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 – Dicks Sporting Goods Inc. (NYSE:DKS) Calls
Friday, May 12, 2017
** OPTION TRADE: Buy the DKS JUNE 16 2017 52.500 CALL at approximately $1.00. Sell price is left to your own judgment.
Dicks Sporting Goods Inc. (NYSE:DKS), an omni-channel sporting goods retailer offering an assortment of sports equipment, apparel, footwear and accessories in its specialty retail stores in the eastern United States, is expected to beat expectations when it reports first-quarter fiscal 2017 results on Tuesday May 16, before the market opens.
2016 has been a watershed for Dick's Sporting Goods. While many brick-and-mortar stores suffered at the hands of internet retail, Dick's used the upheaval in the industry to its advantage. Share prices followed suit and have been up as much as 75% since the start of 2016.
CEO Ed Stack summed it up – “2016 was certainly a unique time in our industry. We have taken advantage of the market disruption by capturing significant market share left behind by The Sports Authority, Sports Chalet, and Golfsmith. As we've studied the consolidation in our industry, we felt it prudent to conduct a thorough review of our business, including our stores, merchandising strategy, and vendor structure.”
Dick's Sporting Goods is a value stock that has seen positive EPS results over the past four quarters. They have a trailing twelve month Price to Earnings ratio of 15.16.
Dick's Sporting Goods restructured their business strategy to avoid what crippled most sporting goods retailers. Companies like GolfSmith, The Sports Authority, and Sports Chalet have recently filed for bankruptcy, leaving a window of opportunity for Dick's Sporting Goods. Technology has been a blessing and a curse to companies in this industry. In the Retail industry, companies fold due to the stiff competition of e-commerce companies. Dick's Sporting Goods decided to in-house their e-commerce platform, resulting in a 26% increase in their online sales.
Dick's Sporting’s shares have rallied 23.6% over the past one year, outperforming the categorized Retail – Miscellaneous/Diversified industry’s growth of 5.5%.
Of late, Dick's Sporting has been gaining from the consolidation in the sporting goods space, and opportunities arising from the liquidation of rival firms. Further, the company has been aggressively expanding its store base and e-commerce capabilities to achieve its long-term revenue target of $8.7–$9.0 billion by the end of fiscal 2017.
The company is also moving ahead with its omnichannel efforts, focusing on capturing displaced market share via store growth. The latest merchandise strategy of reducing 20% of its vendor base is likely to optimize DICK’S Sporting’s collection. This plan, along with the company’s digital endeavors and robust online performance, is likely to keep it ahead of consumer trends, thus helping it combat competition.
Two new brands will be announced later this spring, further sending the company down the path of differentiation. Brand and merchandise sales will probably reach $1 billion this year, which is significant considering net sales were $7.9 billion in 2016.
These factors provide optimism about Dick's Sporting’s ability to maintain its superb earnings streak. For the upcoming quarter, management had projected adjusted earnings in a range of 50–55 cents per share, with comparable store sales expected to grow in a band of 3–4%.
Analysts and Hedge Funds Opinions
Canaccord Genuity reiterated their buy rating on shares of Dicks Sporting Goods Inc (NYSE:DKS) in a report published on Monday. Canaccord Genuity currently has a $67.00 target price on the sporting goods retailer’s stock.
Also, MKM Partners reiterated a buy rating and issued a $67.00 price target on shares of Dicks Sporting Goods in a research report on Tuesday, March 7th.
One analyst has rated the stock with a sell rating, nine have given a hold rating and twenty-two have assigned a buy rating to the stock. The stock has a consensus rating of Buy and a consensus price target of $61.77.
Dick's has had success in pushing omni-channel growth and has benefited from others' demise. Profitability was beaten up last year thanks to the purchases of key competitor assets, dropping 9.5% compared to 2015, most of which came during the fourth quarter.
The outlook for 2017 looks bright, as the company sees a return to bottom-line growth. Earnings per share are expected to go up 42% at the low end of management guidance. A lot of positivity was priced in with the share price run-up in the last year, but the forward price-to-earnings ratio is at a modest 14.
Dicks Sporting Goods has a market capitalization of $5.62 billion, a P/E ratio of 19.47 and a beta of 0.65. Dicks Sporting Goods has a 52-week low of $37.96 and a 52-week high of $62.88. The stock has a 50 day moving average of $49.73 and a 200-day moving average of $53.06.
Option Trade – Monster Beverage Corporation (NASDAQ:MNST) Calls
Thursday, May 11, 2017
** OPTION TRADE: Buy the MNST JUNE 16 2017 50.000 CALL at approximately $0.40. Sell price is left to your own judgment.
Last Friday Monster Beverage Corporation (NASDAQ:MNST), a marketer and distributer of energy drinks, fruit juices, fruit juice smoothies, juice cocktails, iced teas, lemonades, and still water, saw their stock rise on signs of renewed growth following first-quarter earnings that beat consensus estimates of 32 cents per share by a penny.
Leading energy drink maker Monster Beverage’s net sales rose 9.1% on a year-over-year basis to $742.1 million in 1Q17.
The company’s international sales rose 28.0% to $190.9 million in 1Q17, driven by strong performances in its key markets. Its net sales to customers outside the United States accounted for ~26% of its 1Q17 sales, compared to 22% in 1Q16.
Monster Beverage ended the quarter with cash and cash equivalent of $576.3 million as of Mar 31, 2017 compared with $377.6 million as of Dec 31, 2016.
Monster Beverage stock rose 3.3% on May 5, 2017, in reaction to the release of its 1Q17 results, which it announced after the market closed on May 4.
The stock continued its upward momentum on May 8, rising 2.2% to $48.48 on the day.
As of May 5, Monster Beverage’s stock price had risen 7.0% on a YTD (year-to-date) basis.
S&P Capital IQ retained its “4-star buy” rating and raised its 12-month target by $3 to $54, and Credit Suisse Equity Research reiterated its “Outperform” rating and a price target of $59. Standard & Poor’s announced a new 2018 EPS estimate of $1.73 vs. 2017’s EPS estimate of $1.50.
Monster’s board authorized a new $500 billion share repurchase program in March, and that should also add to EPS, helped by its long-term strategic partnership with The Coca-Cola Co (NYSE:KO). Sales are estimated to rise 11% in 2017 driven by new products, price increases and volume growth.
Higher sales were the main drivers of the strong growth in Monster Beverage’s earnings in 1Q17.
Monster’s bottom line also benefited from a fall in the effective tax rate to 32.8% in 1Q17, compared to 35.8% in 1Q16. This lower tax rate was the result of a rise in profits earned by certain foreign subsidiaries in lower tax jurisdictions than the United States. It was also the result of higher equity compensation deductions.
Monster Beverage delivered higher earnings growth than PepsiCo (PEP) and Coca-Cola in 1Q17.
Monster Beverage’s strategic deal with Coca-Cola is expected to strengthen its international position. The company is planning to launch new products in several markets. For instance, at the end of April, the company launched a new Lewis Hamilton signature Monster Energy drink in Great Britain. The drink will be launched in 24 European markets in 2Q17 and in South Africa in July 2017. Monster Beverage is also planning to re-launch its products in India this year.
On Monster’s 1Q17 conference call, its chair and CEO, Rodney Sacks, mentioned that the company would be introducing a line extension of its Mutant brand called White Lightning—a zero sugar offering—to limited customers. The company launched Mutant, a super soda, in limited convenience stores in certain US markets in September 2016. The company also plans to launch Hydro, a noncarbonated lightly sweetened energy drink, to the general retail trade by the end of May.
Analysts and Hedge Funds Opinions
Analysts expect Monster Beverage’s sales to rise 11.2% to $3.4 billion in 2017. Analysts expect the company’s adjusted EPS (earnings per share) to rise 14.6% to $1.49 in 2017. Monster Beverage’s strong brand portfolio is enjoying continued demand in domestic and international markets.
Jefferies Group LLC reissued their buy rating on shares of Monster Beverage Co. (NASDAQ:MNST) in a report issued on Friday morning. They currently have a $63.00 target price on the stock.
“We lift our PT to $63 following MNST’s solid 1Q results as the co. continues to deliver peer-leading org sales growth (+9.5% in qtr) in a tough env’t. LT story here is very much intact with a long runway in intl. (30% FX neutral in 1Q) and US results improving after soft Dec-Feb. Our FY17-19 EPS est. are little changed, though at 17x ’18e EV/EBITDA (16% prem. to KO/PEP), MNST still has room to re-rate vs. hist. ~35% avg. prem. to peers. MNST remains a top pick. MNST posted a solid 1Q as the co. delivered 9.5% org sales growth, 255 bps of GM% expansion, and 22% adj. EPS growth (all items adj. for deferred revenue and distributor termination costs). Though results fell modestly short of consensus (-1% net sales/gross profit misses, adj. EPS of $0.32 was $0.01 below Street), the co.”,” Jefferies Group LLC’s analyst wrote.
Three research analysts have rated the stock with a hold rating, eleven have given a buy rating and one has assigned a strong buy rating to the company. The company currently has an average rating of Buy and an average price target of $56.46.
Therefore, Monster Beverage appears to be a good trade at the present time.
Another reason to consider MNST stock is that beverage stocks are traditionally strong during the summer months.
Energy-drink giant Monster Beverage has been one of the most successful stocks of the past 15 years, and the company has done a lot to create a brand-new segment of the beverage industry.
Option Trade – Yahoo! Inc. (NASDAQ:YHOO) Calls
Wednesday, May 10, 2017
** OPTION TRADE: Buy the YHOO JUNE 16 2017 50.000 CALL at approximately $1.00. Sell price is left to your own judgment.
Tech stocks have been leading the market higher for a while now, but nobody has been talking about Yahoo! Inc. (NASDAQ:YHOO). After such an historic fall from grace, this inept company was all but left for dead.
However, Yahoo!, a global technology company that is engaged in supplying Internet search, communication and digital content, has quietly gained 28% so far this year.
Share price in Yahoo has been on the uptrend throughout most of 2017. The stock even surpassed the high point of around $44 it had traded under for two years and was within striking distance of a more than 15-year high of around $52, trading at $49.30.
Looking at the 50-day moving average vs price signal, the reading is measured at Buy. This indicator is used to watch price changes. After a recent look, the signal strength is Average, and the signal direction is Strongest.
By historical standards, Yahoo! Inc.
remains a cheap stock. For now, Yahoo! Inc. is the toast of Wall Street as its
ABR stands at 2.40 with 4 out of 21 analysts rating the stock a buy.
Yahoo! Inc. has far performed well this year, with the share price up 27.98% since January. Over the past 2 quarters, the stock is up 22.86%, compared with a gain of nearly 11.54% for 3 months and about 6.57% for the past 30 days.
Last earnings report, the company shocked Wall Street by reporting EPS of $0.18, smashing the consensus of $0.14 per share. This was up from $80.07 million, or $0.08 per share, in last year's first quarter. Revenue for the quarter also killed consensus, coming in at $1.33B, compared to the consensus of 1.23B. This was up from $1.09 billion last year.
Analysts and Hedge Funds Opinions
The Vetr crowd on Thursday upgraded its rating for Yahoo! from 2 stars (Sell), issued 17 days ago, to 4 stars (Buy). Currently, the Vetr crowd's target price on Yahoo is up at $53.02, which is well above the average analyst target price of $46. Yahoo! Inc. is a popular stock on Vetr as more than 2 percent of users are holding YHOO in their watch lists.
Also, Yahoo! Inc.‘s stock had its “hold” rating reiterated by investment analysts at Needham & Company LLC in a research note issued to investors on Tuesday, April 18th.
Yahoo! currently has an analyst rating of 3.65. This is based on scale where a 5 would represent a Strong Buy, a 4 would indicate a Moderate Buy, 3 a hold, 2 a moderate sell, and a rating of 1 would represent a Strong Sell.
Yahoo! has a 50 day moving average price of $47.20 and a 200 day moving average price of $43.63. Yahoo! has a 52 week low of $35.05 and a 52 week high of $49.67. The company’s market cap is $47.67 billion.
Option Trade – Macy's, Inc. (NYSE:M) Puts
Wednesday, May 10, 2017
** OPTION TRADE: Buy the M JUNE 16 2017 28.000 PUT at approximately $1.15. Sell price is left to your own judgment.
Macy's, Inc. (NYSE:M), one of the leading department store retailers, is slated to report first-quarter fiscal 2017 results tomorrow, May 11 before market open, and it is expected that the numbers will be underwhelming.. In the preceding quarter, the company delivered a positive earnings surprise of 2.5%.
The current Consensus Estimate for the quarter under review is 35 cents, reflecting a year-over-year decline of over 12%. It is noted that the Consensus Estimate has been stable in the past 30 days. Analysts polled by Zacks expect revenues of $5,473 million, down above 5% from the year-ago quarter.
Consumer spending is down as consumer savings rates continue to rise, M is desperately trying to cut dead weight by closing key stores across the country, and Amazon.com, Inc. (NASDAQ:AMZN) plans to continue disrupting the sector by opening physical locations and increasing its clothing and furniture sales. Things don’t look good for department stores.
A competitive retail landscape, a mature domestic market and cautious consumer spending continue to pose concerns.
Macy's dwindling top-line and bottom-line results remain the primary threat for investors. A look at the performance in fiscal 2015 unveils that net sales declined 0.7%, 2.6%, 5.2% and 5.3% in the first, second, third and fourth quarters, respectively. Maintaining the same chronological order, it is noted that earnings per share fell 6.7%, 20%, 8.2% and 14.3%, respectively. In fiscal 2016 net sales decreased 7.4%, 3.9%, 4.2% and 4% in the first, second, third and fourth quarters, while earnings per share plunged 28.6%, 15.6%, 69.6% and 3.3% during the respective quarters.
Analysts and Hedge Funds Opinions
Macy's Inc‘s stock had its “buy” rating restated by stock analysts at Wunderlich in a research note issued on Friday. They currently have a $24.00 target price on the stock. Wunderlich’s target price suggests a potential downside of 16.29% from the company’s previous close.
Suntrust Banks Inc. decreased its stake in Macy's Inc by 12.8% during the first quarter, according to its most recent filing with the SEC. The fund owned 235,866 shares of the company’s stock after selling 34,488 shares during the period. Suntrust Banks Inc. owned approximately 0.08% of Macy's worth $6,988,000 as of its most recent SEC filing.
Also, insider trades for Macy’s, Inc. show that the latest trade was made on 28 Mar 2017 where Langenstein (Molly), the Officer completed a transaction type “Sell” in which 1251 shares were traded at a price of $28.55.
Look for M to break out of the consolidation range it has been in for the past month and drop back down past its recent lows of $27.72 as the stock continues its long-term downtrend.
Macy's Inc has a 52-week low of $27.72 and a 52-week high of $45.41. The firm has a 50 day moving average price of $29.17 and a 200-day moving average price of $33.79. The stock has a market cap of $8.91 billion, a price-to-earnings ratio of 14.72 and a beta of 0.79.