“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, June 04, 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 - - Newell Brands Inc. (NYSE:NWL) Puts

Thursday, June 07, 2018

** OPTION TRADE: Buy NWL JULY 20 2018 24.000 PUT at approximately $0.90 TO $1.00 each. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.00.

Also include a protective stop loss of $0.35.)

Volatility still seems likely to continue to rise in the short term. As uncertainty persists, there are a few companies showing striking signs of distress. One such company that fits this category is Newell Brands Inc. (NYSE:NWL).

Newell Brands designs, manufactures, sources, and distributes consumer and commercial products worldwide. The company's Live segment offers household products, including kitchen appliances, gourmet cookware, bakeware and cutlery, food storage and home storage products, fresh preserving products, and home fragrance products; and baby gear, infant care, and health products primarily under Aprica, Baby Jogger, Ball, Calphalon, Chesapeake Bay Candle, Crock-Pot, FoodSaver, Graco, Mr.

There is likely to be continuing bad news for Newell after the Chief Financial Officer (CFO) announced retirement after only two years on the job; which is usually a bad sign. Considering the company’s debt load and shareholder fights with management, there is not much likelihood of a short-term improvement.

Kevin Grundy from Jefferies tends to agree with this outlook and maintains a Hold rating on Newell Brands …… Grundy noted:

“NWL announced today that it would sell its Rawlings business (~2.5% of sales) for $395M ($340M in after-tax proceeds) to Seidler Equity Partners, w/ MLB co-investing. The sale is consistent with and we est. represents a ~9.5x EV/EBITDA multiple, relatively in-line with investor expectations. Results will take time to turnaround, execution risk abounds, though valuation undemanding at 9x EV/EBITDA.”

A month has gone by since the last earnings report for Newell Brands. Shares have lost about 11.7% in that time frame.

Influencing Factors

Newell's recent earnings estimates have been mostly trending lower. The current quarter has seen no estimates go higher in the past sixty days compared to seven lower, while the full year estimate has seen two upward and three downward revisions in the same time period.

As a result, the current quarter consensus estimate has fallen by 10.3% in the past two months, while the full year estimate has inched lower by 0.7%.

This negative trend is why the stock has just a Hold rating despite strong value metrics and analysts are only looking for in-line performance from the company in the near term.

Newell Brands reported mixed first-quarter 2018 results wherein the company's bottom line surpassed the Consensus Estimate while the top line marginally lagged the same. While this marked the company's second straight earnings beat, sales figure failed to top the consensus mark after surpassing expectations in the fourth quarter of 2017. Further, management retained its 2018 view.

Newell saw a large growth in short interest in the month of April. As of April 30th, there was short interest totalling 40,205,043 shares, a growth of 10.3% from the April 13th total of 36,441,414 shares. Approximately 8.4% of the shares of the company are sold short. Based on an average trading volume of 5,618,408 shares, the days-to-cover ratio is currently 7.2 days.

Future Outlook…..

Following the mixed quarterly results, management reiterated its guidance for 2018. Net sales are still projected in the band of $14.4 billion to $14.8 billion with core sales to be flat to down low-single digit rate.

Further, management continues to expect normalized earnings per share in the band of $2.65 to $2.85 and envisions operating cash flow in the range of $1.15-$1.45 billion for 2018. However, the company estimates both the metrics' outlook to come in at the lower end of the guided range.

Analysts and Hedge Funds Opinions

Newell Brands has been assigned an average recommendation of “Hold” from the twenty-one ratings firms that are presently covering the firm. Two research analysts have rated the stock with a sell recommendation, thirteen have given a hold recommendation, four have assigned a buy recommendation and one has given a strong buy recommendation to the company.

Several analysts have recently commented on the company…..

  • JPMorgan Chase & Co. set a $28.00 price target on Newell Brands and gave the company a “hold” rating in a report on Monday, March 19th.
  • Barclays set a $28.00 price target on Newell Brands and gave the company a “hold” rating in a report on Thursday, March 15th.
Summary

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift.

Newell has a current ratio of 1.72, a quick ratio of 1.20 and a debt-to-equity ratio of 0.68. Newell Brands has a 12 month low of $27.02 and a 12 month high of $27.24. The company has a market capitalization of $13.14 billion, a P/E ratio of 9.86, a P/E/G ratio of 1.65 and a beta of 0.80.


Option Trade - - Cyberark Software Ltd (NASDAQ: CYBR) Calls

Tuesday, June 05, 2018

** OPTION TRADE: Buy CYBR JULY 20 2018 65.000 CALL at approximately $0.90 TO $1.00 each. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.00.

Also include a protective stop loss of $0.35.)

The cyber-security field is a hot space. The annual cost of cyber-security attacks in the United States alone is estimated at approximately $100 billion, and that figure will only grow with the increase in technology use across all platforms. However, with such an increase in the use of technology and the growing issue of cyber-security threats, the number of companies competing to protect the networks of Fortune 500 companies has become intensely competitive.

Cyberark Software Ltd (NASDAQ: CYBR) provides cyber-security solutions that many other companies do, but its core product occupies a niche space that it has positioned itself as the industry leader in, privileged account management. This security solution, along with diversification in its offerings from recent strategic acquisitions, and the general tailwinds in the industry provide a nice setup for CyberArk to trend higher in the near future.

Privileged account management, to put it simply, restricts unauthorized users from accessing a company's most confidential and important data and information. Privileged account management is used by less than half of large enterprises currently; however, estimates are that this figure will increase to 75% by 2020. As cyber-security attacks continue to grow, it will be increasingly essential for security managers of large firms to protect its most critical information, and this is where solutions developed by CyberArk come into the equation.

CyberArk has seen rapid revenue growth in light of increased privileged account data breaches. Revenue has grown at a CAGR of 43% in the past 5 years, increasing from just $47 million in 2012 to over $250 million today. Their customers include 50% of the Fortune 500 and approximately 25% of the Global 2000.

Despite competition from several large and smaller players, the International Data Corporation recognized CyberArk as the forefront of the industry with leading capabilities and strategies as well as the largest revenue base and customer base in the PAM security space.

The price and the On-Balance-Volume (OBV) line have been moving up nicely since the beginning of the year. CYBR is above the rising 50-day moving average line and the bullish 200-day line. At the beginning of March we can see a bullish golden cross of these two moving averages - 50 and 200. The trend-following Moving Average Convergence Divergence (MACD) oscillator crossed above the zero line in early February and is poised to cross higher again.

The prices have broken out above the July/August highs of 2016 to complete a large base formation. Prices are above the rising 40-week moving average line. The weekly OBV line is bullish and rising as is the MACD oscillator. The initial upside price target from this base measure to around $75-$80.

Since the last earnings report CyberArk Software shares have added about 10.5% in that time frame.

Influencing Factors

Quarter 1 revenues for CyberArk in 2018 came in at $71.8 million, up 21% from last year's Q1 revenues. Q1 revenue figures beat management's guidance of $69.5 million. Q1 free cash flow reported at $31 million, significantly up from last year's $15 million in free cash flow. CyberArk faced increased operational expenses in Q1 2018; however, most of this can be attributed to an increase in employee headcount as the company begins to expand. As bookings continue to increase, earnings should reflect this.

During the reported quarter, the company closed a number of deals, including a significant number of seven-figure new clients. Also, CyberArk witnessed a remarkable number of federal deals in the quarter. The company added more than 150 customers and ended the quarter with more than 3,800 clients.

Segment wise, License revenues which accounted for 54% of total revenues, increased 17% year over year to $38.5 million. Maintenance and Professional Services revenues, contributing 46% to total revenues, jumped 28% year over year to $33.3 million.

Geographically, the company witnessed revenue growth across every region. On a year-over-year basis, revenues from the Americas increased 18% and contributed 62% of total revenues. Revenues in the Asia Pacific and Japan were up 28% year over year, representing 8% of total revenues. EMEA recorded a 29% jump and accounted for 30% of total revenues.

CyberArk exited the first quarter with cash, cash equivalents, short-term deposits and marketable securities of approximately $325.4 million, up from $302.9 million at the end of fourth-quarter 2017. Receivables were $38.4 million at the end of the reported quarter.

CyberArk's balance sheet does not have any long-term debt. The company generated cash flow from operations of approximately $33.1 million in the first quarter.

In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter.

CyberArk rolled out the CyberArk Marketplace at the 2018 RSA Conference, offering a platform for IT and security professionals to use its industry leading privileged access security with seamless integrative applications. The Marketplace provides plug-ins and tools created by CyberArk as well as other software companies that create a simplistic and efficient security management system for its clients. CyberArk has taken the lead to partner with leading software companies to use their technology and integrate it into their proprietary PAM security solution.

In March 2018, CyberArk acquired Vaultive, Inc, a cloud security company. CyberArk plans to build upon Vaultive's cloud technology and incorporate it into its privileged account management offering by providing its clients a cloud-native and mobile experience. It will also allow CyberArk to protect its clients from cyber-attacks in the cloud.

Analysts and Hedge Funds Opinions

ValuEngine upgraded shares of Cyberark Software from a hold rating to a buy rating in a research note published on Wednesday, May 9th.

Several analysts have recently commented on the company…..

Zacks Investment Research raised Cyberark Software from a sell rating to a hold rating in a research report on Tuesday, April 17th.

Needham & Company LLC reissued a buy rating and set a $57.00 target price (up from $55.00) on shares of Cyberark Software in a research note on Wednesday, March 7th.

Cowen reissued a hold rating on shares of Cyberark Software in a research note on Friday, February 16th.

Finally, Bank of America increased their target price on shares of Cyberark Software from $60.00 to $63.00 and gave the stock a buy rating in a research note on Friday, May 4th.

Eight investment analysts have rated the stock with a hold rating, eleven have assigned a buy rating and one has given a strong buy rating to the company. The company has an average rating of Buy and a consensus price target of $57.53.

Summary

CYBR looks like it can head much higher - price targets from $69.55 to $80. CyberArk maintains a strong moat over its competitors with its privileged access management solutions; smaller competitors including Thycotic are making strides and attempting to catch up even though they are much smaller.

Cyberark Software has a market cap of $2.21 billion, a PE ratio of 84.90, a price-to-earnings-growth ratio of 5.07 and a beta of 2.05. Cyberark Software Ltd has a one year low of $39.34 and a one year high of $61.68.


Option Trade - - Stitch Fix Inc (NASDAQ:SFIX) Calls

Monday, June 04, 2018

** OPTION TRADE: Buy SFIX JULY 20 2018 19.000 CALL at approximately $1.60 TO $1.80 each. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $3.20.

Also include a protective stop loss of $0.65.)

Stitch Fix Inc (NASDAQ:SFIX), an online personalized styling service company, is the wave of the future with what t is doing with fashion and artificial intelligence.

It has combined high tech with high touch in a subscription-based business model that's going to have women everywhere clamoring for its personal-shopping service.

The online shopping service that provides subscribers with a monthly clothing "fix" in their mailboxes - selected through a combination of artificial intelligence and human curation - just won an award for having the most diverse board in the tech industry.

To qualify for Boardlist's top 30 tech companies demonstrating diversity and inclusion, a company had to have at least one woman on the board, one person of color, and one independent director on the board.

So, for the relatively new public company (Stitch Fix went public in November at $15 a share) to be number one out of 21 tech companies, it's a real statement about its commitment to diversity.

Stitch Fix founder and CEO Katrina Lake - and the youngest woman to take a company public – had this to say……

"The biggest thing that we could do is to be an example of a company that is founded by a woman, that is in a women's industry and goes public. Because if nothing else it wakes up the capitalists and venture capitalists … Even if they are not going to get excited about fashion, if they feel like they missed out on that one, that creates a natural and capitalist reason for people to pay more attention."

Stitch Fix is one of the biggest disruptors in both technology and retail. Lake's figured out how to bring a high tech, high touch approach under one roof.

Lake didn't seem to see Amazon as a threat, saying its value proposition was "fundamentally different," explaining that Amazon's attraction was in its broad range and choice of clothes available, while Stitch Fix essentially offers no choice as it chooses the clothes for you. She also said that her company hadn't had any serious talks about combining with Amazon.

Influencing Factors

Stitch Fix doesn't let you choose your clothes directly. Instead, it operates as a styling service, sending customers five items at intervals of their choosing based on their style preferences, budget, needs, and fit.

The strength of such a model is clear. By collecting data on its user preferences, Stitch Fix has information that the average brick-and-mortar apparel retailer doesn't, and it can use that to not only hone its choices for individual customers, but also to better serve its broader customer base and even design its own clothes. The company cites "data science" dozens of times in its prospectus and even claims it as a source of "competitive advantage," so it's clear it sees that as a key strength.

Aside from the data, Stitch Fix also provides value to the customer by saving the time and energy normally spent shopping for clothes in a store or online.

Also, Stitch Fix does seem to have some competitive advantages. As the largest subscription box service, the company presumably has more data and brand awareness than its competitors, which should help it attract and keep more new customers than competing styling services. Online styling services also create switching costs as shoppers have to spend a fair amount of time filling out forms explaining their style, preference, and fit. Further, once you start using a service, it collects more information about your tastes, making it more valuable to the user. Therefore, customers are unlikely to switch to a competitor unless they are dissatisfied with the service they're using.

Those elements explain why Stitch Fix is spending heavily on marketing, as attracting new customers can lead to thousands of dollars of lifetime value if they stay with the service for years.

Finally, styling services like Stitch Fix do seem to have competitive advantages over conventional retailers, because the data they collect should help them better cater to customers and know what clothes to design.

Stitch Fix last released its earnings results on Monday, March 12th. The company reported $0.07 EPS for the quarter, topping the consensus estimate of $0.06 by $0.01. The company had revenue of $296.00 million during the quarter, compared to analysts’ expectations of $291.29 million. Stitch Fix’s revenue was up 24.4% compared to the same quarter last year.

Analysts and Hedge Funds Opinions

Several analysts have recently commented on the company…..

  • Stifel Nicolaus lifted their price target on shares of Stitch Fix from $23.00 to $25.00 and gave the company a “hold” rating in a report on Tuesday, March 13th.
  • ValuEngine raised shares of Stitch Fix from a “sell” rating to a “hold” rating in a report on Wednesday, April 4th.
  • Finally, Buckingham Research began coverage on shares of Stitch Fix in a report on Monday, March 19th. They set a “neutral” rating and a $22.00 price target on the stock.

Six research analysts have rated the stock with a hold rating and three have issued a buy rating to the stock. The stock has an average rating of “Hold” and an average price target of $25.57.

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

  • Gilder Gagnon Howe & Co. LLC purchased a new position in shares of Stitch Fix in the fourth quarter worth $25,974,000.
  • Virtu Financial LLC purchased a new position in shares of Stitch Fix in the fourth quarter worth $578,000.
  • Engineers Gate Manager LP purchased a new position in shares of Stitch Fix in the fourth quarter worth $1,538,000.
  • potrero capital research llc purchased a new position in shares of Stitch Fix in the fourth quarter worth $1,808,000.
Summary

Analysts predict that Stitch Fix will post earnings per share (EPS) of $0.03 for the current quarter. Three analysts have provided estimates for Stitch Fix’s earnings, with estimates ranging from $0.02 to $0.03. The business is expected to report its next quarterly earnings report after the market closes this Thursday, June 7th.

Stitch Fix Inc has a one year low of $14.48 and a one year high of $30.07.





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