Option Trade 
Finish Line Inc (NASDAQ:FINL) Calls 
Thursday, 22nd September, 2016

** OPTION TRADE: Buy the FINL NOV 18 2016 25.000 call at approximately $1.10. Place a pre-determined sell at $2.20.

Note: No protective stop losses added -- but if you wish to do so make it $0.45.

by Ian Harvey

September 22, 2016

Finish Line Inc (NASDAQ: FINL), a specialty retailer of athletic shoes, apparel and accessories, is expected to report its second-quarter numbers tomorrow, September 23. The company will post its quarterly numbers before the market open, with the consensus calling for earnings of $0.53 per share. During the same period last year the company earned $0.57 per share, and the stock is up 29.0% on the year.

Last quarter, the company had delivered a positive earnings surprise of 4.6%, which marked its second consecutive beat.

The athleisure fashion trend has been good to athletic goods manufacturers and retailers, and is a main reason why shares of FINL have appreciated 29.0% on the year. FINL has a trailing P/E of 58, and a forward P/E of just 13.1, so there is a lot of upside for the stock moving forward as long as the company is able to hit, or surpass, analyst estimates. Analysts forecast earnings to rise by 27.3% this year, and by 14.3% next year, and with such strong growth estimates, and low forward valuation expect to see plenty of upside in the stock ahead.

The Finish Line Inc. has a market capitalization of $989.32 million, a P/E ratio of 60.13 and a beta of 0.90. The Finish Line Inc. has a 52-week low of $15.37 and a 52-week high of $25.29. The stock’s 50 day moving average is $23.24 and its 200-day moving average is $20.48.

Why Finish Line?

Management remained impressed with its performance in the last quarter – wherein despite a tough retail scenario, the company managed to top earnings and sales estimates, following which it retained its fiscal 2017 earnings and comparable store sales (comps) guidance.

Coming to the second quarter, some analysts anticipate comps to witness a sequential improvement, gaining from the improved trends witnessed in the sneaker industry, backed by various product launches.

Moreover, Finish Line’s second-quarter performance is expected to benefit from the Rio Summer Olympics that took place during the quarter.

These factors, along with the company’s progress with regard to supply-chain optimization and overall business execution bode well, thus making us reasonably confident about the upcoming results.

Analyst Input

Canaccord Genuity Inc. analyst Camilo Lyon said he remains positive on Finish Line’s stock headed into the Sept. 23 report as he believes a beat could be in the cards.

“We believe there is upside to our 2 percent comp and 51 cents EPS estimate,” Lyon wrote on Sept. 21. “While Q2’s [profit and loss] dynamics will likely look similar to Q1’s, Finish Line should show modest sequential improvement in comps, which we believe can be in the 3 percent to 4 percent range — implying a 1 cent to 2 cents beat relative to consensus estimates.”

Likely experiencing a similar train of thought, Cowen and Co. analyst John Kernan raised his comp estimate to 4 percent on Aug. 24. Kernan is also placing his EPS bets above consensus, at 55 cents per share.

“We continue to view the stock favorably given our expectations for a strong second half comp and margin recovery supported by an increasing mix of Adidas, improved supply chain processes, a clean inventory position, and trends indicating a resurgence in running,” Lyon wrote.

Analysts believe that strong athletic trends helped Finish Line in Q2.

“By category, we believe footwear was the key growth driver as soft goods (10 percent of sales) likely remained challenged,” Lyon wrote of Finish Line’s Q2.

Also, The Finish Line Inc.‘s stock had its “buy” rating restated by analysts at Canaccord Genuity in a note issued to investors on Wednesday. They currently have a $25.00 target price on the stock. Canaccord Genuity’s price target would indicate a potential upside of 6.07% from the stock’s previous close.

Also, several other equities research analysts have recently commented on the company.

• Deutsche Bank AG reaffirmed a “hold” rating and set a $24.00 price objective (up from $23.40) on shares of The Finish Line in a report on Monday, September 12th.

• Zacks Investment Research downgraded shares of The Finish Line from a “buy” rating to a “hold” rating in a report on Monday, September 12th.

• Robert W. Baird reaffirmed a “hold” rating and set a $20.00 price objective on shares of The Finish Line in a report on Thursday, June 23rd.

• Goldman Sachs Group Inc. reaffirmed a “neutral” rating and set a $19.00 price objective on shares of The Finish Line in a report on Wednesday, June 22nd.

• Finally, Piper Jaffray Cos. reaffirmed a “neutral” rating and set a $18.00 price objective on shares of The Finish Line in a report on Monday, June 20th.

Twelve analysts have rated the stock with a hold rating and twelve have assigned a buy rating to the company. The company currently has an average rating of “Buy” and a consensus price target of $22.37.

Harvey’s Options Volatility Indicator

Conclusion

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

** OPTION TRADE: Buy the FINL NOV 18 2016 25.000 call at approximately $1.10. Place a pre-determined sell at $2.20.

Note: No protective stop losses added -- but if you wish to do so make it $0.45.

”Success is simple. Do what's right, the right way, at the right time.”

Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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