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.
Thursday, 12th May, 2016
Option Trade – Agilent Technologies Inc (NYSE:A) Calls
**OPTION TRADE: Buy the A June 17 2016 45.000 call at approximately $0.40. Sell price is left to your own judgment.
Agilent Technologies Inc (NYSE: A), a measurement company, providing core bio-analytical and electronic measurement solutions to the life sciences, diagnostics and genomics, chemical analysis, communications and electronics industries, is expected to announce second quarter financial results after market close on Monday, May 16. The company added about 12.5 percent in value since last earnings when it was at $37.08. And there are upgrades before the earnings announcement which bodes well for increased stock price before and after the earnings report.
In front of Q2 earnings release, Wall Street is expecting earnings per share of $0.39. The analysts’ current consensus range is $0.38-$0.41 for EPS. The market consensus range for revenue is $974.00M-$1.00B, with an average of $983.08M.
Shares of Agilent Technologies Inc reached a new 52-week high on Wednesday after Goldman Sachs raised their price target on the stock from $47.00 to $49.00. Goldman Sachs currently has a conviction-buy rating on the stock. Agilent Technologies traded as high as $43.20 and last traded at $42.65, with a volume of 2,440,021 shares. The stock had previously closed at $42.00.
And the latest upgrade for Agilent Technologies Inc was from Zacks Investment Research with a “hold” rating to a “buy” rating. The brokerage presently has a $46.00 price objective on the stock. Zacks Investment Research‘s price target would indicate a potential upside of 8.34% from the company’s previous close.
According to Zacks, “Agilent Technologies is a broad-based OEM of test and measurement equipment. The company’s first quarter earnings were inline the Zacks Consensus Estimate. Agilent’s focus has shifted to life sciences, genomics, diagnostics and wireless test markets, where the company has made a few important acquisitions and alliances. The Electronic Measurement spin-off which is now complete, should reduce the cyclicality of the business. However, the macro weakness in the U.S. and Europe and forex headwinds may temper revenue growth with the significant increase in operating expenses impacting the bottom line.”
There are nine analysts that have issued a buy rating and two have issued a strong buy rating to the company. 12 Wall Street brokers believe that the price target for the company may go as high as $65.00.
The stock has a 50 day moving average of $40.72 and a 200-day moving average of $39.27. Agilent Technologies has a 52 week low of $33.12 and a 52 week high of $43.20. The firm has a market capitalization of $13.93 billion and a PE ratio of 30.79.
Wednesday, 11th May, 2016
Option Trade – Randgold Resources Ltd. (ADR) (NASDAQ:GOLD) Calls
**OPTION TRADE: Buy the GOLD June 17 2016 95.000 call at approximately $1.30. Sell price is left to your own judgment.
The FTSE 100 mining sector has been one of the best performance YTD with returns of almost 30%. And Randgold Resources Ltd. (ADR) (NASDAQ: GOLD), a London-based gold miner with operating gold mines and exploration projects in Mali, Côte d'Ivoire, Democratic Republic of Congo ("DRC") and Senegal, has been one of the most impressive having added over 50% to its’ valuations.
Randgold has been riding on the coat-tails of a bullish gold story. Gold futures had their best quarterly performance since 1986, gaining more than 16% during the first quarter of 2016.
Usually, a strong performance in gold filters through to gold miners like Randgold as it improves margins.
The price of gold may be the most important factor as miners understandably generate larger revenues when commodity prices are higher. However, the efficiency of each mine plays an important role too. The lower the cash cost of operating each mine, the better the margins. This was evident during Rangold's most recent quarterly earnings report, released May 4, as total cash costs dropped 8% from the previous quarter to $648/oz.
The standout performer was Randgold's flagship operation in Loulo-Gounkoto, Mali, which helped offset the technical and commission issues at its other operations, namely the Kibali mine, in the Democratic Republic of Congo and the Tongon Mine, in Côte d'Ivoire. Loulo's outstanding quarter, which includes a 29% reduction in cash cost per ounce, compared to a year earlier, helped boost Randgold's earnings to $0.58.
There is plenty of optimism that Randgold can deliver another period of double-digit capital gains with a continued rally in gold prices based on their ability the company to continue improving its cash costs at key operations.
Randgold's CEO, Mark Bristow, reiterated that the miner can continue delivering at current or even lower gold price levels. Randgold has declared a 10% increase in its annual dividend from $0.60 to $0.66 per share; and currently having a multiple of 42 times earnings.
Randgold Resources has a 12-month low of $54.88 and a 12-month high of $101.60. The firm has a market cap of $7.96 billion and a P/E ratio of 42.47. The firm’s 50-day moving average price is $92.57 and its 200 day moving average price is $76.47.
Tuesday, 10th May, 2016
Option Trade – NVIDIA Corporation (NASDAQ:NVDA) Calls
**OPTION TRADE: Buy the NVDA June 17 2016 36.000 call at approximately $1.40. Sell price is left to your own judgment.
NVIDIA Corporation (NASDAQ: NVDA), engaged in creating the graphics chips used in personal computers (PCs), is set to release earnings on Thursday, May 12 after market close. For this quarter, analysts are expecting the company to post revenues of $1.27 billion and earnings of $0.32 per share, compared to revenues of $1.15 billion and earnings of $0.24 for the same quarter of last year.
Although the company posted record revenues of $1.4 billion last year, this quarter could mark another earnings surprise given the launch of Facebook’s VR Oculus Rift Headset, released in late March, as well as other VR games. Although the company does not manufacture chips for the headset, it does make chips for computers which support VR, such as its NVIDIA GTX GPU, which gamers prefer over competitors.
For this quarter, investors are anticipating slowing growth in the company’s gaming segment, as the first 2 quarters of the year are typically slow for gaming. However, the company has over 50% market share in gaming chips. This expected slowing should be offset by the company’s data center and automotive segments, which investors expect to display impressive growth for the quarter.
Although investors are slightly concerned regarding the impact of the expiration of a licensing deal with fellow chip maker Intel in March 2017, the company’s market position and state of the art technologies are expected to attract similar deals. Related, a court decision for its patent lawsuit with Samsung could generate a new licensing deal which would offset revenue losses from Intel, although a decision has not yet been made. Investors are also expecting the company to report a reduction in free cash flow this quarter due to the $562 million worth of dividends and share buybacks between January and April.
However, NVIDIA’s innovative product pipeline, and strength in gaming and high-end notebook GPUs keep it well positioned. Also, the higher adoption of the company’s Tegra processors could act as a catalyst, going forward.
NVIDIA’s focus on GRID platforms can increase GPU adoption in data centers, giving it an advantage over its competitors. Its GRID enterprise virtual graphics, which improve the visual effects in games, will help drive future revenue and margin growth.
Even though there is a slowdown in the gaming industry, the company has been able to gain traction on the back of a strong line-up of advanced graphics cards such as ‘GeForce GTX 780 Ti’, ‘Maxwell’, the GeForce GT 730, GeForce GT 740, and the new GeForce GTX 750, GeForce GTX 800M, GeForce GTX 980 and 970, which have made it PC makers’ favorite graphics card provider.
Moreover, according to sources, worldwide PC gaming is growing at a CAGR of 10%. This strong demand for PC gaming will provide tailwinds to NVIDIA. The company has always generated substantial revenues from its cards because of higher functionality.
NVIDIA Co.‘s stock had its “buy” rating reissued by equities researchers at Bank of America in a note issued to investors on Monday. They presently have a $43.00 target price on the computer hardware maker’s stock. Bank of America’s target price suggests a potential upside of 21.71% from the company’s current price.
There are twelve analysts that have issued a buy rating on NVDA, and one has assigned a strong buy rating to the company’s stock.
The stock’s 50 day moving average is 35.76 and its 200 day moving average is 31.89. The stock’s market capitalization is 19.02B. NVIDIA Corporation has a 52-week low of 19.09 and a 52-week high of 37.46.
Tuesday, 10th May, 2016
Option Trade – J C Penney Company Inc (NYSE:JCP) Puts
**OPTION TRADE: Buy the JCP June 17 2016 8.000 put at approximately $0.50. Sell price is left to your own judgment.
Discount retailer, J. C. Penney Company, Inc. (NYSE: JCP), is slated to report first-quarter fiscal 2016 results on Friday, May 13, and all is not rosy seemingly!
Last Friday saw J.C.Penney crash dramatically. Such a massive slide in stock price was a result of unexpected light sales during mid-April. Adding more to the retailer’s horror, the employees at the company faced a curb in their payroll, experienced frozen overtime hours – thus no payment for overtime hours. Along with this, the management at the company took drastic cost-cutting measures in order to safe-guard its bottom line.
While the end of JCP’s first fiscal quarter of the year approached, the company directed the store managers to take assertive measures in order to counter the “expense challenge”. A memo obtained by The New York Post says: “We have an expense challenge for the month of April and are asking all stores to do their fair share by closely monitoring all expenses.”
Moreover, the employees at the mid-priced department store were surprised when they came to know about the cut in their working hours on such a short notice. Slashing the employee hours helped JCP save nearly 800 hours during the course of two weeks, which translated into $8,000 per store.
Following such crisis at the company, JP Morgan analyst Matthew Boss shared negative commentary on the stock and reduced his 12-month price target on the stock by 30% to $7 from $10. Additionally, the analyst reiterated a Neutral rating on the stock. Furthermore, Mr. Ross also lowered JCP’s same store sales estimates to +2%, which is below the company’s expectations of 3% to 4%.
The analyst believes that the management at the company will be facing an uphill battle, while the inventory clearance may be the major gross margin headwind over the second quarter.
A total of 26 Wall Street analysts cover the stock and of these, 11 analysts suggest a Buy rating on the stock. Another 11 analysts believe the shareholders should hold the stock, while the remaining four analysts are of the opinion that the stock is a Sell.
Monday, 9th May, 2016
Option Trade – Walt Disney Co (NYSE:DIS) Calls
**OPTION TRADE: Buy the DIS June 17 2016 110.000 call at approximately $1.05. Sell price is left to your own judgment.
Walt Disney Co (NYSE: DIS), together with its subsidiaries and affiliates is a diversified international family entertainment and media enterprise with five business segments: media networks, parks and resorts, studio entertainment, consumer products and interactive media, will report its most recent quarterly numbers after the market closes tomorrow, May 10. Analysts forecast earnings of $1.40 per share for the company's fiscal second quarter, up from $1.23 during the same period last year. The stock has trended higher over the last several months, and is within 0.1% of break even for the year.
Things look good for the media and entertainment enterprise giant, whose shares rose 11.5% over the course of last year. Disney released top films such as Zootopia and Jungle Book. Its latest release, Captain America: Civil War opened with $241 million before its U.S. premiere. Further, the much anticipated Star Wars: The Force Awakens, released earlier this year earned $899 million at the box office and over $1 billion internationally.
The company has a solid track record of posting better than expected earnings each of the last 13 quarters, and while it is likely the company will extend that streak, the real driver of the stock post-earnings will be updates on ESPN. ESPN is very important to the company, but cord-cutting has managed to hurt ESPN's subscriber numbers in the past – as occurred last time we traded Disney options -- despite the fact that live sports are somewhat insulated from cord cutting due to having a zero shelf life. Last quarter the company reported ESPN was still losing subscribers, but the company's other segments remain strong. The new Star Wars movie should have had a positive impact on its movie segment, and its amusement parks remain the most visited parks in the world.
In the past five years, investors have gained quite a good run-up in the stock price. The Walt Disney stock has returned over 145% to its investors during this period. The stock has the price-to-earnings multiple of 19.70x. Year-to-date, the stock is down just 0.75%, after gaining over 10% in 2015.
Recently, Piper Jaffray analyst, Stan Meyers reiterated an Outperform rating on Walt Disney stock, with the price target of $120. According to the analyst, Disney’s robust film lineup will not only help to expand the company’s top line at an accelerated speed, but will also enhance its margins.
Furthermore, Nomura Securities analyst Anthony DiClemente has also reiterated a Buy rating on Walt Disney stock, and raised his price objective from $110 to $115, just ahead of 2Q results. He has also increased EPS estimates for the full year 2016 from $5.82 to $5.85 and from $6.09 to $6.17 for the fiscal year 2017.
DiClemente stated in the research note: "Ahead of Disney's F2Q16 earnings on 5/10, we fine tune our model to capture the impact of ongoing theatrical tailwinds, robust Orlando travel trends for domestic parks, and strong advertising momentum for broadcast TV. Overall, we increase our F2Q16 and FY16 EPS estimates to $1.40 and $5.85, from $1.39 and $5.82, respectively. As such, we also modestly raise our target price to $115 based on our unchanged CY17 P/E target multiple of 18x."
The 12-month consensus price for Walt Disney stock is estimated at $110.48 per share. Of 35 analysts that cover the stock, 19 rated it as a Buy, and 14 assigned a Hold rating.
While the market remains concerned about cord-cutting negatively affecting the future profitability of cable networks and the entire company, Disney's recent results have helped alleviate some of these fears. Shares have nicely rebounded since August, when the market's jitters over this issue first surfaced and drove them to a one-year low. The stock has returned negative 4.1% for the one-year period through May 5, trailing the S&P 500's flat return, however, it's outpaced the broader market, returning nearly 14%, since the company released last quarter's robust results on Feb. 9.
Monday, 9th May, 2016
Option Trade – Nokia Corp (ADR) NYSE:NOK) Puts
**OPTION TRADE: Buy the NOK June 17 2016 6.000 put at approximately $0.55. Sell price is left to your own judgment.
Nokia Corp (ADR) NYSE: NOK), a Finland-based telecommunication and network infrastructure company, is expected to report its Q1:2016 earnings tomorrow, Tuesday, May 10 before market open. Analysts are expecting the newly combined company to post revenues of $6.24 billion compared to $3.60 billion for the same quarter of last year. The analyst forecast consensus for the company is an EPS of $0.04 for the upcoming quarter compared to earnings of $0.06 for the same quarter of last year.
The multinational communications and information technology company seems to be improving in its quarterly earnings. However, sales are expected to be rather modest in key markets such as China during the anticipated quarter due to currency fluctuations, which may impact the top line. Further, investors are speculating the Nokia Networks Segment will be subject to headwinds, likely leading to additional below-par sales.
Results are expected to be impacted by foreign currency movements. Sales are expected to be soft in certain key markets like China in the first quarter which will impact the top line. The Nokia Networks Segment is expected to face the brunt of the headwinds, which will likely result in below-par sales.
Moreover, escalated costs should hurt the bottom line. Focus will be on the integration process of the Nokia-Alcatel-Lucent entity. The telecom giant officially took over rival Alcatel-Lucent in Jan 2016 -- the deal which was first announced in April last year.
With Nokia focusing on the growth by acquisition strategy, we expect an update on the issue during the first-quarter conference call. Last month, Nokia announced intentions to buy Withings S.A. The transaction, valued at EUR 170 million, will be settled in cash. The deal is expected to close by Sep 30, 2016. Through this move, Nokia aims to enter the highly lucrative digital health market. However, this will not impact growth for this quarter.
NOK stock has declined almost 20% so far in 2016, compared with a 0.65% rise in the S&P 500 (SPX) index. Over the past twelve months, the shares have fallen 12.5%, while the S&P 500 index has declined 1.10%. NOK stock has a consensus buy rating and an average analyst 12-month price target of $7.73, implying a 36% rise from current levels.