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.
Friday, September 25, 2015
VMware, Inc. (NYSE:VMW) Puts
**OPTION TRADE: Buy the VMW Oct 2015 75.000 put (VMW151016P00075000) at approximately $0.90. Sell price is left to your own judgment.
VMware, Inc. (NYSE: VMW), a supplier of virtualization infrastructure solutions, is suffering from several concerns, both fundamentally and technically, and the expectation is that further fallout is expected in the near future, even though many analysts are optimistic about the company.
The technical picture for VMW stock is very uncertain -- shares have fallen from a high of nearly $113 in April 2014 to a low of under $74 in January of this year.
Since then, VMW stock started to consolidate, but since July has dropped again significantly. A horn has been formed which is a basic bearish formation usually seen at or close to market tops and is characterized by an increase in selling at its support line. For VMW stock, that line is at about $80.
Other concerning factors are:-
• S&P Capital IQ raised concerns about soft IT spending and economic uncertainties in a number of geographic regions – and VMware has a strong presence in China, where growth is slowing.
• Analysts, at S&P Capital, also noted the possibility of cuts in federal government spending that could impact the company.
• Higher operating expenses coupled with an overall global slowdown will eat into sales and profits.
• VMW stock is trading at 20 times 2015 EPS estimates, and the company pays no dividend to support it shares in a general market decline.
Not all analysts are of a positive view however, with analysts at Zacks giving a short term rating of sell on Vmware, Inc. with a rank of 4. Also, the shares have been rated as hold from 9 Wall Street Analysts.
VMware, Inc. has lost 2.88% in the last five trading days and dropped 4.12% in the last 4 weeks. VMware, Inc. has dropped 12.98% during the last 3-month period. Year-to-Date the stock performance stands at -4.71%.
Tuesday, September 22, 2015
Increase Red Hat Inc (NYSE:RHT) Calls
**OPTION TRADE: Buy the RHT Oct 2015 77.500 call (RHT151016C00077500) at approximately $0.30. Sell price is left to your own judgment.
Red Hat Inc (NYSE: RHT), a global provider of open source software solutions, using a community-powered approach to develop and offer operating system, middleware, virtualization, storage and cloud technologies, reported its fiscal second quarter financial results after the markets closed on Tuesday -- AND REPORTED A SOLID BEAT!
The company had $0.47 in earnings per share (EPS) on $504 million in revenue compared to Thomson Reuters consensus estimates of $0.44 in EPS on $494.65 million in revenue. The same period from the previous year had $0.41 in EPS on $445.90 million in revenue.
The company has quarterly subscription revenue of $442 million, up 13% year over year, and a quarterly operating cash flow of $120 million, up 12%. Overall total revenue was up 13% in U.S. dollars year over year, or 21% in constant currency.
Red Hat gave its guidance for the fiscal third quarter and the fiscal full year. For the third quarter the company expects $0.47 in EPS on $519 million to $523 million in revenue compared to consensus estimates of $0.46 in EPS on $513.56 million in revenue. For the fiscal full year the company expects $1.85 to $1.87 in EPS on $2.034 billion to $2.044 billion in revenue compared to the consensus estimates of $1.83 in EPS on $2.02 billion in revenue.
Jim Whitehurst, President and CEO of Red Hat, commented on earnings…..
Strong execution in Q2 contributed to total revenue results that exceeded 21% year-over-year growth on a constant currency basis. We were pleased with the progress of our technologies that address cloud deployments across multiple footprints. Specifically in this quarter, we achieved a public cloud milestone in our Certified Cloud and Service Provider program of an annualized run-rate of $100 million. We are also thrilled to be the first open source company to achieve an annualized run-rate of $2 billion in revenue this quarter. In addition, we believe Red Hat is well-positioned for the second half of the fiscal year as we continue to benefit from delivering innovation to our customers.
On the books, operating cash flow was $120 million for the second quarter, an increase of 12%, from the same period in the previous year. The company had cash, cash equivalents and investments of $1.17 billion compared to $1.26 billion at the end of the previous fiscal year.
Shares of Red Hat closed Monday up 2.3% at $72.72 on its 52-week trading range of $52.53 to $81.49. Following the release of the earnings report, shares were initially up about 0.5% at $72.38 in the after-hours trading session. The stock has a consensus analyst price target of $83.30.
And today, Red Hat Inc. was reiterated as Outperform with an $84 price target at Credit Suisse. Mizuho Securities reiterated its Buy rating and $88 price target.
Red Hat has a consensus analyst price target of $83.30 and a 52-week range of $52.53 to $81.49.
Tuesday, September 22, 2015
Accenture Plc (NYSE:ACN) Calls
**OPTION TRADE: Buy the ACN Oct 2015 105.000 call (ACN151016C00105000) at approximately $0.30. Sell price is left to your own judgment.
Accenture Plc (NYSE: ACN), engaged in providing management technology consulting and outsourcing services, is scheduled to announce its earnings results on Thursday, September 24th.
Analysts expect Accenture to earn per-share earnings of $1.12 on revenue of $7.68 billion -- compared to the year-ago quarter when it earned $1.08 a share on revenue of $7.78 billion. For the full year, earnings are projected to be up 5.7% year over year to $4.78 a share, while revenue of $30.83 billion would mark a year-over-year increase of 3%.
Accenture shares, at around $98.40, are up 10% in 2015 and 23% over the past 52 weeks. Accenture is diversifying its business into such high-growth and high-margin areas as strategic advertising and marketing.
Also helping growth is the plan to buy Cloud Sherpas, a company that specializes in advisory/IT services that provides cloud applications from Google (GOOGL), Salesforce.com (CRM) and ServiceNow (NOW). The terms of the deal were not disclosed but it can be extremely lucrative for Accenture, which generates some $30 billion in annual revenue. The 1,100 Cloud Sherpas employees will be part of a new segment, Accenture Cloud First Applications; 500 Salesforce-certified professionals are included, which bumps up Accenture's Salesforce-certified crew to 3,200.
This is important. This certification gives Accenture more clout with corporations looking to integrate various cloud trends into their internal business processes; it also allows Accenture to charge more for these services.
According to 12 Analysts, the mean estimate for the short term price target for Accenture plc. stands at $106.08.
The shares have received an average rating of 1.88 from 16 brokerage firms. 8 analysts have rated the company as a strong buy, with 2 analysts suggesting buy for the shares.
At around 18 times forward 2016 earnings-per-share estimates of $5.22 a share, the stock is attractively priced when compared to a forward price to earnings ratio of 18 for the S&P 500 (SPX) index.
Accenture is on a positive move with their strategy of growing through product innovation and acquisitions. Also, increased focus on the Outsourcing business, new bookings and consistent return of shareholders value are the other positives.
Accenture's solid performance across insurance, banking and health care segments reflects strong demand for its services, which should aid earnings in the fourth quarter.
Tuesday, September 22, 2015
Pier 1 Imports Inc (NYSE:PIR) Puts
**OPTION TRADE: Buy the PIR Oct 2015 9.000 put (PIR151016P00009000) at approximately $0.50. Sell price is left to your own judgment.
Pier 1 Imports Inc (NYSE: PIR), a global importer of imported decorative home furnishings and gifts, is scheduled to release its 2015 second quarter earnings results after the market close on Thursday afternoon.
Analysts are expecting the global importer of home décor and furniture to post a year over year decline in earnings per share. However, revenue is expected to grow when compared to the same period in the previous year.
For the most recent quarter, analysts are expecting Pier 1 to report earnings of 7 cents per share on revenue of $435.38 million.
Last year, Pier 1 said it earned 10 cents per share on net sales of $418.6 million for the 2014 second quarter.
The company is based in Fort Worth, Texas and operates a number of retail stores and an e-commerce website under the Pier 1 Imports brand.
The problems associated with PIR:-
• Despite its growing revenue, the company underperformed as compared with the industry average of 10.5%. Since the same quarter one year prior, revenues slightly increased by 3.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
• The debt-to-equity ratio is somewhat low, currently at 0.64, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.39 is very weak and demonstrates a lack of ability to pay short-term obligations.
• PIR has tumbled by 37.13%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 50.00% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor.
• The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 54.3% when compared to the same quarter one year ago, falling from $15.06 million to $6.87 million.
The company has been rated an average of 2.45 by 14 Wall Street Analysts, with 9 analysts having advised “Hold” or worse.
Pier 1 is operating in a difficult environment where brick-and-mortars are losing ground to e-commerce.
Monday, September 21, 2015
Red Hat Inc (NYSE:RHT) Calls
**OPTION TRADE: Buy the RHT Oct 2015 77.500 call (RHT151016C00077500) at approximately $1.00. Sell price is left to your own judgment.
Red Hat Inc (NYSE: RHT), a global provider of open source software solutions, using a community-powered approach to develop and offer operating system, middleware, virtualization, storage and cloud technologies, will report its quarterly earnings today, after-hours trading, of $0.44 per share on revenue of $494.65 million.
Those totals are increases from the 41 cents per share and $446 million the company generated in the year ago period.
The company's stock reached a 52-week high of $81.49 on June 18 but the stock has lost as much as 18% since then which allows plenty of room for this option trade to be profitable.
There are several positive factors working in Red Hat’s favor, which should have a greater impact than any weaknesses. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, notable return on equity and good cash flow from operations.
To shed more light on these positive aspects:-
• The revenue growth came in higher than the industry average of 11.6%. Since the same quarter one year prior, revenues rose by 12.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
• Red Hat Inc has improved earnings per share by 30.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years, and this trend should continue. During the past fiscal year, Red Hat Inc increased its bottom line by earning $0.97 versus $0.93 in the prior year. This year, the market expects an improvement in earnings ($1.83 versus $0.97).
• 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 27.4% when compared to the same quarter one year prior, rising from $37.75 million to $48.09 million.
• The return on equity has improved slightly when compared to the same quarter one year prior. Compared to other companies in the Software industry and the overall market, Red Hat Inc's return on equity exceeds that of both the industry average and the S&P 500.
• Net operating cash flow has increased to $208.76 million or 26.76% when compared to the same quarter last year. In addition, Red Hat Inc has also vastly surpassed the industry average cash flow growth rate of -28.87%.
The company has been rated an average of 1.5 by 20 Wall Street Analysts. 14 analysts have added the shares in their list of strong buys. 2 stock experts have also rated a buy. 4 analysts have advised hold.
Red Hat, Inc. should head towards $83.63 per share according to 16 Analysts in consensus.