“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, April 17, 2017

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 – Twenty-First Century Fox Inc (NASDAQ:FOXA) Calls

Thursday, April 20, 2017

** OPTION TRADE: Buy the FOXA MAY 19 2017 31.000 CALL at approximately $0.65. Sell price is left to your own judgment.

Twenty-First Century Fox Inc (NASDAQ:FOXA), a media and entertainment company, is scheduled to report earnings on the May 10, and could potentially be involved in a takeover deal given the recent buzz.

Twenty-First Century Fox, Inc. has been riding high on robust Cable Network Programming, shareholder friendly moves and impressive earnings history. The company's shares have gained 27.3% in the past year; comfortably outperforming the categorized Movie/TV Production/Distribution industry's gain of 19%.

The performance of Cable Network Programming, which has been magnificent in fiscal 2015 and 2016 owing to rising affiliate fees, continues to impress investors in fiscal 2017 too. In second-quarter fiscal 2017, Cable Network Programming revenues jumped 7.1% on the back of robust affiliate and advertising revenues growth, after increasing 10% in first-quarter fiscal 2017.

Affiliate fees are the dominant source of revenue for the Cable Network segment as well as a major contributor to total revenue. In fiscal 2016, domestic and international affiliate revenues increased 8% and 3%, respectively. In fiscal 2015, revenues from Cable Network grew 12% on the back of 17% and 3% growth in affiliate fees at Domestic and International segments, respectively. Earlier, the company had stated that the pace of affiliate fees will accelerate in the back half of the fiscal year as 15-20% of its domestic subscribers will be up for annual renewal in couple of years.

Also, the country’s most-watched cable network is doing so well that the departure of the star of “The O’Reilly Factor” isn’t likely to be a huge financial blow. That’s even though the show was the biggest draw on Fox News, which has been 21st Century Fox’s most profitable channel, bringing in what one estimate puts at $200 million annually in advertising revenue.

“The growth in the network is overwhelming any advertiser issues” that will crop up now that O’Reilly is out and Tucker Carlson is stepping into the prime-time slot, said Brian Wieser, an analyst at Pivotal Research LLC who has a buy rating on the stock. O’Reilly took his leave Wednesday afternoon, and Fox shares fell 0.9 percent to $30.39 at the close in New York.

O’Reilly’s exit will probably cost just a couple of percentage points in ad sales, before factoring in the networks expected growth over the next year, Wieser said. “Investors wouldn’t really notice the impact.”

Analysts and Hedge Funds Opinions

Jefferies Group LLC reissued their buy rating on shares of Twenty-First Century Fox Inc in a research report recently. Jefferies Group LLC currently has a $35.00 price target on the stock.

Six analysts have rated the stock with a hold rating and twenty-one have issued a buy rating to the stock. The company has a consensus rating of Buy and an average price target of $33.45.

Thrivent Financial for Lutherans boosted its stake in Twenty-First Century Fox Inc by 5.5% during the fourth quarter, according to its most recent filing with the Securities and Exchange Commission (SEC). The fund owned 36,720 shares of the company’s stock after buying an additional 1,930 shares during the period. Thrivent Financial for Lutherans’ holdings in Twenty-First Century Fox were worth $1,030,000 as of its most recent SEC filing.


Twenty-First Century Fox continues to focus on maximizing shareholders' return. In the second quarter, Twenty-First Century Fox bought back 4.8 million shares for $132 million. At the end of the quarter, the company had $3.1 billion remaining under the current share buyback program. Moreover, rise in share price was also aided by three consecutive quarters of earnings beat. The company has an impressive long-term earnings growth rate of 9%.

Twenty-First Century Fox Inc has a 50-day moving average of $31.03 and a 200 day moving average of $28.92. The company has a market cap of $56.25 billion, a P/E ratio of 18.52 and a beta of 1.31. Twenty-First Century Fox Inc has a 1-year low of $23.33 and a 1-year high of $32.60.

Option Trade – American Express Company (NYSE:AXP) Puts

Tuesday, April 18, 2017

** OPTION TRADE: Buy the AXP MAY 19 2017 75.000 PUT at approximately $1.35. Sell price is left to your own judgment.

Payment processor American Express Company (NYSE: AXP), together with its subsidiaries, providing charge and credit payment card products and travel-related services to consumers and businesses worldwide, will report earnings after the bell tomorrow, April, 19.

The consensus calls for earnings of $1.28 for the quarter, down from $1.45 during the same period last year. The stock is up 2.5% year to date.

Last quarter, American Express missed the Consensus Estimate by 7.14%. The stock took a hit after the company lost its partnership with Costco (COST).

Influencing Factors

American Express shares have exploded in value on the back of a surge in bank stocks, but this makes for a wary situation in regard to this surge as it continues to carry an unjustifiable premium to other card companies.

Competition in the credit card industry is as strong as it has ever been. American Express is losing its position as the premier card for the most credit worthy borrowers. In travel cards, JPMorgan (NYSE: JPM) circled the high-end AmEx Platinum with the Chase Sapphire Reserve. In everyday cards, Chase Freedom variants offer more rewards than similar AmEx cards. Chase's Business Cards offer superior rewards at a lower annual fee than AmEx's Business Gold.

Not only are Chase's cards more rewarding, but they're also accepted in more places, as Chase cards carry a Visa (NYSE: V) label whereas AmEx cards are processed in its own closed-loop network. American Express also lacks the cross-selling opportunities of money center and consumer banks, which offer everything from mortgages to multi-million dollar commercial loans.

American Express's brand is something of a wasting asset that is being slowly amortized as more people begin to question whether its cards' higher annual fees for cardholders and loftier fees for merchants are worth the pricetag. Such as the expected increase in cost of card member services as the company continues to provide premium services such as airport lounge access and co-brand benefits such as First Bag Free on Delta.

American Express talks about targeting 20% returns on equity in a world where most banks are ecstatic to eke out 12%. In a commodity business, it's rarely a winning model to be the high bid.

Analysts and Hedge Funds Opinions

Tigress Financial reiterated their neutral rating on shares of American Express Company in a research note released last Friday morning.                                                                          

Insider L Kevin Cox sold 77,006 shares of the stock in a transaction dated Wednesday, January 25th. The shares were sold at an average price of $78.01, for a total value of $6,007,238.06.

Seven investment analysts have rated the stock with a sell rating, thirteen have assigned a hold rating and eleven have assigned a buy rating to the company’s stock. The stock presently has a consensus rating of “Hold” and a consensus target price of $76.02.


The bottom line is likely to suffer from higher marketing and promotion spend that the company is undertaking in an intensively competitive environment.

Loan loss provision is likely to be higher given overall loan growth goals.

American Express Company’s 50-day moving average price is $78.66 and its 200-day moving average price is $73.87. American Express Company has a 12-month low of $57.15 and a 12-month high of $82.00. The firm has a market capitalization of $69.10 billion, a P/E ratio of 13.57 and a beta of 1.19.