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.
Thursday, September 17, 2015
Under Armour Inc (NYSE:UA) Calls
**OPTION TRADE: Buy the UA Oct 2015 110.000 call (UA151016C00110000) at approximately $1.00. Sell price is left to your own judgment.
Sports apparel maker, Under Armour Inc (NYSE: UA) said Wednesday it aims to double its revenue by 2018.
The Baltimore-based company said it is setting a target of $7.5 billion in revenue that year. Under Armour reported $3.08 billion in revenue in 2014 and expects about $3.84 billion in 2015.
Under Armour is reporting rising sales of shoes, clothing and other accessories, and it is spending large sums to buy app makers in hopes of capitalizing on a more high-tech and gadget-oriented fitness age. This year the company spent $475 million to buy MyFitnessPal, which tracks calories and exercise, and Endomondo, a fitness tracking and social fitness network.
Under Armour also said it extended its contract with NBA MVP Stephen Curry, one of the athletes most closely associated with its brand. The new contract with Curry runs through 2024. The company launched a Curry signature shoe earlier this year and is getting ready to start selling a second, and it says he will also be involved in marketing its apps, training, and lifestyle products.
The stock has climbed 53 percent over the last year.
On top of this it has also received several analyst upgrades:-
• Under Armour is Reiterated by Stifel to Buy and the brokerage firm has raised the Price Target to $115 from a previous price target of $105.
• Under Armour is Reiterated by FBR Capital to Outperform and the brokerage firm has raised the Price Target to $115 from a previous price target of $105.
• Under Armour is Reiterated by Telsey Advisory Group to Outperform and the brokerage firm has raised the Price Target to $111 from a previous price target of $108.
UA has a remarkable 20-year investment decision track record, therefore it is no time to start doubting its capital allocation choices.
If the stock grows in-line with the company’s EPS, it would outperform most of its peers in the near term, a situation that has high probability of occurring.
Thursday, September 17, 2015
Herbalife Ltd. (NYSE:HLF) Calls
**OPTION TRADE: Buy the HLF Oct 2015 65.000 call (HLF151016C00065000) at approximately $0.80. Sell price is left to your own judgment.
“Window dressing” can impact stocks. Specifically, mutual funds and other institutions have to divulge their stock holdings by quarter-end – therefore, by shuffling their portfolios to make them look as good as possible -- fund managers can end up amplifying gains on long-term winners and exacerbating losses on losers – and one such outperforming stock that could stand to benefit from this phenomenon in the next couple of weeks is nutritional supplements marketer Herbalife Ltd. (NYSE: HLF).
HLF has been on fire in 2015, soaring over 50% to trade at $56.75 -- and side-stepping August's broad-market bloodbath. In fact, the stock's six-month returns are upwards of 64%, with its 10- and 20-week moving averages acting as support throughout this time frame.
With the security's upward movement showing no signs of relenting, short sellers (including Bill Ackman) and option bears may be ready to throw in the towel. A lofty 28.8% of HLF's float is sold short, representing over four weeks' worth of pent-up buying power, at typical volumes. What's more, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.74 ranks in the 87th annual percentile. Should Herbalife Ltd. finish the quarter strong, a capitulation among these doubters could spell tailwinds.
Wednesday, September 16, 2015
Adobe Systems Incorporated (NASDAQ:ADBE) Calls
**OPTION TRADE: Buy the ADBE Oct 2015 87.500 call (ADBE151016C00087500) at approximately $1.00. Sell price is left to your own judgment.
Adobe Systems Incorporated (NASDAQ: ADBE), a San Jose, Calif.-based software products and services provider for professionals, marketers, application developers, enterprises and consumers, will report its third quarter (fiscal 2015) financial results after the bell on Thursday. Analysts are expecting the software company to post a year over year rise in both earnings and revenue for the most recent quarter. Analysts expect the company to announce earnings of $0.50 per share and revenue of $1.21 billion for the quarter.
There are many analysts that have provided very positive ratings for ADBE this month. They see several positive factors, which should have a greater impact than any weaknesses, and should give investors a better performance opportunity. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, good cash flow from operations and expanding profit margins. There does not seem to be any significant weaknesses which are likely to detract from the generally positive outlook.
Some of the significant positive factors are:-
• The revenue growth came in higher than the industry average of 11.6%. Since the same quarter one year prior, revenues slightly increased by 8.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
• ADBE's debt-to-equity ratio is very low at 0.29 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, ADBE has a quick ratio of 2.02, which demonstrates the ability of the company to cover short-term liquidity needs.
• The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 66.6% when compared to the same quarter one year prior, rising from $88.53 million to $147.49 million.
• Net operating cash flow has increased to $471.48 million or 28.28% when compared to the same quarter last year. In addition, Adobe Systems Inc has also vastly surpassed the industry average cash flow growth rate of -28.87%.
• The gross profit margin for Adobe Systems Inc is currently very high, coming in at 89.90%. Regardless of ADBE's high profit margin, it has managed to decrease from the same period last year.
Therefore, Adobe is in a very positive market position with its compelling product lines (including CS cloud initiative and digital media products), continued innovation and strong balance sheet. In addition, the consistent adoption of the Adobe marketing cloud could serve as a potential catalyst, going forward.
Also synergies from the acquisition of Fotolia and 3D modeling company, Mixamo will drive growth.
Tuesday, September 15, 2015
FedEx Corporation (NYSE:FDX) Calls
**OPTION TRADE: Buy the FDX Oct 2015 170.000 call (FDX151016C00170000) at approximately $0.25. Sell price is left to your own judgment.
FedEx Corporation (NYSE: FDX), a provider of transportation, e commerce and business services under the FedEx brand, is scheduled to report its fiscal first-quarter results before the market opens tomorrow, September 16th. The company is expected to report earnings of $2.45 per share on revenue of $12.34 billion. The stock is down 12.7% on the year.
Since the fourth-quarter fiscal 2015 (4QFY15) earnings release, the company stock has lost 17% compared to the 7% decline in S&P500 Index, due to some selling pressure due to the company's exposure in China and Japan, where economic conditions have weakened. While Asia could pose a problem for the company, low oil prices should help cushion the impact for now. Fuel costs represent a large portion of the company's overall costs, so earnings have been growing nicely while oil remains weak. Therefore, the belief is that at current price levels, a trading opportunity has been provided and earnings are likely to remain intact, despite the global economic turmoil.
Expectations of improved earnings come from the FedEx Profit Improvement Plan, the company’s own initiative to increase profits, aimed to increase profitability by $1.7 billion over the course of the next three years. Analysts have a greatly improved outlook towards FDX due to the fact that the company is not dependent on external factors for improvement, but is dependent on its own profit improvement plan initiative.
The company has been rated an average of 1.78 by 18 Wall Street Analysts with 11 analysts having added the shares in their list of strong buys.
12 Analyst have given the stock of FedEx Corporation a near short term price target of $194.67.
Monday, September 14, 2015
Alibaba Group Holding Ltd (NYSE:BABA) Puts
**OPTION TRADE: Buy the BABA Sep 2015 60.000 put (BABA150918P00060000) at approximately $0.45. Sell price is left to your own judgment.
Alibaba Group Holding Ltd (NYSE: BABA), an online and mobile commerce company, has already fallen below their $68 IPO price amid macro/growth concerns and a Chinese Internet stock rout, and could fall much further as China’s economy struggles, competition in e-commerce increases, and the company’s culture and governance draws scrutiny.
Also, later this month, a 1.6B-share lockup will expire, that JD.com has been gaining share against Taobao/Tmall, and that various non-core businesses such as Alibaba's movie-production arm are losing money.
Also drawing criticism are:-
• Alibaba's corporate governance,
• counterfeit goods sales by merchants,
• and related-party transactions involving funds controlled by founder/chairman Jack Ma,
• and getting the most attention: The doubts aired about Alibaba's official user/spending stats for Taobao/Tmall.
After the great success Alibaba Group Holding Ltd received in the debut of its initial-public-offering (IPO), the retail giant surged 38% in the first week’s trading on the New York Stock Exchange (NYSE). However, the short-lived success story soon turned into despairing stock prices. In August, the shares declined to $64.63 on Friday’s closing at the expense of IPO at $68.
The stock, which has lost 38% year-to-date (YTD) is expected to decline further in the short-term.
Its share price could fall further as the Chinese economy struggles to stabilize and the competition in the e-commerce industry is increasing.
Last week, the company announced its Gross Merchandize Volume (GMV) to be less-than-expected for the second quarter of fiscal year 2016 (2QFY16). It cited China’s worsening economy in recent years and sluggish consumer spending as primary reasons.