“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, March 12, 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.


The following trade is from “Earnings Predictions for the Week Beginning March 12, 2018”

Option Trade - - 3D Systems Corporation (NYSE:DDD) PUTS

Tuesday, March 13, 2018

** OPTION TRADE: Buy the DDD APRIL 20 2018 12.000 PUT at approximately $1.05. Sell price is left to your own judgment.

3D Systems Corporation (NYSE:DDD) – providing three-dimensional (3D) printing solutions, will report earnings after the market closes. Analysts expect 3D Systems's EPS to be near 1 cent per share on sales of $162.48 million.

3D Systems EPS in the same period a year ago totaled 15 cents per share. Sales were $165.93 million. Analysts estimate would represent a 93.33 percent decrease in the company's earnings. Revenue would be down 2.08 percent from the same quarter last year.

Over the last 52-week period, shares are down 37.05 percent. Over the last six months, shares of 3D Systems have underperformed the industry. The stock has plunged 26.1% against the industry's positive return of 9.9%.

Analysts have adjusted their estimates lower for EPS and revenues over the past 90 days. The average rating by analysts on 3D Systems stock is a Neutral.

The company’s bleak earnings surprise history shows estimate misses by a huge margin in three of the trailing four quarters, the average negative surprise being a whopping 83.8%. Last quarter, the company reported an adjusted loss of 20 cents, lagging estimates by a massive 281.8%. The bottom line was dragged by top-line decline as well as a disproportionate rise in cost of sales.

Also, 3D Systems’ earnings estimates have moved south in the past month, indicating a bearish analyst sentiment for the stock.

Influencing Factors

In recent trading, shares of 3D Systems have crossed above the average analyst 12-month target price of $11.78, changing hands for $12.58/share. When a stock reaches the target an analyst has set, the analyst logically has two ways to react: downgrade on valuation, or, re-adjust their target price to a higher level. The situation in this instance is to lower the price target to $11.00.

3D Systems (DDD) recently reported preliminary Q4'17 and FY'17 results and rescheduled its earnings release and conference call and will delay its Form 10-K Filing.

DDD's revenue has been downhill for some time.

The company expects to report a fourth quarter GAAP loss in the range of $0.08 to $0.10 per share compared to earnings of $0.05 per share in the prior year, and expects non-GAAP earnings of $0.03 to $0.05 per share compared to non-GAAP earnings of $0.15 per share in the fourth quarter of 2016.

Also, the company expects to report an FY'17 GAAP loss of $0.58 to $0.60 per share vs. a $0.35 loss in FY'16, and a non-GAAP loss in the range of $0.01 to $0.03 per share vs. a non-GAAP profit of $0.46 per share for FY'16.

Looking at the long-term chart of DDD, it's been in a wide trading zone between $24 and $6.30 over the past three years. And not only has the stock (and the sector) underperformed, but long-time investors who placed a bet on the overhyped growth story years ago still have massive losses.

Analysts and Hedge Funds Opinions             

Vetr lowered 3D Systems from a “strong-buy” rating to a “buy” rating and set an $11.00 price target on the stock in a research note on Thursday, January 11th.

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

  • JPMorgan Chase & Co. lowered 3D Systems from a “neutral” rating to an “underweight” rating and set an $11.00 price objective on the stock in a research report on Friday, February 9th.
  • William Blair restated an “outperform” rating on shares of 3D Systems in a research report on Thursday, January 25th.
  • Finally, ValuEngine upgraded 3D Systems from a “sell” rating to a “hold” rating in a research report on Thursday, November 9th.

Shares of 3D Systems have earned an average rating of “Hold” from the nineteen ratings firms that are covering the company. Seven equities research analysts have rated the stock with a sell rating, ten have given a hold rating, one has issued a buy rating and one has issued a strong buy rating on the company. The average 1 year price target among analysts that have updated their coverage on the stock in the last year is $11.05.

Summary

3D Systems has a 52 week low of $7.92 and a 52 week high of $23.70. The company has a quick ratio of 1.94, a current ratio of 2.63 and a debt-to-equity ratio of 0.01. The stock has a market capitalization of $1,430.00, a price-to-earnings ratio of -27.35 and a beta of 1.55.


Option Trade - - Nuance Communications Inc. (NASDAQ:NUAN) Calls

Tuesday, March 13, 2018

** OPTION TRADE: Buy NUAN APRIL 20 2018 18.000 CALL at approximately $0.75 each. Sell price is left to your own judgment.

The leading provider of speech and imaging solutions for businesses and consumers globally Nuance Communications Inc. (NASDAQ:NUAN), is still greatly undervalued, and has a lot of room to move upwards.

Nuance announced a profit for its first quarter, last Thursday that climbed from last year.

The company said its bottom line rose to $80.67 million, or $0.27 per share. This was up from $76.89 million, or $0.26 per share, in last year's first quarter.

Analysts had expected the company to earn $0.26 per share.

The company said revenue for the quarter rose 2.9% to $501.65 million. This was up from $487.66 million last year.

However, shares are trading flat since earnings, despite a large increase last month on preliminary results; therefore allowing plenty of room for this options trade.

Net new bookings remained strong, rising 10% to $418.4 million and sustaining a good pace of growth from past periods. The company said that the automotive and enterprise businesses contributed the most to bookings performance for the quarter.

Also, a rumored sale of the automotive division could be a major catalyst at a $1.5 billion price tag.

Influencing Factors

Voice recognition is playing a vital role in driving several key technology initiatives, and Nuance has long been a leader in that key space. In order to take maximum advantage of its opportunity, Nuance has sought to transform itself to focus more strongly on the most profitable business niches in its wheelhouse.

Coming into last Thursday's fiscal first-quarter financial report, Nuance investors were looking for solid performance from the company, but they wanted to see signs that the future could be even brighter. Nuance delivered hope in the form of boosted guidance for the coming year, and signs of good market demand were especially encouraging.

The enterprise business was Nuance's most successful segment, posting sales gains of 4% and a nearly 5 percentage point boost in profit margin. Nuance said that digital and omnichannel engagement solutions, artificial intelligence, and voice and security applications all contributed to the strong performance. Healthcare also stood out, with 3% sales gains stemming from Dragon Medical's success and the introduction of AI-related capabilities for physician documentation and diagnostic imaging.

CFO Dan Tempesta was pleased at how far Nuance has come. "Three years ago, we undertook a plan to transform our business and today, with our first-quarter results, we reached a milestone of returning to organic growth," Tempesta said. The CFO noted how a combination of efficiency, innovation, and drive helped lead to winning results.

Nuance has high hopes for the future. In its latest guidance for the 2018 fiscal year, the company said that it expects net new bookings to grow between 5% and 7%, and organic growth should be between 3% and 5%, up by 1 percentage point from its previous projections for organic growth. Nuance added $0.05 to $0.08 per share to its full-year fiscal 2018 earnings range, coming in at $1.14 to $1.20 per share on an adjusted basis.

Analysts and Hedge Funds Opinions

BidaskClub upgraded Nuance Communications from a “sell” rating to a “hold” rating in a report on Saturday, March 3rd.

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

  • Oppenheimer reiterated a “buy” rating and issued a $23.00 price objective on shares of Nuance Communications in a report on Tuesday, January 23rd.
  • Canaccord Genuity reiterated a “buy” rating and issued a $21.00 price objective on shares of Nuance Communications in a report on Monday, January 22nd.
  • Finally, TheStreet upgraded Nuance Communications from a “d+” rating to a “c-” rating in a report on Wednesday, January 17th.

Nuance has been assigned a consensus rating of “Buy” from the ten analysts that are covering the stock. One equities research analyst has rated the stock with a sell rating, two have given a hold rating, five have assigned a buy rating and one has given a strong buy rating to the company. The average 12-month price objective among brokers that have issued ratings on the stock in the last year is $20.86.

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

  • Ameriprise Financial Inc. increased its holdings in shares of Nuance Communications by 3.6% in the 3rd quarter. Ameriprise Financial Inc. now owns 18,257,115 shares of the software maker’s stock valued at $286,977,000 after acquiring an additional 637,014 shares during the last quarter.
  • Victory Capital Management Inc. increased its holdings in shares of Nuance Communications by 955.0% in the 4th quarter. Victory Capital Management Inc. now owns 6,737,164 shares of the software maker’s stock valued at $110,153,000 after acquiring an additional 6,098,570 shares during the last quarter.
  • Sirios Capital Management L P increased its holdings in shares of Nuance Communications by 30.9% in the 3rd quarter. Sirios Capital Management L P now owns 5,015,098 shares of the software maker’s stock valued at $78,838,000 after acquiring an additional 1,183,013 shares during the last quarter.
  • Finally, Neuberger Berman Group LLC increased its holdings in shares of Nuance Communications by 6.0% in the 3rd quarter. Neuberger Berman Group LLC now owns 4,903,924 shares of the software maker’s stock valued at $77,090,000 after acquiring an additional 277,184 shares during the last quarter.

Summary

Nuance has a market capitalization of $5,160.29, a PE ratio of 22.53, a P/E/G ratio of 1.77 and a beta of 0.69. The company has a debt-to-equity ratio of 1.14, a current ratio of 1.46 and a quick ratio of 1.46. Nuance Communications Inc. has a 1 year low of $14.02 and a 1 year high of $19.93.


Option Trade - - Verint Systems Inc. (NASDAQ:VRNT) Calls

Monday, March 12, 2018

** OPTION TRADE: Buy VRNT APRIL 20 2018 45.000 CALL at approximately $0.50 each. Sell price is left to your own judgment.

Technology continues its rapid invasion into every corner of human existence, the need for improved software has increased manifold. The last few years witnessed breakthroughs in cloud computing and artificial intelligence (AI), chip shrinking technology, self-driving vehicles, digital personal assistants, and Internet-of-Things, consequently setting the stage for strong growth in the software industry.

Worldwide spending on software is projected to be $354 billion in 2017, registering year-over-year increase of 8.5% (up from 5.3% in 2016). This year the industry will witness even higher growth of 9.4% to reach $387 billion.

One such prospect of software that looks bright in 2018 is a global leader in Actionable Intelligence solutions Verint Systems Inc. (NASDAQ:VRNT).  Its’ stock has made a good start to 2018, and will continue its upward trajectory after its fourth-quarter results are released on March 26, after the market closes.

Analysts are looking for Verint Systems to report $0.77 EPS, which is a 20.3% growth in earnings and a 7.3% gain in quarterly revenues. It is expected that management can meet those estimates, and the numbers should give the shares a boost and potentially drive them to new all-time highs above $46.

Wall Street analysts expect Verint Systems to post sales of $313.26 million for the current fiscal quarter. Three analysts have issued estimates for Verint Systems’ earnings, with the highest sales estimate coming in at $315.52 million and the lowest estimate coming in at $312.00 million. Verint Systems posted sales of $295.86 million during the same quarter last year, which would indicate a positive year-over-year growth rate of 5.9%.

The stock has a long-term expected EPS growth rate of 10% and has outpaced the Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 20.7%.

The company delivers its solutions through two main divisions…..

  • Customer Engagement Solutions - offering a portfolio of solutions that gathers and shares data across the enterprise, which can then be converted to intelligence to build stronger relationships and better service for customers.
  • Cyber Intelligence Solutions -- used mainly by law enforcement agencies. VRNT’s Network Intelligence Suite gathers insight and intelligence for these agencies by covering critical information from network traffic. Other products can identify suspicious behavior and offer a data mining platform to detect potential threats.

The company also has cybersecurity solutions that identify network attacks. This segment accounts for 36% of total revenues. For both businesses, VRNT uses KANA software, which it acquired from a private equity company for $514 million.

Influencing Factors

For the third quarter of 2017 sales were up 9.1% (8.1% on a constant currency basis), which featured a 6.1% gain in customer engagement (5.3% on a constant currency basis) and a 15.2% gain in cybersecurity revenues (13.7% on a constant currency basis). Management was also confident that growth can continue and is looking for 5% gains in customer engagement revenues and 10% gains in cybersecurity revenue.

EPS in the quarter increased 11.8% from 59 cents to 66 cents, slightly greater than sales growth, as margins expanded despite a 14.8% increase in research and development expenditures. This spending is helping VRNT’s top line as the company is driving innovation by automating basic business processes. This will continue in 2018 and is partly to blame for EPS guidance for fiscal 2019 coming in just shy of some of the highest estimates and consensus of $3.10.

In 2016, management made two important acquisitions…..

  • Opinion Lab, which offers feedback solutions and technological depth to the company’s Voice of the Customer offerings, and
  • Contact Solutions, which manages mobile customer care solutions.

Analysts and Hedge Funds Opinions

Several analysts have recently commented on the company…..

  • Oppenheimer reaffirmed a “buy” rating and set a $49.00 target price on shares of Verint Systems in a report on Thursday, December 7th.
  • BidaskClub raised shares of Verint Systems from a “hold” rating to a “buy” rating in a report on Wednesday, December 27th.
  • Finally, Zacks Investment Research raised shares of Verint Systems from a “hold” rating to a “buy” rating and set a $47.00 target price for the company in a report on Saturday, December 23rd.

Verint Systems has earned a consensus recommendation of “Buy” from analysts that are covering the company. One research analyst has rated the stock with a sell recommendation, two have issued a hold recommendation and six have assigned a buy recommendation to the company. The average 12 month price target among brokerages that have covered the stock in the last year is $47.60.

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

  • Alliancebernstein L.P. boosted its stake in Verint Systems by 5.0% during the 4th quarter. Alliancebernstein L.P. now owns 2,829,874 shares of the technology company’s stock valued at $118,430,000 after acquiring an additional 134,079 shares during the last quarter.
  • Fuller & Thaler Asset Management Inc. boosted its stake in Verint Systems by 9.6% during the 4th quarter. Fuller & Thaler Asset Management Inc. now owns 2,158,174 shares of the technology company’s stock valued at $90,320,000 after acquiring an additional 188,644 shares during the last quarter.
  • Dimensional Fund Advisors LP boosted its stake in Verint Systems by 7.1% during the 3rd quarter. Dimensional Fund Advisors LP now owns 1,449,518 shares of the technology company’s stock valued at $60,663,000 after acquiring an additional 96,051 shares during the last quarter.
  • American Capital Management Inc. lifted its position in shares of Verint Systems by 23.7% in the 4th quarter. American Capital Management Inc. now owns 1,431,899 shares of the technology company’s stock worth $59,925,000 after buying an additional 274,094 shares during the last quarter.
  • Finally, State Street Corp lifted its position in shares of Verint Systems by 5.5% in the 2nd quarter. State Street Corp now owns 1,258,532 shares of the technology company’s stock worth $51,225,000 after buying an additional 65,509 shares during the last quarter.
Summary

The company has shown stable growth through most of the decade aided by acquisitions, with revenues increasing from $704 million in the January 2010 fiscal year to $1.13 billion in fiscal 2016.

Verint Systems has a 1-year low of $37.05 and a 1-year high of $44.70. The company has a debt-to-equity ratio of 0.71, a quick ratio of 1.63 and a current ratio of 1.67. The firm has a market cap of $2,481.09, a price-to-earnings ratio of -155.80, a price-to-earnings-growth ratio of 1.81 and a beta of 1.13.








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