Earnings Predictions
for the
Week Beginning June 11, 2018

Comparing Exiting Options Trades BEFORE and AFTER Earnings Reports!

by Ian Harvey

June 09, 2018

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Different Strategies Based On Exiting Earnings Predictions Options Trades…..

Let us review the trades for last week            and see if it was better to exit before the earnings reports or to hold the trade until after the report.

Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?

As most 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.

SO….looking at the following tables is an exit before or after an earnings report an appropriate decision?

“EARNINGS PREDICTIONS for LAST WEEK” - TAKING PROFITS AFTER EARNINGS REPORTS!

DATE TRADE GAIN
June 04, 2018 COUP JULY 20 2018 55.000 CALL P.P: 37%
June 05, 2018 YY JUNE 15 2018 130.000 CALL P.P: 55%
June 06, 2018 SIG JULY 20 2018 40.000 PUT P.P: 0%
June 06, 2018 FIVE JUNE 15 2018 75.000 CALL P.P: 438%
June 07, 2018 AVGOJUNE 15 2018 260.000 CALL P.P: 120%

The End Result……

In this instance it appears that it would have been more beneficial, when looking at the total profit, to take profits after the earnings report was announced.

In an article on Monday, June 04, after the market closed – there was the possibility of having a profit of 433%; and this would then have alleviated any further anxiety for the rest of the week’s earnings.

So, by exiting the trade before each earnings report was announced, a total potential profit of 650% could be made. This would also relief any concerns of stock direction after the report.

Now looking below, taking the profits after the earnings report certainly pays off; with a total potential profit of 1,736%.

However, there were three companies that reported that did not match the desired options trade direction. The input from Five Below’s potential profit of 1,760% was certainly the saving trade for the week.

Going back to the week before this – if you had opted out before the earnings report the potential profit would have been 168% compared to a loss of 117% when exiting the trade after the results had been announced. (Bear-in-mind, that this was a bad week in comparison to results from previous weeks – view the results here)

“EARNINGS PREDICTIONS for LAST WEEK” - TAKING PROFITS BEFORE EARNINGS REPORTS!

DATE TRADE GAIN
June 04, 2018 COUP JULY 20 2018 55.000 CALL P.P: 163%
June 05, 2018 YY JUNE 15 2018 130.000 CALL -78.5%
June 06, 2018 SIG JULY 20 2018 40.000 PUT -91%
June 06, 2018 FIVE JUNE 15 2018 75.000 CALL P.P: 1,760%
June 07, 2018 AVGOJUNE 15 2018 260.000 CALL -17.5%

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. GREED can be the undoing of a nice profit!

Options Trades to Consider Based on Expected Earnings Reports:

Monday, June 11

“Dave & Buster's Entertainment Inc (NASDAQ: PLAY), an American restaurant and entertainment business headquartered in Dallas, will report earnings after the market closes.

The consensus EPS forecast for the quarter is $0.93, with revenues of $322.27 million. The Whisper number is for $0.97 per share. The reported EPS for the same quarter last year was $0.87. The revenue would mark a nearly 6% climb from the year-ago period when the company posted quarterly revenues of $304.15 million.

Dave & Buster's shares climbed over 2.3% through late afternoon trading on Friday. This is a sign that investors might be expecting strong first-quarter results from the restaurant and arcade chain, when it reports.

Its stock price climbed over 12% during the last four weeks, prior to Friday's surge; but is still down roughly 35% over the last year. The company closed at $47.56 per share on Thursday, down over 30% from its 52-week high of $71.50 per share.

However, shares of Dave & Buster's could continue their month-long charge if the company reports solid Q1 financial results.

Dave & Buster's still believes it has room to aggressively expand its own store footprint. It launched 14 new stores last year, compared to 11 in the prior year, and executives plan to open as many as 15 in 2018.

"Our primary growth vehicle and the biggest driver of value," CEO Steve King explained to investors in early April, "continues to be opening stores that offer excellent returns."

The company launched its first 17,000 square-foot location during the quarter, and management believes the new format, which is a dramatic reduction from its 30,000 to 45,000 square foot full-sized stores, could help the business in two key ways.

1.       It will open up smaller markets to Dave & Buster's locations. And

2.       by shifting the focus toward amusement and away from dining, the format could attract faster sales growth at lower costs.

Option trade to consider: Buy the PLAY JULY 20 2018 50.000 CALL at approximately $1.55.

Tuesday, June 12

H & R Block Inc (NYSE:HRB), a provider of tax preparation and other services, is scheduled to report after the market closes. The consensus earnings estimate is for $5.26 per share on revenue of $2.33 billion; but the Whisper number is for $5.31 per share. This is up from $3.76 during the same period last year. Consensus estimates are for year-over-year earnings growth of 39.89% with revenue increasing by 0.09%.

HRB’s fourth quarter is incredibly important for the company since it covers tax season, and is the only quarter when the company traditionally makes a profit. The company is off to a strong start in the initial weeks of tax season, and that early momentum apparently held up through the quarter. In late April, executives said H&R Block had handled 19.9 million returns this year to mark a 3% boost over the prior year. That amounts to a solid turnaround, considering return volume declined in 2017.

Analysts expect a big year over year earnings growth, with the consensus calling for a 40% jump from the same period last year. The stock has shown strength in recent months, and with a forward P/E of just 12.2, there is still some upside potential should the quarterly numbers top Wall Street estimates.

The street expects a beat for the quarter with short interest decreasing by 16.5%, and overall earnings estimates being revised higher since the company's last earnings release.

HRB stock is up 8.8% on the year. Analysts have a $30.67 average price target on the stock.

Option trade to consider: Buy the HRB JULY 20 2018 30.000 CALL at approximately $0.90.

Thursday, June 14

Michaels Companies Inc  (NASDAQ: MIK), operating arts and crafts specialty retail stores for Makers and do-it-yourself home decorators in North America, will report earnings before the market opens. The consensus earnings estimate is for $0.38 per share on revenue of $1.15 billion; but the Whisper number is for $0.39 per share. The company's guidance was for earnings of $0.36 to $0.38 per share. Consensus estimates are for earnings to decline year-over-year by 0.00% with revenue decreasing by 0.74%.

Investors are bracing for some bad news from Michaels. The arts and crafts retailer met management's expectations at its last quarterly outing, but CEO Chuck Rubin and his team also issued a tough outlook for fiscal 2018. Specifically, they see sales potentially dipping into negative territory for the first time in years.

Profitability is also set to decline as Michaels invests in store remodels and in extending its e-commerce capabilities. Operating margin dipped to 13.7% of sales last year from 13.8%, but it's likely to fall harder as Michaels works to transition itself into a multichannel retailer.

Analysts are not that optimistic…..

  • ValuEngine issued a sell rating in a report on Thursday, May 17th.
  • BidaskClub downgraded shares of Michaels Companies from a hold rating to a sell rating in a report on Tuesday, May 8th.
  • Wells Fargo & Co assumed coverage on shares of Michaels Companies in a research report on Monday, April 23rd. They set a market perform rating and a $20.00 target price for the company.

Overall earnings estimates have been revised lower since the company's last earnings release.

Option trade to consider: Buy the MIK JULY 20 2018 20.000 PUT at approximately $0.80.

The digital media and marketing software firm, Adobe Systems Incorporated (NASDAQ:ADBE), will release its most recent quarterly earnings report after the market closes. The consensus earnings estimate is for $1.54 per share, up from $1.02 during the same period last year, on revenue of $2.15 billion. The Whisper number is $1.59 per share.

The company's guidance was for earnings of approximately $1.53 per share. Consensus estimates are for year-over-year earnings growth of 55.56% with revenue increasing by 21.32%.

It is expected that Adobe will deliver yet another solid quarter, betting on the seventh sequential all-around beat. Adobe has made a habit of beating conservative consensus estimates quarter after quarter. It has been over three years since it disappointed investors by delivering a minimal $20 million revenue miss in fiscal 3Q14.

The same trends of the recent past should play out in fiscal 2Q18. A heavier mix of subscription services (86% of total revenues last quarter vs. 82% the year before, likely 87% this time) means that topping management's usually conservative sales guidance will become increasingly more likely. There is no reason to believe that Adobe's popular digital media and cloud services will sputter, and a slight revenue beat over the guided $2.15 billion.

On profitability, expect Adobe to benefit further from scale to produce increasing gross margins, as the company managed to do in the past couple of quarters.

Adobe offers a rare combination of …..

  • market-leading digital services at,
  • high margins that have become
  • predictable as nearly 90% of revenues are now subscription-based.

Adobe currently holds a $4.3 billion net cash position that keeps being fed by a healthy stream of free cash flow (nearly $1 billion last quarter alone).

Adobe realized early on the shift towards the cloud, and it smartly adjusted its business model to an internet-based subscription model… the Creative Cloud. Adobe has enjoyed solid subscriber growth, and impressive earnings growth following the transition. Earnings have risen by 38.3% per annum over the last five years, and analysts expect to see an additional 26.1% average annual earnings growth over the next five years. Wall Street is very bullish on the stock, and the street expects a third-straight earnings beat.

Option trade to consider: Buy the ADBE JULY 20 2018 260.000 CALL at approximately $5.60.

Friday, June 15

Specialty retailer Canada Goose Holdings Inc. (TSX: GOOS) (NYSE:GOOS), a company that is known specifically for its $900-and-up parkas with fur-trimmed hoods, will report earnings before the market opens. The consensus estimate is for a loss of $0.07 per share on revenue of $60.70 million; but the Whisper number is for ($0.03) per share. Consensus estimates are for year-over-year earnings growth of 41.67% with revenue increasing by 57.25%.

Overall earnings estimates have been revised higher since the company's last earnings release.

Canada Goose has a great May boost, with its best day coming on the last day of the month when the stock gained 5.6% as the company detailed its entry into the Chinese market. The company said it would open a regional head office in Shanghai, launch a direct-to-consumer business in the country through Alibaba's Tmall, and open two retail stores, one in Shanghai and the other in Beijing.

CEO Dani Reiss explained the move, saying, "As the world's largest luxury market, the opportunity for Canada Goose in China is massive. We have already seen exceptional demand from Chinese consumers -- locally and internationally -- for years, and we are excited to bring our authentic and immersive retail and e-commerce experience directly to our fans there."

Canada Goose should find a rich opportunity in China as the Chinese are known for conspicuous consumption, and the company has succeeded in making a luxury item out of winter coats.

Canada Goose has slowly been expanding its retail footprint with new stores in Europe, among other moves to enhance the business, and going to China looks like a smart choice.

Option trade to consider: Buy the GOOS JULY 20 2018 45.000 CALL at approximately $2.30.

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.

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.


”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.


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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”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.



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