“Cut-to-the-Chase” Recommendations
- Week Beginning -
Monday, August 27, 2018

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"



Options Trade - - Canadian Solar Inc. (NASDAQ:CSIQ) Calls

Thursday, August 30, 2018

** OPTION TRADE: Buy CSIQ SEPT 21 2018 15.000 CALL at approximately $0.40 TO $0.45. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $0.80.

Also include a protective stop loss of $0.15.)

Alternative energy company Canadian Solar Inc. (NASDAQ:CSIQ) appears to be undervalued; and Lion Point Capital agrees, and disclosed a 6% stake in the company. The investment firm also noted its plans to work with Canadian Solar's management team to enhance shareholder value.

Recent Movement…..

The past has seen CSIQ struggling on the charts since plunging to an annual low of $11.37 in mid-June on concerns of Chinese energy policy changes. The stock's recent breakout attempts have been quickly capped by the falling 100-day moving average, pushing the solar concern into an 18.6% year-to-date deficit.

However, yesterday saw Canadian Solar climb $1.08, to close at $14.80.

Last Earnings.….

Canadian Solar reported second-quarter 2018 earnings earlier this month of 26 cents per share, missing the Consensus Estimate of 33 cents by 21.2%. The company reported earnings of 63 cents per share in the year-ago quarter.

The solar cell manufacturer also posted total revenues of $650.6 million in the quarter, which also missed the Consensus Estimate of $715 million by 9%. Further, the top line was down 6% from $692.3 million reported in second-quarter 2017.

Moving Forward…..

For third-quarter 2018, Canadian Solar expects shipments in the range of 1.50-1.60 GW including approximately 210 MW of shipments to the company's utility-scale solar power projects. Total revenues are projected in the range of $790-$840 million along with gross margin in the 20-23% range.

Stock analysts at B. Riley lifted their Q1 2019 earnings per share (EPS) estimates for shares of Canadian Solar in a research report issued to clients and investors on Thursday, August 23rd. B. Riley analyst C. Driscoll now expects that the solar energy provider will post earnings of $0.55 per share for the quarter, up from their previous forecast of $0.52.

Analysts and Hedge Funds Opinions

B.Riley FBR analyst Carter Driscoll maintained a Hold rating on Canadian Solar Inc yesterday and set a price target of $18. The company’s shares opened the day at $13.17.

Driscoll commented:

“Yesterday, 8/14, as expected in the face of tough solar market conditions, CSIQ (Neutral, $18 PT) reported disappointing revenues due to constricting average selling prices (ASPs), deferral of project sales, and the new Chinese solar policy. CSIQ reported 2Q18 revenue of $650.6M, gross margin of 20.5% (excluding AD/CVD reversal benefits), EPS of $0.26, and module shipments of 1.7 GW, compared to our estimates of $715.0M, 21.0%, $0.22, and 1.52 GW. In response to this market, management stated it has reduced its 2018 manufacturing expansion plan.”

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

In a report released earlier this month, Colin Rusch from Oppenheimer maintained a Buy rating on Canadian Solar Inc (NASDAQ: CSIQ), with a price target of $19. The company’s shares opened today at $12.49, close to its 52-week low of $11.37.

Rusch said:

“As the solar industry navigates a sizable air pocket in demand due to China policy changes and waits for clarity on India domestic production mandates, CSIQ is making prudent investments in technology which we believe will position it well for the next upcycle. We believe the company’s multi-PERC technology offers the potential to differentiate its product by having efficiency near mono-silicon modules at a meaningful cost advantage. We note CSIQ has historically been a leader in technology-driven cost reduction for silicon module technology and maximizing performance of lower purity materials. This leadership appears to be true again, going through this cycle. We remain constructive on the shares, looking for a bottom in module pricing and capacity during 4Q18.”

BidaskClub upgraded shares of Canadian Solar from a hold rating to a buy rating in a report published on Friday, August 3rd.

Zacks Investment Research upgraded Canadian Solar from a hold rating to a buy rating and set a $19.00 price target for the company in a report on Tuesday, May 15th.

Finally, JPMorgan Chase & Co. upgraded Canadian Solar from an underweight rating to a neutral rating and reduced their price target for the company from $17.00 to $15.00 in a report on Thursday, June 7th.

Two research analysts have rated the stock with a sell rating, seven have given a hold rating and two have issued a buy rating to the stock. The company has a consensus rating of Hold and an average price target of $17.67.

Summary

Canadian Solar has a one year low of $11.37 and a one year high of $19.09. The stock has a market cap of $803.92 million, a price-to-earnings ratio of 14.24, a price-to-earnings-growth ratio of 0.30 and a beta of 2.47. The company has a debt-to-equity ratio of 0.20, a current ratio of 0.93 and a quick ratio of 0.84.


Options Trade - - Jefferies Financial Group Inc (NYSE: JEF) Calls

Wednesday, August 29, 2018

** OPTION TRADE: Buy JEF SEPT 21 2018 24.000 CALL at approximately $0.55. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $1.10.

Also include a protective stop loss of $0.25.)

Jefferies Financial Group Inc (NYSE: JEF), a financial services company, offers a range of products and services in investment banking, equities, fixed income, and wealth management in the Americas, Europe, and Asia, is transforming from a conglomerated holding company into a focused financial firm. But the move has gone largely unnoticed, which provides a great opportunity for this options trade.

According to Oppenheimer’s Christ Kotowski the “unique” firm “combines a strong investment bank’s deal-sourcing capability with the power of being able to write a large equity check at a moment’s notice.”

Jefferies Financial?

For years, Leucadia National was a highly diversified conglomerate, bringing together not only well-known financial services companies but also meat processing giant National Beef. Yet recently, the company realized it wanted to focus on its Jefferies subsidiary, and so it decided to change its name to Jefferies Financial Group (NYSE: JEF) and sell off a substantial portion of its holdings of National Beef.

Recent Earnings…..

Jefferies Financial Group's second-quarter financial results showed the continued success of that portion of Leucadia's old business. Revenue climbed 6% to $911.2 million, accelerating from the segment's pace of growth in the first quarter of 2018. Net income soared to $725.5 million, and that produced earnings of $2.03 per share, easily beating the $1.88 consensus forecast among those following the stock.

A closer look at what's under Jefferies' corporate umbrella can shed light on what's working for the company right now. The primary Jefferies Group LLC unit, which makes up about 90% of revenue, saw good results from its investment banking division, which enjoyed a more than 40% jump in sales compared to the previous year's second quarter. The fixed income portion of that business struggled, but equities were relatively consistent with year-ago performance.

Influencing Factors…..

Berkadia also contributed to Jefferies' overall success. The debt-origination business provided $6 billion in financing for clients during the second quarter, up by 25% from last year, and investment sales were also higher. Despite some tough conditions in the commercial mortgage-backed securities market, Berkadia has sustained its servicing portfolio near current levels.

Elsewhere, Jefferies expanded its asset management business by joining up with Weiss Multi-Strategy Advisors in collaboration, as well as partnering with the newly combined businesses of Schonfeld Strategic Advisors and Folger Hill Asset Management. Vitesse Energy Finance kept working in the Bakken shale play, while positions in Spectrum Brands and Idaho Timber had relatively small impacts on Jefferies' overall performance.

The sale of a 48% stake in National Beef generated $1.1 billion in cash, and that prompted the company to take steps to consider additional return of capital. Even after the sale, Jefferies will still own a 31% interest in National Beef, and solid performance in the beef and cattle industry made a positive contribution to Jefferies' financial results.

Jefferies has been seeing solid activity on the earnings estimate front as well. For current year earnings, the consensus has gone up by 9.6% in the past 30 days, thanks to upward revisions in the past one month compared to none lower.

Moving Forward…..

Jefferies CEO Rich Handler and President Brian Friedman focused on what the company has done with its spare cash. "We repurchased a total of over 24 million of our outstanding shares (7%) at an average price of $24.17 per share," Handler and Friedman said, "or a total of $582 million returns to shareholders in the second quarter." The CEO and president also noted the many milestones the company passed during the period, including the sale of its interest in Garcadia and the company's renaming.

Also, the company said it will allow repurchase of another 25 million shares, potentially further reducing the outstanding share count by roughly 7%. At the same time, Jefferies boosted its dividend by 25% and will now pay $0.125 per share on a quarterly basis. By doing so, Jefferies is making it clear that it wants to give back to its investors even as it cashes out some of what it now considers its non-core assets.

Analysts and Hedge Funds Opinions

In a report released last week, Chris Kotowski from Oppenheimer maintained a Buy rating on Jefferies, with a price target of $35.

“Until earlier this week, when another major broker-dealer initiated coverage on $29 target, we were the only sell-side firm covering the stock. While we normally do not comment on other analysts’ reports, we were glad to see this one because it is the most visible and concrete step forward in our thesis that the shares will be revalued as JEF “gains more of a following on both the buy-side and the sell- side” as a result of refocusing as a financial services company (see our Bank…, dated April 10, 2018). The shares reacted favorably, but the stock is still at just 92% of TBV, indicating that this thesis still has a long way to play out.”

Also, Jefferies received a Buy rating and a $29 price target from KBW analyst Ann Dai last week.

Jefferies has an analyst consensus of Moderate Buy, with a price target consensus of $32, implying a 35.3% upside from current levels.

Summary

Jefferies Financial Group has a current ratio of 0.59, a quick ratio of 0.59 and a debt-to-equity ratio of 0.97. Jefferies Financial Group has a twelve month low of $21.61 and a twelve month high of $28.30. The company has a market cap of $7.82 billion, a PE ratio of 14.55 and a beta of 1.21.


Options Trade - - Cronos Group Inc (NASDAQ: CRON) Calls

Tuesday, August 28, 2018

** OPTION TRADE: Buy CRON SEPT 21 2018 12.500 CALL at approximately $1.40. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $2.80.

Also include a protective stop loss of $0.55.)

On October 17, Canada will officially lift the gate on recreational marijuana sales to adults. Once legal, sales are expected to soar, with the industry pulling in up to $5 billion in added annual sales when fully ramped up. The expectation of billions of dollars in added revenue into marijuana stocks is expected. One company that will benefit from this situation is Cronos Group Inc (NASDAQ: CRON).

Cronos received a boost as investors anticipated that it could be a prime candidate for a deal with British alcoholic beverage maker Diageo (NYSE: DEO), known for its products such as Crown Royal whisky and Guinness beer.

On Friday, Diageo was in discussions with at least three Canadian marijuana growers. Aphria, Cronos Group, and Tilray weren't specifically mentioned as candidates, but the stocks have been trending steadily upward since Canopy Growth announced a $4 billion investment from Constellation Brands on August 15, 2018.

The cannabis-infused beverage market could be a big opportunity, as evidenced by Constellation Brands’ eagerness to fork over billions of dollars to Canopy Growth.

Cronos is currently a leader in the Canadian medical cannabis market. It has significant production capacity as well. Cronos, is also competitive in international medical cannabis markets, notably including Germany.

Recent Movement…..

An important factor is that the opening of Canada's recreational marijuana market is right around the corner. The country is scheduled to begin allowing sales of recreational cannabis for adult use on October 17, 2018. Earlier last week, Ontario, which has the largest population of all of Canada's provinces, announced supply agreements with 26 licensed producers, including Canopy Growth, Cronos Group, and Tilray.

Influencing Factors

On August 21, the Company announced its initial supply agreements for retail distribution, both government-operated and private, across Canada for the upcoming launch of the cannabis recreational market in October 2018.

Cronos Group has secured listings and signed binding master supply agreements with both the Ontario Cannabis Retail Corporation and the BC Liquor Distribution Branch. The Company has also secured listings and has accepted supplier terms with the Nova Scotia Liquor Corporation and Prince Edward Island Liquor Corporation.

Analysts and Hedge Funds Opinions

Beacon Securities reiterated a “buy” rating on shares of Cronos Group in a research report on Friday, May 4th.

Also, Canaccord Genuity upgraded Cronos Group from a “sell” rating to a “hold” rating in a research report on Wednesday, August 15th.

Summary

Cronos Group has a 12 month low of $1.50 and a 12 month high of $11.90. The firm has a market capitalization of $1.76 billion and a PE ratio of 1,268.00. The company has a current ratio of 52.98, a quick ratio of 44.71 and a debt-to-equity ratio of 0.02.


Options Trade - - Bilibili Inc – ADR (NASDAQ: BILI) Calls

Monday, August 27, 2018

** OPTION TRADE: Buy BILI OCT 19 2018 12.500 CALL at approximately $0.60 TO $0.70. Sell price is left to your own judgment.

(or alternatively : Place a pre-determined sell at $1.80.

Also include a protective stop loss of $0.25.)

Gaming platform Bilibili Inc (NASDAQ: BILI), another rapidly growing streaming play in China, is confirmed to report earnings today, Monday, August 27, 2018, after the market closes. The consensus estimate is for a loss of $0.03 per share on revenue of $142.41 million.

Who Is Bilibili?

BILI is a Chinese hybrid of Twitch, Crunchyroll, and Kings Games. The company listed on the NASDAQ on March 2018, opening at $9.80 on its first day of trading, and has a market cap of around $4 billion.

BILI's audience consists of over 77.5 million monthly active users (up 35% y/y in Q1) and 2.5 million paying members (up 190% in Q1).

Recent Movement…..

Bilibili had a blowout first quarter in late May which attracted plenty of market attention. The stock would peak in mid-June at $22.70, more than doubling off of its first public trade just three months earlier. But the stock then took a pummelling. Shares of Chinese internet gaming stocks have taken a beating as regulators clamp down on new content, something that has weighed on some of the larger companies but has been brutal for the younger and smaller Bilibili.

The big zinger for Bilibili came in late July when its app was taken down from some smartphone app stores in China in response to the crackdown on content sharing. The stock has been cut roughly in half since its June high, and it's now back below its March IPO price.

Earnings Expectations….

There isn't a lot of analyst coverage for Bilibili at this point, but Wall Street pros see another period of strong growth. Analysts are targeting $146.9 million in revenue for the quarter, a healthy sequential increase off the $138.4 million it rang up during the first quarter and once again more than doubling off of prior-year levels.

Analysts are also bracing for another modest deficit. Bilibili isn't profitable at this juncture, and this isn't typically a deal breaker for growth investors at this phase of a company's cycle.

Influencing Factors

BILI's monetization of its users is at an early stage. Mobile gaming revenue grew 300% in FY 2017. Advertising revenue growth is expected to be the key driver in FY.

Along with explosive top-line growth, BILI's TTM EBITDA and operating cash flow are improving rapidly due to strong economies of scale in the company's full-on digital business model.

BILI's market cap per user is severely undervalued in comparison to its Chinese video streaming peers such as HUYA, MOMO, and IQ.

Bilibili was on a roll earlier this year. It attracted an average of 77.5 million active monthly users through the first quarter of the year. Bilibili may have gotten its start by attracting young Chinese users to its anime portal, and 82% of its audience is under 18 according to its IPO prospectus. However, mobile games are now accounting for 79% of its revenue. Bilibili teens often go online with empty pockets, as most of the content is free and ad supported, but the number of people paying for premium features has nearly tripled over the past year.

Moving Forward…..

BILI is expected revenue growth to more than double in the upcoming year. This is expected to flow down into an impressive return on equity of 21.05% over the next couple of years.

BILI’s ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This indicates that BILI has sufficient cash flows and proper cash management in place, which is a key determinant of the company’s health.

BILI’s has zero debt levels. It has only utilized funding from its equity capital to run the business. Therefore the company has plenty of headroom to grow, and the ability to raise debt should it need to in the future.

Analysts and Hedge Funds Opinions

Bilibili Inc has been given a consensus broker rating score of 1.17 (Strong Buy) from the three brokers that cover the company. One research analyst has rated the stock with a buy rating and two have given a strong buy rating to the company.

Analysts have set a twelve-month consensus price target of $16.10 for the company.

Several analysts have recently commented on the company…..

  • Morgan Stanley started coverage on shares of Bilibili in a report on Monday, April 23rd. They issued an “overweight” rating for the company.
  • Bank of America upped their price objective on shares of Bilibili from $13.00 to $15.30 and gave the stock a “buy” rating in a report on Thursday, May 24th.
  • Finally, JPMorgan Chase & Co. started coverage on shares of Bilibili in a report on Monday, May 7th. They issued an “overweight” rating and a $14.00 price objective for the company.
Summary

BILI is a company with impressive financial health as well as a buoyant growth outlook. And Bilibili should have a strong second quarter.

Bilibili has a 12-month low of $9.09 and a 12-month high of $22.70.






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