“Armchair Trader Series” Recommendations
- Week Beginning -
Monday, May 07, 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



UPDATE -- Option Trade – NVIDIA Corporation (NASDAQ:NVDA) Calls

Thursday, May 10, 2018

**DECISION TIME**

If you managed to buy in at $5.60, or better, for the alternative option trade, a decision as to hold or sell should be considered before the earnings report this afternoon.

The sell-price has already reached $10.00 (not far from the recommended pre-determined sell point), but has fallen back a bit at the moment; but even so, a decent profit is still available.

A similar decision is appropriate for the June Call as well.

As they say “A bird in the hand is worth two in the bush”

Best of luck with your decision!

Regards,

Ian


Option Trade – NVIDIA Corporation (NASDAQ:NVDA) Calls

Wednesday, May 09, 2018

** OPTION TRADE: Buy the NVDA JUNE 15 2018 260.000 CALL at approximately $9.00. Place a pre-determined sell at $18.00.

Also include a protective stop loss of $7.00. KEEP THIS TIGHT!

** ALTERNATIVE OPTION TRADE: Buy the NVDA MAY 18 2018 260.000 CALL at approximately $5.60. Place a pre-determined sell at $11.20.

Also include a protective stop loss of $4.00. ALSO KEEP THIS TIGHT!

The maker of graphics and high-performance computing chips NVIDIA Corporation (NASDAQ:NVDA) is scheduled to report its first-quarter numbers earnings after the market closes tomorrow, May 10. Analysts expect earnings of $1.47 per share, up from $0.85 during the same period last year.

Considering how big the company is ($150 billion market cap), and how influential the markets it’s exposed to are (data-centers, autonomous driving, artificial driving, and cryptocurrencies, etc.), NVDA’s numbers could have a broad impact on numerous stocks.

Which fortunately; the numbers look like they will be quite good.

A few weeks back, Intel Corporation (NASDAQ:INTC) and Advanced Micro Devices, Inc. (NASDAQ:AMD) both reported really good quarterly numbers. The theme across both of the reports was still-robust demand from cloud data-centers. Meanwhile, it appears that these companies are largely shielded from erosion in the cryptocurrency mining tailwind.

The graphics processing unit (GPU) specialist is barreling toward the report with a lot of momentum. It's coming off a year in which its revenue grew 41%, and adjusted earnings per share increased a whopping 88%. And it announced many innovative new products at its GPU Technology Conference in late March.

Moreover, its stock has come roaring back in the last couple of weeks to recover from a pullback of nearly 15% that began in mid-March, just after it hit an all-time closing high of $250.48. The stock closed at $248.68 on Monday, within reach a new record. Shares have returned 140% over the past 12 months, sprinting far ahead of the S&P 500 's 13.6% return over the period.

NVDA has trended higher over the last year, and shares are currently up 17.5% year to date.

Influencing Factors

Nvidia is the leader in the cloud data-center space. If AMD and INTC reported good numbers there, chances are that NVDA will report great numbers. Also, bears have been worried about the lack of a cryptocurrency boost. But AMD, which was seen as having a bigger crypto reliance, reported great numbers. Thus, Nvidia likely shook off crypto headwinds this past quarter, too.

NVIDIA's gaming platform -- the largest of its four target-market platforms -- has been performing well, and should continue to do so. Last quarter and in fiscal 2018 overall, gaming's revenue jumped 29% and 36% year over year, respectively. Gamers have been upgrading to NVIDIA's Pascal-based GeForce graphics cards, and more of them have been purchasing higher-end cards, due largely to the growing popularity of esports and to higher-quality video games being released. Moreover, the number of gamers around the world is increasing.

Sales of NVIDIA's data-center platform -- its second-largest business -- -- have been growing at a torrid pace in recent years. Last quarter and in fiscal 2018, this platform's revenue rocketed upward by 105% and 133%, respectively, year over year. In Q4, it accounted for about 21% of the company's total revenue -- and that percentage should continue to increase.

Sales of NVIDIA's automotive platform are small and slow-growing relative to company as whole. Revenue from that segment increased just 15% in fiscal 2018, and accounted for just 5.7% of the company's total.

However, revenue from this platform is likely to significantly rev up when driverless vehicles become legal to sell across the county, which many industry watchers believe could occur as early as 2021.

Analysts and Hedge Funds Opinions

Nvidia has received a slew of bullish calls from the Street in the last month. All eyes are on the chip giant right now ahead of its first quarter earnings results on May 10. "Expect beat/raise … We remain positive on NVDA ahead of Q1 results," five-star Bank of America analyst Vivek Arya told clients on May 7.

"In our view, FQ2 sales outlook can be at-least inline or better than consensus from continued data center strength, start of Nintendo Switch sales, workstation demand, and shift of GPU sales to gamers from miners" this five-star analyst added. He is predicting that prices can soar to $300 from $248 currently.

And the longer-term outlook for NVDA is even more impressive given its 'unparalleled strength' in both auto and AI. Top Goldman Sachs analyst Toshiya Hari advises investors not to be alarmed by any short-term choppiness: "Despite the potential near-term volatility, our long-term thesis on the stock is intact - we continue to see Nvidia as one of the best-positioned companies in the Semiconductor space with exposure/leadership in AI, PC gaming, and further down the road in L4/5 autonomous cars."

SunTrust Robinson's William Stein agrees. He believes shares have 23% upside right now (which would take shares to $305) and sees huge potential for NVDA in the self-driving space. Meaningful revenue from autonomous driving should hit in the next 2-3 years advises Stein. As a result, he urges investors to buy any weakness.

Harvey’s Options Volatility Indicator

Summary

For all intents and purposes, the setup heading into Thursday's report couldn't get much better. Both of Nvidia's major competitors posted solid first-quarter earnings results and boosted guidance. Intel stock surged to record highs following its quarterly report, and AMD finally appears to have broken out of its short-term funk.

Tech stocks have seen solid year-over-year growth of late, and an improving outlook for semiconductor demand lifted results for both AMD and Intel - both of which are locked in a battle for market share in server, desktop and data center processing power.

Nvidia is quickly gaining ground in artificial intelligence and data center processing power.


Option Trade – Planet Fitness Inc (NYSE: PLNT) Calls

Monday, May 07, 2018

** OPTION TRADE: Buy the PLNT JUNE 15 2018 40.000 CALL at approximately $2.50 to $2.70. Place a pre-determined sell at $5.00.

Also include a protective stop loss of $1.00.

New Hampshire-based Planet Fitness Inc (NYSE: PLNT), which franchises and operates fitness centers through its subsidiaries under the Planet Fitness name, will report earnings tomorrow, Tuesday, May 08, 2018, after the closing bell. Analysts' expect a 42% jump in EPS to 27 cents and a 25.3% increase in revenue to $114 million when the low-cost gym announces Q1 results Tuesday.

Planet Fitness is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to earnings beat. After all, analysts raising estimates right before earnings - with the most up-to-date information possible - is a pretty good indicator of some favorable trends underneath the surface for PLNT in this report.

In fact, the Most Accurate Estimate for the current quarter is currently at 29 cents per share for PLNT, compared to a broader Consensus Estimate of 27 cents per share.

It saw positive earnings estimate revision of 13 cents for this year over the past 30 days and is expected to witness earnings growth of 41.7%.

Planet Fitness appeals to a broader demographic than competitors do, especially first-time gym goers, by touting a "judgment-free" atmosphere and cheap membership.

The stock is in buy range after breaking out of a flat base with a 40.14 entry point last month, and remains near record highs.

The gym has more than 1,500 locations in all 50 states, Canada and Latin America, and boasts membership in excess of 10 million.

"If you look at the concept, it's a 20,000-square-foot box that's full of all the cardio and strength equipment you can imagine," R.W. Baird analyst Jonathan Komp told Investor's Business Daily. "There's a lot of capacity and scale they are able to drive with the model. That facilitates the low price, then they are able to advertise their proposition and it fuels the awareness for its distinctive value."

Influencing Factors

"Expect great equipment," D.A. Davidson & Co analyst Andrew Burns told IBD. "This is a franchise model and they require their franchisees to buy new equipment on a standard schedule. So expect a clean, new environment in any one you go into."

The entire fitness industry has gotten a boost in recent years as consumers focus on healthier food options and lifestyles.

"The gym, health and fitness clubs industry has benefited from recent marketing campaigns aimed at fighting obesity, as well as consumer trends toward improved health," IBISWorld's Cohen said.

In a recent report, IBIS said it expects fitness industry revenue to grow at an annualized rate of 1.6% to $4 billion over the next five years. That will come "as the growing proliferation of public health campaigns that raise awareness about health and fitness will prompt more consumers to join gyms, boosting industry demand," IBIS said.

Brick-and-mortar stores face increasing competition from Amazon (AMZN) and other online retailers. But gyms offer an investment safe haven, Burns said.

"All the brick-and-mortar store closures occurring creates lease opportunities," he said. "Gyms and fitness studios are becoming the new anchor tenant and drive traffic into the sectors they are in."

Planet Fitness updated its app and is modernizing its equipment. That makes streaming entertainment providers like Netflix (NFLX), Hulu and Spotify (SPOT) easier to use at the gym, Cowen & Co. analyst Oliver Chen wrote in a recent note to clients.

The app and Black Card membership allow Planet Fitness gym goers to monitor their progress in a number of metrics like distance run or calories burned.

Trendy cycling classes like SoulCycle or high-end yoga boutiques that can cost $30 a session aren't a major concern for Planet Fitness. The gym's $10-a-month membership for a fitness center that's open 24 hours a day offers a good complement to other, more expensive class offerings, R.W. Baird's Komp said.

Analysts and Hedge Funds Opinions

Planet Fitness was upgraded by Zacks Investment Research from a “hold” rating to a “buy” rating in a research report issued on Wednesday, April 18th. The firm currently has a $44.00 price target on the stock. Zacks Investment Research‘s price objective suggests a potential upside of 8.78% from the company’s previous close.

According to Zacks, “Planet Fitness, Inc. franchises and operates fitness centers through its subsidiaries. The company’s operating segments consists of Franchise, Corporate-owned stores and Equipment. It is engaged in licensing and selling franchises under the Planet Fitness trade name, owning and operating fitness centers under the Planet Fitness trade name and selling fitness-related equipment to franchisee-owned stores. Planet Fitness, Inc. is headquartered in Newington, New Hampshire. “

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

  • Cowen increased their price objective on Planet Fitness from $30.00 to $38.00 and gave the company an “outperform” rating in a report on Wednesday, January 10th.
  • Roth Capital set a $36.00 price target on Planet Fitness and gave the stock a “buy” rating in a research note on Tuesday, February 20th.
  • Bank of America raised their price target on Planet Fitness from $39.00 to $42.00 and gave the stock a “buy” rating in a research note on Thursday, February 1st.
  • Finally, Guggenheim reaffirmed a “buy” rating on shares of Planet Fitness in a research report on Friday, February 23rd.

Three research analysts have rated the stock with a hold rating and nine have assigned a buy rating to the company. The company has an average rating of “Buy” and an average target price of $43.75.

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

  • BlackRock Inc. grew its position in shares of Planet Fitness by 5.4% in the fourth quarter. BlackRock Inc. now owns 5,383,805 shares of the company’s stock valued at $186,442,000 after purchasing an additional 273,727 shares during the period.
  • UBS Asset Management Americas Inc. boosted its holdings in Planet Fitness by 17.0% in the fourth quarter. UBS Asset Management Americas Inc. now owns 51,981 shares of the company’s stock valued at $1,800,000 after acquiring an additional 7,564 shares during the last quarter.
  • American International Group Inc. boosted its holdings in Planet Fitness by 3.2% in the fourth quarter. American International Group Inc. now owns 58,299 shares of the company’s stock valued at $2,019,000 after acquiring an additional 1,782 shares during the last quarter.
  • Deutsche Bank AG boosted its holdings in Planet Fitness by 286.1% in the fourth quarter. Deutsche Bank AG now owns 371,443 shares of the company’s stock valued at $12,860,000 after acquiring an additional 275,251 shares during the last quarter.

Harvey’s Options Volatility Indicator

Summary

Planet Fitness is offering up aggressive goals for all of 2018, forecasting revenue and adjusted earnings per share to grow 20% and 40%, respectively. The chain has typically been conservative in its outlooks, so that's a lot of growth on both ends of the income statement to throw out there this early in the year.

The company announced that its board has authorized an additional $80 million in stock buybacks, a fivefold increase for its repurchases. Planet Fitness is at the right place at the right time, and the markets pumped about the stock's prospects. As long as the blowout quarters continue, the market-thumping returns should follow suit.

After conquering the U.S., Planet Fitness still has room to grow overseas, in addition to Canada and Latin America.

Planet Fitness has a current ratio of 1.58, a quick ratio of 1.56 and a debt-to-equity ratio of -5.09. Planet Fitness has a 1-year low of $20.00 and a 1-year high of $41.50. The firm has a market cap of $3,979.55, a price-to-earnings ratio of 48.15, a PEG ratio of 1.77 and a beta of 0.53.






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