“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, April 30, 2018

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



Option Trade – salesforce.com, inc. (NYSE:CRM) Calls

Friday, May 04, 2018

** OPTION TRADE: Buy the CRM JUNE 15 2018 130.000 CALL at approximately $3.00 TO $3.30. Place a pre-determined sell at $6.00.

Also include a protective stop loss of $1.20.

The San Francisco-based cloud software provider, salesforce.com, inc. (NYSE:CRM), managed to stay fairly stable despite the market turbulence in recent times. This is basically due to the continuing, and accelerating, shift that companies are making to the cloud. As data and technology become increasingly important, companies like CRM are likely to see continued growth, which makes them an ideal target for bullish traders.

Already CRM stock is up 19% on the year, dwarfing the gains of the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) and the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ), which are flat and up 4%, respectively.

As well, Salesforce stock is up 45% over the past 12 months.

The average price target on Wall Street calls for CRM to rally 13% to $137.50. The highest target calls for a 31% rally to $160 and heck, even the lowest price target isn’t very encouraging for bears. It sits at just $116, less than 5% below current levels.

CRM has an earnings announcement coming up on May 24, after market close. It is expected that the stock will to start climbing up to its previous highs around $128 in the run up to this announcement, especially now that the Federal Open Market Committee (FOMC) has eased investor concerns by not indicating it is going to be raising interest rates at a faster clip in 2018.

Equities research analysts forecast that Salesforce.com will announce $0.43 earnings per share (EPS) for the current quarter. Fourteen analysts have provided estimates for Salesforce.com’s earnings, with estimates ranging from $0.14 to $0.48. Salesforce.com reported earnings of $0.28 per share during the same quarter last year, which would indicate a positive year-over-year growth rate of 53.6%.

Influencing Factors

Salesforce is operating in an industry that’s seeing accelerating growth. Cite the economy or the tech industry (or both), but the company’s business and many others continue to do very well.

That’s what’s allowing these companies to hold up better than other industries and sectors; not necessarily rally amid market declines, but still the point stands. That’s very encouraging price action.

Cloud computing growth isn’t slowing down, as evidenced by visible through Amazon.com, Inc. (NASDAQ:AMZN), Adobe Systems Incorporated (NASDAQ:ADBE) and even the recent earnings results from Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG).

The industry continues to fire on all cylinders and while many folks may have thought that the cloud is the past and artificial intelligence is the future, they may be overlooking how much growth is still left in the cloud.

All in all, this bodes well for CRM stock and it still has a long runway of growth.

Analysts are looking for strong growth this year. On the revenue front, estimates call for 21% growth this year (fiscal 2019) and more than 19% next year (in fiscal 2020). Longer term, expectations call for roughly 20% revenue growth over the next four years.

Expectations for 2022 call for $19.8 billion in sales, but CEO Marc Benioff has continually said management sees a clear path to $20 billion in sales by 2022. That may not seem all that special, but consider that 2018 sales were “just” $10.5 billion. So revenue should essentially double between then and 2022.

It becomes more realistic considering that the Salesforce stock deferred revenue grew 28% year-over-year last quarter.

Earnings are set to grow almost 60% this year and over 25% in the following year. Salesforce has momentum in both its business and its stock.

Analysts and Hedge Funds Opinions

Salesforce.com‘s stock had its “buy” rating reiterated by analysts at Canaccord Genuity in a research note issued on Friday, April 6th. They presently have a $135.00 target price on the CRM provider’s stock. Canaccord Genuity’s price target indicates a potential upside of 12.29% from the stock’s current price.

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

  • Barclays boosted their price objective on Salesforce.com from $130.00 to $140.00 and gave the stock an “overweight” rating in a research note on Wednesday, March 21st.
  • UBS set a $144.00 price objective on Salesforce.com and gave the stock a “buy” rating in a research note on Wednesday, March 21st.
  • Citigroup boosted their price objective on Salesforce.com from $130.00 to $140.00 and gave the stock a “buy” rating in a research note on Thursday, March 1st.
  • Sanford C. Bernstein raised shares of Salesforce.com from an “underperform” rating to a “market perform” rating in a research report on Thursday.
  • Monness Crespi & Hardt assumed coverage on shares of Salesforce.com in a research report on Wednesday, April 11th. They set a “buy” rating and a $152.00 price target for the company.
  • Finally, ValuEngine raised Salesforce.com from a “hold” rating to a “buy” rating in a research note on Monday, April 2nd.

Six analysts have rated the stock with a hold rating and forty-six have issued a buy rating to the company’s stock. The company has an average rating of “Buy” and an average price target of $134.85.

Institutional investors that have recently made a change to their positions in the stock….

  • Oppenheimer & Co. Inc. boosted its holdings in shares of Salesforce.com by 10.1% in the first quarter. The firm owned 44,226 shares of the CRM provider’s stock after acquiring an additional 4,063 shares during the period. Oppenheimer & Co. Inc.’s holdings in Salesforce.com were worth $5,144,000 at the end of the most recent reporting period.
  • TIAA CREF Investment Management LLC boosted its stake in shares of Salesforce.com by 7.0% during the 4th quarter. TIAA CREF Investment Management LLC now owns 9,865,725 shares of the CRM provider’s stock worth $1,008,573,000 after acquiring an additional 645,099 shares in the last quarter.
  • Brown Advisory Inc. boosted its stake in shares of Salesforce.com by 2.4% during the 4th quarter. Brown Advisory Inc. now owns 4,756,094 shares of the CRM provider’s stock worth $486,216,000 after acquiring an additional 112,839 shares in the last quarter.

Insider news……

Director Susan Wojcicki purchased 6,000 shares of the firm’s stock in a transaction dated Tuesday, March 13th. The stock was bought at an average price of $127.82 per share, for a total transaction of $766,920.00. Following the purchase, the director now owns 52,393 shares in the company, valued at approximately $6,696,873.26.

Harvey’s Options Volatility Indicator

Summary

CRM has a market capitalization of $90,026.38, a price-to-earnings ratio of 272.93, a PEG ratio of 5.29 and a beta of 1.24. Salesforce.com has a 1-year low of $83.55 and a 1-year high of $128.87. The company has a debt-to-equity ratio of 0.07, a current ratio of 0.92 and a quick ratio of 0.92.


Option Trade – Texas Instruments Incorporated (NASDAQ:TXN) Calls

Wednesday, May 02, 2018

** OPTION TRADE: Buy the TXN JUNE 15 2018 105.000 CALL at approximately $2.60. Place a pre-determined sell at $5.20.

Also include a protective stop loss of $1.05.

Semiconductor stock Texas Instruments Incorporated (NASDAQ:TXN), headquartered in Dallas, Texas, is an original equipment manufacturer of analog, mixed signal and digital signal processing (DSP) integrated circuits.

It operates through the following business segments: Analog (67% of revenue in 2017), Embedded Processing (24%) and Other (9%).

The company reported excellent results for the first quarter, beating on both the top and bottom lines. Both earnings and revenues posted double-digit growth.

Earnings of $1.11 per share exceeded the Consensus Estimate of $1.21. Earnings were up 36% year over year and 11% sequentially.

Revenues of $3.79 billion beat the Consensus Estimate of $3.65 billion and were up 11.4% year-over-year basis and 1% sequentially.

Growth was driven by strong demand for Analog and Embedded Processing products in the auto and industrial markets.

Analysts have been raising their estimates for the company after stronger than expected results.

Consensus Estimates for the current and next year have surged to $5.43 and $6.01 from $4.97 and $5.67 respectively, 30 days back.

Influencing Factors

The company has been returning a lot of cash to shareholders in the form of dividends and buybacks. They have increased dividends consecutively for the past 14 years and also reduced their share count by 43% since 2004. Their current dividend yield is 2.44%.

The company is poised to benefit from strong growth in the Internet of Things space as it supplies building blocks required to enable the IoT. There is increasing demand for their products from the auto markets, as automakers race to advance driving technologies.

Texas Instruments is set to gain from the increasing demand for chips from automakers, driven by autonomous and semi-autonomous vehicles and other technological advancements, coupled with strong demand in the industrial segment. Both these markets are increasing the use of semiconductors, which should provide significant growth opportunities for TI.

In addition, the planned installations of 5G wireless networks  later this year, and eventual further expansion to other cities in the U.S., should result in strong demand for TI equipment, leading to significant long term growth.

The company is a proven capital-allocator, earning wide excess returns on its supplied capital. Its solid free cash flow growth should also translate to solid dividend growth going forward.

TI also maintains dominate market share in many of its businesses, including the leading position (roughly 19%, according to its 10-K) in the fragmented analog semiconductors market, which is the firm's "bread-and-butter" - both size-wise and margins-wise.

The company has depth, breadth, market share, and in many cases, a cost advantage, allowing it to simultaneously generate wide economic profits; as well as grow and return value to shareholders (in the form of dividends and buybacks). The last increase was by over 20%, in fact.

Analysts and Hedge Funds Opinions

DZ Bank upgraded shares of Texas Instruments from a hold rating to a buy rating in a research note published on Thursday.

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

  • Zacks Investment Research raised shares of Texas Instruments from a “hold” rating to a “buy” rating and set a $113.00 price target for the company in a research note on Tuesday, April 3rd.
  • Credit Suisse Group raised shares of Texas Instruments to a “buy” rating and set a $125.00 price objective on the stock in a report on Wednesday, February 7th.
  • Mizuho restated a buy rating and set a $107.00 price objective (up previously from $96.00) on shares of Texas Instruments in a research report on Tuesday, January 23rd.
  • Drexel Hamilton restated a buy rating and set a $130.00 price objective (up previously from $110.00) on shares of Texas Instruments in a research report on Tuesday, January 23rd.
  • Oppenheimer restated a buy rating and set a $130.00 price objective on shares of Texas Instruments in a research report on Friday, January 19th.
  • Finally, Royal Bank of Canada restated a buy rating and set a $112.00 price objective on shares of Texas Instruments in a research report on Thursday, January 4th.

One research analyst has rated the stock with a sell rating, fourteen have given a hold rating, fifteen have assigned a buy rating and one has given a strong buy rating to the company. The company presently has an average rating of Buy and a consensus target price of $115.41.

Institutional investors that have recently made a change to their positions in the stock….

Cambridge Investment Research Advisors Inc. raised its position in shares of Texas Instruments by 2.8% in the 4th quarter. Cambridge Investment Research Advisors Inc. now owns 55,212 shares of the semiconductor company’s stock worth $5,766,000 after acquiring an additional 1,529 shares in the last quarter.

Charter Trust Co. boosted its stake in Texas Instruments by 1.2% during the fourth quarter. Charter Trust Co. now owns 39,470 shares of the semiconductor company’s stock worth $4,122,000 after acquiring an additional 479 shares in the last quarter.

Patriot Wealth Management Inc. boosted its stake in Texas Instruments by 1.7% during the fourth quarter. Patriot Wealth Management Inc. now owns 29,234 shares of the semiconductor company’s stock worth $3,053,000 after acquiring an additional 497 shares in the last quarter.

Finally, Xact Kapitalforvaltning AB raised its position in shares of Texas Instruments by 14.1% in the 4th quarter. Xact Kapitalforvaltning AB now owns 92,512 shares of the semiconductor company’s stock worth $9,662,000 after acquiring an additional 11,433 shares in the last quarter.

Harvey’s Options Volatility Indicator 

Summary

The company should benefit from the higher production of 300mm fabs, increasing demand for chips from the auto industry, driven by autonomous and semi-autonomous vehicles and other technological advancements. Expect the company to post strong results in 2018.

Texas Instruments has a 52-week low of $75.92 and a 52-week high of $120.75. The company has a debt-to-equity ratio of 0.34, a current ratio of 4.62 and a quick ratio of 3.53. The stock has a market capitalization of $100,848.06, a PE ratio of 23.70, a P/E/G ratio of 2.01 and a beta of 1.24.


Option Trade – Autodesk, Inc. (NASDAQ:ADSK) Calls

Tuesday, May 01, 2018

** OPTION TRADE: Buy the ADSK JUNE 15 2018 130.000 CALL at approximately $4.40 TO $4.80. Place a pre-determined sell at $9.00.

Also include a protective stop loss of $1.75.

Computer-aided design software firm Autodesk, Inc. (NASDAQ:ADSK) has made some big moves on the charts in recent months, both to the upside and the downside. The shares were last seen trading near $126, a retreat of roughly 10% from their March 13 record high of $141.26. However, the software stock recently bounced from a noteworthy technical level, suggesting it could be poised for a short-term move to the upside.

Specifically, ADSK last week bottomed near the $121 mark. This region is home to an early March bull gap, and it contained a pullback in early April, as well. Not to mention, it represents a 50% Fibonacci retracement of the stock's rally from its year-to-date low to its year-to-date high.

But maybe most importantly, the 80-day moving average has currently settled at $121.80; which has represented a trendline that has been an excellent "buy" signal in recent years. Following the last six pullbacks to this moving average, Autodesk has averaged a 21-day gain of 7.98%, and has been higher after each occurrence. A similar move this time around would put the equity just above the $137 level.

Equities research analysts expect Autodesk to post earnings of $0.05 per share for the current quarter. Seven analysts have made estimates for Autodesk’s earnings, with estimates ranging from $0.01 to $0.27. Autodesk posted earnings of ($0.16) per share in the same quarter last year, which would indicate a positive year over year growth rate of 131.3%. The business is expected to report its next earnings report on Thursday, May 17th.

Influencing Factors

This groundbreaking 3D design company makes software for people who make things. This includes software for architects, animators, constructors and engineers. Its growth trajectory is very impressive, with prices up about 15% year-to-date; despite the pullbacks.

Reasons for Autodesk call option trade:-

  • its dominant market positioning;
  • rapid innovation;
  • strong execution;
  • Right now the company is undergoing a transition to subscriptions, which is anchored by bullish FY2020 financial targets; and
  • Excellent growth trajectory -- the business is well positioned in a large but lightly penetrated construction industry that is yearning for next-generation technologies, like Autodesk's, to help digitize the industry, which should act as a pillar for Autodesk's next leg of growth beyond FY2020.

Analysts and Hedge Funds Opinions

Yesterday saw KeyBanc raise Autodesk’s price target from $144 to $150 on increased confidence that revenue ramp is achievable; Believes the company's move to a subscription model will provide better visibility, more consistency in financial results.

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

Top Oppenheimer analyst Koji Ikeda calls ADSK his Top Stock Pick in Saas/ Applications Software. He explains: "Autodesk is a well-established franchise and industry leader and operates as an industry-standard, must-have technology in nearly every industry it operates in."

Looking forward, Ikeda sees big growth potential as "the business is well positioned in a large but lightly penetrated construction industry that is yearning for next-generation technologies, like Autodesk's, to help digitize the industry."

Similarly, five-star Robert W Baird analyst Robert Oliver calls ADSK a "Fresh Pick." He ramped up his price target from $145 to $155 (20% upside) while praising the company's strong execution.

Three investment analysts have rated the stock with a hold rating, twenty-two have given a buy rating and one has given a strong buy rating to the company’s stock. Autodesk presently has a consensus rating of “Buy” and an average price target of $149.48.

Institutional investors that have recently made a change to their positions in the stock….

  • Viking Global Investors LP lifted its position in Autodesk by 68.5% in the 4th quarter. Viking Global Investors LP now owns 4,094,027 shares of the software company’s stock worth $429,177,000 after buying an additional 1,664,658 shares during the last quarter.
  • Parnassus Investments CA lifted its position in Autodesk by 100.0% in the 4th quarter. Parnassus Investments CA now owns 1,800,000 shares of the software company’s stock worth $188,694,000 after buying an additional 900,000 shares during the last quarter.
  • Millennium Management LLC lifted its position in Autodesk by 337.9% in the 4th quarter. Millennium Management LLC now owns 648,395 shares of the software company’s stock worth $67,971,000 after buying an additional 500,322 shares during the last quarter.

Harvey’s Options Volatility Indicator

Summary

ADSK has a debt-to-equity ratio of -6.20, a quick ratio of 0.88 and a current ratio of 0.88. The company has a market cap of $27,649.04, a PE ratio of -79.15 and a beta of 1.70. Autodesk has a fifty-two week low of $91.17 and a fifty-two week high of $141.26.






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