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 – Carnival Corp (NYSE:CCL) Calls
Tuesday, December 13, 2016
**OPTION TRADE: Buy the CCL JAN 20 2017 55.000 call at approximately $0.75. Sell price is left to your own judgment.
Carnival Corp (NYSE:CCL), a cruise operator, will report its fourth-quarter numbers before the market open on December 16. And Carnival will likely have plenty of good news for investors when it posts its results. After hitting a record in the fiscal third quarter, sales should rise by 6%, according to consensus estimates, as earnings improve to $0.58 per share from $0.50 per share last year.
Carnival stock has been moving higher in recent months, and if the company is able to top estimates for the quarter, the stock will likely trade into positive territory for the year. The stock has an attractive valuation, with a P/E of just 16.5, and analysts expect earnings growth of 24.4% this year, and an additional 11.6% next year. The consensus for the quarter calls for year-over-year earnings growth of 16%, and revenue is expected to climb 5.6%. Carnival has topped revenue estimates for three straight quarters, and posted better than expected earnings 14 straight quarters. If it can extend its streak of better than expected reports, the stock is going to move higher and into positive territory for the year.
The cruise ship operator is enjoying a favorable balance between supply and demand for its vacation packages, which is giving Carnival plenty of room to boost profitability. In fact, management in late September said that bookings for the first half of 2017 are "ahead of prior year at considerably higher prices." These trends have already produced a 20% spike in operating income over the past nine months, which has translated into a 50% improvement in bottom line earnings. "We delivered the strongest quarterly earnings in our company's history," CEO Arnold Donald said in September, "affirming our ongoing efforts to expand consumer demand in excess of measured capacity increases and leverage our industry leading scale."
Executives forecast a 3% uptick in net revenue yields and a smaller 1% increase in net cruise costs for the fourth quarter, which would preserve its healthy profitability momentum.
Many hedge funds and other institutional investors have recently boosted their shares of the stock. One such is Frost Bankers Inc. which increased its stake in shares of Carnival Corp by 0.8% during the third quarter.
Two equities research analysts have rated the stock with a sell rating, seven have assigned a hold rating and fourteen have given a buy rating to the stock. The stock presently has a consensus rating of “Buy” and an average target price of $55.64.
The stock is currently down 2.1% on the year.
Carnival Corp.’s 50-day moving average price is $50.20 and its 200 day moving average price is $47.57. The company has a market capitalization of $37.95 billion, a price-to-earnings ratio of 16.17 and a beta of 0.66. Carnival Corp. has a 12-month low of $40.52 and a 12-month high of $55.77.
Option Trade – VeriFone Systems Inc. (NYSE:PAY) Puts
Monday, December 12, 2016
**OPTION TRADE: Buy the PAY DEC 16 2016 16.000 put at approximately $0.80. Sell price is left to your own judgment.
VeriFone Systems Inc. (NYSE:PAY), engaged in providing electronic payment solutions at the point of sale, is scheduled to announce its Q416 earnings results today, Monday, December 12th, after the market closes.
For the fourth quarter, the company projects non-GAAP revenues of approximately $460 million and non-GAAP earnings per share in the range of 28 to 29 cents. For fiscal 2016, the company estimates non-GAAP revenues of approximately $2 billion (earlier projection was $2.100 billion). Non-GAAP earnings per share are likely to be about $1.64–$1.65 (down from the prior expectation of $1.85).
However, analysts forecast EPS of $0.20, down exactly $0.25 or 55.56% from 2014’s $0.45 EPS. The expected PAY’s profit could reach $21.99 million giving the stock 20.58 P/E in the case that $0.20 earnings per share is reported. After posting $0.33 EPS for the previous quarter, VeriFone Systems Inc.’s analysts now forecast -39.39% negative EPS growth.
The stock decreased 0.78% or $0.13 on December 9, hitting $16.46. About 3.14M shares traded hands or 46.05% up from the average. VeriFone Systems Inc. has declined 38.35% since May 9, 2016 and is downtrending. It has underperformed by 48.11% the S&P500.
Vetr downgraded shares of VeriFone Systems from a “strong-buy” rating to a “buy” rating and set a $17.50 price objective for the company. in a research note on Monday. Out of 23 analysts covering Verifone Systems Inc., 9 rate it a “Buy”, 0 “Sell”, while 14 “Hold”.
VeriFone’s business has been affected by weakness in emerging markets like Latin America and Turkey. Furthermore, delays in installations of the EMV enabled PoS in the U.S. also weighed on the financials.
Not all hedge funds are bullish on the stock and some hedge funds have actually dumped their positions entirely, a fall of 21% from one quarter earlier. Paul Singer’s Elliott Management dumped the biggest position, worth an estimated $55.9 million in call options. Daniel S. Och’s fund, OZ Management, also cut its call options, about $9.3 million worth.
VeriFone Systems Inc. has a market capitalization of $1.84 billion, a PE ratio of 55.30 and a beta of 2.03. VeriFone Systems Inc. has a 12 month low of $14.94 and a 12 month high of $29.73. The stock’s 50 day moving average is $16.43 and its 200-day moving average is $18.28.