“Cut-to-the-Chase” Recommendations
- Week Beginning -
Tuesday, September 11, 2017

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 - Teva Pharmaceutical Industries Ltd (ADR)(NYSE:TEVA) Calls

Friday, September 15, 2017

** OPTION TRADE: Buy the TEVA OCT 20 2017 20.000 CALL at approximately $0.36.

Sell price is left to your own judgment.

Teva Pharmaceutical Industries Ltd (ADR)(NYSE:TEVA) recently appointed a new CEO.

The new CEO, Kare Schultz, has extensive experience in restructuring and battling price erosion.

At his former company, Lundbeck, Schultz was hired to do the exact same thing and succeeded. The stock has now more than doubled.

Schultz was appointed in the first quarter of 2015 when Lundbeck reported a hefty loss. Tough competition and price erosion of mature products were very similar to what Teva is currently facing. The difference is that Teva has extremely high leverage on top of secular headwinds. During his tenure, Schultz managed to reduce Lundbeck's debt from 3.4 billion DKK (Danish krone) in 2015 ($550 million) to around 800 million DKK ($129 million) in Q2 2017. During that same period, EBITDA increased from a negative 6.8 billion DKK (negative $1.1 billion) to a positive 3.4 billion DKK (positive $550 million), which drastically improved the net debt/EBITDA ratio. Improving Teva's net debt/EBITDA ratio will probably be the CEO's number one priority, so it's good that he has prior experience in this area.

Analyst Derek Archila of Oppenheimer points to the successful history of Schulz as CEO of Lundbeck for “leading the restructuring initiatives and the company’s turnaround, according to this morning’s press release. We believe this experience will be helpful, given TEVA’s current state. Since his hiring at Lundbeck as CEO, its stock has appreciated roughly ~200%. Shultz also spent almost ~30 years at Novo Nordisk and served as COO for the company from 2014-2015.”

Some breathing room has been created for TEVA now that temporary selling pressure has been removed and that one major problem -- not having a CEO -- has been solved.

As well, Teva has finally delivered some good news; causing shares to jump a quarter from their lows on the back of three positive news developments.

In the time frame of just two days Teva besides announcing a new CEO, had a sizeable asset sale, and was able to report favourable news from the FDA as well. This news flow appears to have put a bottom under the shares.

The company has sold its PARAGARD product to CooperSurgical. This intrauterine copper contraceptive product generates $168 million in sales and netted the company $1.1 billion, for a 6.5 times sales multiple. The company is open to sell the remainder of its women's health business as well as the oncology and pain business in Europe, as it expects that asset sales exceed $2 billion this year.

Following this deal Teva will reduce net debt to $33.3 billion. Assuming similar EBITDA margins of 30% (as is the case or the overall business) this sale could reduce overall EBITDA by $50 million. As a result, leverage ratios will fall from 5.1 times to 5.0 times, a drop on a plate.

The final piece of good news was the fact that the FDA has accepted the New Drug Application for TRISENOX in combination with ATRA for patients with newly diagnosed low or intermediate risk acute promyelocytic leukemia. Favourable regulatory news is always welcomed, especially during times of financial distress and pressure on the topline sales results.

The good news is that the company is moving swiftly, a comforting sign for investors.

Other recent approvals are……

In August 2017, the FDA (US Food and Drug Administration) approved Teva Austedo for the treatment of adult individuals with tardive dyskinesia. In April 2017, the FDA approved Austedo for the treatment of chorea associated with Huntington’s disease patients.

In August 2017, the FDA approved Teva’s Qvar RediHaler inhalation aerosol for the maintenance treatment of asthma as a prophylactic therapy in patients aged four years and over.

In August 2017, Teva launched the generic version of Eli Lilly’s (LLY) Axiron. Axiron is a topical solution of testosterone prescribed for the treatment of adult males with low or no testosterone because of a medical condition.

In July 2017, Teva launched the generic version of Galderma’s Epiduo gel. Epiduo gel is a combination of adapalene and benzoyl peroxide used for the topical treatment of acne vulgaris in individuals aged nine years or older. According to IMS Health March 2017 statistics, in US markets, adapalene and benzoyl peroxide gel had annual sales of ~$251 million.

In June 2017, Teva also launched the generic version of Novartis’ (NVS) Pataday in US markets. Pataday (olopatadine hydrochloride) ophthalmic solution is used for the treatment of ocular itching due to allergic conjunctivitis. According to IMS Health statistics of March 2017, in the US, Pataday had generated revenues of ~$303 million.

In June 2017, Teva launched the generic versions of Merck’s (MRK) Zetia. Zetia (ezetimibe) is prescribed for the management of total cholesterol and low-density lipoprotein cholesterol in the blood. Ezetimibe is used in individuals who are unable to control their cholesterol levels in the blood by diet and exercises alone.

In April 2017, Teva launched the generic version of Merck’s Vytorin. Vytorin is a combination of ezetimibe and simvastatin tablets in the US. According to IMS Health statistics of March 2017, ezetimibe tablets and Vytorin had annual revenues of ~$2.7 billion and $678 million, respectively.

Analysts and Hedge Funds Opinions

Teva Pharmaceutical Industries was upgraded by research analysts at BidaskClub from a “strong sell” rating to a “sell” rating in a research report issued on Wednesday.

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

  • Cantor Fitzgerald set a $31.00 price target on Teva Pharmaceutical Industries Limited and gave the stock a “hold” rating in a research report on Thursday, June 22nd.
  • Vetr cut Teva Pharmaceutical Industries Limited from a “hold” rating to a “sell” rating and set a $31.05 price target for the company. in a research report on Thursday, June 22nd.
  • Maxim Group restated a “hold” rating and issued a $35.00 price target on shares of Teva Pharmaceutical Industries Limited in a research report on Thursday, July 13th.
  • Finally, Credit Suisse Group restated an “outperform” rating and issued a $39.00 price target on shares of Teva Pharmaceutical Industries Limited in a research report on Wednesday, August 9th.

Five investment analysts have rated the stock with a sell rating, nineteen have issued a hold rating, seven have given a buy rating and one has assigned a strong buy rating to the company. The company presently has an average rating of “Hold” and a consensus target price of $31.42.

Summary

The company has appointed a good CEO, has delivered on its first asset sale at a reasonable price, and of course has already cut its dividend.

September should be a positive month for the share price, and thus shareholders. The main focus will be how fast the company can deleverage.

Teva Pharmaceutical Industries Limited has a 52 week low of $15.22 and a 52 week high of $52.01. The company’s market cap is $18.64 billion. The firm has a 50-day moving average price of $19.41 and a 200 day moving average price of $28.68.


Option Trade - JPMorgan Chase & Co. (NYSE:JPM) Calls

Thursday, September 14, 2017

** OPTION TRADE: Buy the JPM OCT 20 2017 92.500 CALL at approximately $1.15. Sell price is left to your own judgment.

JPMorgan Chase & Co. (NYSE:JPM), which is engaged in investment banking and financial services, is looking quite bullish at the moment, as is it is forming a new base; and is also working on a new pattern and saw its Relative Strength Rating improve to 69. (This unique rating measures market leadership by using a 1 (worst) to 99 (best) score that indicates how a stock's price performance over the last 52 weeks stacks up against all the other stocks.)

Shares of the banking giant just bounced from the 100-day moving average, and also experienced a series of closes below their lower Bollinger Band. A similar setup occurred back in mid-May and early June, and resulted in a massive upside rally for JPM. Add to this the fact that bank stocks in general have been strong, and it would seem all signs are pointing up for the security.

Short interest is extremely low for JPM with less than 1% of shares on loan. This could indicate that investors who seek to profit from falling equity prices are not currently targeting JPM.

Expect JPM shares to rise above $92.50 by the close on Friday, Oct. 20, when the contacts expire. It's been almost one month since they've explored this territory.

Call volume is also booming. In fact, calls are trading at 27 times the expected pace, thanks to heavy interest in the weekly 9/29 97.50-strike call, where 4,779 contracts have traded. Buy-to-open activity is possible here, so these bulls would be eyeing a move to $97.50 by next Friday's close, when the weekly series expires.

ETFs that hold JPM had net inflows of $8.83 billion over the last one-month. While these are not among the highest inflows of the last year, the rate of inflow is increasing.

According to the latest IHS Markit Purchasing Managers' Index (PMI) data, output in the Financials sector is rising.

It certainly seems like a good time to target this recommended call option.

Analysts and Hedge Funds Opinions

Zacks Investment Research raised shares of J P Morgan Chase & Co from a “hold” rating to a “buy” rating and set a $103.00 target price on the stock in a research note on Tuesday, July 18th.

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

  • BidaskClub raised shares of J P Morgan Chase & Co from a “hold” rating to a “buy” rating in a research note on Wednesday, July 5th.
  • Deutsche Bank AG reissued a “buy” rating on shares of J P Morgan Chase & Co in a research note on Monday, July 3rd.
  • Bank of America Corporation reissued a “buy” rating and issued a $99.00 target price on shares of J P Morgan Chase & Co in a research note on Monday, July 17th.

Three analysts have rated the stock with a sell rating, fourteen have issued a hold rating and eighteen have given a buy rating to the company. The company presently has an average rating of “Hold” and an average target price of $85.59.

Several institutional investors have recently made changes to their positions in the stock, to name a few…..

  • Davis Rea LTD. raised its stake in shares of J P Morgan Chase & Co by 8.1% during the 1st quarter. The firm owned 21,742 shares of the financial services provider’s stock after purchasing an additional 1,633 shares during the quarter. Davis Rea LTD.’s holdings in J P Morgan Chase & Co were worth $1,910,000.
  • CHURCHILL MANAGEMENT Corp bought a new position in shares of J P Morgan Chase & Co during the 1st quarter worth about $1,367,000.
  • Israel Discount Bank of New York GFN bought a new position in shares of J P Morgan Chase & Co during the 4th quarter worth about $1,857,000.

Summary

J P Morgan Chase & Co has a 50-day moving average of $91.62 and a 200-day moving average of $88.99. The firm has a market cap of $319.80 billion, a PE ratio of 13.41 and a beta of 1.19. J P Morgan Chase & Co has a 52 week low of $65.11 and a 52 week high of $95.22.


Option Trade – Texas Instruments Incorporated (NASDAQ:TXN) Calls

Tuesday, September 12, 2017

** OPTION TRADE: Buy the TXN OCT 20 2017 85.000 CALL at approximately $0.67.

Sell price is left to your own judgment.

Semiconductor stocks, of which Texas Instruments Incorporated (NASDAQ:TXN) is a part of, headquartered in Dallas, Texas, have been on a terrific ride driven by improving overseas demand and innovative technologies – and now – before the big iPhone event, TXN, a chip supplier for Apple, is just slightly below a cup-with-handle buy point – and is likely to overcome this point when the iPhone is revealed.

Texas Instruments is a global semiconductor company and an original equipment manufacturer of analog, mixed signal and digital signal processing (DSP) integrated circuits.

Their chips are used in everything from mobile phones to industrial equipment and many smart products.

The company has about 30,000 employees in more than 30 countries and 15 manufacturing sites in 9 countries. More than 85% of their revenue comes from Analog and Embedded Processing segments.

Influencing Factors

The company reported excellent results for the second quarter, exceeding Consensus Estimates for both earnings and revenues. Net earnings of $1.03 per share exceeded estimates by eight cents. Revenues of $3.7 billion beat the consensus by $139 million.

Strong results were driven by growth in auto, industrial, communications and personal electronics markets. The company also upgraded its guidance for the third quarter.

"Revenue increased 13% from the same quarter a year ago. Demand for our products continued to be strong in the automotive market and continued to strengthen in the industrial market. In our core businesses, Analog revenue grew 18% and Embedded Processing revenue grew 15% from the same quarter a year ago. Operating margin increased in both businesses," said the CEO.

The stock has returned approximately 12.2% compared with the S&P 500 growth of 11.9%.

Texas Instruments’ diverse portfolio, targeting different market segments such as smart grid, factory automation, high-voltage power, LED lighting and control, are positives for its future revenue growth.

Also, the company's margins should continue to expand because of the secular strength in the auto and industrial markets, a stronger mix of analog and embedded processing products, benefits of restructuring actions and more 300mm capacity coming online.

Moreover, the semiconductor giant is poised to gain from the growing IoT market. It has substantial opportunities stemming from the increasing demand for its microcontrollers - low cost, low power, embedded chips that have programming and data memory. Its increasing number of connected devices is expected to drive demand for these chips in 2017 and beyond.

The company's solid market position, increasing focus on new products and increased focus on segments with growth potential remain major growth drivers.

Analysts have been raising their estimates for the company after stronger than expected results and updated guidance. Consensus Estimates for the current and next year are now $5.09 per share and $5.30 per share, up from $5.06 and $4.95 respectively, before the results.

BidaskClub upgraded shares of Texas Instruments from a buy rating to a strong-buy rating in a research note published last Saturday morning.

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

  • Royal Bank Of Canada boosted their target price on shares of Texas Instruments from $95.00 to $96.00 and gave the company an “outperform” rating in a research note on Wednesday, July 26th.
  • UBS AG reissued a “buy” rating and set a $93.00 target price (up from $91.00) on shares of Texas Instruments in a research note on Wednesday, July 26th.
  • Loop Capital reissued a “hold” rating and set a $84.00 target price (up from $79.00) on shares of Texas Instruments in a research note on Wednesday, July 26th.
  • Citigroup Inc. lifted their price target on Texas Instruments from $87.00 to $97.00 and gave the company a buy rating in a research note on Wednesday, July 26th.
  • Finally, Drexel Hamilton lifted their price target on Texas Instruments from $93.00 to $95.00 and gave the company a buy rating in a research note on Wednesday, July 26th.

One investment analyst has rated the stock with a sell rating, thirteen have issued a hold rating, fourteen have given a buy rating and two have assigned a strong buy rating to the stock. The company presently has a consensus rating of Buy and an average price target of $85.96.

Several institutional investors have recently made changes to their positions in the stock, to name a few…..

  • National Planning Corp purchased a new stake in Texas Instruments during the 2nd quarter. The institutional investor purchased 3,140 shares of the semiconductor company’s stock, valued at approximately $240,000.
  • Conning Inc. increased its holdings in shares of Texas Instruments by 21.9% in the first quarter. Conning Inc. now owns 414,741 shares of the semiconductor company’s stock valued at $33,412,000 after buying an additional 74,542 shares in the last quarter.
  • DUPONT CAPITAL MANAGEMENT Corp increased its holdings in shares of Texas Instruments by 9.3% in the first quarter. DUPONT CAPITAL MANAGEMENT Corp now owns 267,250 shares of the semiconductor company’s stock valued at $21,530,000 after buying an additional 22,749 shares in the last quarter.

Summary

Texas Instruments is one such technology stock which has performed well so far this year and has the potential to carry the momentum in the near term.

Texas Instruments Incorporated has a 12-month low of $66.80 and a 12-month high of $84.65. The firm’s 50-day moving average is $81.44 and its 200-day moving average is $80.40. The company has a market capitalization of $81.40 billion, a PE ratio of 20.57 and a beta of 1.20.


EXTRA OPTIONS TRADES

Add the following trades that appeared in the article “Earnings Predictions for the Week Beginning September 11, 2017.”

These trades will be included in the results.

Wednesday, September 13

Applied Genetic Technologies Corporation (NASDAQ:AGTC) -- scheduled to be issuing its quarterly earnings data before the market opens. Analysts expect the company to announce earnings of $0.14 per share on revenue of $13.43 million for the quarter.

Five research analysts have rated the stock with a hold rating and six have issued a buy rating to the company. Applied Genetic Technologies Corporation has an average rating of “Buy” and a consensus target price of $13.81

Morgan Stanley raised its position in Applied Genetic Technologies Corporation by 27.3% during the 1st quarter. Morgan Stanley’s holdings in Applied Genetic Technologies Corporation were worth $1,162,000 at the end of the most recent quarter.

Investor sentiment going into the company's earnings release has 64% expecting an earnings beat. Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the AGTC OCT 20 2017 5.000 CALL at approximately $0.45.

Thursday, September 14

Oracle Corporation (NYSE:ORCL) -- continues a major transition to the cloud, Oracle will report fiscal first-quarter earnings after the market closes. The consensus estimate on revenue looks for the enterprise software and database company to report $9 billion, up 5% from the year-ago quarter. The consensus on adjusted EPS is 61 cents, up 11%. In fiscal Q4, Oracle beat on the top and bottom lines, with strong growth from its emerging cloud-computing operations.

Investor sentiment going into the company's earnings release has 85% expecting an earnings beat The company's guidance was for earnings of $0.59 to $0.61 per share. Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the ORCL OCT 20 2017 52.500 CALL at approximately $1.00.





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