“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, January 22, 2018

by Ian Harvey

IMPORTANT NOTE: There is no stop-loss or pre-determined sell price recommended – this is left to the discretion of the individual trader.

Option Trade - Intel Corporation (NASDAQ:INTC) Puts

Thursday, January 25, 2018

** OPTION TRADE: Buy the INTC FEB 16 2018 43.000 PUT at approximately $0.40.

Sell price is left to your own judgment.

Intel Corporation (NASDAQ:INTC), a designer and manufacturer of digital technology platforms, a large-cap value stock and member of the Dow Jones Industrial Average, is set to report its Q4, and, by extension, for the full year of 2017, today, January 25, after the market closes. Analysts see EPS to rise 9% to 86 cents as revenue dips 0.4% to $16.3 billion.

When it last reported, both revenue and earnings topped analyst’s expectations and shares gapped up in trading the next day. INTC also raised its full-year outlook and said it expected adjusted earnings per share (EPS) of $3.25 on revenue of $62 billion in fiscal 2017, up from its previous guidance for adjusted EPS of $3.00 on revenue of $61.3 billion.

Intel repeatedly increased its financial guidance through the end of 2017 thanks in large part to better-than-expected performance from its Client Computing Group (CCG), which primarily sells processors and related components into the personal computer market.

Then Intel announced in November that its firmware needed patching, as it was allowing hackers and government to take over user PCs via their USB ports. 

And now, Intel's earnings come just weeks after security flaws known as Spectre and Meltdown were revealed in the company's chips as well as those from rival chipmakers.

And some tough questions need to be answered on the earnings call in regard to the following issues…….

  • As one of the key enablers of Intel's business is its chip manufacturing technology, there seems to be significant difficulty in transitioning to its next-generation chip manufacturing technology, known as 10-nanometer. The company was originally supposed to start production on this technology in late 2015 for product launches in 2016, but the technology has faced delay after delay.
  • Two security exploits, known as Spectre and Meltdown, recently became public. Spectre affects virtually every high-performance processor in the market, so while Intel is affected, everybody else is, too. This means that any software workarounds that degrade performance on Intel's processors will probably degrade performance on everyone else's processors.
  • That said, it was revealed that Intel's chips, unlike some competitors' chips, are affected by the exploit known as Meltdown. To the extent that software is redesigned to work around this vulnerability, Intel's processors stand to lose performance while some competing chips won't.

Influencing Factors

2017 was a major transitional year for Intel, with the company making a large purchase of Mobileye but selling off a chunk of its Security Group (the McAfee business). That made quarterly results a bit lumpy at times, but Intel is still expected to see a new yearly record for revenues, along with a nearly 20% rise in non-GAAP earnings per share. There is a possibility that reported revenues could decline in Q4 over the prior year period given the divestiture, but management will likely detail an adjusted figure showing growth.

While analysts are currently projecting more revenue growth in 2018, probably around mid-single digits if you exclude the McAfee divestiture, the street basically expects zero net income growth. EPS are forecast to rise by 2 cents, but that alone could be contributed to the ongoing share repurchase plan. Extrapolating current street forecasts, revenues will rise but so will expenses, but this could all change depending on how tax reform will impact the company. A decline in the tax rate by just a few percentage points could add a nickel or even dime to EPS. It's possible a large one-time charge may have been taken in Q4 as well due to foreign untaxed profits.

The balance sheet may cause some concern. Intel ended Q3 2017 with a net debt position of more than $14 billion, which is not a good thing when US interest rates are rising as they have been recently. Also, unlike a lot of other US tech giants, Intel doesn't have a massive foreign cash pile to repatriate, so there is no $25 billion or $250 billion crown jewel coming back to the US.

Analysts and Hedge Funds Opinions

Royal Bank of Canada set a $44.00 target price on shares of Intel and gave the company a “neutral” rating in a research note on Thursday, January 4th.

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

  • Vetr downgraded shares of Intel from a “buy” rating to a “hold” rating and set a $47.77 price objective on the stock in a report on Tuesday.
  • BidaskClub upgraded shares of Intel from a “hold” rating to a “buy” rating in a report on Saturday.
  • Sanford C. Bernstein set a $34.00 price objective on shares of Intel and gave the company a “sell” rating in a report on Wednesday, January 10th.
  • Argus restated a “buy” rating and set a $50.00 price objective on shares of Intel in a report on Friday, January 5th.
  • Finally, SunTrust Banks reissued a “hold” rating and set a $43.00 target price (up from $39.00) on shares of Intel in a research note on Friday, October 27th.

Four equities research analysts have rated the stock with a sell rating, fourteen have given a hold rating and twenty-eight have given a buy rating to the stock. The stock has a consensus rating of “Buy” and a consensus price target of $44.72.

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

  • Lyell Wealth Management LP trimmed its position in shares of Intel by 17.6% in the 3rd quarter. The firm owned 52,878 shares of the chip maker’s stock after selling 11,267 shares during the quarter. Lyell Wealth Management LP’s holdings in Intel were worth $2,014,000 as of its most recent filing with the Securities & Exchange Commission.
  • Ballentine Partners LLC reduced its position in Intel by 48.7% in the third quarter. The firm owned 32,438 shares of the chip maker’s stock after selling 30,843 shares during the quarter. Ballentine Partners LLC’s holdings in Intel were worth $1,236,000 as of its most recent filing with the Securities and Exchange Commission (SEC).
  • Prudential Financial Inc. trimmed its holdings in shares of Intel by 1.0% during the third quarter. The fund owned 13,446,191 shares of the chip maker’s stock after selling 135,526 shares during the quarter. Prudential Financial Inc. owned approximately 0.29% of Intel worth $512,031,000 as of its most recent SEC filing.

Insider News……

  • EVP Diane M. Bryant sold 2,119 shares of the company’s stock in a transaction that occurred on Thursday, October 26th. The stock was sold at an average price of $41.06, for a total value of $87,006.14.
  • Also, CEO Brian M. Krzanich sold 889,878 shares of the stock in a transaction that occurred on Wednesday, November 29th. The shares were sold at an average price of $44.19, for a total value of $39,323,708.82.

Summary

For the stock to get back to new highs, management will need to assure everyone that things are running normally but also show that past moves have put the company in place to continue its growth trajectory.

But for now expect more dismal top line growth from Intel. Operating income growth will likely outstrip revenue growth due to operating efficiencies. INTC trades at nearly 16x earnings. Many investors rate the stock a sell until it can jump-start both top and bottom line results.

Intel has a current ratio of 1.60, a quick ratio of 1.27 and a debt-to-equity ratio of 0.39. Intel Co. has a 1-year low of $33.23 and a 1-year high of $47.64. The stock has a market cap of $212,940.00, a price-to-earnings ratio of 15.97, a PEG ratio of 1.66 and a beta of 1.06.

Option Trade - Las Vegas Sands Corp. (NYSE:LVS) Calls

Wednesday, January 24, 2018

** OPTION TRADE: Buy the LVS FEB 16 2018 80.000 CALL at approximately $1.20.

Sell price is left to your own judgment.

The world’s largest casino company, Las Vegas Sands Corp. (NYSE:LVS), is slated to release fourth-quarter 2017 numbers today, January 24, after the market closes. Analysts expect Las Vegas Sands to post earnings of $0.72 per share for the quarter.

Las Vegas Sands had an impressive run on the bourses in 2017. The stock surged a whopping 30.1%, reflecting strong investor optimism through the year.

As well, the company delivered a ROE of 31.1% in the trailing 12 months compared with the industry's 7.6%. This shows that it has a more efficient profit generation and reinvestment capacity compared to peers.

Given its strong brand recognition and improving non-gaming revenues, coupled with expansion in the domestic market. It is believed that the stock has decent upside potential.

Las Vegas Sands is well-positioned long-term with resorts in Macau, Singapore, and the U.S. It has also indicated interest in building a new property in Japan if it can win a gaming license there. And with just $7.6 billion in net debt, the company has fairly low leverage as well.

Influencing Factors

Las Vegas Sands' revenues are likely to increase year over year on a solid business model, extensive non-gaming revenue opportunities, high quality assets and attractive property locations. Additionally, a few planned entertainment offerings are expected to prove profitable in the fourth quarter.

The company's strong portfolio has helped it to withstand the economic downturn in China that hurt its Macao operations. Meanwhile, with the economic recovery in the United States, the company's business should continue to improve in Macao. Operations in Macao are expected to deliver strong growth across both gaming and non-gaming businesses.

Macau gross gaming revenue growth should continue to sizzle over the next two years as more Chinese flock to the peninsula.

That will drive significant profit growth for Las Vegas casino operators like Wynn Resorts and Las Vegas Sands, the U.S investment bank Morgan Stanley said in a report this week.

Morgan Stanley forecasts Macau gaming revenue will surge nearly a third to $43 billion by 2019. That would fall just short of its all-time revenue record of $45 billion set in 2013. Macau posted revenue of $33 billion last year, its first increase in three years.

The number of visitors traveling to the gaming enclave from small-scale Chinese cities will grow at a cumulative double-digit clip through 2022 as economic prosperity spreads, infrastructure improves and new resorts are opened, the investment bank said in the report.

Las Vegas Sands is an even bigger play than Wynn on the rapidly-growing Macau market, with a share of 21.3% projected for 2018 by Morgan Stanley. Their overweight rating stems from treating Las Vegas Sands as a "long-term play on Macau." For all operators in Macau, Morgan Stanley projects that their aggregate revenues will grow from an estimated $33.3 billion in 2017 to $47.8 billion in 2020, a 43.5% increase.

The forward P/E is 26. EPS in Q3 2017 were 72 cents, up 4.3% from 69 cents in the prior quarter. The stock has a dividend yield of 3.96%.

Analysts have increased their 2018 estimates for the company, making the earnings picture favorable. Over the past 60 days, four estimates have gone up compared with no downward revisions for the year.

Las Vegas Sands industry-leading Cotai Strip property portfolio in Macao is witnessing strong visitation and higher hotel occupancy rates buoyed by the addition of The Parisian Macao. In fact, strong visitation at The Parisian Macao has now established it as a 'must-see' destination for visitors to the Cotai Strip. Going forward, the resort is anticipated to deliver continued growth as the company further aligns the property's suite of offerings to appeal to every segment of the continually growing and evolving Macao market.

Las Vegas Sands' entire Cotai Strip portfolio of properties bode well. The company expects these properties to continue providing the economic benefits of diversification to Macao, help lure greater numbers of business and leisure travelers as well as provide both Macao and the company with a superior platform for growth in the future.

Going forward, the company plans to invest over $1.1 billion in new capital projects at Sands Cotai Central and the Four Seasons Hotel Macao over the next three years.

Las Vegas Sands continues to diversify its revenue sources. The company's consistent focus on a convention-based Integrated Resort business model is helping it to generate the most diversified set of cash flows and profit from non-gaming segments while bringing unsurpassed economic and diversification benefits to the regions in which it operates.

Moreover, new products along with The Parisian Macao will significantly bolster its strategic position and competitiveness across multiple segments. The company will be able to significantly grow its retail business and meetings, incentive, convention and exhibitions (MICE) space. Both these areas of business will aid non-gaming revenues.

Analysts and Hedge Funds Opinions

Stifel Nicolaus restated their buy rating on shares of Las Vegas Sands in a research note issued to investors on Tuesday, January 9th. The brokerage currently has a $76.00 target price on the casino operator’s stock.

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

  • Barclays upped their target price on shares of Las Vegas Sands from $69.00 to $75.00 and gave the stock an “overweight” rating in a report on Thursday, December 7th.
  • Zacks Investment Research raised shares of Las Vegas Sands from a “hold” rating to a “buy” rating and set a $75.00 target price on the stock in a report on Wednesday, November 8th.
  • Morgan Stanley raised shares of Las Vegas Sands from an “equal weight” rating to an “overweight” rating and set a $65.00 target price on the stock in a report on Monday, November 6th.
  • Roth Capital assumed coverage on shares of Las Vegas Sands in a report on Wednesday, October 25th. They set a “buy” rating and a $69.00 target price on the stock.
  • Finally, Nomura upped their target price on shares of Las Vegas Sands from $54.00 to $57.00 and gave the stock a “neutral” rating in a report on Thursday, October 26th.

Ten equities research analysts have rated the stock with a hold rating and ten have given a buy rating to the company. Las Vegas Sands currently has an average rating of “Buy” and a consensus target price of $77.66.

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

  • Csenge Advisory Group purchased a new stake in shares of Las Vegas Sands in the 3rd quarter valued at $504,000.
  • Oppenheimer & Co. Inc. boosted its stake in shares of Las Vegas Sands by 5.1% in the 2nd quarter. Oppenheimer & Co. Inc. now owns 75,993 shares of the casino operator’s stock valued at $4,855,000 after purchasing an additional 3,664 shares in the last quarter.
  • ARGA Investment Management LP boosted its stake in shares of Las Vegas Sands by 110.7% in the 2nd quarter. ARGA Investment Management LP now owns 45,300 shares of the casino operator’s stock valued at $2,894,000 after purchasing an additional 23,800 shares in the last quarter.
  • Investec Asset Management LTD boosted its stake in shares of Las Vegas Sands by 38.5% in the 2nd quarter. Investec Asset Management LTD now owns 1,800,200 shares of the casino operator’s stock valued at $115,015,000 after purchasing an additional 500,619 shares in the last quarter.

Insider News……

Director George Jamieson purchased 1,000 shares of the business’s stock in a transaction on Tuesday, November 14th. The stock was acquired at an average price of $66.96 per share, with a total value of $66,960.00. Following the purchase, the director now directly owns 6,488 shares in the company, valued at $434,436.48.

Summary

Las Vegas Sands will likely continue to benefit from a solid business model, extensive high-quality assets and attractive property locations through 2018. Moreover, some entertainment offerings in the pipeline are expected to deliver increased profitability across the company's properties.

Las Vegas Sands has a one year low of $51.35 and a one year high of $71.42. The company has a current ratio of 1.07, a quick ratio of 1.05 and a debt-to-equity ratio of 1.38. The company has a market capitalization of $55,724.89, a price-to-earnings ratio of 25.36 and a beta of 1.80.

Option Trade - Comcast Corporation (NASDAQ:CMCSA) Puts

Tuesday, January 23, 2018

** OPTION TRADE: Buy the CMCSA FEB 16 2018 40.000 PUT at approximately $0.35.

Sell price is left to your own judgment.

Headquartered in Philadelphia, PA, Comcast Corporation (NASDAQ:CMCSA), a media and technology company, will report fourth-quarter earnings tomorrow, Wednesday, January 24, before the market opens. It is expected to earn $0.47/share on $21.84 billion in revenue. Meanwhile, the so-called Whisper number is $0.51.

The focus will be on the release from the communications giant: video subscribers. The impact of 'cord-cutting' on Comcast earnings is one of the biggest risks to CMCSA stock. Back in September, a warning in terms of video subscriber declines sent CMCSA stock down 6% in a single day.

Comcast stock since has recovered those losses - and Wednesday morning's report looks potentially dangerous for exactly that reason. The rally into earnings could reverse quickly if video subscribers disappoint again. And given the accelerated pace of cord-cutting another steep decline seems potentially likely.

Obviously, Comcast can recapture some of the lost revenue from video subscriber losses through broadband access fees. But the trend still provides a headwind to growth going forward, and a 19x forward P/E multiple doesn't exactly scream value. Resistance twice has held around $42 for CMCSA in the last year - expect it will do the same this week.

According to estimates of research firm eMarketer, there were 22.2 million cord-cutters in 2017, an increase of 33.2% from 2016. According to the same report, the number of American adults watching pay TV declined 2.4% year-over-year in 2017. Comcast has about 22 million cable subscribers. It is one of the leading cable TV providers in the United States.

Since customers have increasingly more options for content, traditional media companies such as Comcast are feeling the crunch. Low-cost quality video streaming companies such as Netflix (NFLX) and Amazon Prime Video are negatively affecting the media giant’s video subscriber growth. In fiscal 3Q17, Comcast lost 125,000 video customers.

Influencing Factors

Good things happen to companies that exceed expectations, and that is something that has helped Comcast in the past. It's been four-for-four over the past year in landing ahead of Wall Street profit targets.

However, any stumble with a market used to perpetual beats could lead some analysts to rethink the model's earnings power. Comcast was able to overcome a 12% spike in programming costs in the third quarter, and it will be hard to keep profits rising if total expenses start to outweigh revenue growth.

Comcast became a major player in content with the NBCUniversal acquisition, a move that added not just NBC and Universal Pictures but also a fast-growing theme park chain and interests in cable channels including Bravo, E!, CNBC, and Syfy. Comcast's cable channels are at the mercy of the same cord-cutting trends as its original cable television platform; and Ratings for linear television continues to suffer.

The Universal Studios theme parks offer some welcome diversification, but the coming year will find it having to ramp up its capital expenditures to keep up with what Mickey Mouse is rolling out in 2019.

Analysts and Hedge Funds Opinions

On Thursday last week, Nomura Instinet downgraded Comcast Corporation from a “Buy” to “Neutral” on concerns that its growth was about to hit a major headwind. Namely, Comcast is dealing with a “narrowing runway” that will ultimately prove to be a drag on CMCSA stock, as competitors drive deeper into the company’s core-but-commoditized markets.

Nomura Instinet analyst Jeffrey Kvaal’s said…..

“Comcast’s broadband business growth] may narrow as a decline in DSL subscribers, rising fiber competition from telco rivals, and wireless technologies, such as LTE Advanced and 5G, emerge. We consider the proliferation of aggressively priced – if often limited – over the top competition likely to intensify in 2018.”

Also, Oppenheimer lowered their FY2017 EPS estimates for Comcast in a note issued to investors on Wednesday last week. Oppenheimer analyst T. Horan now anticipates that the cable giant will post earnings per share of $2.07 for the year, down from their prior forecast of $2.11. Oppenheimer also issued estimates for Comcast’s FY2018 earnings at $2.22 EPS.

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

  • Barclays lowered their price target on Comcast from $44.00 to $41.00 and set an “overweight” rating on the stock in a report on Friday, October 27th.
  • BidaskClub raised Comcast from a “strong sell” rating to a “sell” rating in a report on Tuesday, December 5th.
  • Finally, KeyCorp reissued a “hold” rating on shares of Comcast in a report on Tuesday, October 17th.

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

  • Korea Investment CORP trimmed its stake in Comcast Corporation by 3.1% during the third quarter. The institutional investor owned 4,895,595 shares of the cable giant’s stock after selling 154,500 shares during the period. Korea Investment CORP owned approximately 0.10% of Comcast worth $188,382,000 as of its most recent filing with the SEC.

Insider News……

  • EVP Arthur R. Block sold 5,630 shares of the company’s stock in a transaction dated Monday, December 18th. The stock was sold at an average price of $39.89, for a total transaction of $224,580.70.
  • Also, EVP Arthur R. Block sold 3,937 shares of the company’s stock in a transaction dated Wednesday, December 27th. The stock was sold at an average price of $40.62, for a total value of $159,920.94.

Summary

Nomura was right to deem CMCSA stock a “Hold.” This translates to an acknowledgment that, in its present condition and in light of its plausible prospects, there may be better opportunities out there for stocks moving forward.

Comcast Corporation has a market capitalization of $198,350.00, a P/E ratio of 20.02, a PEG ratio of 1.87 and a beta of 1.00. The company has a quick ratio of 0.74, a current ratio of 0.74 and a debt-to-equity ratio of 1.06. Comcast Corporation has a fifty-two week low of $34.78 and a fifty-two week high of $42.71.

Option Trade - Steel Dynamics, Inc. (NASDAQ:STLD) Calls

Monday, January 22, 2018

** OPTION TRADE: Buy the STLD FEB 16 2018 48.000 CALL at approximately $1.00.

Sell price is left to your own judgment.

So far, 2018 has started on a positive note for US steel companies. Steel stocks, which were subdued for most of 2017, saw a sharp rally in December. The positive momentum has continued into January as well.

Steel Dynamics, Inc. (NASDAQ:STLD), a steel producing and a metal recycling company,  will release its fourth-quarter results after the bell today, Monday, January 22, 2018, with analysts p estimating earnings of $0.52 per share on revenue of $2.22 billion.

On December 15, 2017, the company said it expects Q4 earnings to be in the range of $0.48 - $0.52 per share. Comparatively, the company's sequential third quarter 2017 earnings were $0.64 per share, which included debt refinancing and repayment charges of $0.02 per share. Excluding these items, Q3 2017 adjusted earnings were $0.66 per share.

However, it’s worth noting that Steel Dynamics’ guidance was released before the tax bill passed. Any impact from the tax bill isn’t included in the guidance. The company posted an EPS of $0.64 in 3Q17 and $0.08 in 4Q16. However, there were significant one-time items in Steel Dynamics’ 4Q16 earnings. After adjusting for these one-time items, the company posted an adjusted EPS of $0.43 in 4Q16 and $0.66 in 3Q17. Steel Dynamics’ 4Q17 earnings estimates might be somewhat conservative looking at the trend in steel prices.

"Despite a lower sequential fourth quarter earnings result, we remain confident that macroeconomic and market conditions are in place to benefit domestic steel consumption in 2018," said Mark D. Millett, President and Chief Executive Officer.

Steel Dynamics expects Q4 2017 profitability from its overall steel operations to decrease in comparison to sequential third quarter results, reflecting the company's flat roll operations. Profitably for metals recycling platform is expected to remain consistent with sequential third quarter results, despite lower average ferrous selling values, as nonferrous earnings improved. However, demand remains strong for fabricated steel joist and deck products, and earnings from fabrication business are expected to somewhat improve from sequential Q3 results, based on expected record shipments and improved average sales price.

The stock has gained 8.5% as of the closing prices on January 17.

There have been some important developments in the US steel space this month. The US Department of Commerce submitted the findings of the Section 232 imports probe to President Trump. The Trump Administration ordered the probe last year to investigate whether steel imports threaten US national security. According to the Department of Commerce, “After this submission, by law, the President has 90 days to decide on any potential action based on the findings of the investigation.”

Analysts and Hedge Funds Opinions

Jefferies Group reaffirmed their buy rating on shares of Steel Dynamics in a report published last  Thursday morning. Jefferies Group currently has a $53.00 target price on the basic materials company’s stock. Jefferies Group also issued estimates for Steel Dynamics’ Q4 2017 earnings at $0.50 EPS, FY2017 earnings at $2.61 EPS, FY2018 earnings at $3.63 EPS and FY2019 earnings at $2.97 EPS.

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

  • BidaskClub raised shares of Steel Dynamics from a buy rating to a strong-buy rating in a research report on Saturday, January 6th.
  • Bank of America set a $51.00 price objective on shares of Steel Dynamics and gave the stock a buy rating in a research report on Monday, January 8th.
  • Zacks Investment Research raised shares of Steel Dynamics from a sell rating to a hold rating in a research report on Wednesday, January 10th.
  • Longbow Research raised shares of Steel Dynamics from a neutral rating to a buy rating in a research report on Wednesday, December 20th.
  • Finally, Cowen set a $43.00 price objective on shares of Steel Dynamics and gave the stock a buy rating in a research report on Monday, December 18th.

Five equities research analysts have rated the stock with a hold rating, twelve have given a buy rating and one has issued a strong buy rating to the company. The stock currently has an average rating of Buy and an average target price of $43.71.

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

  • Vanguard Group Inc. lifted its position in Steel Dynamics by 2.6% in the 2nd quarter. Vanguard Group Inc. now owns 24,405,049 shares of the basic materials company’s stock valued at $873,945,000 after acquiring an additional 611,096 shares in the last quarter.
  • BlackRock Inc. increased its stake in Steel Dynamics by 9.2% in the 2nd quarter. BlackRock Inc. now owns 21,932,609 shares of the basic materials company’s stock valued at $785,405,000 after buying an additional 1,840,803 shares during the last quarter.
  • Boston Partners increased its stake in Steel Dynamics by 3.6% in the 3rd quarter. Boston Partners now owns 16,977,310 shares of the basic materials company’s stock valued at $585,208,000 after buying an additional 593,498 shares during the last quarter.
Summary

Steel Dynamics has a 1-year low of $32.15 and a 1-year high of $47.85. The company has a debt-to-equity ratio of 0.80, a current ratio of 3.35 and a quick ratio of 1.95. The company has a market capitalization of $11,040.00, a price-to-earnings ratio of 21.39, a P/E/G ratio of 1.06 and a beta of 1.40.