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.
Wednesday, 10th August, 2016
Alibaba Group Holding Ltd (NYSE:BABA) Calls
**OPTION TRADE: Buy the BABA SEPT 16 2016 90.000 call at approximately $1.20. Sell price is left to your own judgment.
Alibaba Group Holding Ltd (NYSE: BABA), an online and mobile commerce company, is expected to report earnings tomorrow, Thursday, August 11, before market open, and Wall Street is expecting solid year-over-year results. Wall Street expects Alibaba to generate healthy revenues amid increased focus on mobile; analysts reaffirm a bullish stance on the stock ahead of quarterly earnings.
Wall Street analysts largely expect Alibaba to report 22-23% gross merchandise volume growth given its management said June quarter GMV growth would be on par with the March quarter growth of 23.7% at its mid-June analyst day. The street sees revenue at Alibaba growing by 50% to 30 billion yuan ($4.5 billion). Alibaba can grow its revenue faster than transactions conducted on its sites thanks to higher take rates.
T.H. Capital‘s Tian Hou this morning said that Alibaba can beat street estimates on the top line. According to China’s National Bureau of Statistics, online retail sales in the second-quarter re-accelerated to 28.5% from a year ago, compared to 27.8% in the first-quarter. In other words, Alibaba’s management may have been conservative and wanted to manage expectations.
”Street expectation of RMB30.0B (US$4.5B) and highly likely to be better due to: 1) better commission revenue driven by accelerating Tmall GMV growth and higher commission rate in the June quarter. Based on our data, total GMV transacted on BABA domestic retail marketplaces is likely to increase 24% Y/Y to RMB833B, of which GMV from Tmall is likely to grow 37% Y/Y to reach RMB338B and GMV from Taobao is likely to grow 16% Y/Y to reach RMB495B in F1Q17. Commission rate for Tmall is likely to grow to 2.11% in F1Q17 from 2.04% in F1Q16. Higher Tmall GMV and commission rate will lead to better commission revenue growth at 42% Y/Y to reach RMB7.12B in F1Q17.”
Hou raised her price target for Alibaba substantially to $97, from $84 previously. Alibaba closed at $85.24 on Tuesday.
Shares are up 7% in the last three months in anticipation of an upbeat performance by the company’s platforms, despite rough macroeconomic conditions across the globe. For the quarter ended June 30, Alibaba is expected to generate earnings of $0.62 per share on revenue of $4.53 billion, up from $3.26 billion in the same period last year.
Why Alibaba?Although China’s economic growth rate has decreased, the company was able to increase revenue last quarter to 39% year-over-year. However, the continued slowdown could still affect GMV this quarter. Even so, Alibaba expects to hit $1 trillion in GMV by 2020 and reach 2 billion customers in the process.
RBC Capital analyst Mark Mahaney remains bullish on the Alibaba Group Holding Ltd, reiterating a Buy rating with a price target of $105, marking a 23% increase from where the stock is currently trading.
Mahaney explains, “China Macro is a concern, but Internet Secular trends can offset much of this. Cloud Computing is small for BABA, but showing great growth. We still view BABA as a Premium-Growth/Premium-Profit Asset, with a very reasonable valuation. We also view this as a very effective management team with a sound l-t strategy. Finally, we see BABA as having significant option value in terms of non-retail/platform revenue streams in China, possibly International expansion & a series of major strategic investments.”
One analyst has rated the stock with a sell rating, seven have issued a hold rating and twenty-seven have given a buy rating to the stock. The stock currently has a consensus rating of “Buy” and a consensus price target of $94.74.
Alibaba Group Holding Ltd. has a 12 month low of $57.20 and a 12 month high of $86.42. The stock has a 50 day moving average of $81.39 and a 200-day moving average of $76.22. The company has a market cap of $212.70 billion and a P/E ratio of 20.30.
Tuesday, 9th August, 2016
Facebook Inc (NASDAQ:FB) Calls
**OPTION TRADE: Buy the FB SEPT 16 2016 130.000 call at approximately $1.15. Sell price is left to your own judgment.
Facebook Inc (NASDAQ: FB), which is engaged in building products to create utility for users, developers, and advertisers, has a lot more room to run. Once again, the social media giant proved its control of the industry with an impressive earnings beat, backed by solid mobile advertising growth. Billions of dollars in profit, triple-digit net income growth, and a rapidly growing user base -- Facebook is firing on all cylinders.
On the back of yet another expectation-crushing quarter, Facebook stock year-to-date gain is now up 18.4%.
Who would have guessed when Facebook stock went public in May 2012 at $38 a share that the stock would be trading at $124 just over four years later! After all, the stock's $100 billion market capitalization when it went public was criticized by many as overvalued. But between its $38 share price and its $124 price today, Facebook has posted lots of quarters of huge growth -- quarters like the second quarter it announced recently.
Once again, the social network didn't disappoint when it reported quarterly results.
As usual, Facebook's second-quarter revenue came in well ahead of analyst estimates. The company reported revenue of $6.44 billion, obliterating analysts' consensus estimate for revenue of $6.02 billion. Further, Facebook's year-over-year revenue growth for the quarter actually accelerated compared to growth in the prior quarter. In the first quarter of 2016, Facebook's year-over-year revenue growth rate was 52%.
With Facebook's revenue soaring faster than its expenses, the social network's earnings benefited from operating leverage. Net income soared 186% to more than $2 billion, and non-GAAP EPS jumped 94%.
Rising profits were similarly evident in the company's closely watched non-GAAP EPS metric. As a result of Facebook's faster-than-expected revenue growth, the social network was able to handily beat the consensus analyst estimate for non-GAAP EPS. Facebook reported non-GAAP EPS of $0.94 -- above analyst estimates for $0.82.
Facebook's size certainly isn't slowing it down. Facebook's large user base is still growing rapidly -- despite the fact that about one in seven people already use the platform every day. In Q2, Facebook's monthly active users hit 1.71 billion -- up 15% year over year and up 3.5% sequentially.
Why Facebook?Facebook Inc is the only leading tech firm to have a zero debt-to-equity ratio. This firm also has the lowest short ratio among the above six large-cap tech stocks. Facebook’s 27.1% net profit margin and 39.6% operating margin are by far the highest among the six big tech firms. Facebook’s 32.2% capital appreciation over the past 12 months was the highest among these firms, but its 4.84% climb during 2Q2016 was the lowest. The 59.48 price-to-earnings ratio shows that Facebook is coveted much more than the other six tech stocks. This recent lull in capital appreciation may be an opportune time to consider investing before more bullish traders join in.
After Facebook blew away expectations yet again, analysts were left scrambling to adjust their estimates for the remainder of the year. Since the release of Facebook’s earnings report, analysts across the board are becoming even more bullish on Facebook stock, the company has seen eight positive estimate revisions for its current-quarter, next-quarter, and full-year earnings.
Facebook Inc. has been assigned a $170.00 price target by analysts at Jefferies Group in a note issued to investors last Thursday. The firm currently has a “buy” rating on the social networking company’s stock. Jefferies Group’s price target indicates a potential upside of 38.76% from the company’s current price.
One investment analyst has rated the stock with a sell rating, five have given a hold rating, forty-six have issued a buy rating and three have given a strong buy rating to the company’s stock. Facebook presently has an average rating of “Buy” and a consensus price target of $146.99.
The stock has a 50-day moving average of $117.55 and a 200-day moving average of $112.87. The stock has a market capitalization of $356.59 billion and a PE ratio of 59.3575. Facebook has a one year low of $72.00 and a one year high of $128.33.
Tuesday, 9th August, 2016
Michael Kors Holdings Ltd (NYSE:KORS) Calls
**OPTION TRADE: Buy the KORS SEPT 16 2016 55.000 call at approximately $1.25. Sell price is left to your own judgment.
Michael Kors Holdings Limited (NYSE:KORS), a global accessories, footwear and apparel company, is set to post its Q117 quarterly earnings results tomorrow, August 10th. Analysts expect Michael Kors Holdings to post earnings of $0.74 per share and revenue of $954.13 million for the quarter. Michael Kors Holdings has set its Q1 guidance at $0.70-0.74 EPS and its FY17 guidance at $4.56-4.64 EPS.
During the same period last year the company reported earnings of $0.87 per share, and KORS stock is up 25.2% on the year.
KORS has been stuck in a sideways pattern, but that should change following the company’s fiscal first-quarter report. The consensus calls for earnings of $0.74 per share, but the street has a slightly higher whisper number of $0.77, which is what Wall Street is really hoping to see in the company’s upcoming report.
KORS has a four-quarter streak of dividend increases, and last quarter it enjoyed better than expected revenue as well. Last quarter’s report led to a nice jump in the stock, and investors could enjoy another rally if Q1 earnings impress.
The stock has a pretty low P/E of 11.2, and Wall Street has a bullish price target on the stock, which suggests a decent amount of upside potential post-earnings.
Why Michael Kors?Piper Jaffray believes that the handbag and accessories market is going to post very strong results and hence recommends investors to purchase the stock as they are almost certain to gain following the earnings print.
One investment analyst has rated the stock with a sell rating, eighteen have assigned a hold rating, nine have assigned a buy rating and one has assigned a strong buy rating to the company. The company currently has a consensus rating of “Hold” and an average target price of $55.29 on the stock. The bullish price target indicates potential 10.6% upside potential.
The company’s 50-day moving average is $50.47 and its 200 day moving average is $50.66. The stock has a market capitalization of $8.85 billion and a PE ratio of 11.32. Michael Kors Holdings Ltd. has a 1-year low of $34.83 and a 1-year high of $59.49.
Monday, 8th August, 2016
Twitter Inc (NYSE:TWTR) Calls
**OPTION TRADE: Buy the TWTR SEPT 16 2016 20.000 call at approximately $0.60. Sell price is left to your own judgment.
Twitter Inc (NYSE: TWTR), a global platform for public self-expression and conversation in real time, issued its Q216 quarterly earnings data on Tuesday, July 26th -- which was very poor – and the stock dropped dramatically. The “Cut-to-the-Chase” Members benefited greatly from this pullback as they had been recommended to trade an option put to account for this eventuality.
Now is the time to look at Twitter again as it may have bottomed and place an option call on this occurrence.
Twitter Inc stock has been the equivalent of dead money since June 3, 2015 – but for the smart option trader this volatility provides plenty of benefits.
Firstly, the downtrend line that pressured shares lower in April 2015 has been broken to the upside. However, the share price has yet to make a higher high.
The second feature is the possible pattern that is emerging. TWTR stock is setting up a possible double bottom formation. The double bottom would signal a trend reversal.
Why Twitter?Twitter Inc might be trading almost 20% lower year-to-date, but that statistic fails to capture what’s happening to Twitter stock. In reality, it has gained almost 30% since the start of May. Over the past week, almost as if by stealth, Twitter shares have seen an especially bullish display.
Twitter Inc.‘s stock had its “neutral” rating reiterated by analysts at SunTrust Banks Inc. in a research note issued to investors last Thursday. They presently have an $18.00 target price on the social networking company’s stock. SunTrust Banks Inc.’s price target indicates a potential upside of 2.21% from the stock’s current price.
The firm’s market cap is $12.72 billion. The stock’s 50-day moving average price is $17.19 and its 200 day moving average price is $16.47. Twitter has a one year low of $13.73 and a one year high of $31.87.
Twitter, apart from merger and acquisition rumors, which will certainly continue --continues to find ways to build its userbase and advertising revenue. There’s little else it can do. User numbers are the biggest asset that a social media company can exploit for revenue generation.
Twitter stock will likely sustain some of its gains over the next few weeks, given that the Olympics in Rio have begun. Additionally, Twitter has secured rights from major sports leagues like the North American Basketball Association (NBA), the National Football League (NFL), Major League Soccer, and Turner Broadcasting (Time Warner). In other words, Twitter plans to live-stream sports events on its platform. The sports ambitions and the predictably higher use of the social media platform during the Olympics should help Twitter should increase its user numbers—sustaining higher TWTR stock valuations.