“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, September 18, 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 - Nike Inc (NYSE:NKE) Puts

Friday, September 22, 2017

** OPTION TRADE: Buy the NKE OCT 20 2017 52.500 PUT at approximately $1.35.

Sell price is left to your own judgment.

Nike Inc. (NYSE: NKE), a seller of athletic footwear and athletic apparel worldwide, is expected to report earnings on Tuesday, September 26, after the market closes. The report will be for the fiscal Quarter ending Aug 2017. Based on 18 analysts' forecasts, the consensus EPS forecast for the quarter is $0.48. The reported EPS for the same quarter last year was $0.73.

The Street expects to see revenues of $9.1 billion, pointing at the worst top-line growth rate that the company has delivered since at least 2013. These results would largely be driven by certain events, including last year's summer Olympic Games, not being on the calendar this time around. EPS of $0.48 would meet expectations, but would also look soft on the YOY comparison not only because of weaker sales growth, but also margin contraction due to FX headwinds.

There have been enough reports released over the past couple of months suggesting that the company might have had a tougher-than-expected start to fiscal 2018, likely the result of increased competition and a potential shift in consumer preference away from the Swoosh brand -- particularly in footwear.

Nike NKE stock received two analyst downgrades that caused shares of the sportswear powerhouse to dip on Tuesday, and investors might also be worried after a recent report showed that Adidas ADDYY surpassed Jordan as the second most popular sneaker brand in the U.S.

Influencing Factors

Within this important product category (nearly two-thirds of Nike's total revenues last quarter), it has been remarkable to see Adidas (OTCQX:ADDYY) gain as much ground as it has in the recent past. Research house NPD claimed, back in August, that the German-based company had gobbled 500 bps of sport footwear market share in calendar 2Q17, at the expense of Nike and its key brand Jordan, to reach 11% (see tweet below). The most recent update from the same industry analyst now places Adidas at the number two spot for all U.S. sneaker market with 13% share, ahead of Nike's Jordan and catching up fast with the Nike brand.

Wholesale accounts for 72% of Nike-branded revenue, but growth has slowed, coming in at only 2% in fiscal year 2017. While the company is dependent on wholesale partners to sell its merchandise in "virtually all countries around the world," the company recognizes mounting challenges.

Looking at sporting goods retailers, Foot Locker (FL) reported having a "Nike problem" last month. The company, whose product purchases last year were mostly Nike goods (more than two-thirds of the total), cited "the limited availability of innovative new products” as one of the key reasons for its poor results.

Finish Line (FINL) might add fuel to the fire, after it reported dismal revenue contraction of -8% in the quarter ended May 2017 -- the company reports again on September 22nd in the morning. As a reminder, 71% of Finish Line's sales came from Nike in fiscal 2017. While Nike could still drive upside from its direct channel, independent of the performance of third-party retailers, it is worth noting that 72% of the company's total revenues still came from wholesale customers last year.

Hibbett Sports, Inc. (NASDAQ: HIBB) is also materially affected by Nike, where first-quarter results are expected to negatively impact the retailers shares. Hibbett tends to over-index on performance products, and weakness in the category has played a significant role in Nike’s struggles.

Analysts and Hedge Funds Opinions

Susquehanna Financial Group analyst Sam Poser downgraded Nike on Tuesday from "positive" to "neutral." Poser also updated his Nike price target to $54 a share from $64 a share.

Poser warns of an oversupply in the North American sneaker market that will hurt sales and profit margins. On top of that, a lack of innovation has hurt some categories more than expected.

Poser warns that Nike's $50 billion 2020 revenue target now looks "elusive."

“We expect NKE will lower, or modify the timeline, of the $50B 2020 revenue target during next week's 1Q18 earnings release or the October 25 Investor Day. Additionally, we believe it's essential that Nike management discuss details of what is needed and the steps the company is taking to restore the pull model that has historically been the company's mainstay. If the company fails to address these issues, we believe there is risk the stock may trend lower.”

On top of the Susquehanna downgrade, Jefferies analyst Randal Konik and his team lowered Nike's price target for the second time in the last 30 days. Konik cut his Nike price target from $60 per share to $49 per share and reiterated his "hold" rating.

The title of Jefferies' note to clients is very telling as well: "DATA Shows Nike Losing to Adidas at Home & Away." The note pointed to the fact that Nike has started to lose market share to Adidas in the running shoe space.

According to Konik, Nike has only 35 shoes in the top 60 sellers in the U.S. this year. Last year, the Oregon-based company boasted 52.

As well, Canaccord Genuity analyst Camilo Lyon warned that a guide down may be coming, arguing that a resurging Adidas (ADDYY) has taken meaningful market share.

Camilo Lyon fears “patience is wearing thin and panic may be setting in” for disappointed Nike investors.

“NKE investors have exhibited an extraordinary amount of patience over the past two years, and perhaps that patience could start to wane. […] In that time, the company has shown little in the way of progress as it relates to its stale innovation pipeline, while a resurging Adidas has taken meaningful share to the point of causing panic internally, according to our industry contacts. In fact, NKE this quarter has become more promotional, more of its footwear platforms have slowed, and NKE-levered retailers have been crippled by negative comps. As we head into the company’s FQ1 report on Tuesday, September 26 and then its Analyst Day event in late October, we remain cautious on the stock as we believe expectations for these events must be tempered, particularly the 2020 goal of hitting $50B in sales,” contends Lyon.

As such, the analyst reiterates a Hold rating on shares of NKE with a price target of $51, which represents a 3% downside from where the stock is currently trading.

And, Rick Patelof Needham takes a more cautious approach on the swoosh. Given the call outs of Nike’s softness by its multiple retail partners, Patel believes its hard to see Nike’s recent downturn as a “one quarter hiccup.”

“While we think it is wrong to discount Nike’s potential to take market share, we think the industry’s soft demand and discounting will persist,” said Patel.

While the analyst insists that Nike’s biggest opportunity exists in emerging markets, he believes the North American story is likely to dominate the stock’s narrative.

Needham lowered its first-quarter 2018 and full-year 2018 EPS estimates and maintains a Hold rating.

Also, last week, Barron's Jack Hough recommended avoiding the stock.

Insider action…..

CFO Andrew Campion sold 96,243 shares of Nike stock in a transaction on Friday, June 30th. The stock was sold at an average price of $56.68, for a total transaction of $5,455,053.24.

Also, insider Trevor A. Edwards sold 200,000 shares of Nike stock in a transaction on Wednesday, July 5th. The shares were sold at an average price of $57.63, for a total value of $11,526,000.00.

Summary

In 2015, Adidas only claimed 4% of this market. The fact that Adidas eroded some of Nike and Jordan's cultural clout that quickly, might make some investors very nervous; and rightfully so; because “fashion and what's "cool" rarely lasts forever”.

Nike Inc has a 52 week low of $49.01 and a 52 week high of $60.53. The stock has a market capitalization of $87.91 billion, a P/E ratio of 21.31 and a beta of 0.61. The company has a 50-day moving average of $55.57 and a 200-day moving average of $55.39.


Option Trade – United Continental Holdings Inc (NYSE:UAL) Calls

Wednesday, September 20, 2017

** OPTION TRADE: Buy the UAL NOV 17 20 2017 62.500 CALL at approximately $1.25.

Sell price is left to your own judgment.

U.S. airliner United Continental Holdings Inc. (NYSE:UAL), the Chicago-based parent company of United Airlines, has had a tough year -- down 21% year-to-date.

But the beleaguered airline appears about to take off despite J.P. Morgan Securities downgrading it to "neutral" from "overweight." UAL stock also received a price-target cut to $68 from $84. The new price target represents a 16% discount to the stock's average 12-month price target of $81.38.

But, the company forecasts strong margins despite one-time impacts to the business.

The stock remains cheap and has catalysts to protect downside risks.

To no surprise, United Airlines (UAL) lowered Q3'17 estimates due to Hurricane Harvey. To some surprise, the airline included reductions to revenue metrics from unrelated events.

The United Continental Holdings stock has dropped due to guiding down Q3 numbers, as well as effects of Hurricane Irma and Harvey.

The airline reduced PRASM (passenger revenue per available seat mile) by a large amount while increasing cost impacts including higher fuel charges. The Hurricane hitting United's hub in Houston understandably hurt the results. Houston's Hobby airport was closed for multiple days and disrupted for an extended period.

However, the stock remains cheap and has catalysts to protect downside risks. After falling from near $82 to its current $57.54, it is finally oversold and near major technical support. A huge bounce is expected; with an upside target of $70.00.

Despite United's fundamental and technical troubles lately, analyst sentiment remains bullishly skewed. Of the 15 brokerages covering UAL shares; eight rate them a "buy" or "strong buy," with not a single "sell" in sight.

Analysts expect United Continental Holdings to report $1.82 EPS on October, 16. They anticipate $1.29 EPS change or 41.48 % from last quarter’s $3.11 EPS. UAL’s profit would be $553.74M giving it 8.14 P/E if the $1.82 EPS is correct.

Influencing Factors

United Continental Holdings emerged from bankruptcy in 2006 and merged with Continental in 2010. Over the next five years, on earnings call after earnings call, CEO Jeff Smisek and his team said results were insufficient and would soon improve.

Smisek left in 2015. Since then, Wall Street has been tantalized by the combination of empathetic labor relations pro Oscar Munoz as CEO and combative network genius Scott Kirby as president.

In 2016, United shares rose 27%, third best among the eight large airline stocks. Shares are up 27% since Kirby signed on in August 2016.

During an investor presentation on Sept. 6, United Chief Financial Officer Andrew Levy reiterated United's commitment to lead peers in margin by 2020.

But Levy also disclosed that United had cut its third-quarter unit revenue guide from flat to between negative 2% and negative 5%. He attributed about a third of the decline to the impact of Hurricane Harvey. The rest reflected competitive battles, primarily with ultra-low cost competitor Spirit Airlines Co.

Most analysts say United's fare war with Spirit has been at the heart of the recent decline in airline share prices.

However, the market is more concerned about the guidance for PRASM to drop 3% to 5%, down from the previous guidance of up to a 1% gain. The midpoint is a 400 basis point hit. The concerns though are the impacts from basic economy and ULCC pricing. These issues are potentially more long term than issues from Hurricane Harvey or tensions in North Korea.

But, the numbers though are very fluid and more importantly United Airlines still guided to pre-tax margins of 8% to 10%. Despite all of these disruptions to the business model, the airline remains highly profitable.

One key to higher stock prices and a likely outcome of this dip while still highly profitable is a return to aggressive stock buybacks. United spent $400 million on stock buybacks during Q2. The amount turns material as the market cap has dipped to $18 billion. United Airlines ramped up buybacks during 2016 when the stock dipped to lows. One should expect a similar move now.

On a different note, United Continental announced its intention to start nonstop flights operating daily between its Houston hub and Sydney from Jan 18, 2018. The service once operational, should be warmly welcomed by passengers as it broadens their options of reaching Sydney from Houston. The flight, first connecting Houston to Australia, will be the second-longest for this carrier spanning 8,596 miles.

Also, United continues to add capacity, mainly in the domestic region. In August 2017, United’s domestic region grew 4.8% YoY. YTD, its domestic capacity had increased 4.9% YoY.

United is currently trading at a 2.1x price to book multiple, well below its five-year average of 7.2x. Growth is expected to pick up. United's forecasted to report around $38 billion (+4.1%) in revenue for fiscal year ending Dec 31, '17 and $39.6 billion (+4.1%) for the fiscal year ending Dec 31, '18.   United's stock last traded at $58.11 as of Monday, September 18th and is up 14% over the last year. However, shares are down 20% year-to-date.

United Continental’s yield improved in the first two quarters of 2017. In 2Q17, its average yield improved by 0.4% YoY to 15.1 cents. In 2Q17, the average yield improved by 2.0% YoY to 15.3 cents. As a result, the airline’s unit revenue has also improved. In 1Q17, United’s unit revenue improved by 0.1% YoY to 14.1 cents. In 2Q17, its unit revenue improved 2.1% YoY to 14.8 cents.

Analysts and Hedge Funds Opinions

Morgan Stanley reaffirmed their equal weight rating on shares of United Continental Holdings in a research note released on Friday, September 1st. The brokerage currently has a $71.00 target price on the transportation company’s stock, down from their previous target price of $72.00.

Also, Barclays PLC reaffirmed their buy rating on shares of United Continental in a research report published on Thursday morning. Barclays PLC currently has a $90.00 price objective on the transportation company’s stock.

As a matter of interest, the downgrade by CFRA Research highlights the absurdity of the current stock price. Analyst Jim Corridore reduced United Airlines to a Buy from Strong Buy while reducing the price target to $80 from $95. The analyst sees some 35% upside in the stock.

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

  • UBS AG reiterated a “buy” rating and issued a $103.00 price target (up from $95.00) on shares of United Continental Holdings in a research report on Friday, June 9th.
  • Bank of America Corporation lowered their price target on shares of United Continental Holdings from $105.00 to $85.00 and set a “buy” rating on the stock in a research report on Friday, June 30th.
  • Sanford C. Bernstein reaffirmed a market perform rating and set a $86.00 price target on shares of United Continental Holdings in a research note on Thursday, July 13th.
  • Citigroup Inc. upped their price target on shares of United Continental Holdings from $78.00 to $85.00 and gave the stock a neutral rating in a research note on Thursday, July 13th.
  • Citigroup Inc. reiterated a “neutral” rating and issued a $68.00 price target (down from $85.00) on shares of United Continental Holdings in a research report on Thursday, September 7th.
  • Finally, Raymond James Financial, Inc. reaffirmed an outperform rating and set a $100.00 price target on shares of United Continental Holdings in a research note on Friday, July 14th.

As of September 10, 2017, four (23.5%) of the 17 analysts tracking United Continental recommended “strong buy,” six (35.3%) recommended “buy,” and seven (41.2%) recommended “hold.” There were no “sell” ratings. The company has a consensus rating of “BUY” and a consensus price target of $81.92.

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

  • Hosking Partners LLP grew its holdings in United Continental Holdings by 1.6% in the second quarter. The fund owned 486,710 shares of the transportation company’s stock after buying an additional 7,737 shares during the period. Hosking Partners LLP owned 0.16% of United Continental Holdings worth $36,625,000.
  • BlackRock Inc. increased its stake in shares of United Continental Holdings by 4,642.3% during the first quarter. BlackRock Inc. now owns 22,075,033 shares of the transportation company’s stock worth $1,559,382,000 after acquiring an additional 21,609,536 shares during the period.
  • Vanguard Group Inc. grew its position in United Continental Holdings by 0.6% during the first quarter. Vanguard Group Inc. now owns 21,776,181 shares of the transportation company’s stock worth $1,538,270,000 after buying an additional 138,457 shares during the period.

Summary

There’s a strong possibility that the United Continental Holdings stock could enter into a new bull market after finding strong support between $56.78 and $57.45.

United Continental Holdings has a market capitalization of $18.19 billion, a price-to-earnings ratio of 8.26 and a beta of 1.06. The company’s 50-day moving average is $64.14 and its 200-day moving average is $71.77. United Continental Holdings, Inc. has a 12-month low of $49.28 and a 12-month high of $83.04.


Option Trade - AutoNation, Inc. (NYSE:AN) Calls

Tuesday, September 19, 2017

** OPTION TRADE: Buy the AN OCT 20 2017 48.000 CALL at approximately $0.75.

Sell price is left to your own judgment.

AutoNation, Inc. (NYSE:AN), an automotive retailer in the United States, saw Hurricane Harvey directly affect the company's 18 stores in the Houston area, but all are back up and running and already working with customers to replace vehicles claimed by the flood.

According to long-time CEO Mike Jackson, the results of those sales, from both new and used cars, should flow through to the company's bottom line in the fourth quarter.

Shares of the nation's largest automotive retailer are priced at $46.10, a 14% discount to their 52-week high, with a value-level forward P/E of 12.87.

"Disaster capitalism" is not the greatest way to promote this options trade, but, Baron Rothschild, proffered that one should "buy when you hear the cannon, sell when you hear violins."

The projected number of cars completely ruined by the floodwaters; in just the Houston area, which is heavily auto-dependent, the total could be over 1 million vehicles. The number is much higher if the entire affected area is included.

According to auto researcher Kelley Blue Book, the average transaction price for a new car in the United States is currently $33,560. That means that replacing the lost cars in Houston alone could be worth over $33 billion.

Influencing Factors

AutoNation is one of the most active stocks in the Auto Dealerships industry based on today’s trading volumes.

AutoNation.....

  •  is expected to grow at a 5.13% annual rate,
  • has an EBITDA margin of 3.58%,
  • has a ROI of 9.40%,
  • has a current ratio of 0.80,
  • has a forward P/E of 12.00, a P/B of 1.88, and a P/S of 0.22,
  • AN’s beta is 1.21.

AutoNation published that its board has authorized a shares buyback plan on early Tue, Aug 29th that authorizes The corporation to buyback $250.00 M in Stocks. This buyback authorization authorizes The corporation to buy up to 6% of its Stocks through open market purchases. Stocks buyback plans are typically a sign that the firms board believes its shares is undervalued.

Summary

Based on the company’s’ ability to successfully benefit from recovery and continue its respective growth path, a modest expansion of the forward P/E to 15 would result in total returns of 25% or better.

AutoNation stock’s 50 day moving average price is $42.76 and its 200 day moving average price is $42.01. AutoNation has a 52 week low of $38.20 and a 52 week high of $53.74. The stock has a market cap of $4.65 billion, a price-to-earnings ratio of 11.53 and a beta of 1.22.


Option Trade - Finish Line Inc. (NASDAQ:FINL) Puts

Monday, September 18, 2017

** OPTION TRADE: Buy the FINL OCT 20 2017 10.000 PUT at approximately $0.55.

Sell price is left to your own judgment.

Finish Line Inc (NASDAQ:FINL), a specialty retailer of athletic shoes, apparel and accessories, is scheduled to release its second-quarter fiscal 2018 results before the market opens on Friday, September 22. Finish Line shares are down about 44% year-to-date, and the company has struggled to adapt to a changing retail environment that has punished mall-based chains like itself.

Sporting goods retailers, including Finish Line, have been struggling amid sluggish spending at brick-and-mortar stores sparking concerns of a price war and waning demand for basketball shoes and sneakers.

Finish Line cut its adjusted profit forecast for the fiscal year ending March 3 to 50-60 cents per share from $1.12-$1.23 per share, and said it expects sales and gross margin to remain challenged through the year.

Analysts on average had expected earnings of $1.10 per share.

Finish Line also said it expected second-quarter sales to be $469.4 million, while analysts estimated revenue of $477.2 million. The company attributed the decline to a "promotional" market and "pressure on gross margin from increased markdowns".

Influencing Factors

Finish Line Inc. said at the end of August that its board adopted a shareholder rights plan and cut its adjusted profit forecast for fiscal 2018. The news plunged its shares by as much as 31% in premarket trading.

"The board believes that it is in the best interests of Finish Line and our shareholders to adopt a shareholder rights plan given the current market conditions and recent share accumulations," Glenn Lyon, chairman of Finish Line said.

The company said the rights plan, also known as a "poison pill", will be triggered if a party takes 12.5 percent ownership and will expire on Aug. 28, 2020.

A shareholder rights plan is typically adopted by companies that are trying to stave off hostile takeover bids.

UK-based Sports Direct International Plc, one of Finish Line's top shareholders, raised its stake in the company to 19.9 percent on June 21 from 9.2 percent on May 17, according to a regulatory filing.

Also, Finish Line CEO Sam Sato, said in a release announcing preliminary second-quarter results……

The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends. ... Despite these headwinds, we remained disciplined in managing our inventories and expect to end the quarter with inventory levels down approximately 7-8% compared with a year ago.

As well, from the very beginning of 2015 the company experiences diminishing margins. The most important sign even before such online competitors as Amazon (AMZN) entered into its business, the Finish Line had been weakening for years.

Finish Line faces tough challenges on both the brick-and-mortar and e-commerce fronts. On the brick-and-mortar front, bigger rivals like Foot Locker (NYSE:FL) and DSW (NYSE:DSW) are making it tough for Finish Line to stay relevant.

Leading footwear makers like Nike, Adidas, and Under Armour are exacerbating that pain with their own brick-and-mortar stores. They're also striking deals with other retailers to open mini-shops in their stores -- as Nike recently did with J.C. Penney and Under Armour did with Kohl's.

On the e-commerce front, Nike, Adidas, and Under Armour are all directly selling their products to consumers via their websites and apps. This makes it tough for "middlemen" retailers like Finish Line to remain relevant.

Finally, the market sentiment does not look good either. From the steep jump in March'17 the PE ratio entered the downside trend until today's 15.6x. That being said, the ratio fell down by 52% within 5 months.

And short interest, which is straight on its way to the all-history highs, and is currently, stands for 25.4% of all shares outstanding.

Analysts and Hedge Funds Opinions

The Finish Line, Inc. was downgraded by research analysts at FBR & Co from a “buy” rating to a “neutral” rating in a note issued to investors on Tuesday. They currently have a $9.00 target price on the specialty retailer’s stock, down from their prior target price of $22.00.

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

  • Zacks Investment Research cut The Finish Line from a “hold” rating to a “sell” rating in a report on Monday, August 28th.
  • Deutsche Bank AG cut The Finish Line from a “hold” rating to a “sell” rating and cut their price objective for the company from $15.00 to $5.00 in a report on Tuesday, August 29th.
  • Citigroup Inc. cut The Finish Line from a “neutral” rating to a “sell” rating and cut their price objective for the company from $14.00 to $5.00 in a report on Tuesday, August 29th.
  • Finally, Bank of America Corporation reissued an “underperform” rating and set a $8.00 price objective (down from $10.00) on shares of The Finish Line in a report on Tuesday, August 29th.

Six analysts have rated the stock with a sell rating, fourteen have assigned a hold rating and three have assigned a buy rating to the stock. The company presently has an average rating of “Hold” and a consensus target price of $8.00.

Insider action…..

  • COO Melissa A. Greenwell sold 4,077 shares of the stock in a transaction dated Saturday, July 29th. The stock was sold at an average price of $21.67, for a total value of $88,348.59.
  • Also, COO Melissa A. Greenwell sold 7,525 shares of the stock in a transaction dated Saturday, July 15th. The shares were sold at an average price of $22.71, for a total value of $170,892.75.

Summary

Finish Line stock has plummeted 65% over the past year. In the end, given Finish Line's relative underperformance and freshly reduced guidance, it's no surprise to see shares plunging further.             

The Finish Line, Inc. has a 12 month low of $6.90 and a 12 month high of $24.50. The company has a 50-day moving average price of $11.26 and a 200-day moving average price of $13.85. The firm’s market capitalization is $421.13 million.


Option Trade - CarMax, Inc. (NYSE:KMX) Calls

Monday, September 18, 2017

** OPTION TRADE: Buy the KMX OCT 20 2017 72.500 CALL at approximately $0.90.

Sell price is left to your own judgment.

Auto retailer CarMax, Inc. (NYSE:KMX) is expected to report its second quarter numbers before the market open on Friday, September 22. The consensus calls for earnings of $0.94 per share, up from $0.88 during the same period last year.

Used car sales volumes spiked 14% thanks to the powerful combination of rising customer traffic levels and improved conversion rates. Those trends helped drive comparable-store sales up a healthy 8% in the first quarter. At the same time, gross profit margin ticked higher and expenses fell, which allowed net income to soar by 21% to $212 million.

Auto sales have been stronger this year than industry experts earlier, which has helped keep strength under KMX. CarMax has posted better than expected profits and sales for the last three quarters, and the street expects to see another earnings beat for the company’s second quarter. The consensus calls for earnings of $0.94 per share, but the street has a whisper number of $0.96.

Equities research analysts at William Blair issued their FY2020 earnings per share estimates for CarMax in a research note issued to investors on Wednesday. William Blair analyst S. Zackfia forecasts that the company will earn $4.29 per share for the year.

Also, stock analysts at Wedbush raised their Q4 2018 earnings per share estimates for CarMax in a research report issued to clients and investors on Wednesday. Wedbush analyst S. Basham now anticipates that the company will post earnings per share of $0.88 for the quarter, up from their previous estimate of $0.85. Wedbush currently has a “Outperform” rating and a $77.00 price target on the stock.

KMX has a P/E of 19.7, with earnings forecast to rise 14.1% during the current year, and 12.2% per annum over the next five years.

The strong growth estimates, in tandem with the current valuation make a strong case for setting up this options trade.

The stock has appreciated 5.5% on the year.

Influencing Factors

Hurricanes Harvey and Irma have caused massive devastation to Houston and the surrounding area since they made landfall recently, but the used car industry has already experienced some gains as the storm has left hundreds of thousands of cars submerged under water.

Roughly half a million vehicles are possibly damaged beyond repair, according to Cox Automotive. Now, car retailers, especially used car dealers, are set to benefit.

"It's supply and demand," chairman of the Houston Automobile Dealers Association, Steven Wolf said on Wednesday. "And obviously there's going to be a tremendous demand for vehicles. I think that you're going to see some price pressure on used cars."

Analysts and Hedge Funds Opinions

Zacks Investment Research upgraded shares of CarMax from a hold rating to a buy rating in a research report released on Friday, September 8th. The brokerage currently has $77.00 price objective on the stock.

According to Zacks, “CarMax is one of the strongest operators in the used-car market, which helps it occupy a significant market share, among its peers. The company is also following an aggressive store expansion initiative to strengthen its presence and cater to a larger customer group. Moreover, it enhances shareholders value by undertaking frequent share buyback programs. Also, in the last three months, its shares have outperformed the industry it belongs to.”

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

  • Oppenheimer Holdings, Inc. restated a buy rating on shares of CarMax in a research report on Friday, September 1st.
  • BidaskClub upgraded shares of CarMax from a hold rating to a buy rating in a research report on Sunday, July 16th.
  • Royal Bank Of Canada reiterated a market perform rating and set a $63.00 price objective (down from $71.00) on shares of CarMax in a research report on Tuesday, July 4th.
  • Finally, Susquehanna Bancshares Inc reaffirmed a “neutral” rating and issued a $70.00 price objective (up previously from $66.00) on shares of CarMax in a research note on Thursday, June 22nd.

One investment analyst has rated the stock with a sell rating, four have assigned a hold rating, nine have assigned a buy rating and one has given a strong buy rating to the stock.

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

  • Canada Pension Plan Investment Board increased its holdings in shares of CarMax by 16,031.3% during the 1st quarter. Canada Pension Plan Investment Board now owns 15,486 shares of the company’s stock worth $917,000 after purchasing an additional 15,390 shares during the period.
  • First Trust Advisors LP increased its holdings in shares of CarMax by 39.5% during the 1st quarter. First Trust Advisors LP now owns 118,553 shares of the company’s stock worth $7,021,000 after purchasing an additional 33,588 shares during the period.
  • DekaBank Deutsche Girozentrale increased its holdings in shares of CarMax by 120.8% during the 1st quarter. DekaBank Deutsche Girozentrale now owns 13,675 shares of the company’s stock worth $845,000 after purchasing an additional 7,481 shares during the period.
  • Suntrust Banks Inc. increased its holdings in shares of CarMax by 43.0% during the 1st quarter. Suntrust Banks Inc. now owns 16,200 shares of the company’s stock worth $958,000 after purchasing an additional 4,868 shares during the period.
  • Finally, Pictet Asset Management Ltd. increased its holdings in shares of CarMax by 6.6% during the 1st quarter. Pictet Asset Management Ltd. now owns 106,988 shares of the company’s stock worth $6,336,000 after purchasing an additional 6,600 shares during the period.

Summary

As long as CarMax comps expansion pace remains healthy, the retailer is expected to continue an aggressive growth strategy that's targeting 16 dealership openings this year, including in major new markets like Salisbury, Maryland, and Myrtle Beach, South Carolina.

CarMax’s stock has a 50 day moving average of $66.00 and a 200-day moving average of $62.68. The company has a market capitalization of $12.48 billion, a PE ratio of 19.55 and a beta of 1.32. CarMax has a 1-year low of $47.50 and a 1-year high of $69.92.





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