“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, August 12, 2019

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.


You may also wish to read Stock Options Made Easy Trading Philosophy

ALSO "Trading Capital Management"



Option Trade – Apple Inc. (NASDAQ:AAPL) CALLS

Thursday, August 15, 2019

** OPTION TRADE: Buy AAPL SEP 20 2019 215.000 CALL at approximately $3.00.

Sell price is left to your own judgment.

 (or, alternatively as requested by some members : Place a pre-determined sell at $6.00.

Also include a protective stop loss of $1.20.)

Shares of tech heavyweight Apple Inc. (NASDAQ: AAPL), a company that designs, manufactures and markets mobile communication and media devices, personal computers, and portable digital music players, and a variety of related software, services, peripherals, networking solutions, and third-party digital content and applications, have been volatile, to say the least, since the start of 2018. Apple stock was trading at $169.2 in January 2018, and it rose to $233.0 in October 2018. Apple shares then fell to $142.0 in January this year before making a strong comeback over the last few months.

AAPL stock is currently trading at $202.75 per share. It has returned 28.5% year-to-date, -2.0% over the last 12 months, and 94.0% over the last three years. A lot of this volatility is due to the ongoing trade war between China and the United States. Apple shares have also been affected by slowing demand for iPhones. The company’s flagship product has seen a decline in shipments over the last two quarters.

Last week, President Trump announced another round of tariffs to take effect from September 1. Trump’s tweet stated that the US government would impose a 10.0% tariff on Chinese goods. This new round of tariffs will impact consumer goods such as electronics (including smartphones), footwear, and apparel.

About face…..

Then Tuesday saw Apple shares jumped as much as 5 per cent on Tuesday after President Trump's shock move to delay China tariffs.

The news that Mr Trump had relaxed his hardline stance came as some relief for investors. Apple and other US tech firms make their products in Chinese factories meaning they would have been subject to the additional tariffs.

Apple has warned the USTR that additional tariff costs would simply be passed on to consumers.

Wednesday fears…..

Volatility continued with Wall Street opening sharply lower on Wednesday, as poor economic data from China and Germany put the focus back on the impact of a bruising Sino-U.S. trade war which is pushing some major economies towards the brink of recession. How this continues to effect Apple is still to be determined.

Analysts’ Views Positive…..

Canaccord Genuity restated their buy rating on shares of Apple in a research report released on Wednesday, July 31st. Canaccord Genuity currently has a $240.00 price target on the iPhone maker’s stock, up from their prior price target of $202.00.

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

  • Rosenblatt Securities restated a sell rating and issued a $150.00 price target on shares of Apple in a research note on Monday, July 8th.
  • Cowen restated a buy rating and set a $250.00 target price (up from $220.00) on shares of Apple in a report on Friday, July 26th.
  • Evercore ISI began coverage on Apple in a report on Thursday, June 6th. They set an outperform rating and a $205.00 target price on the stock.
  • ValuEngine upgraded Apple from a hold rating to a buy rating in a report on Tuesday, July 2nd.
  • Finally, Maxim Group upped their price objective on Apple from $197.00 to $217.00 and gave the company a hold rating in a report on Wednesday, May 1st.

Four investment analysts have rated the stock with a sell rating, twenty have given a hold rating, twenty-four have issued a buy rating and one has issued a strong buy rating to the stock. The company presently has an average rating of Hold and a consensus target price of $217.12.

Summary…..

Apple has a debt-to-equity ratio of 0.88, a current ratio of 1.50 and a quick ratio of 1.47. The company has a market cap of $908.31 billion, a PE ratio of 17.09, a PEG ratio of 1.69 and a beta of 1.25. Apple has a 12-month low of $142.00 and a 12-month high of $233.47. The firm’s fifty day moving average is $203.68.


Option Trade – HealthEquity Inc. (NASDAQ: HQY) CALLS

Wednesday, August 14, 2019

** OPTION TRADE: Buy HQY SEP 20 2019 70.000 CALL at approximately $3.70.

Sell price is left to your own judgment.

 (or, alternatively as requested by some members : Place a pre-determined sell at $7.40.

Also include a protective stop loss of $1.50.)

Shares of HealthEquity Inc. (NASDAQ: HQY), which bills itself as "the nation's largest independent health savings account (HSA) non-bank custodian," rocketed 25.4% higher last month. The stock is up 34% in 2019 through Aug. 8.

The stock has done well, despite the politics of healthcare.

It seems that every election cycle, politicians tend to pick on health insurers. This time, several 2020 Democratic presidential hopefuls have called for the end of private health insurance as we know it.

So, against that backdrop, the firm is really defying the odds.

But, importantly a key fact driving HealthEquity is that it is riding a massive trend of health savings accounts (HSAs). These are wildly popular with the public because they provide patients far more choice in their health-spending decisions.

HealthEquity manages 4.8 million HSAs and $9.7 billion in assets. Over the past three years, HealthEquity has grown its earnings per share by an average 49%, which means they are doubling every 18 months.

And it’s just bulked up for another round of growth. The company recently paid $2 billion to acquire WageWorks, a health care benefits administrator. The deal unites two of the nation’s largest HSA firms.

HQY now has 115,000 employer clients, including two-thirds of Fortune 500 firms.

Past earnings…..

When it reported last quarter's results, HealthEquity increased its full-year guidance for both the top and bottom lines. For fiscal 2020, the company expects revenue to be between $339 million and $345 million, which represent growth of about 18% to 20% year over year. It projects adjusted EPS to be between $1.28 to $1.34; representing growth of about 8% to 13%.

This outlook was established before the company announced its acquisition of WageWorks, which is expected to close by year's end. 

Expected Earnings…..

HealthEquity is scheduled to announce its next quarterly earnings results on Tuesday, September 3rd.

Equities research analysts expect that Healthequity will post earnings per share of $0.35 for the current fiscal quarter. Healthequity reported earnings of $0.34 per share in the same quarter last year, which indicates a positive year-over-year growth rate of 2.9%.

Also, Wall Street brokerages expect Healthequity to report $85.38 million in sales for the current quarter. Healthequity posted sales of $71.07 million during the same quarter last year, which suggests a positive year over year growth rate of 20.1%.

Positive Factors…..

HealthEquity stock's robust July performance was due in part to a continuation of the upward momentum it's enjoyed this year, thanks to the company posting better-than-expected financial results. It beat Wall Street's earnings estimates in both quarters that it's reported this year.

In early June, HealthEquity reported its fiscal first-quarter 2020 results. Revenue jumped 25% year over year to $87.1 million, easily surpassing the $84.1 million that analysts had been expecting. GAAP (generally accepted accounting principles) earnings per share (EPS) soared 81% to $0.65, and adjusted EPS rose 24% to $0.41, also easily beating the consensus estimate, which was $0.33. 

Another likely catalyst for the stock's healthy showing in July was investor enthusiasm over the Utah-based company's pending acquisition of WageWorks (NYSE: WAGE), a California-based leader in administering HSAs. On June 27, the companies announced the all-cash, approximately $2 billion deal. 

Further growth is expected due to…..

  • Earnings growth - which is arguably the most important factor, as stocks exhibiting exceptionally surging profit levels tend to attract the attention of most investors. The company's EPS is expected to grow 11.6% this year, crushing the industry average, which calls for EPS growth of 11.5%.
  • Cash flow growth – which is the lifeblood of any business, but higher-than-average cash flow growth is more beneficial and important for growth-oriented companies than for mature companies. Right now, year-over-year cash flow growth for HealthEquity is 58.3%, which is higher than many of its peers. In fact, the rate compares to the industry average of 11.3%.
  • Promising earnings estimate revisions –with upward revisions in current-year earnings estimates for HealthEquity.

Analysts’ Views…..

Healthequity had its price target upped by Raymond James from $85.00 to $90.00 in a report released on Friday, July 19th. The firm currently has an outperform rating on the stock.

Also, Healthequity was upgraded by research analysts at Bank of America from a “neutral” rating to a “buy” rating in a report issued on Friday, July 19th. The brokerage presently has a $90.00 price objective on the stock, up from their previous price objective of $75.00. Bank of America‘s price target would suggest a potential upside of 23.76% from the company’s previous close.

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

  • ValuEngine raised shares of Healthequity from a “hold” rating to a “buy” rating in a research report on Wednesday, July 17th.
  • Citigroup reaffirmed a “buy” rating on shares of Healthequity in a research report on Friday, June 28th.
  • Raymond James boosted their price objective on shares of Healthequity from $80.00 to $85.00 and gave the company an “outperform” rating in a research report on Monday, June 10th.
  • Finally, JPMorgan Chase & Co. set an $80.00 price objective on shares of Healthequity and gave the company an “overweight” rating in a research report on Wednesday, June 5th.

Two analysts have rated the stock with a hold rating and twelve have given a buy rating to the company’s stock. Healthequity currently has a consensus rating of “Buy” and an average price target of $91.20.

Insider Buys…..

Healthequity CEO Jon Kessler, founder Stephen Neeleman and two other directors took advantage of a public offering of shares. At $61.00 apiece, the 40,000 shares acquired altogether totaled $2.44 million. Note that two other insiders exercised options on almost 16,000 shares of this health savings accounts custodian as well.

Summary…..

Healthequity has a quick ratio of 15.59, a current ratio of 15.60 and a debt-to-equity ratio of 0.07. The stock has a market capitalization of $5.11 billion, a P/E ratio of 85.83, and a P/E/G ratio of 4.01 and a beta of 1.46. Healthequity has a 12 month low of $50.29 and a 12 month high of $101.58. The stock has a 50-day moving average price of $69.62.


Option Trade – Micron Technology, Inc. (NASDAQ:MU) PUTS

Tuesday, August 13, 2019

** OPTION TRADE: Buy MU SEP 20 2019 40.000 PUT at approximately $1.70.

Sell price is left to your own judgment.

 (or, alternatively as requested by some members : Place a pre-determined sell at $3.40.

Also include a protective stop loss of $0.70.)

Volatility continues!

Idaho-based Micron Technology, Inc. (NASDAQ: MU), a memory chip manufacturer, has seen its shares battered by a downturn in the chip cycle. MU stock has been buoyed recently by hopes of a turnaround in the sector later this year.

On Tuesday, July 02, 2019, we executed a CALL trade on Micron with quite a bit of success. The option trade returned a potential profit of 236%.

However, times have changed, for the short-term at least; despite Micron stock clinging to a 30% year-to-date gain; therefore, looking at the negatives it seems viable to execute a PUT trade.

Past earnings…..

On June 25, Micron reported better-than-expected sales and earnings in its fiscal third quarter. It earned an adjusted $1.05 a share on sales of $4.79 billion. Analysts expected Micron earnings of 78 cents a share on sales of $4.66 billion.

On a year-over-year basis, earnings fell 67% while sales dropped 39%. It was the second quarter in a row of declines in earnings and sales for Micron. But MU stock gapped up the next day.

In addition to the chip down cycle, Micron lost sales because of U.S. trade restrictions on customer Huawei, a Chinese telecom gear maker. Huawei accounted for 13% of Micron's revenue in the previous two quarters.

Expected Earnings…..

Micron is scheduled to report its next quarterly earnings report on Thursday, September 19th.

Equities analysts expect Micron Technology to post $4.50 billion in sales for the current quarter. Nine analysts have provided estimates for Micron Technology’s earnings, with the lowest sales estimate coming in at $4.49 billion and the highest estimate coming in at $4.52 billion. Micron Technology reported sales of $8.44 billion during the same quarter last year, which indicates a negative year-over-year growth rate of 46.7%.

As well, Wall Street brokerages forecast that Micron Technology will post earnings of $0.46 per share for the current quarter. Nine analysts have made estimates for Micron Technology’s earnings. The lowest EPS estimate is $0.44 and the highest is $0.56. Micron Technology reported earnings of $3.53 per share in the same quarter last year, which indicates a negative year over year growth rate of 87%.

Factors Behind This Downside…..

In its fiscal third quarter, Micron said DRAM average selling prices declined about 20% from the prior quarter. DRAM shipments were roughly flat.

Nand average selling prices fell in the midteens percentage range from a quarter earlier. Shipment quantities decreased in the mid-single-digit percentage range.

Micron has lowered production during the current oversupply situation.

One major concern, at the present time, is that Micron gets 57% of its revenue from China. As the trade war drags on, the Chinese are going to start making their own DRAM chips to bypass U.S. companies and the American tariffs. For example, China’s Changxin Memory Technologies is investing $8 billion in its own DRAM operations.

MU stock, at its current prices, has deteriorating financials. Although Micron’s Q3 EPS handily beat analysts’ average expectations, it was still 66% lower, excluding some items,, than in the same quarter a year earlier.

Analysts’ Views…..

As well, analysts’ estimates for MU’s earnings are falling dramatically. At the end of May, analysts’ average estimate for Micron’s FY20 EPS was $4.51 per share. Now the average EPS estimate is down to $2.49, representing a 45% cut in less than two months. 

And, on Monday Citigroup analyst Christopher Danely rated Micron Technology stock with a Sell and now has a $30 price target on the shares, about 28% below recent levels.

He remains bearish on Micron (ticker: MU) stock because he thinks the downturn in DRAM chips—a key computer memory product Micron makes—will last into 2020. “Longer-term we think [earnings per share] can get back to the peak of $11.74 and the stock could reach [more than] $60,” Danely said in his report.

So part of his problem with the stock is timing and the uncertainty about when things will get better for the computer-memory industry. “The two previous DRAM downturns lasted 6 to 8 quarters and we are only four quarters into the current downturn,” Danely said. What’s more, “there’s still oversupply and excess inventory in DRAM and we expect pricing to decline into the first half of 2020.”

The company has made some progress. “Since 2001, Micron’s gross and operating margins have consistently put in higher [cyclical] highs and higher [cyclical] lows,” Danely said. In the end, his inventory fears overwhelm the potential gains that will accrue when the cycle turns.

Micron is actually a highly controversial stock on Wall Street. Analyst price targets range from $28 to $90 a share. The spread of almost 150% is far wider than the average 40% spread for stocks in the Dow Jones Industrial Average. The boom-bust nature of the DRAM cycle lies at the heart of the controversy.

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

  • Wedbush started coverage on shares of Micron Technology in a report on Wednesday, June 26th. They issued a “neutral” rating and a $30.00 target price for the company.
  • Robert W. Baird reduced their price target on Micron Technology from $32.00 to $28.00 and set an “underperform” rating for the company in a research report on Friday, June 21st.
  • Nomura reduced their price target on Micron Technology from $45.00 to $32.00 and set a “neutral” rating for the company in a research report on Monday, June 3rd.
  • Barclays raised their price objective on shares of Micron Technology from $40.00 to $50.00 and gave the company an “overweight” rating in a report on Thursday, July 18th.
  • ValuEngine raised shares of Micron Technology from a “sell” rating to a “hold” rating in a research report on Wednesday, May 1st.
  • JPMorgan Chase & Co. reissued an “overweight” rating on shares of Micron Technology in a research report on Friday, June 21st.
  • Finally, Cfra downgraded shares of Micron Technology to a “sell” rating and set a $32.00 target price for the company in a research report on Wednesday, May 22nd.

Three research analysts have rated the stock with a sell rating, fifteen have given a hold rating and seventeen have issued a buy rating to the company. The company currently has a consensus rating of “Hold” and a consensus price target of $48.27.

Insider Movement…..

SVP Michael W. Bokan sold 20,488 shares of the stock in a transaction dated Friday, July 19th. The stock was sold at an average price of $45.71, for a total value of $936,506.48.

Also, SVP April S. Arnzen sold 4,800 shares of the stock in a transaction dated Monday, July 15th. The shares were sold at an average price of $45.00, for a total value of $216,000.00.

Insiders have sold 57,244 shares of company stock worth $2,624,899 over the last ninety days. 0.20% of the stock is currently owned by insiders.

Summary…..

Micron Technology has a debt-to-equity ratio of 0.10, a current ratio of 2.79 and a quick ratio of 1.88. The stock’s fifty day moving average price is $42.62. Micron Technology has a 1 year low of $28.39 and a 1 year high of $53.68. The company has a market capitalization of $45.83 billion, a price-to-earnings ratio of 3.56 and a beta of 1.96.