“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, November 06, 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 - Nordstrom, Inc. (NYSE:JWN) PUTS

Thursday, November 09, 2017

** OPTION TRADE: Buy the JWN NOV 17 35.000 PUT at approximately $0.55.

Sell price is left to your own judgment.

Mall anchor, Nordstrom, Inc. (NYSE:JWN), an upscale department store chain, reports pre-holiday quarterly earnings under the pressure of continuing to lose market-share to Amazon.com, today, November 9, after the market closes. The report will be for the fiscal Quarter ending Oct 2017. Based on 11 analysts' forecasts, the consensus EPS forecast for the quarter is $0.63. The reported EPS for the same quarter last year was $0.84, reflecting nearly 25% decline from earnings in the year-ago quarter.

Further, analysts expect revenues of $3.6 billion, up 1.7% from the prior-year quarter. The consensus mark for revenues at Nordstrom full-line stores and Nordstrom Rack are currently pegged at $1,495 million and $997 million, respectively. These estimates show a year-over-year decline of 4.7% for Nordstrom full-line stores but 4.1% increase for Nordstrom Rack.

Nordstrom’s shares have lost 18.9% in the last three months, wider than the industry’s decline of 3.8%. The downturn was owing to the temporary call off of the Nordstrom family's plans to take the company private.

Influencing Factors

Though Nordstrom’s growth strategy bodes well, investments related to occupancy, technology, supply chain and marketing are expected to increase near-term cost and weigh upon margins. Evidently, the company’s merchandise performance was hurt by higher occupancy expenses related to new Rack and Canada stores in the previous quarter. Also, for fiscal 2017, management anticipates Retail gross profit to be impacted by higher new store occupancy expenses and mix impact from off-price growth.

Further, the company’s projections for SG&A expenses incorporates higher technology and supply chain expenses related to its growth initiatives, offset by progress in productivity improvements.

While Nordstrom’s business is in line with the evolving retail industry that focuses on offering maximum choices to customers to enhance their shopping experience, the company cannot be fully immune to the ill-effects of the industry.

Nordstrom’s fiscal 3Q17 margins could be under pressure due to increased occupancy expenses related to the new stores of Nordstrom Rack, Canada, and its Manhattan flagship men’s store. Higher supply chain and technology costs are also expected to weigh on the company’s third-quarter margins.

A highly promotional retail environment might also put pressure on the company’s margins. On October 27, 2017, rival department store chain JCPenney (JCP) announced that it expects its cost of goods sold to rise in fiscal 3Q17. Among the many reasons for the rise is its decision to accelerate the liquidation of its inventory ahead of the crucial holiday season.

According to a newly released annual survey from Deloitte on the holiday retail environment, for the first time ever in its 32 years of conducting its holiday survey, a majority of spending is expected to come from online purchases in 2017, as opposed to brick-and-mortar businesses.

Last year, there was an even 47%-to-47% split between online and in-store purchases, with 6% going to catalog and direct mail purchases. This year, the breakdown is 51% to online purchases, 42% for in-store, and 7% to the other category (catalog and mail order).

There are several reasons that mall-based retailers are struggling to keep up with the online experience: -----

  • Online companies can offer a considerably broader selection of goods to consumers than in-store retailers,
  • There are often pricing advantages to buying products online, and
  • It's a matter of convenience.

Nordstrom caters to more affluent consumers who, according to Deloitte's data, are even more likely than the average consumer to shop online this holiday season.

Also, off-price retailers are also impacting the market share, attracting customers with their discounted prices.

Analysts and Hedge Funds Opinions

Zacks Investment Research downgraded shares of Nordstrom, Inc. from a hold rating to a sell rating in a research note published on Tuesday morning.

According to Zacks, “Nordstrom has underperformed the industry in the last three months. The recent decline in share price can be attributed to the temporary call off of the Nordstrom family's plans to take the company private. While Nordstrom’s growth strategy bodes well, investments related to occupancy, technology, supply chain and marketing are likely to increase near-term cost and weigh upon margins. The company anticipates Retail gross profit for fiscal 2017 to be impacted by higher new store occupancy expenses and mix impact from off-price growth. The company’s projections for SG&A expenses incorporate higher technology and supply chain expenses related to its growth initiatives, offset by progress in productivity improvements.”

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

  • ValuEngine lowered Nordstrom from a “buy” rating to a “hold” rating in a research report on Friday, September 1st.
  • Royal Bank Of Canada restated a “hold” rating and set a $45.00 price target on shares of Nordstrom in a research report on Thursday, October 5th.
  •  J P Morgan Chase & Co restated an “underweight” rating and set a $48.00 price target on shares of Nordstrom in a research report on Friday, July 14th.
  • Gordon Haskett cut Nordstrom from an accumulate rating to a hold rating in a report on Wednesday, September 13th.
  • Finally, Vetr lowered Nordstrom from a “sell” rating to a “strong sell” rating and set a $41.54 price target for the company in a research report on Monday, July 17th.

Five equities research analysts have rated the stock with a sell rating, sixteen have issued a hold rating and seven have issued a buy rating to the company’s stock. The stock currently has an average rating of “Hold” and an average price target of $47.41.

Institutional investors that have recently made a change to their positions in the stock….

Lord Abbett & CO. LLC reduced its stake in Nordstrom, Inc. by 9.9% during the second quarter. The institutional investor owned 811,878 shares of the specialty retailer’s stock after selling 89,238 shares during the quarter. Lord Abbett & CO. LLC owned about 0.49% of Nordstrom worth $38,832,000 as of its most recent filing with the Securities and Exchange Commission (SEC).

Summary

Nordstrom’s 50-day moving average is $38.31 and its 200 day moving average is $38.37. The company has a market cap of $6.37 billion, a P/E ratio of 18.13 and a beta of 0.84. Nordstrom has a 1-year low of $37.39 and a 1-year high of $62.82.

Option Trade - Snap Inc. (NYSE:SNAP) PUTS

Tuesday, November 07, 2017

** OPTION TRADE: Buy the SNAP DEC 15 2017 14.000 PUT at approximately $1.05.

Sell price is left to your own judgment.

Snap Inc. (NYSE:SNAP), formerly Snapchat, Inc., a camera company, is confirmed to report earnings today, Tuesday, November 7, 2017, after the market closes. For Snap's third quarter, the consensus estimate is for revenue of $236 million, up 84% from the year-ago period but the fifth quarter in a row of deceleration. The consensus estimate on adjusted earnings is a loss of 14 cents, compared with an 11-cent loss in the year-ago period.

Snap's second-quarter report on Aug. 10 fell short of estimates on just about every metric, damaged by the Instagram platform owned by Facebook (FB). Both Snap, with its Snapchat app, and Facebook's Instagram provide a mobile communications platform used for sharing photos and videos, with social networking features.

Investor sentiment going into the company's earnings release has 20% expecting an earnings beat. Short interest has increased by 69.5% since the company's last earnings release while the stock has drifted higher by 27.3% from its open following the earnings release. Overall earnings estimates have been revised lower since the company's last earnings release.

It's a problematic sign that analyst moves ahead of Tuesday afternoon's big report have been lukewarm at best. Michael Pachter at Wedbush put out a cautious note on Friday. The $212 million that he's forecasting in revenue for the third quarter is well below where most of his peers are perched. He sees Snapchat struggling to keep up with the superior targeting and similar ad formats offered by Instagram and other rivals. He's bracing for 181 million daily active users and total average revenue per user of $1.17. Snap clocked in with 173 million daily active users and $1.05 in average revenue per user in its second quarter.

Two days before Pachter's cautious note, we had Stifel's Scott Devitt forecasting that Snapchat's U.S. audience grew by just 1.1% sequentially last month, slower than market darling Instagram's 2.8% projected gain. Instagram also continues to smoke Snapchat's gains internationally, though Devitt is actually sticking to his buy rating on the shares and an $18 price target that is north of its springtime IPO price.

Influencing Factors

Piper Jaffray's report, thatSnap doesn't enjoy a "unique user base" as 90% of the users also use Facebook's FB Instagram.

Stiff competition from the likes of Alphabet (GOOGL), Facebook and Twitter (TWTR) in the digital ad market remains an area of major concern. The total addressable market (TAM) of these companies is much larger compared to Snapchat. Therefore, they present a much larger canvas for advertisers. Notably, Facebook's huge user base of over 2 billion combined with Instagram's strong user base of 800 million makes it highly attractive to advertisers.

Though Snap's rising user base is a positive, it may not be able to cash in on it like Facebook. Advertisers are more likely to opt for the latter's Instagram whose TAM is thrice that of Snap's. To put it simply, it's unlikely for advertisers to pay for Snap's services as its reach is limited.

Therefore, it is believed that although the company's user base and ad revenue will increase but the rate of growth will be in declining trend, as it has registered in the previous two quarters.

Also, the slash in 2017 U.S. ad revenue estimates for Snapchat by market research firm, eMarketer doesn't bode well for the company.

It is also believed that Snap's lack of popularity in the international quarters, its sole focus on under-30 users and revenue concentration are the primary headwinds ahead of the third quarter earnings.

Analysts and Hedge Funds Opinions

Zacks Investment Research cut shares of Snap Inc. from a hold rating to a sell rating in a research note issued to investors recently.

According to Zacks, “Snap Inc. provides technology and social media services. The Company’s principal product Snapchat, is a camera application that helps people to communicate through short videos and images. Snap Inc. is headquartered in Venice, California. “

Research firm and finance website ValuePenguin in a report on Snap's upcoming results estimates user growth in the third quarter continued to deteriorate, "with Instagram overtaking Snapchat in download rankings in the U.S. and the U.K. for the first time," according to Value Penguin analyst D.J. Kang.

"We believe Snap's stock is still very overvalued," Kang wrote. He said Snap looks almost identical to another social network stock, Twitter (TWTR), saying both are 'social platforms' with dismal user growth in face of competition from Facebook."

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

  • Piper Jaffray Companies reissued a “neutral” rating and issued a $16.50 price target (down from $20.00) on shares of Snap in a report on Thursday, July 13th.
  • SunTrust Banks, Inc. began coverage on shares of Snap in a report on Thursday, October 12th. They issued a “sell” rating and a $10.00 price target for the company.
  • Needham & Company LLC reiterated an underperform rating on shares of Snap in a report on Thursday, October 5th.
  • Cantor Fitzgerald restated a buy rating and set a $15.00 price target on shares of Snap in a report on Tuesday, August 22nd.
  • Finally, Citigroup Inc. reaffirmed a “neutral” rating and set a $13.00 price objective (down from $19.00) on shares of Snap in a research note on Thursday, August 10th.

Eleven analysts have rated the stock with a sell rating, twenty-two have assigned a hold rating and fourteen have issued a buy rating to the company. Snap currently has a consensus rating of “Hold” and an average target price of $16.14.

Insider trading..….

  • VP Timothy Sehn sold 150,000 shares of Snap stock in a transaction dated Wednesday, August 23rd. The stock was sold at an average price of $15.00, for a total transaction of $2,250,000.00.
  • Also, CFO Andrew Vollero sold 195,100 shares of Snap stock in a transaction dated Monday, August 14th. The shares were sold at an average price of $12.50, for a total value of $2,438,750.00.
  • Insider Imran Khan sold 350,000 shares of the company’s stock in a transaction dated Wednesday, August 23rd. The shares were sold at an average price of $15.00, for a total value of $5,250,000.00.

Insiders have sold a total of 2,533,598 shares of company stock valued at $35,540,362 over the last 90 days.

Summary

Shares of Snap have lost 40.6% of their value since its listing date of Mar 2, 2017 against 20.7% growth of its industry.

Snap Inc. The stock has a 50 day moving average price of $14.85 and a 200 day moving average price of $17.13. Snap has a 52 week low of $11.28 and a 52 week high of $29.44. The firm’s market capitalization is $18.26 billion.

Option Trade - Emerson Electric Co. (NYSE:EMR) Calls

Monday, November 06, 2017

** OPTION TRADE: Buy the EMR NOV 17 2017 65.000 CALL at approximately $0.60.

Sell price is left to your own judgment.

Emerson Electric Co. (NYSE:EMR), a diversified global manufacturing company, which provides solutions to customers by bringing technology and engineering together in the industrial, commercial and consumer markets around the world, will report fourth-quarter 2017 results before the opening bell tomorrow, November 7. In the quarter to be reported, the company is expected to report strong revenues in Industrial Automation business, which constitutes nearly two-third of its total revenues.

Equities researchers at Oppenheimer Holdings lifted their FY2017 earnings estimates for Emerson Electric in a research note issued to investors on Thursday last week. Oppenheimer Holdings analyst C. Glynn now expects that the industrial products company will post earnings of $2.64 per share for the year, up from their prior estimate of $2.60. Oppenheimer Holdings also issued estimates for Emerson Electric’s Q4 2017 earnings at $0.83 EPS.

As well, the Consensus Estimate for revenues from the Automation Solutions segment in the to-be-reported quarter currently remains high at $2,874 million compared with third-quarter revenues of $2,440 million.

Last quarter, the company's adjusted earnings came in line with the Consensus Estimate of 68 cents. It has a decent earnings surprise history, with an average positive surprise of 5.5% in the trailing four quarters.

It is expected that Emerson will have an earnings beat in the to-be-reported quarter.

Influencing Factors

Emerson is now poised to grow on the back of global infrastructure growth, as its core businesses hold dominant positions in markets tied to energy efficiency and infrastructure spending.  As well, environmental regulations are driving the need for new products, adding to its strength. Going forward, Emerson believes telecommunications infrastructure demand will continue to be one of the strongest growth drivers.

The company remains bullish on its Automation Solutions segment backed by favorable trends in power and life sciences as well as improving MRO spending by oil and gas customers. The company's focus on domains like human comfort; connected home, food quality, advancing energy efficiency at home and work and sustainability augur well for its Commercial and Residential Solutions segment. Furthermore, its restructuring efforts, undertaken over the past few quarters, are likely to prove conductive to its upcoming results.

The company's ardent eye for acquisitions is anticipated to be conducive to its core business, going forward. The company is likely to see growth on the recent GeoFields buyout. Other acquisitions including Pentair Valves & Controls, Locus Traxx and PakSense are expected to drive fourth-quarter fiscal sales as well.

Analysts and Hedge Funds Opinions

Cowen and Company upgraded shares of Emerson Electric Company (NYSE:EMR) to a buy rating in a research report released on Monday, October 23rd. They currently have $71.00 price objective on the industrial products company’s stock.

“EMR pre-announced a Q4 EPS beat with 3% organic growth and strong FCF.” Cowen and Company’s analyst commented.

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

  • Stifel Nicolaus restated a “buy” rating on shares of Emerson Electric in a report on Thursday, October 12th.
  • Cowen and Company upgraded shares of Emerson Electric to a “buy” rating and set a $71.00 target price on the stock in a report on Monday, October 23rd.
  • Zacks Investment Research upgraded shares of Emerson Electric from a “sell” rating to a “hold” rating in a report on Tuesday, October 31st.
  • Bank of America Corporation raised shares of Emerson Electric from a “neutral” rating to a “buy” rating and upped their target price for the company from $64.44 to $79.00 in a report on Tuesday, October 17th.
  • Finally, Citigroup Inc. restated a “sell” rating and set a $61.00 target price (up previously from $58.00) on shares of Emerson Electric in a report on Monday, October 9th.

Four research analysts have rated the stock with a sell rating, ten have issued a hold rating and four have issued a buy rating to the company’s stock. Emerson Electric presently has an average rating of “Hold” and an average target price of $67.86.

Institutional investors that have recently made a change to their positions in the stock….

  • Zurcher Kantonalbank lifted its holdings in Emerson Electric Company by 22.5% during the 2nd quarter. The institutional investor owned 561,297 shares of the industrial products company’s stock after acquiring an additional 102,957 shares during the quarter. Zurcher Kantonalbank owned approximately 0.09% of Emerson Electric worth $33,465,000 at the end of the most recent reporting period.
  • Mitsubishi UFJ Trust & Banking Corp increased its holdings in Emerson Electric Company by 0.9% during the second quarter. The institutional investor owned 1,369,815 shares of the industrial products company’s stock after purchasing an additional 12,102 shares during the period. Mitsubishi UFJ Trust & Banking Corp owned 0.21% of Emerson Electric worth $81,668,000 as of its most recent SEC filing.
  • River Road Asset Management LLC reduced its holdings in Emerson Electric Company by 1.7% during the 2nd quarter. The institutional investor owned 1,020,371 shares of the industrial products company’s stock after selling 18,113 shares during the quarter. River Road Asset Management LLC owned about 0.16% of Emerson Electric worth $60,835,000 at the end of the most recent quarter.

Summary

Emerson Electric has a market cap of $43.12 billion, a price-to-earnings ratio of 30.07 and a beta of 1.22. Emerson Electric has a 12 month low of $49.38 and a 12 month high of $67.79. The company has a 50-day moving average of $63.43 and a 200-day moving average of $60.43.

Monday, November 06, 2017

The following 2 trades are taken from……

 "Earnings Predictions for the Week Beginning November 06, 2017"

NOTE: Check the price before executing!

Wednesday, November 08

Trade 1

Monster Beverage Corporation (NASDAQ:MNST) CALLS

Option trade to consider: Buy the MNST NOV 17 2017 60.000 CALL at approximately $1.00.

Monster Beverage Corporation (NASDAQ:MNST) -- is expected to report earnings after market close. Based on 7 analysts' forecasts, the consensus EPS forecast for the quarter is a 21% jump in EPS to 40 cents and a 14.3% increase in revenue to $901 million. The reported EPS for the same quarter last year was $0.33.

The energy drink maker has a global distribution partnership with Coca-Cola (KO) so international sales have become a bigger focus. Soft drink sales have declined over the last decade while energy drink demand continues to grow, leading some analysts to speculate that Coke, which has a 16.7% equity stake in Monster, could buy the rest of the company. Monster shares are in buy range ahead of earnings after breaking out of a flat base with a 57.35 entry point on Oct. 31.

 Monster Beverage has become a recession-proof business in recent years. Its partnership with soft-drink giant Coca-Cola (NYSE: KO) has allowed it to take the lead in the energy drink space. Not only is it at the forefront of the energy drink segment, it has also increased its revenue every year. 

Friday, November 10

Trade 2

J C Penney Company Inc. (NYSE:JCP) PUTS

Option trade to consider: Buy the JCP NOV 17 2017 2.500 PUT at approximately $0.25.

J C Penney Company Inc. (NYSE:JCP) – will report before the market opens. The report will be for the fiscal Quarter ending Oct 2017. Based on 8 analysts' forecasts, the consensus EPS forecast for the quarter is $-0.43. The reported EPS for the same quarter last year was $-0.21.

On October 30, Susquehanna cut its rating for JCPenney (JCP) stock to “neutral” from “positive” and lowered its price target to $3.00 from $6.50. Susquehanna downgraded its rating following news of JCPenney lowering its fiscal 2017 guidance on October 27.

Also, on October 30, Citigroup also downgraded its rating for JCPenney stock to “sell” from “neutral” and lowered its price target to $1.50 from $3.00.

As of October 30, 86% or 18 out of 21 analysts had a “hold” recommendation for JCPenney stock. Two analysts had a “buy” rating, and one analyst had a “sell” rating.

Option trade to consider: Buy the JCP NOV 17 2017 2.500 PUT at approximately $0.25.