“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, March 05, 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 - - Applied Materials, Inc. (NASDAQ:AMAT) Calls

Friday, March 09, 2018

** OPTION TRADE: Buy AMAT APRIL 20 2018 62.50 CALL at approximately $1.50 each. Sell price is left to your own judgment.

Chip stocks are on a rampage. And the chip-gear maker Applied Materials, Inc. (NASDAQ:AMAT), headquartered in Santa Clara, manufacturing equipment, services, and software to the semiconductor, display, and related industries worldwide, being a top holdings, is ripe for a bullish option trade.

Ever since the early February crash, tech stocks have been market leaders. The Nasdaq was the first broad market index to reclaim its peak and strength from semiconductors was a big reason for the muscle flexing. And, AMAT shares have been following in kind. Their recovery from February was rapid, resulting in a "V" shaped bounce for the ages. Volume patterns accompanying the rebound were particularly telling. Multiple accumulation days cropped up showing institutions were plowing capital back into the stock.

Applied Materials is still riding a huge wave of investor confidence after the company reported record quarterly revenues of $4.2 billion just a few weeks ago. On top of the 28% jump in Q1 sales, the wafer equipment firm’s adjusted quarterly earnings skyrocketed 58% year over year.

Before today’s gains, shares of AMAT had jumped over 19% in the last four weeks alone and 56% during the last year.

Credit Suisse recently reiterated its “Outperform” rating on AMAT and bumped up its 12-month target for the stock from $74 to $75.

Influencing Factors

Applied Materials is expected to see its current-quarter earnings soar 43% to hit $1.13 per share. On top of this bottom line growth projection, Applied Materials’ quarterly sales are expected to reach $4.45 billion, which would mark yet another stellar period of top line expansion at 25.5%.

Looking ahead to Applied Materials full fiscal year, the company is projected to see its earnings surge over 35%. The firm’s full-year sales are expected to climb 19.6% to reach $17.39 billion.

Applied Materials announced that its board has authorized a share repurchase program on Wednesday, February 14th that allows the company to repurchase $6.00 billion in outstanding shares. This repurchase authorization allows the manufacturing equipment provider to repurchase shares of its stock through open market purchases. Stock repurchase programs are generally an indication that the company’s leadership believes its stock is undervalued.

Analysts and Hedge Funds Opinions

Applied Materials was upgraded by research analysts at BidaskClub from a “hold” rating to a “buy” rating in a research report issued on Thursday, March 1st.

Also, Applied Materials was upgraded by Zacks Investment Research from a “hold” rating to a “buy” rating in a report released on Monday, February 19th. The brokerage presently has a $60.00 price objective on the manufacturing equipment provider’s stock.

According to Zacks, “Applied Materials delivered strong fiscal first-quarter results on the back of demand for chips used in electronic items. The company has outperformed the industry it belongs to in the past 12 months. The stock is currently riding on inflection-focused innovation strategy which is its primary growth driver. The company continues to witness technological advancements in semiconductor and display areas. Applied Materials is in a great position to grow sustainably and profitably based on its strong pipeline of enabling technologies, supported by expanding opportunities on the semiconductor and display fronts. 3D NAND, DRAM and patterning have led to significant market share gains.”

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

  • Susquehanna Bancshares raised Applied Materials from a “neutral” rating to a “positive” rating and increased their price objective for the stock from $60.00 to $72.00 in a research report on Tuesday, January 16th.
  • Bank of America increased their target price on Applied Materials from $65.00 to $76.00 and gave the stock a “buy” rating in a research note on Wednesday, November 15th.
  • B. Riley reaffirmed a “buy” rating and issued a $71.00 price objective on shares of Applied Materials in a research note on Tuesday, January 16th.
  • Vetr raised Applied Materials from a “hold” rating to a “buy” rating and set a $59.06 price target for the company in a research report on Friday, January 26th.
  • Finally, UBS Group upgraded Applied Materials from a “neutral” rating to a “positive” rating in a report on Tuesday, January 16th.

Twenty-six equities research analysts have rated the stock with a buy rating and one has issued a strong buy rating to the stock. The stock has a consensus rating of “Buy” and an average target price of $70.10.

Summary

Investors seem confident in Applied Materials based on its past performance—the company has matched or topped earnings estimates for 18 straight quarters—as well as its potential to grow in a booming industry.

Applied Materials has a market capitalization of $62,550.00, a P/E ratio of 16.54, a price-to-earnings-growth ratio of 1.14 and a beta of 1.58. The company has a debt-to-equity ratio of 0.62, a current ratio of 2.96 and a quick ratio of 2.25. Applied Materials, Inc. has a 12-month low of $36.96 and a 12-month high of $60.89.

Option Trade - - Twitter Inc. (NYSE:TWTR) Calls

Thursday, March 08, 2018

** OPTION TRADE: Buy TWTR APRIL 20 2018 39.000 CALL at approximately $1.20 each. Sell price is left to your own judgment.

Twitter Inc. (NYSE:TWTR), a global platform for public self-expression and conversation in real time, continues to trade well despite the volatility in the broader market; plus better-than-expected earnings has propelled TWTR stock higher.

Twitter is continuing its so-far stellar 2018 rally and also marked another breakout move on Monday that now eyes a next well-defined upside target.

Since TWTR’s initial public offering date in 2013 it didn’t stop falling until early 2016, but then slipped into a lengthy bottom-building phase that did not end until December 2017, when it broke past both diagonal resistance as well as out of the two-year sideways consolidation phase.

The rally since then has seen the stock break above its it’s 200-week simple moving average and now sits inside a price band that has offered both support and resistance.

After an initial post-earnings rally in February, the stock began to consolidate along with the broader market volatility spike. And now the recent rally broke Twitter stock out of the wedge-pattern consolidation.

Summary

Twitter has a market cap of $26,560.00, a price-to-earnings ratio of 111.75, a P/E/G ratio of 9.26 and a beta of 0.80. The company has a quick ratio of 9.12, a current ratio of 9.12 and a debt-to-equity ratio of 0.34. Twitter Inc has a 12-month low of $14.12 and a 12-month high of $35.82.

Option Trade - - Ross Stores, Inc. (NASDAQ:ROST) Calls

Tuesday, March 06, 2018

** OPTION TRADE: Buy ROST APRIL 20 2018 82.500 CALL at approximately $1.75each. Sell price is left to your own judgment.

California-based off-price retail apparel and home fashion store Ross Stores, Inc. (NASDAQ:ROST) will report its fourth-quarter numbers after the market closes today, March 6, with the consensus calling for earnings of $0.93 per share. The whisper number is $0.95. During the same period last year the company earned $0.77. Analysts expect that ROST will beat expectations.

For the fourth quarter, the company’s raised sales and earnings view. Ross Stores anticipates sales growth in the range of 11-12%, including a benefit from the additional 53rd week. Moreover, earnings per share are expected to lie in the range of $3.24-$3.28.

Ross Stores has been continuing with its upbeat performance, recording a positive earnings surprise in 13 of the last 14 quarters.

ROST has been one of the better performing retailers over the last six months, and the stock should manage to build on its recent gains following the upcoming quarterly report. The company offers name brand merchandise at low prices, which is a good business model to have in the current market. Consumers are upbeat about the overall economy, so consumer spending should remain strong for the foreseeable future.

Influencing Factors

Ross Stores Holding is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an 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 ROST in this report.

The company’s strong performance can be attributed to its solid endeavors, including better price management, merchandise, cost containment and store expansion plans. Furthermore, Ross Stores’ off-price model offers strong value proposition and micro-merchandising that drive better product allocation and margins. This, in turn, will help sustain the company’s top-line growth trends.

Meanwhile, Ross Stores remains focused on its merchandising organization through investments in workforce, processes and technology. In fact, the company has been committed to improving its merchandise assortments in the ladies’ apparel business. These initiatives strengthen Ross’ buying operation, facilitating the purchase of in-trend merchandise at attractive prices.

Over the last few years, they've performed exceptionally well, especially in a sector that is getting increasingly difficult to compete in. Over the last 3 years, ROST has an average YoY increase in revenue of 8%. This success is attributed to the company's understanding of the growing e-commerce industry and their ability to adapt by "pursuing and refining our existing strategies and by continuing to strengthen our organization, diversify our merchandise mix and more fully develop our systems to improve regional and local merchandise offerings."

Ross Stores has clearly been driven towards increasing marketplace exposure through their expansion of store locations. Since 2013, the company has opened an average of 90 stores per year. Between Q1 and Q3 of their 2017 fiscal year, they've already opened 96 stores.

ROST has a P/E of 25.20, a forward P/E of 20 and a PEG of 1.67. The average industry ratios are a P/E of 28.6 and a forward P/E of 17.1. For a company like ROST that has been expanding so rapidly while consistently blowing past earnings estimates, they are grossly undervalued to the industry. With the growth that the company has already shown, a PEG as low as 1.67 signals that there is still plenty of upside potential.

Analysts and Hedge Funds Opinions

BidaskClub upgraded shares of Ross Stores from a “hold” rating to a “buy” rating in a research report on Wednesday, January 24th.

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

  • SunTrust Banks reiterated a “buy” rating on shares of Ross Stores in a research note on Friday, February 2nd.
  • Nomura reiterated a “buy” rating and set a $90.00 target price (up from $80.00) on shares of Ross Stores in a research note on Wednesday, January 17th.
  • Cowen set a $78.00 target price on shares of Ross Stores and gave the company a “buy” rating in a research note on Saturday, November 18th.

Eight analysts have rated the stock with a hold rating and thirteen have assigned a buy rating to the company’s stock. The stock currently has a consensus rating of “Buy”.

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

  • Ross Stores accounts for approximately 4.7% of Bristol Gate Capital Partners Inc.’s holdings, making the stock its largest position. Bristol Gate Capital Partners Inc. owned approximately 0.11% of Ross Stores worth $33,931,000 at the end of the most recent quarter.
  • Dimensional Fund Advisors LP raised its stake in Ross Stores by 0.8% during the 2nd quarter. Dimensional Fund Advisors LP now owns 1,118,801 shares of the apparel retailer’s stock valued at $64,586,000 after buying an additional 8,858 shares during the last quarter.
  • AHL Partners LLP raised its stake in Ross Stores by 71.5% during the 2nd quarter. AHL Partners LLP now owns 28,226 shares of the apparel retailer’s stock valued at $1,629,000 after buying an additional 11,763 shares during the last quarter.
  • Nomura Holdings Inc. purchased a new stake in Ross Stores during the 2nd quarter valued at $1,867,000.
Summary

Ross Stores has been posting some impressive growth numbers and continually expanding their exposure to the market. And as the markets start to recover from the correction in early February, ROST shares are in a prime position to extend upwards.

Ross Stores, Inc. has a 1-year low of $52.85 and a 1-year high of $85.66. The company has a debt-to-equity ratio of 0.14, a current ratio of 1.57 and a quick ratio of 0.68. The stock has a market cap of $29,800.00, a price-to-earnings ratio of 24.91, a PEG ratio of 2.09 and a beta of 1.09.

Option Trade - - Momo Inc (ADR) (NASDAQ:MOMO) Calls

Monday, March 05, 2018

** OPTION TRADE: Buy MOMO MARCH 16 2018 35.000 CALL at approximately $1.35each. Sell price is left to your own judgment.

Momo Inc (ADR) (NASDAQ:MOMO), China's fast-growing social entertainment platform, will report earnings on Wednesday, March 07, 2018, before the market opens. The consensus earnings estimate is $0.46 per share on revenue of $386.00 million. The Earnings Whisper number is for $0.48 per share. The company's guidance was for revenue of $370.00 million to $385.00 million.

Consensus estimates are for year-over-year earnings growth of 12.20% with revenue increasing by 56.84%.

For the full year, analysts are looking for earnings of $1.71 on revenue of $1.31 billion. If Momo meets or exceeds current expectations - which it has done for four straight quarters - it will represent more than 100% growth for both metrics.

Momo's social app, often called "China's Tinder," lets users find each other based on their shared locations. However, its core growth engine is its live video streaming business, which generates revenue from viewers paying membership fees for premium broadcasters or the purchase of "virtual gifts." A much smaller percentage of Momo's revenue comes from its ads and internally developed mobile games.

Momo stock has gained 41% since hitting a 52-week low in early December. The acquisition of Tantan - an app similar to Tinder - sent MOMO up 17% in a single session last month. Even after those gains, by any measure, MOMO stock looks much cheaper than other Chinese growth plays. The stock trades at 15x forward earnings, and the average Street target price of $40 implies 25%+ upside.

Those same analysts are projecting 54% revenue growth for Q4. The combination of a cheap multiple and big growth would seem to imply that MOMO is set up nicely for gains on Wednesday if it can top consensus expectations.

Short interest has decreased by 3.1% since the company's last earnings release.

Influencing Factors

Built originally as a messaging company, MOMO has expanded to premium memberships, third-party game-sharing revenue and producing marketing tools for local merchants. All of these features are helping fuel the company's impressive growth.

MOMO continues to have strong growth in both sales and net income, while Momo stock's valuation is quite reasonable.

Current estimates call for another strong year in 2018. Earnings expectations stand at $2.13-per-share, up almost 25% from 2017 estimates. Revenue expectations call for 30% growth in 2018.

Shares trade at 19.5 times 2017 earnings and just 15.7 times 2018 estimates. This appears to be cheap considering how much Momo stock is growing earnings next year after an intense year of growth in 2017. While its growth is set to slow considerably, the valuation is low enough that it seems to reflect that slowdown.

It's not just a growth story, as the fundamentals are really solid. Momo sports operating profit margin of more than 29%, while the net profit margin is almost 26%. It has trailing free-cash flow (FCF) of $393 million and that doesn't include fourth-quarter results.

Analysts and Hedge Funds Opinions

The stock of Momo was given a“Buy” rating on Tuesday, February 20 by Citigroup.

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

  • Jefferies maintained it with “Buy” rating and $54.0 target in Tuesday, October 3 report. Jefferies initiated Momo Inc. (NASDAQ:MOMO) on Wednesday, February 8 with “Buy” rating.
  • J.P. Morgan upgraded Momo Inc. (NASDAQ:MOMO) on Friday, January 26 to “Buy” rating.

Among 11 analysts covering Momo, 9 have Buy rating, 0 Sell and 2 Hold.

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

  • Elite Wealth Management Inc. purchased a new stake in shares of Momo during the 4th quarter. The firm purchased 48,781 shares of the information services provider’s stock, valued at approximately $1,194,000.
  • Virginia Retirement Systems ET AL now owns 37,900 shares of the information services provider’s stock worth $1,188,000 after acquiring an additional 1,900 shares during the last quarter.
  • Boothbay Fund Management LLC grew its stake in shares of Momo by 11.4% in the third quarter. Boothbay Fund Management LLC now owns 26,000 shares of the information services provider’s stock worth $815,000 after acquiring an additional 2,657 shares during the last quarter

Summary

MOMO has robust earnings, revenue and cash flow growth and a below-market valuation.

Momo Inc has a twelve month low of $22.49 and a twelve month high of $46.69. The stock has a market capitalization of $6,350.00, a PE ratio of 21.75 and a beta of 1.79.