“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, March 02, 2020

by Ian Harvey

IMPORTANT NOTE: This is a recommendation and individual members can use their own discretion as to when to enter or exit!

You may also wish to read Stock Options Made Easy Trading Philosophy

ALSO

"Trading Capital Management"



Option Trade – Clorox Co (NYSE: CLX) Calls

Wednesday, March 04, 2020

** OPTION TRADE: Buy the CLX APR 17 2020 175.000 CALLS at approximately $4.00.

Place a pre-determined sell at $8.00.

Include a protective stop loss of $1.60.

Clorox Co (NYSE: CLX) has seen a surge in interest over the company's products due to the coronavirus, which has pushed the stock price above the key resistance of the upper trendline, which in turn has triggered a bullish crossover between the 50-day and 200-day moving averages.

Shares have been up in the past month and year-to-date during periods when the broader market fell. Clorox’s website now has a whole section listing products like disinfecting wipes and bleach, which can help prevent the spread of COVID-19.

The common long-term buy signal suggests that the next leg in the long-term uptrend could just be getting underway.

Earnings.....

Top and bottom line improved last quarter. Earnings were up 4%, compared to -2% in the prior report. Revenue fell 2%, primarily on foreign currency rates, the company said. That improved from a 4% drop a year earlier amid a company turnaround.

"I feel good about the progress we're making, which is reflected in our second-quarter results, particularly the fifth consecutive quarter of gross margin expansion and sequential improvement in organic sales," Chairman and CEO Benno Dorer said in the company's Feb. 4 earnings news release.

About The Clorox Company…..

The Clorox Company manufactures and markets consumer and professional products worldwide. It operates through four segments: Cleaning, Household, Lifestyle, and International. The company offers laundry additives, including bleach products under the Clorox brand, as well as Clorox 2 stain fighter and color booster; home care products primarily under the Clorox, Formula 409, Liquid-Plumr, Pine-Sol, S.O.S, and Tilex brands; naturally derived products under the Green Works brand; and professional cleaning, disinfecting, and food service products under the Clorox, Dispatch, HealthLink, Clorox Healthcare, Hidden Valley, KC Masterpiece, and Soy Vay brands.

Coronavirus Effect…..

Principally, the driving force behind the massive surge in Clorox stock is the underlying company’s suddenly relevant brands. As you know, the household essentials specialist makes the Clorox disinfectant wipes. These are great to have around in the home and office, as well as out in public places. Proper hygienic practices will never go out of style.

A spokeswoman for the Oakland, California-based company said that Clorox was stepping up production.

“Clorox is clearly positioned for a short-term gain as everyone needs additional disinfectant,” William Susman, managing director at Threadstone Advisors, told Bloomberg. “There could be a few winners.”

Clorox shares have risen nearly 10% so far this year.

So.....

Clorox should continue to rise on demand for hand sanitizers and disinfectants over mounting fears about the deadly coronavirus.

Clorox’s business will never go out of style; as cleaning supplies, plumbing solutions, even mundane stuff like garbage bags, will all be necessities.

Clorox’s fifty day moving average is $161.16 and its two-hundred day moving average is $154.56. The company has a quick ratio of 0.52, a current ratio of 0.86 and a debt-to-equity ratio of 4.63. The stock has a market capitalization of $21.10 billion, a PE ratio of 25.03, and a price-to-earnings-growth ratio of 5.69 and a beta of 0.40.


The Roller-Coaster Ride

Tuesday, March 03, 2020

Stocks rebounded sharply from their worst week since the financial crisis on Monday, with the Dow Jones Industrial Average posting its best day in more than a decade. Expectations that the Federal Reserve would cut rates drove the gains, which accelerated aggressively into the close.

The Dow closed 1,293.96 points higher, or 5.1%, at 26,703.32. The move on a percentage basis was the Dow’s biggest since March 2009. It was the largest-ever points gain for the 30-stock average.

The S&P 500 climbed 4.6% — its best one-day performance since Dec. 26, 2018 — to close at 3,090.23. The Nasdaq Composite also had its best day since 2018, surging 4.5% to 8,952.16.

Monday’s gains snapped a seven-day losing streak for the Dow.


EXTRA OPTIONS TRADES – BASED ON EARNINGS - ZM & SPLK

NOTE: If you an “Earnings Predictions Member” you will have already received these trades.

It is a belief that the following companies will present very positive results.

I would suggest that you keep a very tight stop-loss or engage a trailing stop-loss.

Again, these trades are not part of your membership but may be of interest to you.



Zoom Video Communications Inc (NASDAQ: ZM), a provider of a video-first communications platform primarily in the Americas, the Asia Pacific, Europe, the Middle East and Africa, will report earnings after the market closes. The consensus earnings estimate is $0.07 per share on revenue of $176.36 million; but the Whisper number is higher at $0.10 per share.

The company's guidance was for earnings of approximately $0.07 per share on revenue of $175.00 million to $176.00 million.

ZM stock has gained about 48% in a little over a month on hopes that lightened corporate travel will lead to more downloads of the company’s solution — and higher revenue growth.

Average daily downloads at Zoom Video Communication shot up 90% over the past 30 days as companies, increasingly anxious about the spread of the coronavirus, pulled back on face-to-face meetings.

Companies, increasingly anxious about the spread of the coronavirus, have pulled back on face-to-face meetings, Bernstein analyst Zane Chrane noted.

"Perhaps more impressively, Zoom has added more active new users year to date in 2020 than in all of 2019 combined," Chrane wrote.

Zoom is also seeing an increase in the number of sessions per day - 17% - as well as a 3% rise in their average length, according to the Bernstein analyst.

Chrane boosted his price target on Zoom Video's stock to $125 a share from $107. He rates the shares outperform.

While many of the new users Zoom Video is seeing amid the fallout from the coronavirus are probably opting to use its free services, the company is still likely to see a big boost in revenue as some of those users convert to paying customers, the Bernstein analyst wrote.

Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the ZM MAR 20 2020 115.000 CALL at approximately $8.70.



The data analytics software provider Splunk Inc. (NASDAQ:SPLK), delivering usable insights into digital systems -- everything from websites and apps to servers and mobile devices, will report earnings after the market closes. The consensus earnings estimate is $0.96 per share on revenue of $783.94 million; but the Whisper number is higher at $1.00 per share.

The company's guidance was for revenue of approximately $780.00 million. Consensus estimates are for year-over-year earnings growth of 31.51% with revenue increasing by 26.02%.

For the last reported quarter, it was expected that Splunk would post earnings of $0.52 per share when it actually produced earnings of $0.58, delivering a surprise of +11.54%.

Over the last four quarters, the company has beaten consensus EPS estimates four times.

The company aims to turn data into doing with its new “Data-to-Everything Platform.” And SPLK’s revenue has climbed from $451 million in 2015 all the way to $1.8 billion in fiscal 2019.

The San Francisco-based firm’s technology is designed to help “investigate, monitor, analyze and act on data at any scale, from any source over any time period.” SPLK in late November topped our Q3 earnings and revenue estimates as it nears the completion of its transition to a subscription or renewable model.

Last quarter, the company signed 440 new enterprise customers and its software revenues surged 40%, while its cloud segment jumped 78%. “Data has emerged as the strategic asset as more and more enterprises and government agencies around the globe are investing in data-centric digital strategies,” CEO Douglas Merritt said in prepared remarks.

“We believe data is the answer to many of the world's most pressing problems and its greatest opportunities.”

Positive Factors.....

Splunk recently acquired cloud monitoring company SignalFX for $1.05 billion, which is estimated to could contribute $84 million to revenue next year.

Splunk also changed some of its financial reporting, providing more clarity on its organic growth and other business metrics.

Splunk added 450 new enterprise customers in the reported quarter. The company had 134 orders greater than $1 million in total contract value, up 21% from 111 last year.

Splunk unveiled its Data-to-Everything Platform in the third quarter including new products such as Data Fabric Search (DFS), Data Stream Processor (DSP) and Splunk Mission Control.

Additionally, the company also announced new versions of Splunk Enterprise 8.0 and Splunk Enterprise Security 5.0, designed to process massive scale to data in any form.

Splunk announced the acquisition of Omnition, a stealth-mode SaaS company that is innovating in distributed tracing and improving monitoring across micro-services applications.

The company also announced acquisition of the open source distributed messaging leader Streamlio. Management expects that the acquisition will help accelerate Splunk’s real-time stream processing.

Splunk is one of software names that should be relatively unaffected by the broader fears in the market.

Splunk, for instance, only generated 11% of revenue overseas through the first nine months of FY2020 (ending January). Its business-to-business model might see some modest disruption if U.S. corporations pull back on spending. But Splunk’s offerings, which improve security and efficiency, seem less likely to be affected by tightened corporate budgets.

Option trade to consider: Buy the SPLK MAR 20 2020 155.000 CALL at approximately $7.20.


Option Trade – Twitter Inc. (NYSE:TWTR) Calls

Tuesday, March 03, 2020

** OPTION TRADE: Buy the TWTR JUN 19 2020 36.000 CALLS at approximately $3.60.

Place a pre-determined sell at $7.20.

Include a protective stop loss of $1.45.

The interactive media sector, of large tech companies, Twitter Inc. (NYSE:TWTR), a global platform for public self-expression and conversation in real time, saw its stock jump yesterday and more growth expected.

Activist investor group Elliott Management has taken a roughly $1 billion stake in the company and is pushing for changes, including the possible ouster of Chief Executive Jack Dorsey.

Elliot also reportedly nominated four directors to the Twitter board.

Executives Meet....

Twitter's representatives included Chairman Omid Kordestani and its lead director Patrick Pichette.

Representing Elliott was the New York-based hedge fund's head of U.S. activism, Jesse Cohn, and portfolio manager Marc Steinberg. Chief among their concerns was that Twitter needs to have a full-time chief. Dorsey, in addition to overseeing Twitter, is also CEO of Square, a mobile payments company.

On a typical day, Dorsey reportedly spends his mornings at Twitter and his afternoons at Square, which he founded.

Twitter reported fourth-quarter results last month that missed on earnings but beat on revenue. User growth also topped forecasts, as Twitter stock soared by double digits. Daily average users rose 21% to 152 million. That was about 4.5 million above estimates, driven by product improvements.

Other Events…..

Twitter Inc. is asking all of its employees to work from home in order to slow the spread of coronavirus. "We are strongly encouraging all employees globally to work from home if they're able," the San Francisco-based company said Monday in a statement. "Our goal is to lower the probability of the spread of the COVID-19 coronavirus for us -- and the world around us."

Twitter employees in Hong Kong, Japan and South Korea will be required to work from home "due in part to government restrictions," the company said. On Sunday, Twitter suspended all "non-critical" company travel and events, including CEO Jack Dorsey's scheduled appearance at the South by Southwest conference in Texas.

So.....

Twitter has a debt-to-equity ratio of 0.36, a quick ratio of 9.15 and a current ratio of 9.15. Twitter Inc has a 1-year low of $28.63 and a 1-year high of $45.85. The firm has a market cap of $27.09 billion, a price-to-earnings ratio of 17.66, and a price-to-earnings-growth ratio of 2.41 and a beta of 0.61. The company has a fifty day simple moving average of $34.92 and a two-hundred day simple moving average of $35.69.