by Ian Harvey
January 27, 2019
A Quick Review of Last
There was plenty of action for the short week due to a day short for the Martin Luther King Jr. holiday on Monday. Fourth-quarter earnings season was in full swing, there were constant talks based on the U.S.-China relations, the government shutdown situation with a final end to the longest government shutdown in U.S. history on Friday, and the Fed input with its balance sheet.
Corporate earnings reactions this week were mostly well-received, especially among blue chips. Despite China concerns Starbucks (SBUX) shares rose thanks to another strong quarter; but may still be in the firing line as the U.S.-China talks progress, and semiconductor stock Xilinx (XLNX) soared after its report.
IBM shares sank before reporting earnings; but proved analysts wrong in their pessimism to climb after the report; which may also due to a lot of investor optimism!
Procter & Gamble Co (NYSE: PG) the world's leading consumer staples company posted broadly positive earnings results that included some of its strongest sales growth in years.
Ford Motor Company (NYSE: F) missed quarterly earnings projections owing to pensions and layoff costs, its revenue met expectations.
Santa Clara, California based Intel Corporation (NASDAQ:INTC) shares dropped in the extended session Thursday after the chip giant’s quarterly revenue and outlook fell short of Wall Street expectations amid growing concern about trade and economic issues. Intel shares were down 6.7% after hours, following a 3.8% gain to close the regular session at $49.76 as chip makers staged a huge rally on strong earnings results.
And, shares of American Airlines (NASDAQ: AAL), which jumped 6% on Thursday in response to upbeat earnings news, flew a higher again Friday as well, closing the day up 3.9%.
For the week, the Dow Jones Industrial Average (DJI) finished up 0.1% at 24,737.20.
The S&P 500 Index (SPX) was down 0.2% at 2,664.76 for the week.
And the Nasdaq Composite (IXIC) was up 0.01% for the week at 7,164.86.
There won't be time for traders to rest, since this week brings not only FAANG earnings, but the next Fed meeting and high-level U.S.-China trade talks.
There will be about a quarter of the S&P 500, nearly half of the Dow Jones Industrials and three of the four biggest companies in the world reporting in the week ahead.
There will be heavy focus on mega-cap tech companies Apple, Microsoft, and Amazon reporting respectively on Tuesday, Wednesday and Thursday, not just because they are the biggest stocks, but because they represent growth and have been market leaders. Facebook, the sixth largest stock by market cap, also reports on Wednesday.
Analysts expect Amazon will see revenue growth of 19 percent, to $72.1 billion, driven by e commerce, web services and advertising.
earnings in the coming week, the Fed meets Tuesday and Wednesday, but it is not
expected to take any rate action. There is also the January employment report
Earnings to Watch…..
Caterpillar, Whirlpool, AK Steel, Crane, Ethan Allen, Graco, Brown and Brown, Reinsurance Group of America, Celanese
Apple, Verizon, 3M, Harley-Davidson, Amgen, Pfizer, Lockheed Martin, PulteGroup, LVMH, United Micro, Danaher, Corning, SAP, Stryker, eBay, Stryker, Advanced Micro Devices, KLA-Tencor, Xerox
Microsoft, Facebook, AT&T, Boeing, McDonald's, Anthem, Novartis, Qualcomm, Alibaba, PayPal, Wynn Resorts, Ameriprise, U.S. Steel, Cirrus Logic, Gentex, General Dynamics, Hess, Nasdaq OMX, T. Rowe Price, Invesco, Siemens, Avery Dennison, Check Point Software
Amazon, Blackstone, Mastercard, Raytheon, General Electric, Baker Hughes, Diageo, Altria, Unilever, Marsh and McLennan, Hershey, International Paper, Eaton, Sprint, AmerisourceBergen, Fortune Brands, Conoco Phillips, DowDupont, Celgene, Aflac, Northrop Grumman, Valero Energy, Xcel Energy, Sherwin-Williams, Tractor Supply, Symantec, Cypress Semiconductor
ExxonMobil, Chevron, Merck, Cigna, Aon, Deutsche Bank, Sony, Honda Motor, Illinois Tool Works, Johnson Controls, Weyerhaueser, KKR, Booz Allen Hamilton, Madison Square Garden, LyondellBasell, Roper Industries
Economic Data to Watch…..
*Advance economic indicators, Q4 GDP, Personal income/spending, construction spending are among the reports delayed by government shutdown.
CONTROL OF EMOTIONS AND LESS PANIC WILL HELP YOUR PROFIT MARGIN!
OUT WHILST THE GOING IS GOOD!
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
YOU NEED TO BE IN IT TO PROFIT!
Options Trades to Consider Based on Expected Earnings Reports:
Tuesday, January 29, 2019
Advanced Micro Devices, Inc. (NASDAQ:AMD), a global semiconductor company, will report earnings after the market closes. The report will be for the fiscal Quarter ending Dec 2018. Based on 8 analysts' forecasts, the consensus EPS forecast for the quarter is $0.09 per share on revenue of $1.44 billion. The reported EPS for the same quarter last year was $0.06.
The same tailwinds which pushed AMD stock higher in 2018 remain intact today. The valuation is reasonable under realistic growth assumptions, the growth trajectory remains promising, and the company’s size relative to its addressable market implies further upside. There are also M&A rumors on the table.
Overall, there are reasons to believe that AMD stock is set have another big year, so long as certain tailwinds remain in play, AMD stock should have another strong showing in 2019.
Chipmaker Advanced Micro Devices was the top-performing stock in the S&P 500 for 2018. In calendar 2018, AMD stock rose 80%, versus a 6% drop for the S&P 500.
AMD has made a big push into the CPU server market with its EPYC chips. Estimates for how much server market share AMD has gained through EPYC most normally come in around 5%, or in the mid-single-digit range. With the launch of new 7nm EPYC Rome chips, AMD projects to keep stealing share from Intel in 2019. Many industry analysts and insiders see AMD’s share rising from 5% in 2018, to 10% or higher in 2019.
This is an extremely valuable market supported by secular growth trends in AI and data. If AMD can continue to grow share in this market, not only does that boost present-day financials, but it also adds visibility and firepower to the long-term growth trajectory. That is a winning combination which usually leads to a winning stock.
AMD has been steadily gaining GPU market share through its Ryzen and Radeon products. Notably, AMD just scored a big win when cloud giant Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) announced that its huge cloud gaming project would use AMD’s Radeon GPUs.
If AMD can continue to grow share in this market, this will provide a double tailwind thanks to boosted near- and long-term fundamentals. That combination could power AMD stock higher in 2019.
The fundamentals for AMD stock are that this is a small company attacking big markets and successfully growing share in those markets. There are question marks surrounding the sustainability of those share gains, but if they persist, this will remain a double-digit revenue growth company with healthy margin drivers for the next five-plus years.
If AMD does remain a double-digit growth company, then $2 in EPS looks achievable by fiscal 2023. A growth average 20 forward multiple on that implies a fiscal 2022 price target of $40. Thus, this is a stock which could reasonably double within the next four to five years.
Three research analysts have rated the stock with a sell rating, twelve have given a hold rating, sixteen have given a buy rating and one has assigned a strong buy rating to the stock. The stock presently has an average rating of “Hold” and an average target price of $27.31.
Option trade to consider: Buy the AMD FEB 15 2019 22.000 CALL at approximately $1.70.
Wednesday, January 30, 2019
The Chinese e-commerce goliath Alibaba Group Holding Ltd
(NYSE:BABA), an online and mobile commerce company, will report
earnings before the market opens. The consensus earnings estimate is $1.65 per
share on revenue of $17.26 billion; but the Whisper number is higher at $1.73
per share. Consensus estimates are for year-over-year earnings growth of 7.14%
with revenue increasing by 35.26%.
BABA should continue to benefit from the strong, continuous megatrends of e-commerce and cloud computing. Meanwhile Wall Street analysts remain bullish on BABA, as their average price target on BABA stock is $213, representing upside of about 50% from the shares’ current levels.
China's Alibaba Group Holding has acquired German data analysis firm Data Artisans, the Berlin-based startup said, in a deal reported to be worth around 90 million euros ($103 million).
The transaction marks the first full takeover by a Chinese company on Berlin's growing startup scene. In the last significant deal, Alibaba's rival Tencent Holdings participated in a $160 million funding round for online bank N26 in March 2018.
Data Artisans CEO Kostas Tzoumas said Alibaba would also invest an undisclosed sum in the company to develop Apache Flink, its open-source software that can process large data volumes, and to expand into new business areas.
The price of the deal was reported to be 90 million euros in the media, including German newspaper Handelsblatt.
Also, Alibaba’s Ant Financial subsidiary is in talks to acquire British payment company WorldFirst. A deal could value WorldFirst at more than $700 million, according to the report.
WorldFirst was founded in 2004. It’s headquartered in London and operates offices around the world. WorldFirst mostly handles payments and currency exchanges for businesses and individuals.
There is plenty of strength in Alibaba's core commerce business with revenues in the last reported quarter at RMB72.5 billion (US$10.5 billion), increasing 56% year over year. The top line is expected to further increase in the quarter to be reported, driven by innovation in data technology, widespread application of big data, as well as increasing validation for Taobao and Tmall portals.
Mobile Monthly Active Users (MAU) is expected to increase, in turn driving revenues of the company. This is because of the increased adoption of mobile devices by consumers as the primary method of accessing Alibaba's platforms.
it has been witnessing an increase in monetization rates over the past few
quarters. The company is building its online marketing inventory on both mobile
and PC, and is likely to continue recording higher monetization rates, thereby
boosting Alibaba's profits.
Growing cloud momentum revenues is expected to increase in
the to-be-reported quarter, driven by growth in the number of paying customers
and higher-than-usual spending by them, reflecting increased usage of services.
Equities research analysts are positive on the stock…..
Two analysts have rated the stock with a hold rating, twenty-five have
issued a buy rating and two have assigned a strong buy rating to the company’s
stock. The company currently has a consensus rating of “Buy” and a consensus
target price of $212.41.
Option trade to consider: Buy the BABA FEB 15 2019 170.000 CALL at approximately $2.45.
Aerospace giant Boeing Co (NYSE:BA) is scheduled to
report before the market opens. The consensus earnings estimate is $4.52 per
share on revenue of $26.92 billion; but the Whisper number is higher at $4.61
per share. Consensus estimates are for earnings to decline year-over-year by
5.83% with revenue increasing by 6.12%.
This airplane builder has an established record of topping earnings estimates, especially when looking at the previous two reports. The company boasts an average surprise for the past two quarters of 3.27%.
For over 100 years, Boeing has kept its eye on the skies. From planes to rockets, the aerospace company has come a long way since William Boeing began building 'flying boats' for the U.S. Navy in 1916.
While Boeing's technology has certainly evolved, it has maintained its relationship with the U.S. government with its defense products.
As tensions with China continue, expect further business for Boeing as a ' Cold War atmosphere' develops.
On balance, Boeing offers investors a compelling mix of
revenue growth and margin expansion. The long-maligned airline industry is in
the middle of a period of profitability and efficiency like it has never seen
Boeing enjoys a solid inflow of contracts from both the
Pentagon as well as foreign allies, courtesy of the company's varied product
Among the commercial contracts that Boeing won in the fourth
quarter, the significant ones include a $12-billion order for delivering 100
737 MAX 8 aircraft to Green Africa Airways and a $5.9-billion order for
supplying 30 737 MAX jets with options for 20 more to a Saudi-based airline.
The aerospace giant won another $5.9 billion order to supply 40 737 MAX 8
airplanes to a Korea-based airline.
In the defense space, the company clinched a modification
contract worth $367 million related to the CMV-22B and MV-22B variants of the
V-22 family of tiltrotors and a $240 million deal for performing highly complex
technical systems engineering and integration requirements associated with the
Ballistic Missile Defense system. Additionally, it secured a $307.5 million
contract for offering integrated product support in relation to F/A-18 jets'
A-D and E-G versions. The company also won a few more multi-million-dollar
contracts from the Pentagon.
Such solid order growth must have boosted Boeing's backlog
count, which should get duly reflected in the upcoming quarterly results.
Expect future orders of Boeing and Airbus planes to increase,
and as increased production generally leads to lower unit production costs, it
suggests the profit margins on many of Boeing's aircraft programs are likely to
Boeing's management believes it can make progress toward an
operating margin in the mid-teen percentages at Boeing Commercial Airplanes
(BCA) within the next couple of years, compared to a guidance range of 12% to
12.5% for 2018.
Boeing has been expanding its own manufacturing operations in order to claim a slice of the lucrative aftermarket parts segment. Essentially, Boeing is muscling in on its suppliers' margins.
Boeing management believes that wide-body orders are set to experience a meaningful increase, propelled both by replacement demand and the forthcoming availability of new Boeing 777X.
Boeing believes sales in the wide-body market will be driven
by demand for the smaller aircraft that it specializes in.
Overall earnings estimates have been revised higher since
the company's last earnings release. Boeing has an Earnings ESP of +0.31% at
the moment, suggesting that analysts have grown bullish on its near-term
Also, analysts have a positive attitude towards Boeing…..
Seven equities research analysts have rated the stock with a hold rating and twenty have issued a buy rating to the company. The company has a consensus rating of “Buy” and a consensus price target of $410.55.
Option trade to consider: Buy the BA FEB 15 2019 370.000 CALL at approximately $7.30.
Social media leader Facebook Inc. (NASDAQ:FB) will report earnings after the market closes. The consensus earnings estimate is $2.17 per share on revenue of $16.41 billion; but the Whisper number is higher at $2.26 per share. Consensus estimates are for earnings to decline year-over-year by 1.36% with revenue increasing by 26.50%.
Facebook stock suffered in 2018 by a convergence of headwinds that ultimately cut into user growth, revenue growth and margins. Those headwinds could reverse course in 2019 and 2020. Negative media headlines are already largely moving into the background.
FB is starting to monetize better through Stories and messages, two places which could reinvigorate ad-revenue growth in 2019/20. And, the company is already spending an arm and a leg on data security, so further investment seems unlikely, giving margins a chance to move higher.
Despite fears regarding user privacy that traffic will start
to drop significantly, and advertisers will start to sever ties with the social
media leader, at least for now, earnings continue to rise. And analysts forecast
average annual earnings growth of 18% for the next five years.
And analysts appear to be more confident in FaceBooks revovery.....
Four research analysts have rated the stock with a sell rating, nine have assigned a hold rating, thirty-eight have given a buy rating and one has given a strong buy rating to the stock. Facebook currently has an average rating of “Buy” and a consensus target price of $186.92.
Option trade to consider: Buy the FB FEB 15 2019 155.000 CALL at approximately $3.50.
Microsoft Corporation (NASDAQ:MSFT), the tech titan, will report
earnings after the market closes. The consensus earnings estimate is $1.09 per
share on revenue of $32.45 billion; but the Whisper number is higher at $1.16
per share. Consensus estimates are for year-over-year earnings growth of 13.54%
with revenue increasing by 12.21%.
Microsoft has posted positive earnings surprises each of the
last 10 quarters, and the street expects another beat for Q2 with a whisper
number of $1.16 per share.
Overall earnings estimates have been revised higher since
the company's last earnings release.
After selling off in December with the overall market, MSFT
stock has trended higher as stability returned to the market. The stock looked
a bit overvalued after hitting a record high in September but currently the
stock trades at 21 times forward earnings which is much more attractive with
the company forecast to grow earnings by slightly over 14% per annum over the
next five years.
Microsoft was late to the cloud market but caught up
quickly, earning the second spot behind Amazon with 13% market share.
Microsoft's Azure cloud business grew revenue 76% year over year in the third quarter, faster than Amazon Web Services.
Microsoft has plenty of cash, and operating performance has been stellar. At the end of the third quarter, the software giant had $59.7 billion of net cash and generated $32 billion of free cash flow over the last year. Microsoft pays out 40% of free cash flow in dividends.
Microsoft enjoys a wide moat based on its dominance with its Windows operating system, and the familiarity users have with its Office software. More of Microsoft's revenue is coming from recurring subscription fees, such as Office 365. The software giant has seen steady growth in its flagship Windows and Office products lately.
Also, analysts are quite positive about MSFT…..
One investment analyst has rated the stock with a sell rating, one has
assigned a hold rating, thirty-three have given a buy rating and two have
assigned a strong buy rating to the company’s stock. Microsoft has an average
rating of “Buy” and an average price target of $121.78.
Option trade to consider: Buy the MSFT FEB 15 2019 110.000 CALL at approximately $1.65.
Friday, February 01, 2019
Honeywell International Inc. (NYSE:HON), a diversified technology and manufacturing company, previously had a strong set of earnings which led to a mid-single-digit gain in the stock price. And it stands out in comparison with the difficulties at other industrials like General Electric Company (NYSE:GE).
Honeywell has acquired an enviable reputation for being conservative with guidance - under-promising and over-delivering is the norm, and the trend in Honeywell's full-year guidance in 2018 suggests the company had strong earnings momentum.
For the quarter ended December 2018, this industrial conglomerate is expected to post quarterly earnings of $1.89 per share, which represents a year-over-year change of +2.2%.
Revenues are expected to be $9.69 billion, down 10.6% from the year-ago quarter.
The company reported better-than-expected second-quarter 2018 results. The company's top-line performance improved 6%, year over year, organically.
Honeywell believes sturdier demand for its innovative technology solutions will continue to drive the company's segmental revenues in the quarters ahead. Analysts think stronger sales volumes, increased productivity and ongoing commercial effectiveness actions will likely drive near-term profitability.
Honeywell had gained 7.05% over the past month. This has outpaced the Conglomerates sector's gain of 5.58% and the S&P 500's gain of 4.16% in that time.
technical indicators are pointed up now, so a bullish strategy is in order. HON
has rallied back above the bottoming 50-day moving average line. The flat
200-day moving average line is just above the market and a close above $145 will
was upgraded by RBC Capital recently. This comes a day after being upgraded by
In a note,
RBC analyst, Deane Dray, stated, "We
believe HON shares are positioned for further re-rating higher following the
successful Garrett/Resideo spins that bolstered RemainCo's earnings quality and
Five research analysts have rated the stock with a hold rating, sixteen have given a buy rating and one has assigned a strong buy rating to the stock. Honeywell International has an average rating of “Buy” and a consensus price target of $170.34.
Option trade to consider: Buy the HON FEB 15 2019 145.000 CALL at approximately $1.40.
An Important Note: That these suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented.
If you wish to receive more options trading recommendations similar to this, which will help boost your portfolio strategy, check out the other memberships available at Stock Options Made Easy.
When To Exit A Trade Based On Earnings?.....
It is also worth considering, when options trading earnings reports – “Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?”
traders realize, there is a 50/50 chance that the company stock price could go
either way after reporting earnings – even if the report is good, the stock
price could reverse – and if you hold a call option, means depletion of an
already good profit if it exists. A similar situation can be found if you hold
a put option, and a report is not that sound (and you expect a profit from
this) but the stock price can, at times move upwards due to traders bias or
other external conditions......READ MORE.....
The Decision Is Yours!
Before You Trade Consider This Strategy……
"Trading Capital Management" is a key component of your trading strategy. The strategy, on which we base our trades to achieve maximum profit, and to minimize loss, is contingent on using an equal amount of money for each trade.……continue reading this article……
”Success is simple. Do what's right, the right way, at the right time.”
Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.