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.
Wednesday, 03 February, 2016
Option Trade – New York Times Co (NYSE:NYT) Calls
**OPTION TRADE: Buy the NYT Feb 2016 13.000 call (NYT160219C00013000) at approximately $0.50. Sell price is left to your own judgment.
The New York Times Co (NYSE: NYT), a diversified media conglomerate, is slated to report fourth-quarter 2015 results tomorrow, February 4th. Analysts expect New York Times to post earnings of $0.29 per share and revenue of $439.67 million for the quarter.
The New York Times Company continued its earnings beat trend with better-than-expected results in the third quarter of 2015, driven by an increase in digital subscribers and a rise in circulation revenues. With this, the company surpassed earnings expectations for five straight quarters. The average positive surprise over the trailing four quarters comes to 29.7%.
Analysts believe that the momentum building around the stock is guiding toward another impressive performance. Following better-than-expected third-quarter 2015 results, the Consensus Estimate portrayed an uptrend, climbing 8.5% and 5.1% to 64 cents and 62 cents for 2015 and 2016, respectively, over the past 90 days. Over the same time frame, the Consensus Estimate for the fourth quarter displayed positive movement, rising 11.5% to 29 cents, thus instilling confidence among investors about an earnings beat.
The New York Times Company has been adding diverse revenue streams, which include a circulation pricing model and a pay-and-read model for NYTimes.com and the International New York Times, to stay less susceptible to the economic conditions. The company is also adapting to the changing face of the multiplatform media universe, which currently includes incorporating mobile, social media networks and reader application products in its portfolio. Additionally, the company remains focused on launching lower-priced as well as premium subscription-based model to target different masses according to their appetite, and emphasize on online video production and brand extension. These factors make the stock appear promising and a rational choice for investors ahead of its fourth-quarter earnings release.
Wednesday, 03 February, 2016
Option Trade – News Corp (NASDAQ:NWSA) Puts
**OPTION TRADE: Buy the NWSA Feb 2016 12.000 put (NWSA160219P00012000) at approximately $0.40. Sell price is left to your own judgment.
News Corp (NASDAQ: NWSA), a diversified media and information services company, is scheduled to announce its second quarter fiscal 2016 earnings tomorrow, Thursday, February 4. The company continued to struggle amid changing consumer behavior towards digital media. Despite enhancing its digital expertise by way of acquisitions, News Corp failed to grow its revenues in the September quarter, which fell 4% y-o-y to $2 billion.
One part of the company’s multi-pronged strategy to return to profitability is to maintain strict control over its operating expenses. As a result, in the September quarter, operating expenses were down 6% y-o-y to $1.2 billion. Despite fiscal prudence, losses in the top line caused the company-wide EBITDA margin to fall by 1 percentage point to 8.2%.
It is expected that foreign currency headwinds and soft advertising demand will weigh upon the company’s performance in the quarter to be reported. Advertising, which forms a major part of News Corporation’s total revenue (approximately 44% of fiscal 2015 total revenue), remains highly vulnerable to the economic conditions. Total advertising revenue dropped 4.3% during the first quarter of fiscal 2016. Advertising revenue fell across its News and Information Services segment due to the adverse impact of foreign currency fluctuations, softness in the print advertising market, and a decline in revenues at News America Marketing.
News Corporation is in a transitional phase, looking to diversify its revenue streams. Moreover, a sturdy balance sheet provides it with the financial flexibility to focus on strategic acquisitions, operational enhancement and shareholder-friendly moves.
Stock analysts at Jefferies Group dropped their FY2016 EPS estimates for News Corp in a research note issued on Tuesday. Jefferies Group analyst J. Janedis now forecasts that the firm will post earnings of $0.49 per share for the year, down from their prior estimate of $0.55. The consensus estimate for News Corp’s FY2016 earnings is $0.53 per share. Jefferies Group also issued estimates for News Corp’s Q3 2016 earnings at $0.07 EPS.
Wells Fargo downgraded News Corp from an “outperform” rating to a “market perform” rating in a research note on Monday, November 9th. Zacks Investment Research reissued a “sell” rating on shares of News Corp in a research note on Sunday, January 17th. Finally, Deutsche Bank dropped their price target on News Corp from $19.00 to $18.50 in a research note on Friday.
Tuesday, 02 February, 2016
Option Trade – GoPro Inc (NASDAQ:GPRO) Puts
**OPTION TRADE: Buy the GPRO Feb 2016 10.000 put (GPRO160219P00010000) at approximately $0.80. Sell price is left to your own judgment.
GoPro Inc (NASDAQ: GPRO), a producer of mountable and wearable cameras and accessories, will report Q4 2015 earnings after close of market tomorrow, February 3rd.
The market has already been warned that its fourth-quarter revenue would be much lower than expected and that layoffs were in order, news that hammered the California-based company’s stock down nearly 30 percent.
Analysts expect GoPro to post losses in the quarter ending in December of $12 million, or 10 cents per share, compared to profit of $122.1 million, or 83 cents per share in the same quarter of 2014. Revenue is expected to drop to $499.2 million, from $633.9 million.
Since the outcome of the fourth quarter earnings call scheduled for Wednesday is already out there, analysts and investors are instead on the lookout for what the first quarter has in store. Citigroup analyst Jeremy David describes the $297 million revenue consensus estimate for the three months ending in March as ‘too optimistic’. The analyst projects revenue in the range of $230 million-250 million, attributing his lowered estimates on a difficult sell-through coupled with a strong likelihood of inventory destocking.
In the past six months, shares of the action camera pioneer have plunged by nearly 82% on the back of disappointing sales of its flagship Hero product line during the past two quarters. GoPro’s latest offering, the Hero 4 Session, launched back in July last year, has witnessed extremely poor demand from consumers. Management had to bring down the price of the product in two consecutive instances in order to attract consumer interest, but to no avail.
Additionally, the economic downturn in China has also taken an immense toll on the company’s stock, which slipped below the $10 mark earlier last month. Poor production numbers in China resulted in the country’s stock market plunging as much as 7%, which in turn sparked a broader market sell-off in the United States.
Company stock is down about 78 percent over the past 12 months and down about 37 percent since the start of the year.
Tuesday, 02 February, 2016
Option Trade – General Motors Company (NYSE:GM) Calls
**OPTION TRADE: Buy the GM Mar 2016 30.000 call (GM160318C00030000) at approximately $1.00. Sell price is left to your own judgment.
General Motors Company (NYSE: GM) is set to report fourth-quarter 2015 results on Feb 3. Analysts forecast fourth-quarter unadjusted earnings for the world’s third-largest automaker to come in at $1.90 billion, or $1.21 per share, up from $1.12 billion, or 66 cents per share in the last three months of 2014.
In the last quarter, the company delivered a positive earnings surprise of 28.21%.
Benefitting from Americans’ ravenous demand for trucks and SUVs, General Motors Company has seen steady sales growth despite challenges to the industry in South America and Europe. GM is also one of the largest foreign automakers in China, the world’s largest auto market, where it has nearly a dozen joint ventures. Like its American rival Ford, GM has dipped more deeply into the industry’s future-of-mobility movement, most recently by forming a special division to speed up development of self-driving and electric cars.
Company executives have already signaled that the carmaker would report robust earnings and maintain a bright outlook for 2016. GM and rival Ford Motor Co have each been reporting results and outlook that show that both companies have come back strong after the 2008 recession. If GM carries out its plan, the once-bankrupt automaker will have returned to shareholders about $23 billion between 2012 and the end of 2017, or about 90 percent of its free cash flow. GM has allied with several companies including ride-sharing Lyft as it attempts to evolve with the transforming transportation industry.
GM stock is down about 11 percent over the past 12 months and down about 13 percent since the start of the year.
Monday, 01 February, 2016
Option Trade – Bank of America Corp (NYSE:BAC) Calls
**OPTION TRADE: Buy the BAC Mar 2016 14.000 call (BAC160318C00014000) at approximately $0.65. Sell price is left to your own judgment.
Stocks had a strong open on Friday after Japan cut its interest rates into negative territory to follow Europe on easing trends and quantitative easing. This followed on from strong gains in U.S. markets on Thursday.
Bank of America Corp (NYSE: BAC) also gained greatly from this stock market movement, but more so due to analysts at CSLA raising the stock to Outperform from Sell with a $16 price target (versus a $13.53 prior close). Bank of America’s consensus analyst target is now $18.40 and its 52-week range is $12.94 to $18.48.
It is important to consider that over the past one week, Bank of America has gained momentum, recovering towards the neutral territory.
CLSA is "positive on large US banks" in general, arguing their stocks are priced at "recession prices without a recession." As for Bank of America in particular, the stock sports "relatively clean" book value and a cheap valuation.
Currently, Bank of America sells for a price-to-book value of just 0.6, versus CLSA's longtime favorite, JPMorgan, which costs more than half-again Bank of America's price -- 0.95 times book.
With better-than-expected earnings results, Bank of America stands out in the industry. The bank has been able to outperform its peers with effective cost cutting measures that aided the bank to improve overall earnings and post record annual profits.
The bank has great asset sensitivity and excess deposits, which are deemed to be invested in short-term yields when rates are low.
As for the future outlook, analysts providing coverage on the bank remain bullish and expect improved earnings.
Additionally, it is worth noting that the bank holds nearly 2% of total loan in energy sector. With the plunge in oil prices, investors remain concerned for banks that have issued loan to the energy sector. While collaterals backing these loans are shedding value, Bank of America has been able to mitigate the risk related to its exposure by creating provision of loan loss reserves. Moreover, in order to protect itself from trading risks, it has repurchased shares and increased dividends.
Bank of America is all set to penetrate into the market with card-less ATM initiative, as these transactions will be made through smartphones. The pursuit of this initiative is expected to provide the bank with improved security and efficient transaction.
Additionally, the bank has been striving to combat the headwinds in the industry and has adopted alternative measures to boost profits. It has undertaken cost-cutting measures; reduction in headcount has been the prominent one.