“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, April 30, 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 - - Coupa Software Inc (NASDAQ: COUP) Calls

Friday, May 04, 2018

** OPTION TRADE: Buy COUP JUNE 15 2018 50.000 CALL at approximately $2.80. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $5.60.

Also include a protective stop loss of $1.10.)

Despite the market's weakness, enterprise software remains the No. 1-ranked industry out of 197 groups. Coupa Software Inc (NASDAQ: COUP), a cloud-based management system that helps clients control spending, has held up quite well amid the recent turbulence in the stock market.

Rob Bernshteyn, the CEO of Coupa Software Inc. says the share price of this expense management software provider is up 50% so far this calendar year.

In the most recent quarter, Coupa swung to a profit of 2 cents per share. Coupa also forecast a smaller-than-expected loss for full-year fiscal 2019 ending next January. Despite the bullish earnings release, the company is set to lose money over the coming years. But analysts only expect a 3-cent-per-share loss in fiscal-year 2020 compared with a 21 cent-per-share loss in fiscal 2018.

Year-over-year quarterly revenue growth remains stellar — in excess of 40% every quarter except one going back several years.

According to Goldman Sachs, Coupa can sustain 30%-plus subscription growth through 2020. Coupa is one of the leaders in spend management.

Goldman has a buy rating and a 60 price target on the software firm — a 29% premium to recent stock price.

Analyst Jesse Hulsing believes the company is approaching an inflection point when it comes to spend management, which is a one the larger addressable markets in growth software following conversations with partners according to a Sunday research note. The analyst believes this will support subscription growth of at least 30% YoY through FY 2020 and additionally believes the company's unit economics are among the most attractive in the coverage universe.

Hulsing expects FCF margins of 20% by FY 2021 and given the limited subscription deceleration, attractive unit economics, and large TAM the company is deserving of a premium valuation.

Coupa Software Incorporated is estimated to report their next earnings on June 04, 2018. Equities analysts expect that Coupa will report earnings of ($0.11) per share for the current quarter. Five analysts have issued estimates for Coupa’s earnings. The lowest EPS estimate is ($0.12) and the highest is ($0.09). Coupa posted earnings per share of ($0.09) during the same quarter last year, which would indicate a negative year over year growth rate of 22.2%.

Also, Wall Street brokerages expect Coupa to report sales of $51.40 million for the current quarter. Five analysts have provided estimates for Coupa’s earnings, with estimates ranging from $51.14 million to $51.65 million. Coupa posted sales of $41.14 million in the same quarter last year, which would indicate a positive year-over-year growth rate of 24.9%.

Influencing Factors

In the daily bar chart of COUP, below, the uptrend from September can be observed. Prices are above the rising 50-day moving average line and above the rising 200-day line.

The daily On-Balance-Volume (OBV) line has moved higher the past 12 months in a stair-step fashion. A new high from the OBV line would continue to support the advance from a technical perspective.

The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line in the middle of January for an outright go long signal. The oscillator is still above the zero line and looks poised for a turn higher again. This would be a positive signal.

Analysts and Hedge Funds Opinions

Coupa was upgraded by investment analysts at ValuEngine from a “hold” rating to a “buy” rating in a report released on Wednesday.

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

  • Needham & Company LLC set a $55.00 price target on shares of Coupa and gave the stock a “buy” rating in a research report on Tuesday, March 13th.
  • Morgan Stanley reaffirmed an “equal weight” rating and set a $49.00 price target (up from $42.00) on shares of Coupa in a research report on Tuesday, March 13th.
  • Cantor Fitzgerald reaffirmed a “buy” rating on shares of Coupa in a research report on Friday, April 13th.
  • Finally, Royal Bank of Canada lifted their price target on shares of Coupa to $53.00 and gave the company an “outperform” rating in a research report on Tuesday, March 13th. They noted that the move was a valuation call.

Five research analysts have rated the stock with a hold rating and twelve have assigned a buy rating to the company’s stock. Coupa has an average rating of “Buy”.

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

  • Highland Capital Management LP purchased a new position in Coupa in the fourth quarter worth approximately $3,122,000.
  • Bank of New York Mellon Corp grew its holdings in shares of Coupa by 2.5% during the 3rd quarter. Bank of New York Mellon Corp now owns 113,344 shares of the technology company’s stock valued at $3,531,000 after purchasing an additional 2,782 shares during the last quarter.
  • Monashee Investment Management LLC purchased a new stake in shares of Coupa during the 4th quarter worth approximately $1,405,000.
Summary

Coupa is a fantastic company that is showing huge growth in a very niche market with precious few competitors. After briefly getting knocked to its feet with below-par growth in Q3, Coupa has found its footing again in Q4, ending the year with 36% total growth in revenues as well as nearly doubling the spend on its platform.

Coupa has a twelve month low of $24.27 and a twelve month high of $50.69. The stock has a market cap of $2,574.93, a PE ratio of -58.96 and a beta of 1.12. The company has a debt-to-equity ratio of 0.68, a current ratio of 3.18 and a quick ratio of 3.18.


Option Trade - - Roku Inc. (NASDAQ: ROKU) Calls

Wednesday, May 02, 2018

** OPTION TRADE: Buy ROKU JUNE 15 2018 35.000 CALL at approximately $2.00 TO $2.45 each. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $4.40.

Also include a protective stop loss of $0.95.)

The Los Gatos, California-based TV streaming platform Roku Inc. (NASDAQ: ROKU) is looking to do a turn-around according to KeyBanc analysts who have started the stock with an "overweight" rating and $42 price target -- a 29% premium to last night's close, and territory not charted since late February. The brokerage firm said it recommends "buying ROKU" because it's poised for "long-term creation value as streaming video continues to see adoption globally."

This upbeat outlook is helping offset an uninspiring "neutral" rating and $32 price target at D.A. Davidson, with ROKU stock trading up 1.4% at $33.00. More broadly, though, the shares have been trending lower since topping out at a record high of $58.80 last December -- down 44% -- and, outside of a brief mid-month pop, spent the majority of April churning in the $31-$32 neighborhood.

The security could be shaken out of this tight trading range after Roku reports earnings next Wednesday, May 9, after the market closes. Following the company's November report, the stock surged 54.9% in the subsequent session, while back in February, ROKU shares logged a single-session post-earnings loss of 17.7%.

The report will be for the fiscal Quarter ending Mar 2018. Based on 3 analysts' forecasts, the consensus EPS forecast for the quarter is $-0.17. Also, Wall Street analysts forecast that Roku will report $128.10 million in sales for the current fiscal quarter

On average, analysts expect that Roku will report full year sales of $675.58 million for the current fiscal year, with estimates ranging from $672.85 million to $678.52 million. For the next financial year, analysts expect that the business will post sales of $884.11 million per share, with estimates ranging from $868.13 million to $898.37 million.

Influencing Factors

Roku made its public debut at $14 last September, soared to $23.50 on the first trading day, and skyrocketed to the mid-$50s by the end of 2017.

Yet Roku dropped back to the low $30s this year, after investors grew concerned about its waning hardware sales, the sustainability of its platform business, and its lofty valuations. Its fourth quarter numbers easily beat expectations on the top and bottom lines in February, but the stock kept sliding.

That volatility continued throughout April, as several new developments strengthened for the bullish case……..

  • After the market close on April 16, Roku announced that it would launch Disney 's (NYSE: DIS) new streaming service ESPN+ on its devices. ESPN+ costs an extra $4.99 per month and offers fewer ads than regular ESPN viewers receive on the ESPN App, ESPN.com, and other connected-TV platforms.
  • The news caused Roku's stock to rally 9% the following day. The ESPN+ partnership is a win-win deal for both companies, since Roku gains more content to attract viewers, while Disney might retain ESPN subscribers via digital channels.
  • Steve Cohen's hedge fund, Point72 Asset Management, recently disclosed a 5.1% passive stake in Roku via a 13G filing. That vote of confidence was encouraging, since institutional ownership in Roku, prior to Point72's filing, remained low at 24%.
  • Roku's post-IPO lockup expired on March 27. Therefore, any major insiders who wanted to sell the stock probably already did so. Meanwhile, insiders seem bullish on the company's future. Over the past three months, insiders sold 12.5 million shares but bought 54.4 million shares on the open market.
  • Roku will also launch the Roku Channel, which generates its Platform revenues, on select Samsung Smart TVs. That partnership could help Roku reach a lot more viewers, since Samsung is the largest maker of premium TVs in the world.
  • Roku, Inc saw a significant decrease in short interest in the month of March. As of March 29th, there was short interest totalling 7,709,379 shares, a decrease of 16.8% from the March 15th total of 9,264,091 shares. Based on an average trading volume of 4,332,710 shares, the short-interest ratio is currently 1.8 days.
  • Roku has said its game plan is not to be selling devices, but rather to grow the number of users and build up the amount of content they stream.
  • At the end of the fourth quarter, Roku had 19.3 million active user accounts who streamed 4.3 billion hours of content in the quarter, a better than 15% increase from the end of the third quarter and 44% jump from a year ago. Hours of video streamed has risEN 55% over the past year. Now that it is expanding beyond its own controlled ecosystem with the Samsung deal, other partners may also sign on and those figures could increase exponentially.

Analysts and Hedge Funds Opinions

In a note to clients Monday, KeyBanc Capital Markets initiated coverage on Roku stock at overweight, expecting a turnaround as the firm posts strong sales growth over the next two years. Analyst Evan Wingren highlighted Roku's "strong competitive position" and "improving fundamentals" as the "unique platform play" continues to capitalize on the growth of long-form streaming video.

"We believe its purpose-built TV operating system, OEM relationships, growing platform, and early content efforts set it up for long-term value creation as streaming video continues to see adoption globally," wrote the KeyBanc analyst. Roku, the leader in the video streaming player space with an over 35% hold over the market, sold its operating system in about 20% of smart TVs in U.S. and Canada last year, wrote Wingren. He expects the company to generate sales growth on its platform by over 60% annually through 2019.

"Roku players and smart TVs enable it to capitalize on the growing secular shift to streaming video," wrote KeyBanc. "Although the majority of streaming viewing has shifted to ad-free environments, we believe that ad-supported streaming will continue to see strong adoption over the long run and could provide a tailwind to Roku."

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

Zacks Investment Research raised shares of Roku from a “hold” rating to a “buy” rating and set a $44.00 target price for the company in a report on Thursday, January 18th.

Oppenheimer raised shares of Roku from an “underperform” rating to a “market perform” rating in a report on Tuesday, March 20th.

Finally, Citigroup reaffirmed a “positive” rating and set a $33.00 target price (up previously from $28.00) on shares of Roku in a report on Tuesday, February 20th.

Four investment analysts have rated the stock with a sell rating, seven have given a hold rating, two have given a buy rating and one has assigned a strong buy rating to the company’s stock. Roku has a consensus rating of “Hold” and a consensus price target of $38.06.

Summary

As the company pointed out after Q4 earnings, it's already the third-largest distributor of content in the U.S. The Roku Channel is seeing increasing viewership. The company offers pinpoint targeting of advertisements - without the messy data problems afflicting Facebook, Inc. (NASDAQ: FB).

Roku is becoming increasingly embedded in TVs. It has a plan to roll out home entertainment offerings like speakers and soundbars, creating a long-sought integrated experience. It could even, as it grows, look to develop or acquire content itself, positioning Roku not as just a conduit to Netflix, Inc. (NASDAQ: NFLX) but a rival.

The bull case for Roku stock is that its players are like Amazon's books - a way to garner customers and get a foot in the door of the exceedingly valuable media business. The amount of options and a reasonable valuation (Roku's market cap is barely $3 billion) means that betting on its strategy could be a lucrative play.

Roku has a 12-month low of $15.75 and a 12-month high of $58.80. The stock has a market capitalization of $3,255.91 and a P/E ratio of -14.53.


Option Trade - - Activision Blizzard, Inc. (NASDAQ:ATVI) Calls

Monday, April 30, 2018

** OPTION TRADE: Buy ATVI MAY 18 2018 67.500 CALL at approximately $1.50 each. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $3.00.

Also include a protective stop loss of $0.60.)

Activision Blizzard, Inc. (NASDAQ:ATVI), a publisher of online, personal computer, console, handheld, mobile and tablet games, is confirmed to report earnings on Thursday, May 03, after the market closes. Analysts expect EPS of 30 cents on sales of $1.33 billion, both up 11% year over year.

Activision is widely considered the best way to invest in esports given its ownership of the Call of Duty World League, Overwatch League, and esports streaming network Major League Gaming.

Influencing Factors

There were a few big events in the first quarter that likely stimulated player engagement levels. On the Blizzard side, the launch of Overwatch League in January has been driving higher interest for League-themed merchandise and in-game content.

Additionally, it should be a strong quarter for the Activision side of the company with new in-game content released during the quarter for Call of Duty: WWII, which launched in the fourth quarter and was the No.1 console game globally in 2017. After just six months on the market, unit sales of WWII are already well exceeding the life-to-date unit sales of Call of Duty: Infinite Warfare (released in November 2016).

Also, players have continued to remain engaged with Call of Duty: Black Ops 3 (2015). In fact, despite strong sales of WWII, players have remained most engaged with Black Ops, and management continues to support the 2015 version with add-on content updates.

With two Call of Duty games performing well right now, the Call of Duty player base is likely larger than it was a year ago after poor sales of Infinite Warfare. This could set up a particularly strong quarter for the Activision segment.

In the fourth quarter, Blizzard had its sixth consecutive quarter of 40-plus million MAUs, and Activision saw a 12% increase over the third quarter to 55 million, driven by the release of Call of Duty: WWII.

Looking Ahead…..

2018 is looking to be a record year for Activision Blizzard. The company is expanding its esports management team and has a major new World of Warcraft expansion releasing this summer called The Battle of Azeroth. As for King's mobile game initiatives, there's a new game in development in partnership with Playstudios called Social Casino.

The company recently announced that the new installment to the Call of Duty franchise will launch in October of this year. Call of Duty: Black Ops 4 will seek to build on the thriving player community of Black Ops 3.

Also, there will likely be more team sale announcements for Overwatch League as the year moves along.

Analysts and Hedge Funds Opinions

Wedbush analyst Michael Pachter maintained a Buy rating on Activision Blizzard today and set a price target of $81.

Currently, the analyst consensus on Activision Blizzard is Strong Buy and the average price target is $80.56, representing a 22.5% upside.

In a report issued on April 19, Benchmark Co. also maintained a Buy rating on the stock with a $80 price target.

Shares of Activision Blizzard have been assigned an average recommendation of “Buy” from the thirty-three research firms that are covering the company. Five equities research analysts have rated the stock with a hold rating, twenty-six have assigned a buy rating and one has given a strong buy rating to the company. The average 1-year price target among brokers that have issued ratings on the stock in the last year is $75.14.

Summary

Activision Blizzard hasn't had a consistent growth path the last five years because video game launches can cause a lot of earnings volatility, but it has consistently beaten its own guidance and the expectations of investors.

Activision Blizzard has a current ratio of 1.78, a quick ratio of 1.77 and a debt-to-equity ratio of 0.46. The company has a market cap of $49,379.33, a price-to-earnings ratio of 32.33, a PEG ratio of 1.73 and a beta of 1.16. Activision Blizzard has a fifty-two week low of $48.41 and a fifty-two week high of $79.63.


Option Trade - - Square Inc. (NYSE:SQ) Calls

Monday, April 30, 2018

** OPTION TRADE: Buy SQ MAY 18 2018 50.000 CALL at approximately $2.10 each. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $4.20.

Also include a protective stop loss of $0.85.)

Payment processing and point-of-sale upstart Square Inc. (NYSE:SQ), will report earnings after the market closes. The consensus earnings estimate is $0.06 per share on revenue of $623.75 million. But the Earnings Whisper number is $0.07 per share.

The company's guidance was for earnings of $0.03 to $0.05 per share on revenue of $290.00 million to $295.00 million. Consensus estimates are for year-over-year earnings growth of 300.00% with revenue increasing by 35.14%.

The red-hot company builds hardware and software products that help merchants accept payments, streamline operations, and analyze business information. Square also offers lending services via Square Capital and HR services through Square Payroll.

Square announced that it has agreed to buy Weebly, a website-building service, for $365 million in a cash and stock deal. This could help Square accelerate its growth in two key ways -- e-commerce sales volume and international expansion.

Adding a website-building platform to Square's growing ecosystem could pay off tremendously for the company, and the acquisition's price tag could end up looking like a bargain.

"Omnichannel commerce is our top focus area in 2018," according to Alyssa Henry, Square's seller lead. "Whether they're an artist, a winemaker, or a hairdresser, with Square and Weebly sellers will have one cohesive solution to build their business."

With 625,000 paying subscribers and little overlap with Square's current merchant base, this creates tremendous opportunity to cross-sell Square's other services.

In addition to creating omnichannel solutions, one of Square's top priorities is expanding its international footprint.





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