Earnings Predictions
for the
Week Beginning November 05, 2018

Still Well In-Front
Despite Market Turbulence!

And, Another Great Week Coming Up!

by Ian Harvey

November 05, 2018


A Quick Review of Last Week’s Market…..

The Dow wrapped up its best week since June, and the Nasdaq enjoyed its best week since May. The S&P fared even better, having its best week since March.

Catalysts for the past week were the upbeat tweet on U.S.-China trade talks from President Donald Trump and some positive feedback from earnings, particularly FaceBook, although Apple was a drag on the stock market momentum.

For the week, the Dow Jones Industrial Average (DJI) finished up 2.4% at 25,270.83. However, this wasn't enough to save the Dow from its worst monthly loss since January 2016.

The S&P 500 Index (SPX) was up 2.4% at 2,723.06 for the week; and the Nasdaq Composite (IXIC) up 2.7% for the week at 7,356.99.

Moving Ahead…..

Looking ahead, the first full trading week features a number of notable earnings reports, including results from Walt Disney (DIS) and Etsy (ETSY). Plus, the November Fed meeting kicks off in the wake of a strong October jobs report, though no rate hikes are expected this time around. However, the most anticipated event is the midterm election vote next Tuesday, Nov. 6, which has historically been positive for stocks.


CONTROL OF EMOTIONS AND LESS PANIC WILL HELP YOUR PROFIT MARGIN!

Reviewing the Earnings Predictions from Last Week…..


“EARNINGS Profits for LAST WEEK”!

DATE TRADE GAIN
October 29, 2018 MDLZ DEC 21 2018 41.000 CALL P.P: 113%
October 23, 2018 GE DEC 21 2018 11.000 PUT P.P: 208%
October 24, 2018 IQ DEC 21 2018 22.500 CALL P.P: 0%
October 25, 2018 AAPL DEC 21 2018 225.000 CALL P.L: -49%
October 25, 2018 XOM DEC 21 2018 75.000 PUT P.L: -56%

TOTAL potential profit for these 5 trades= P.P: 216%.

NOTE: I have previously mentioned that it is often a great strategy to exit an earnings predictions trade before earnings if there is a substantial profit to be made. This was again true for last week for International Business Machines Corp. (NYSE:IBM) as noted in the chart below…..

“Taking Profits on Apple Inc. before EARNINGS LAST WEEK”!

DATE TRADE GAIN
October 25, 2018 AAPL DEC 21 2018 225.000 CALL P.P: 22%
October 25, 2018 XOM DEC 21 2018 75.000 PUT P.P: 22.5%

Don’t miss out – check out further options trades recommended for the week ahead by becoming a member of Stock Options Made Easy “Earnings Predictions”.

Options Trades to Consider Based on Expected Earnings Reports:

Monday, November 05

CVS Health Corp (NYSE:CVS), formerly CVS Caremark Corporation, is a pharmacy healthcare provider in the United States, will reports third-quarter earnings before the market opens. The consensus earnings estimate is $1.71 per share on revenue of $47.19 billion; but the Whisper number is $1.74 per share. The company's guidance was for earnings of $1.68 to $1.73 per share. Consensus estimates are for year-over-year earnings growth of 14.00% with revenue increasing by 2.18%.

During the same period last year the company earned $1.50 and the stock is down 0.8% on the year.

Looking a bit further down the road, CVS' fiscal 2018 revenues are projected to climb 2.23% to hit $188.88 billion. Meanwhile, CVS fiscal 2019 revenues are expected to jump 4.4% over our 2018 estimate.

CVS has a strong earnings track record of posting better than expected profits and the street expects another beat.

CVS was showing a lot of strength before the overall market pulled back in October. The stock traded lower in sympathy to the broad sell off but shares have already started to recover as the market appears to have found its footing, with profits and sales rising.

As well, October marked what could prove to be a pivotal point in the company's history after the U.S. Department of Justice allowed CVS to move forward with its proposed acquisition of Aetna. CVS said it remains on track to close its $70 billion deal in the early part of the fourth quarter.

Amid all of the recent changes in the healthcare and pharmaceutical landscape, CVS saw its same-store prescription volume surge of 9.5% last quarter. Plus, the company's same-store sales popped 5.9% and same-store pharmacy sales rose 8.3%.

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

Analysts remain very bullish on the stock and have an average price target of $88.46, suggesting just under 22% upside potential.

Option trade to consider: Buy the CVS DEC 21 2018 75.000 CALL at approximately $2.45.

 

Twilio Inc. (NYSE:TWLO), offering a Cloud Communications Platform, which enables developers to build, scale and operate real-time communications within software applications, will report earnings after the market closes. The consensus earnings estimate is $0.02 per share on revenue of $151.44 million; but the Whisper number is for $0.03 per share. The company's guidance was for earnings of $0.02 to $0.03 per share on revenue of $150.00 million to $152.00 million. Consensus estimates are for year-over-year earnings growth of 116.67% with revenue increasing by 50.62%.

Revenue is projected to growth 48% and 27% in the current and next years as well. Moreover, current cash flow growth is hitting over 82%, and the firm certainly holds that "segment leader" position we mentioned earlier.

Twilio’s most recently published quarterly earnings results saw it post $0.03 earnings per share (EPS) for the three-month period, surpassing analysts’ consensus estimate of -$0.05 by $0.08. The publicly-traded organization reported revenue of $147.75 million for the quarter, compared to the average analyst forecast calling for $130.37 million, which was surpassing the analyst consensus estimate.

Twilio, being one of the best-performing stocks so far in 2018 with a 190% advance to-date, just announced the buyout of email communications outfit SendGrid (NYSE: SEND) for $2 billion.

Twilio operates a library of cloud-based software telecommunications tools for software developers. The idea is to make life easy for these programmers when they design new ways for businesses to keep in touch with customers. The model has worked wonders: Twilio's annualized revenues have doubled since the company went public during the summer of 2016.

The company's catalog of software covers voice, text, chat, and video communications tools, but email has proved a big gap in its suite. That's where SendGrid comes in, as it is the leader in cloud-based email services. SendGrid says it has over 74,000 customers and sends emails to more than half of the world's email addresses, yet it still only accounts for a fraction of the total email service industry.

SendGrid posted a 32% growth rate during the second quarter and a gross profit margin of 75%. Besides raising Twilio's profitability profile, the companies think they will be able to promote more growth than the two could accomplish alone by cross-selling services to customers. They also plan to benefit from shared research and development efforts.

Two investment analysts have rated the stock with a hold rating and twenty have given a buy rating to the company. The company currently has an average rating of “Buy” and an average price target of $76.55.

Option trade to consider: Buy the TWLO DEC 21 2018 75.000 CALL at approximately $7.60.

 

Wednesday, November 07

Gaming stock Wynn Resorts, Limited (NASDAQ: WYNN) will report earnings after the market closes. The consensus earnings estimate is $1.77 per share on revenue of $1.64 billion; but Whisper number is for $1.65 per share. Consensus estimates are for year-over-year earnings growth of 16.45% with revenue increasing by 1.72%.

Before a recent rally – including a 12% bounce on Thursday – WYNN stock had lost more than half of its value just since June 1. The combination of cyclical fears and exposure to the key hub of Macau has led earnings multiples to compress – despite results that haven’t been all that bad.

Short interest has increased by 22.2% overall earnings estimates have been revised lower since the company's last earnings release. Over the last 60 days, no analysts have increased their earnings estimates for the current quarter, while four have revised the estimates downward.

In their Q2 earnings report, Wynn posted an 18% decrease in Macau casino revenues and a 13% drop in table-games turnover.

Q2 earnings were a significant disappointment, as Wynn’s $1.53/share net profit missed the Consensus Estimate of $2.03/share by 25%. Downward revisions followed and the consensus for full year 2018 earnings is now $7.35/share, down from $8.27/share 90 days ago. 2019 estimates have been lowered as well, currently at $8.27/share – down from $9.70/share.

Even after shedding more than 50% of their value so far in 2018, Wynn shares still trade at a premium to industry peers with a P/E Ratio of 13.7X versus the casino industry average of 8.7X.

Casino companies are facing a rough road ahead. Though gambler visits and room rentals have held relatively steady in the U.S., gambling and related resort activities on the Chinese island of Macau have dropped off precipitously as China deals with an economic slowdown, a lagging stock market and the lingering pain of a trade war with the United States.

Option trade to consider: Buy the WYNN DEC 21 2018 110.000 PUT at approximately $7.80.

 

Thursday, November 08

Activision Blizzard, Inc. (NASDAQ:ATVI), a publisher of online, personal computer, console, handheld, mobile and tablet games, will report earnings after the market closes. The consensus earnings estimate is $0.50 per share on revenue of $1.66 billion; but the Whisper number is $0.57 per share. The company's guidance was for earnings of approximately $0.37 per share. Consensus estimates are for earnings to decline year-over-year by 18.03% with revenue increasing by 2.60%.

Activision Blizzard has a long history of beating its own expectations. For the last reported quarter, it was expected that Activision Blizzard would post earnings of $0.36 per share when it actually produced earnings of $0.41, delivering a surprise of +13.89%.

2018 has been a year of changes for Activision Blizzard as esports have risen in importance and the company launched the next generation of games.

Esports has been a big growth driver for Activision Blizzard. The professional Overwatch League is expanding from 12 teams to 20 teams in 2019, and that expansion will come with expansion fees that could be worth hundreds of millions for Activision Blizzard.

Esports is also a way to engage customers more deeply and expand the overall gaming market.

The biggest product launch Activision Blizzard had in 2018 was that of Call of Duty: Black Ops 4, which was released on October 12; selling $500 million in the first three days.

The other big launch in October was of Candy Crush's new title, Candy Crush Friends Saga, on October 11. It may not get as much attention as games like Call of Duty and World of Warcraft, but King was Activision Blizzard's biggest segment last quarter and it's key to keeping the company's biggest user base engaged. This may be the most important game for Activision Blizzard financially in 2018 and it could drive results the rest of the year.

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

Option trade to consider: Buy the ATVI DEC 21 2018 70.000 CALL at approximately $3.60.


Media giant Walt Disney Co (NYSE:DIS) is projected to report its fiscal 2018 and Q4 financial results after the closing bell. Earnings per share and revenue are projected to be $1.31 and $13.81 billion, respectively. If these figures hold up, they would mark growth of 22% and 8% from the prior-year quarter.

Disney is on pace to return to sales and profit growth in fiscal 2018 after posting a rare decline last year. However, some parts of its business are performing better than others.

The studio segment has been a standout so far, with revenue up 13% in the past nine months and 20% higher in the fiscal third quarter. Recent theatrical wins included Black Panther and Avengers: Infinity War, which have helped ensure that Disney will dominate the box office for a second consecutive year. That's great news for the business since the movie theater is the main launching pad for new franchises that the company can monetize in other operating segments, like its parks and consumer products divisions.

Also, Disney revealed an encouraging slowdown in the rate at which subscribers were leaving its pay-TV ecosystem last quarter.

Disney shares have climbed 15% over the last six months as the media conglomerate rides a wave of positive momentum from its 21st Century Fox FOXA deal and its streaming push to challenge Netflix and others.

Disney's $71 billion deal to acquire Fox's film and TV studios, among other assets has been approved. Disney will have to divest nearly two dozen regional sports channels as part of the deal's approval based on Disney's outsized influence over sports through ESPN.

The company's acquisition was made to help Disney offer a more robust direct-to-consumer TV service as well as more blockbuster titles. This is the latest and the largest of a string of media properties Disney has purchased, which also includes Star Wars production company Lucasfilm and Marvel Entertainment.

Looking ahead, Disney seems poised to offer consumers both live streaming sports and big-name TV and movie content that should help it thrive in the new age of entertainment.

Option trade to consider: Buy the DIS DEC 21 2018 115.000 CALL at approximately $4.00.

 

Don’t miss out – check out further options trades recommended for the week ahead by becoming a member of Stock Options Made Easy “Earnings Predictions”.

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.

GETTING OUT WHILST THE GOING IS GOOD!

GREED CAN BE THE UNDOING OF A GOOD PROFIT!

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?” 

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......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.


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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