company in a research note on Friday.

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

Royal Bank of Canada reissued a “buy” rating and set a $26.00 price objective on shares of Bank of America Corporation in a research note on Tuesday, April 4th.

Keefe, Bruyette & Woods reissued a “buy” rating and set a $27.00 price objective on shares of Bank of America Corporation in a research note on Wednesday, June 7th.

Deutsche Bank AG reissued a “hold” rating on shares of Bank of America Corporation in a research note on Monday, July 3rd.

Finally, Jefferies Group LLC reissued a “buy” rating and set a $28.00 price objective on shares of Bank of America Corporation in a research note on Friday, May 5th.

One investment analyst has rated the stock with a sell rating, eleven have assigned a hold rating, twenty-four have given a buy rating and two have assigned a strong buy rating to the stock. Bank of America Corporation currently has an average rating of “Buy” and an average target price of $26.03.

In other Bank of America Corporation news, Director Thomas D. Woods purchased 25,000 shares of the business’s stock in a transaction on Thursday, April 27th. The shares were bought at an average cost of $23.81 per share, for a total transaction of $595,250.00.

Also, United Fire Group Inc. held its position in Bank of America Corporation during the first quarter, according to its most recent disclosure with the Securities and Exchange Commission (SEC). The institutional investor owned 140,000 shares of the financial services provider’s stock at the end of the first quarter. Bank of America Corporation comprises about 1.2% of United Fire Group Inc.’s portfolio, making the stock its 22nd largest position. United Fire Group Inc.’s holdings in Bank of America Corporation were worth $3,303,000 at the end of the most recent reporting period.

Summary

Bank of America’s earnings report should be influenced by JPMorgan Chase (NYSE: JPM) reporting earnings on Friday morning, which had better-than-expected earnings.

Bank of America Corporation’s 50-day moving average price is $23.26 and its 200 day moving average price is $23.42. Bank of America Corporation has a 52 week low of $13.52 and a 52 week high of $25.80. The company has a market cap of $254.60 billion, a P/E ratio of 14.90 and a beta of 1.27.






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