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

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

ALSO "Trading Capital Management"

Options Trade - - - Morgan Stanley (NYSE:MS) Puts  

Thursday, August 02, 2018

** OPTION TRADE: Buy MS SEPT 21 2018 50.000 PUT at approximately $1.40. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.80.

Also include a protective stop loss of $0.55.)

The New York City-based bank Morgan Stanley (NYSE:MS) issued its quarterly earnings data on Wednesday, July 18th and surprised the market with a very positive report. The financial services provider reported $1.30 earnings per share for the quarter, beating the consensus estimate of $1.11 by $0.19. The business had revenue of $10.61 billion for the quarter, compared to the consensus estimate of $10.05 billion. Morgan Stanley had a return on equity of 12.09% and a net margin of 15.84%. The firm’s revenue was up 11.6% compared to the same quarter last year. During the same period last year, the business earned $0.87 EPS.

Two analysts have rated the stock with a sell rating, nine have given a hold rating, eleven have issued a buy rating and one has given a strong buy rating to the company’s stock. The company has an average rating of “Hold” and an average price target of $57.05.

However, Morgan Stanley‘s earnings report on October, 16 may not be as successful. Analysts expect $1.12 earnings per share, up 20.43 % or $0.19 from last year’s $0.93 per share. MS’s profit will be $1.98 billion for 11.25 P/E if the $1.12 EPS becomes a reality. After $1.30 actual earnings per share reported by Morgan Stanley for the previous quarter, Wall Street now forecasts -13.85 % negative EPS growth.

And checking out the chart, Morgan Stanley is right at the upper rail of its channel and the stochastics just made a bearish crossover.

Time to see a further pull-back!

Options Trade - - JD.Com Inc. (ADR) (NASDAQ:JD) Calls

Wednesday, August 01, 2018

** OPTION TRADE: Buy JD SEPT 21 2018 37.000 CALL at approximately $1.30. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.60.

Also include a protective stop loss of $0.55.)

Chinese e-commerce giant JD.Com Inc. (ADR) (NASDAQ:JD), often referred to the Chinese Amazon.com, despite the fact that its larger competitor, Alibaba, is often called the same. Of the two, JD is clearly the most Amazon like, in that it maintains its own supply network and distribution chain, while Alibaba does mostly agency business, making it a bit like a very big Chinese eBay.

JD is playing a long game, and a smart one, focusing on strategic partnerships, such as it now has with Baidu and Tencent. The company is investing in and actually using blockchain technology, and it remains on the forefront of automated delivery, meaning drones.

JD.com's core business is a first-party online retail model. It's one of the main e-commerce platforms in China with more than $57 billion in sales generated in 2017. There's no reason why JD shouldn't exploit the huge reach and traffic of its platform to generate uncorrelated revenues through ads on its platform, and the management is well aware of this opportunity. JD's management has clearly stated that increasing advertising revenue is a priority.

Influencing Factors

China's consumer economy is huge and only growing. It is undeniably massive - with a 770.4 million working population, more than five times as large as America's working population. It also undeniably has a long way to go before it's mature - it has about $3,600 in household expenditures per capita, less than 20% of America's household expenditures per capita.

Thus, China's consumer economy continues to look more and more like America's consumer economy in the long-run, and then China’s internet stocks have a bunch of growth potential ahead of them.

JD has gone through the painstaking process of building out its own distribution system. While this has resulted in huge capital needs and minuscule margins, JD is well-positioned to dominate over the long term. JD has a much better control over its product quality than Alibaba. Alibaba is just a platform for connecting buyers and sellers (much like eBay is in the U.S.), so it's rife with counterfeits. By contrast, JD's complete control over its distribution network should help it earn trust from its consumers in the same way that Amazon.com has in the U.S.

At the same time, JD.com's stock isn't enjoying much of a premium valuation right now, given investor fears over a growing trade war with China. JD is currently trading for less than 1 times sales and for about 31 times forward earnings. That's not all that expensive for a company that just posted revenue growth of 44% and EPS growth of 750%.

Moving Forward…..

JD's small size is actually an advantage, because the company has much more room to grow than Alibaba.

JD's fulfillment network not only gives it a low internal cost of guaranteeing two-day delivery, but its control over inventory helps combat counterfeit goods, which is a major problem in China.

Margins are compressing, thanks to growth-related investments. In the long-run, these growth-related investments will not only fuel continued robust top-line growth, but they will also disappear as the business goes from expansion stage to maturation stage. Thus, near-term investments actually improve the long-term revenue and margin profile at JD.

This dynamic of big near-term investment leading to big long-term growth is presently being dramatically underappreciated by the market. As such, JD stock can break above $50 by the end of the year as investor sentiment normalizes.

Analysts and Hedge Funds Opinions

JD.Com had its “buy” rating reaffirmed by analysts at Stifel Nicolaus on July 19. They now have a $50.00 price target on the stock. They wrote, “We expect JD.com to report 2Q:18 earnings in mid-August (TBD). We are forecasting topline growth of 33.2% y/y in 2Q, which is modestly above consensus expectations (32.1% y/y) and near the high-end of the guided range (28.8%-33.0% y/y). Our 2Q adj. net income margin estimate of 0.9% matches consensus expectations. We expect profitability to improve in the back half of the year driven by margin expansion in both JD’s core and logistics businesses, with the latter being driven by increasing utilization. We remain confident in the management team’s execution and support where investment dollars are focused as we believe the initiatives support greater long-term growth potential without sacrificing margin potential.””

Several analysts have recently commented on the company…..

  • Wells Fargo & Co reaffirmed a “buy” rating and set a $53.00 target price on shares of JD.Com in a research note on Tuesday, June 19th.
  • BNP Paribas assumed coverage on JD.Com in a research report on Thursday, June 14th. They set a “hold” rating on the stock.
  • ValuEngine upgraded JD.Com from a “sell” rating to a “hold” rating in a research report on Wednesday, June 6th.
  • BidaskClub upgraded JD.Com from a “strong sell” rating to a “sell” rating in a research report on Wednesday, June 6th.
  • Finally, KeyCorp upgraded JD.Com to a “buy” rating and set a $51.00 price target on the stock in a research report on Monday, July 9th.

Shares of JD.Com have received an average rating of “Buy” from the nineteen ratings firms that are presently covering the firm. One analyst has rated the stock with a sell recommendation, six have given a hold recommendation and eleven have given a buy recommendation to the company. The average 12 month target price among brokerages that have issued ratings on the stock in the last year is $51.27.


JD stock has been a loser in 2018, but, that could change as JD’s big investments start to pay off in the form of global retail sales growth, cloud growth, and operational efficiency improvements.

JD.Com Inc has a 12-month low of $34.76 and a 12-month high of $50.68. The company has a current ratio of 1.06, a quick ratio of 0.72 and a debt-to-equity ratio of 0.13. The company has a market capitalization of $43.60 billion, a price-to-earnings ratio of 3,516.00, and a P/E/G ratio of 7.16 and a beta of 1.58.

Options Trade - - 3D Systems Corporation (NYSE:DDD) Calls

Tuesday, July 30, 2018

** OPTION TRADE: Buy DDD SEPT 21 2018 13.000 CALL at approximately $0.80. 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.)

3D Systems Corporation (NYSE:DDD) – providing three-dimensional (3D) printing solutions, rocketed 270 percent in 2012 and another 161 percent in 2013, reaching a record high in early 2014 before crashing in the next two years. Its shares plummeted 90 percent from the end of 2013 through 2015.

Since this massive breakdown, in the last year or so, the stock’s seen a nice rally. It’s made a nice higher low and now it’s breaking above its trend line going back to those 2014 highs.”

Its shares have rallied nearly 75 percent in 2018, though they are still a 23 percent rally from their 52-week highs set in July last year. Shares are still 84 percent below their intraday high set in early January 2014.

The 3D printing business has been lagging for the last three years and 3D Systems has seen revenue stagnate and financial losses mount. In the first half of 2018, there have been signs that a reprieve is on the way.

3D Systems Corporation is expected to report earnings on August 07, 2018 after the market closes. The report will be for the fiscal Quarter ending Jun 2018. The consensus EPS forecast for the quarter is $-0.06. The reported EPS for the same quarter last year was $-0.07.

Influencing Factors

First-quarter revenue was up 6.1% to $165.9 million and non-GAAP loss shrunk by half to $0.03 per share. This provides a signs that operations are going to turn around in 2018 and the early results were enough to send share prices higher.

Shares are bouncing off an extreme low and are still down 83% from the start of 2014; therefore plenty of space for improvement. This appears to be the beginning of a turnaround.

Analysts and Hedge Funds Opinions

There is plenty of scope for upgrades on 3D Systems Corporation as there are no BUYS at this stage. 1 of them rated the stock as OUTPERFORM, 6 recommended it as HOLD, 5 set the rating at UNDERPERFORM but 0 rated it as a SELL.


3D Systems has a market capitalization of $1.59 Billion. Its outstanding shares are 128.4 Million. The company’s beta value stood at 1.26. The stock is trading -29.21% away from its 52 week high of $17.53 and 56.69% far from the stock’s low point over the past 52 weeks, which was $7.92.