“Armchair Trader Series” Recommendations
- Week Beginning -
Monday,  March 08, 2021

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

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"Trading Capital Management"



Options Trade - Vishay Intertechnology Inc (NYSE: VSH) Calls

Friday, March 12, 2021

** OPTION TRADE: Buy VSH OCT 15 2021 25.000 CALLS at approximately $2.70. (Max. $3.00)

 Place a pre-determined sell at $5.40.

Also include a protective stop loss of $1.10.

The semiconductor industry has continued to showcase its bullish run so far in 2021 following an impressive performance in 2020 despite coronavirus-induced macroeconomic crisis. Sales in the global semiconductor industry grew 6.5% year over year to $439 billion in 2020, per data from the Semiconductor Industry Association (or SIA).

And, Vishay Intertechnology Inc (NYSE: VSH), is well positioned to capitalize on the growing proliferation of applications related to passive electronic-component devices and the increasing demand for sophisticated electronic-component designs.

Demand for microchips surged during the peak of the pandemic when sales of electronic goods skyrocketed, thus boosting semiconductor sales. So much so that there is presently a supply crunch for microchips that is affecting production of electronic and automobiles. However, this supply shortage suggests that the semiconductor industry is on track for further growth attributed to strong demand.

Markedly, global semiconductor sales reflected both a month-over-month and a year-over-year increase in January according to the latest data from the SIA.

The global semiconductor industry, which is the building block for emerging technologies including AI, ML, IoT, blockchain, and advanced quantum computing, is poised to perform well in 2021.

In fact, per the latest World Semiconductor Trade Statistics data, the global semiconductor market is now predicted to improve 8.4% in 2021, based on double-digit growth of memory and optoelectronics. The forecast for 2021 is higher than the previously projected growth of 6.2%, made by WSTS in July.

Vishay Intertechnology Company Profile.....

Vishay Intertechnology, Inc manufactures and supplies discrete semiconductors and passive components in the United States, Europe, Asia, and internationally.

Semiconductor products include metal oxide semiconductor field-effect transistors (MOSFETs), diodes and optoelectronic components. These are typically used to perform functions such as switching, amplifying, rectifying, routing or transmitting electrical signals, power conversion, and power management.

The Diodes segment provides rectifiers, small signal diodes, protection diodes, thyristors/silicon-controlled rectifiers, and power modules.

The Optoelectronic Components segment offers standard and customer specific optoelectronic components, such as infrared (IR) emitters and detectors, IR remote control receivers, optocouplers, solid-state relays, optical sensors, light-emitting diodes, 7-segment displays, and IR data transceiver modules.

Earnings…..

In the last two quarters of fiscal 2020, Vishay witnessed a meaningful recovery in demand for its products. In the fourth quarter, the company reported a bottom-line number of $0.28 on sales of $667.18 million as plants once more reopened.

This momentum is expected to continue going into 2021 with the company expected to report $0.38 and $0.43 per share in the first two quarters of this year alone. At present, the bottom-line earnings number expected for 2021 come in around the $1.60 mark. However, if existing trends continue, we will see this number increasing even more over the next few months.

Influencing Factors…..

Evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm technology is opening new business avenues.

Microchip demand is expected to get a boost with the 5G boom in Europe and parts of Asia, including China and Singapore. New 5G smartphone devices from Apple and Samsung will make the technology more accessible. Intel and MediaTek-supported 5G notebooks are also expected to hit the shelves in 2021.

IDC expects 5G smartphone shipments to grow to 58% in 2024 from 19% of global volume in 2020, which should act as a tailwind for the semiconductor market.

Meanwhile, high-speed 5G rollout is also expected to accelerate the adoption of IoT. These are expected to result in unprecedented demand for memory chip, power amplifier and AI semiconductors.

Moreover, ongoing infusion of AI and ML, high performance computing (HPC) applications, gaming, wearables, drones, EVs and VR/AR devices are fueling massive growth in the semiconductor space.

Accelerated rate of digital transformation, with work-from-home and web-based learning trends bolstering demand for processors utilized in enterprise laptops, data center servers, PC systems, notebooks, tablets, and smartphones, is expected to benefit the chip stocks in 2021.

Other Factors.....

Vishay Intertechnology’s strong thermistor offerings will likely benefit from the growing adoption of building and home automation systems, the increasing use of temperature sensors in the automotive industry, and rising applications of portable and advance healthcare equipment across the world.

The recent launch of NTCALUG family of NTC lug thermistors makes this company well-poised to gain strong traction among automotive, consumer and industrial applications as the NTCALUG family features accurate temperature-sensing capability.

The Consensus Estimate for its fiscal 2021 earnings has been revised upward by 29.3% in 30 days’ time to $1.72 per share, suggesting 87% growth from the figure reported in the year-ago quarter.

Summary.....

At present, there is a 70%+ difference between bottom-line expectations for 2021 compared to the $0.70 per share already reported for 2020. Besides earnings though, Vishay´s sales and assets look very cheap compared to the sector in general but now are trading higher than the firm´s 5-year averages. Suffice it to say, it is all about deciphering where is the cyclical top for this semiconductor company. A clear breakout above the 2018 highs would definitely stack the odds in favor of a sustained move to the upside.

From a shareholder compensation viewpoint, the $55 million which was paid out to shareholders in 2020 in the form of a dividend was easily covered by the $1.32 per share in free cash flow. Long-term debt decreased by well over $100 million and shareholder equity increased to $1.57 billion. These trends should decrease the interest expense the firm has to pay overtime to its creditors. All in all, when we include growth expectations, the above trends are bullish for the dividend.

To sum up, at present, forward-looking earnings projections remain bullish in Vishay and we are seeing this bullishness being played out in the technicals.

Vishay Intertechnology, Inc. has a 1 year low of $11.23 and a 1 year high of $24.94. The company has a current ratio of 3.22, a quick ratio of 2.33 and a debt-to-equity ratio of 0.29. The stock has a 50 day simple moving average of $23.18 and a 200-day simple moving average of $19.25. The stock has a market cap of $3.35 billion, a PE ratio of 34.54, a PEG ratio of 8.24 and a beta of 1.36.


Options Trade - Bilibili Inc – ADR (NASDAQ: BILI) Calls

Tuesday, March 09, 2021

** OPTION TRADE: Buy BILI JUN 18 2021 115.000 CALLS at approximately $9.00. (Max. $9.50)

 Place a pre-determined sell at $18.00.

Also include a protective stop loss of $3.60.

Gaming platform Bilibili Inc (NASDAQ: BILI), a rapidly growing streaming play in China, saw its stock dip after it posted its fourth-quarter earnings, even though its report easily beat analysts' expectations. And, further pullback has been experienced due to the overall technological section suffering.

The growth rates are impressive, but investors seemed eager to take profits after the stock price rallied nearly 400% over the past 12 months. Concerns about Bilibili's ongoing losses, the market's ongoing rotation from growth to value stocks, and higher interest rates likely exacerbated that sell-off.

However, there are plenty of positive factors to buy the dip!

About Bilibili.....

Bilibili Inc is a Chinese video sharing website based in Shanghai and centered around animation, comic and games (ACG).

It offers a platform that covers a range of genres and media formats, including videos, live broadcasting, and mobile games.

Bilibili Inc has a strategic collaboration agreement with Tencent Holdings Limited for sharing and operating existing and additional anime and games on its platform in China.

Bilibili’s user-focused video content is why it is often known China’s closest answer to YouTube (a better description however is that Bilibili is a cross between Google's YouTube (NASDAQ:GOOG) (GOOGL) and Amazon's Twitch (NASDAQ:AMZN); or YouTube and Crunchyroll).

Earnings…..

The Chinese gaming and digital media company's revenue jumped 91% year over year to 3.84 billion yuan ($588.5 million), accelerating from its 74% growth in the third quarter and beating estimates by $28.8 million.

Its adjusted net loss deepened from 336.9 million yuan to 681.9 million yuan ($104.5 million), but its loss of $0.29 per ADS still topped expectations by a nickel. It expects its revenue to rise 60%-64% year over year in the first quarter, and analysts anticipate 55% revenue growth for the full year.

Bilibili Inc Chairman and CEO Rui Chen said, “2020 was a year of solid execution on our growth strategy as we brought our business to new heights. With a series of high quality content and branding efforts, we continue to influence China’s young generations on an increasing scale.”

Looking ahead to 1Q, Bilibili Inc expects revenues to land between RMB 3.70 billion to RMB 3.80 billion.

Influencing Factors…..

Bilibili provides mobile games, streaming video, and other ACG (anime, comics, and gaming) content for China's Gen Z users. It ended the fourth quarter with 202 million monthly active users, up 55% from a year ago. Its daily active users increased 42% to 54 million, and its number of monthly paying users more than doubled to 17.9 million.

Bilibili's paid users purchase content in its mobile games, virtual gifts for live streamers, and premium ad-free memberships for its online videos, online comics, and Maoer audio drama platform.

It also lets free users become "official" members by passing a 100-question exam on ACG content to prove their fandom. Its total number of official members, which are often easier to convert to paid ones, rose 51% year over year to 103 million in the fourth quarter.

This sticky ecosystem makes Bilibili one of the few Chinese tech companies that can keep pace with ByteDance, the parent company of Douyin (known as TikTok overseas) and the popular news app Jinri Toutiao, in the Gen Z market.

Bilibili generated 40% of its revenue from its mobile gaming business in 2020. Another 32% came from its value-added services business, which mainly includes virtual gifts and subscriptions for its media platforms, 15% came from ads, and the remaining 13% mainly came from its e-commerce marketplace, which mainly sells tie-in products for its ACG content with the help of Alibaba's Taobao. All four businesses generated impressive growth in 2020.

Bilibiili's gaming business grew as newer games like Princess Connect complemented the growth of its older hits like Fate/Grand Order and Azure Lane. The VAS segment also continued to expand as its live broadcasters, original content, and esports events attracted more paid users.

The growth of its advertising business accelerated for the seventh straight quarter, which was supported by robust ad sales to the gaming, food and beverage, e-commerce, cosmetics, and consumer electronics markets.

Bilibili's gross margin actually rose from 17.6% in 2019 to 23.7% in 2020. Therefore, once Bilibili starts to rein in its operating expenses, its losses could finally narrow and open up a path toward generating long-term profits.

Analysts Thoughts.....

On Feb. 8, Credit Suisse analyst Kenneth Fong raised Bilibili Inc’s price target to $145 from $110 but lowered its rating to Hold from Buy. Fong noted, “While there is strong potential ahead when it comes to users and revenue, the current valuation looks fair.”

BILI has a Moderate Buy consensus rating based on 3 Buys and 2 Holds. The average analyst price target of $142.20.

Summary.....

Bilibili's stock could remain volatile for the foreseeable future, but its reasonable valuation, high growth rates, and rising gross margins will all support its continued growth.

Bilibili has a market cap of $39.23 billion, a price-to-earnings ratio of -110.04 and a beta of 1.42. Bilibili Inc. has a fifty-two week low of $19.25 and a fifty-two week high of $157.66. The company has a debt-to-equity ratio of 1.03, a quick ratio of 2.44 and a current ratio of 2.44. The stock has a fifty day moving average price of $133.94 and a 200-day moving average price of $77.62.