“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, July 16, 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.


You may also wish to read Stock Options Made Easy Trading Philosophy

ALSO "Trading Capital Management"



Options Trade - - Overstock.com Inc (NASDAQ: OSTK) Calls

Thursday, July 19, 2018

** OPTION TRADE: Buy OSTK AUG 17 2018 45.000 CALL at approximately $2.00. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $4.00.

Also include a protective stop loss of $0.80.)

Overstock.com Inc (NASDAQ: OSTK) shares skyrocketed in 2017 thanks to the company's efforts to make a business out of cryptocurrencies and blockchain technology. That surge continued into the first week of 2018, where cryptocurrency prices still appeared to have some fresh boosts coming their way.

But when bitcoin and other digital coins ran out of oomph, so did Overstock . The company also presented two disappointing earnings reports along the way, but the market largely shrugged them off and continued to tie Overstock's share prices very closely to the ups and downs of leading cryptocurrencies.

However, shares of Overstock.com fell 47.3% in the first half of 2018, according to data from S&P Global Market Intelligence.

Overstock.com, Inc. is an online closeout retailer offering discount, brand-name merchandise for sale over the Internet. Their merchandise offerings include bed-and-bath goods, kitchenware, watches, jewelry, electronics, sporting goods and designer accessories.

This week saw Overstock.com rallying past $43 in a single session. But, now Overstock is providing a second chance to get in as it pulled back some 4% on Wednesday, which provides a buy of OSTK with a solid-risk/reward. Now near the $40 level and the 100-day moving average, there should be decent support just below current levels.

Influencing Factors

The market seems to think that Overstock is bitcoin because of Medici ventures and Byrne's obsession with blockchain. An astute buyer of the e-commerce division will look past Medici and analyze the merits of Overstock’s retail arm. If they do so they will see efficiency and value based , with a fair price between $1-$2.5 billion.

The security offering for tZero tokens on June 29, 2018 for $160 million was extended to August 6, 2018. There is $328 million committed and $95 million funded. If August commitments exceed $328 million, then the stock price should jump. Likewise, if letters of intent result in actual funded tokens, the stock price could increase as well. Either action could result in a short squeeze.

Announcing the sale of the e-commerce retail business for $1 billion - $2.5 billion.

Any of the Medici ventures could prove profitable and valuable blockchain/crypto assets.

Analysts and Hedge Funds Opinions

Overstock.com had its target price lifted by stock analysts at DA Davidson to $103.00 in a report issued recently. The firm currently has a “buy” rating on the stock. DA Davidson’s price target suggests a potential upside of approx. 200% from the stock’s previous close.

Several analysts have recently commented on the company…..

  • Overstock.com was upgraded by investment analysts at BidaskClub from a “sell” rating to a “hold” rating in a report issued on Wednesday, June 13th.
  • DA Davidson cut their price objective on shares of Overstock.com from $110.00 to $100.00 and set a buy rating for the company in a research report on Monday, March 19th.
  • TheStreet downgraded shares of Overstock.com from a c- rating to a d rating in a research report on Tuesday, March 20th.
  • Finally, ValuEngine upgraded shares of Overstock.com from a hold rating to a buy rating in a research report on Wednesday, May 2nd.

Two investment analysts have rated the stock with a hold rating and two have assigned a buy rating to the stock. The stock has an average rating of Buy and an average target price of $70.50.

Summary

Overstock.com has a market cap of $1.06 billion, a P/E ratio of -20.61 and a beta of 1.71. The company has a quick ratio of 1.36, a current ratio of 1.42 and a debt-to-equity ratio of 0.16. Overstock.com has a 1-year low of $14.30 and a 1-year high of $89.80.


Options Trade - - Micron Technology, Inc. (NASDAQ:MU) Calls

Wednesday, July 18, 2018

** OPTION TRADE: Buy MU AUG 17 2018 60.000 CALL at approximately $1.50. 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.)

Chip-stock analysts continue to like what they are seeing in the area of memory chips, such as DRAM. Susquehanna Financial Group’s Mehdi Hosseini offered a relatively upbeat view on DRAM, saying,supply of DRAM is going to increase by 20% to 22% this year”.

Idaho-based Micron Technology, Inc. (NASDAQ: MU), a memory chip manufacturer, will benefit from this positive aspect. Also, Micron has been lifted by an announcement Monday that it is parting ways with partner Intel (INTC) for the future of the two companies’ novel “3D XPoint” memory-chip technology after 12 years.

Credit Suisse analyst John Pitzer reiterated his upbeat view of Micron yesterday, after the company issued the announcement with Intel Corp regarding their 3D XPoint arrangement. The companies said that they have agreed to complete development of the second generation of 3D XPoint technology by the first half of next year, and that they would work independently on technology development beyond the second generation. "While this decision should lead to higher R&D intensity as MU and INTC no longer pool resources, we believe this decision along with the 3D NAND decision continue to show Micron's willingness to develop its own technology roadmap to optimize its business mix - and we expect mix to be a significant potential driver of fundamental outperformance," Pitzer wrote in a note to clients. He rates the stock at outperform with a $90 target price.

RBC Capital analyst Amit Daryanani commented, “Based on our discussion with the company, ~100bps headwind to GM from 3D Xpoint will persist over the next few quarters as it’s related to underutilization at IMFT fab (production expected to start in ~3-4 quarters). Also, based on our prior discussions, ending the JV is likely an indication that MU is ROI driven for cash outlays, be that for a JV or M&A. Net net, We believe MU remains one of the more attractive names in our coverage as we see potential for sustained beats/raises that should get augmented by a consistent buyback program as we get into FY19. Near term, investor concerns around China and NAND supply seem overblown and neither one should impact MU’s standalone performance going forward.”

As such, Daryanani reiterates an Outperform rating on Micron shares, with a price target of $83, which implies an upside of 45% from current levels.

Influencing Factors

Micron has rebounded smartly from both a disappointing earnings report and veiled threats out of China on DRAM price fixing. MU stock has risen nearly 10% over the past eight trading days since making a low of $51.48 on July 3, but it is now running into some serious resistance.

Micron stock certainly sits at an important inflection point and seems poised for a major move. Look for the stock to break out of the recent consolidation in a convincing manner over the coming weeks.

MU stock has had a series of both higher lows and lower highs, meaning it is coiling ever tighter and it is likely poised for a dramatic breakout.

Also, Micron Technology declared that its board has authorized a stock buyback plan on Monday, May 21st that authorizes the company to repurchase $10.00 billion in outstanding shares. This repurchase authorization authorizes the semiconductor manufacturer to buy up to 16.2% of its stock through open market purchases. Stock repurchase plans are generally an indication that the company’s board believes its shares are undervalued.

Moving Forward…..

IV is at the 21st percentile, while historic volatility (HV), which measures how volatile MU stock has actually been, is much higher at the 68th percentile. This means option prices are very cheap in comparison to how much Micron shares have been moving.

Analysts and Hedge Funds Opinions

Micron has been given a $108.00 price objective by Stifel Nicolaus in a note issued to investors last Thursday. The brokerage presently has a “buy” rating on the semiconductor manufacturer’s stock. Stifel Nicolaus’ price objective points to a potential upside of 102.89% from the stock’s current price.

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

  • JPMorgan Chase & Co. upped their price target on shares of Micron Technology from $60.00 to $80.00 and gave the stock an “overweight” rating in a research note on Friday, March 23rd.
  • BidaskClub upgraded shares of Micron Technology from a “buy” rating to a “strong-buy” rating in a report on Thursday, May 31st.
  • Rosenblatt Securities boosted their target price on shares of Micron Technology to $120.00 in a report on Thursday, June 21st.
  • BMO Capital Markets boosted their target price on shares of Micron Technology from $43.00 to $63.00 and gave the stock a “market perform” rating in a report on Wednesday, March 21st.

Wall Street loves the chip giant, scoring one of the most bullish consensus ratings – Strong Buy. Based on 22 analysts polled in the last 3 months; 18 rate a Buy on Micron stock while 4 recommend a Hold. The 12-month average price target stands at $83.95, marking a 47% upside from where the stock is currently trading.

Summary

Micron Technology has a market cap of $62.84 billion, a PE ratio of 12.78, a P/E/G ratio of 0.57 and a beta of 1.50. The company has a debt-to-equity ratio of 0.20, a quick ratio of 2.06 and a current ratio of 2.63. Micron Technology, Inc. has a fifty-two week low of $26.85 and a fifty-two week high of $64.66.


Options Trade - - Cleveland-Cliffs Inc (NYSE: CLF) Calls

Monday, July 16, 2018

** OPTION TRADE: Buy CLF AUG 17 2018 8.000 CALL at approximately $0.78. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $1.60.

Also include a protective stop loss of $0.30.)

Iron ore mining company Cleveland-Cliffs Inc (NYSE: CLF) will present second quarter earnings results on Friday, July 20, before the market opens.

The consensus earnings estimate is $0.54 per share on revenue of $618.55 million; but the Whisper number is much higher at $0.60 per share.

Consensus estimates are for year-over-year earnings growth of 107.69% with revenue increasing by 8.65%. Cleveland-Cliffs also delivered an average earnings surprise of 49.92% in the last four quarters.

Shares of Cleveland-Cliffs Inc. CLF have grown by around 24% over the past three months. The company has also significantly outperformed its industry’s growth of roughly 2% over the same time frame.  

Short interest has decreased by 11.3% and overall earnings estimates have been revised higher since the company's last earnings release. In fact, over the past month, current quarter estimates have risen from 47 cents per share to 54 cents per share, while current year estimates have risen from $1.34 per share to $1.52 per share.

In the first half of 2018, US steel stocks and Cleveland-Cliffs saw a lot of volatility. A large part of the volatility was due to tariffs, initial exemptions, removal of exemptions, and the consequent retaliation. The spike in steel prices is expected to support steel companies’ earnings this year.

Influencing Factors

Forecast-topping first-quarter results and buoyant outlook for its U.S. Iron Ore business have contributed to the rally in Cleveland-Cliffs' stock. The company delivered a positive earnings surprise of 61.9% in the first quarter. Notably, Cleveland-Cliffs has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering a positive average earnings surprise of 49.9%.

Cleveland-Cliffs, during the first quarter of 2018, witnessed healthy steel demand in several sectors including construction, machinery and equipment, automotive and energy. It also believes that consumption will be very high this year as business environment remains good.

The company also expects prices to continue remaining high. Cleveland-Cliffs expect strength in the U.S. steel market coupled with its enhanced pellet supply contracts to help it deliver significantly higher EBITDA and cash flow in 2018.

Cleveland-Cliffs also raised its sales volume expectations for 2018 for its U.S. iron ore business factoring in strong demand. The company now sees sales volume to be 20.5 million long tons for the full year, up from roughly 20 million long tons expected earlier.

Moving Forward…..

Cliffs raised its expectation for US realized prices to $102–$107 per ton for 2018 during its first-quarter results compared to its original expectation of $97–$102 per ton. This revision was the result of the favorable performance of iron ore, US HRC steel, and Atlantic pellet premiums. This expectation should not be construed as guidance, as the company has mentioned that it does not reflect its internal views on pricing.

Investment analysts at Jefferies Financial Group lifted their FY2019 earnings estimates for Cleveland-Cliffs in a research report issued to clients and investors on Tuesday, July 10th. Jefferies Financial Group analyst S. Rosenfeld now expects that the mining company will post earnings per share of $1.25 for the year, up from their prior estimate of $1.01. Jefferies Financial Group currently has a “Buy” rating and a $9.50 price target on the stock.

Analysts and Hedge Funds Opinions

Cleveland-Cliffs stock has received six upgrades (including initiations) and just one downgrade in 2018 so far.

Citigroup initiated coverage on CLF on June 6 with a “buy” rating.

Citigroup analyst Daniel Knauff thinks that Cliffs has “significant logistical, quality and cost advantages” to supply iron ore pellets to US steel companies. Knauff has noted that domestic market dynamics have improved. He likes Cleveland-Cliffs because it’s the only major independent supplier of iron ore pellets to the domestic market, and it has secured its revenue through long-term, partially fixed pricing contracts.

Several analysts have recently commented on the company…..

  • On Tuesday, July 10th Jefferies Financial Group analyst S. Rosenfeld gave CLF a “Buy” rating and a $9.50 price target on the stock.
  • Macquarie initiated coverage on Cliffs on June 26 with an “outperform” rating.
  • Among other changes, Seaport Global Securities initiated coverage of CLF with a “buy” rating and a target price of $10 on May 9. Analyst Mark Levin cited strong cash flows and long-term contracts as the major reasons for the “buy” rating.
  • On April 23, Clarkson Capital upgraded CLF from a “neutral” to a “buy.” It also boosted the stock’s target price 57% to $11.

  • On February 7, Credit Suisse (CS) analyst Curt Woodworth upgraded Cleveland-Cliffs stock two notches from an “underperform” to an “outperform.” The analyst also raised the stock’s target price 80% from $5 to $9.
  • Finally, Zacks Investment Research raised Cleveland-Cliffs from a “hold” rating to a “buy” rating and set an $8.25 target price for the company in a research note on Wednesday, April 25th.

Cleveland-Cliffs currently has a consensus rating of “Hold” and a consensus price target of $9.84. 

Insider News……

Director Eric M. Rychel purchased 5,000 shares of Cleveland-Cliffs stock in a transaction dated Friday, April 27th. The shares were acquired at an average cost of $7.48 per share, for a total transaction of $37,400.00. Following the transaction, the director now directly owns 19,845 shares of the company’s stock, valued at $148,440.60.

Summary

Cleveland-Cliffs has a market capitalization of $2.46 billion, a P/E ratio of 16.80 and a beta of 1.63. Cleveland-Cliffs has a fifty-two week low of $5.60 and a fifty-two week high of $9.15. The company has a debt-to-equity ratio of -4.76, a quick ratio of 2.37 and a current ratio of 3.32.






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