Earnings Predictions
for the
Week Beginning November 26, 2018

by Ian Harvey

November 25, 2018

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

It was another tough day for tech and FAANG stocks, and energy stocks suffered as oil prices plunged.

For the week, the Dow Jones Industrial Average (DJI) finished down 4.4% at 24,285.95.

The S&P 500 Index (SPX) was down 3.8% at 2,632.56 for the week; and the Nasdaq Composite (IXIC) also down at 4.3% for the week at 6,938.98.

Moving Ahead…..

The week ahead will see a highly anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping, also the minutes from the latest Fed meeting are due.

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

Reviewing the Earnings Predictions from Last Week…..


“EARNINGS for LAST WEEK”!

DATE TRADE GAIN
November 19, 2018 INTU DEC 21 2018 220.000 CALL P.L: -78%
November 20, 2018 MDT DEC 21 2018 95.000 CALL P.L: -11%
November 20, 2018 TGT DEC 21 2018 80.000 CALL P.L: -85%
November 20, 2018 BBY DEC 21 2018 65.000 PUT P.P: 71%
November 20, 2018 LOW DEC 21 2018 90.000 PUT P.P. 147%
November 20, 2018 TJX DEC 21 2018 55.000 CALL P.L: -50%

TOTAL potential profit for these 5 trades= P.L: -6%.

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:

Tuesday, November 27

Enterprise cloud company Nutanix Inc. (NASDAQ:NTNX) will report earnings after the market closes. The consensus estimate is for a loss of $0.27 per share on revenue of $304.81 million; but the Whisper number is for ($0.24) per share. The company's guidance was for a loss of $0.28 to $0.26 per share on revenue of $295.00 million to $310.00 million. Consensus estimates are for earnings to decline year-over-year by 237.50% with revenue increasing by 10.62%.

Management is intentionally eliminating the company's least profitable hardware revenue as they transition to a higher margin software and subscription revenue model.

Wall Street's short term focus on quarterly revenue growth is causing analysts to miss Nutanix's hidden software and subscription growth, its position as a leader in the enterprise cloud market, and its growing federal business.

At the beginning of fiscal 2018, Nutanix took action to remedy the negative effects of maintaining complete control over its hardware and selling it at zero margins. Starting in the first quarter, Nutanix allowed legacy hardware manufacturers to sell its branded hardware directly. This decision eliminated more than 80% of Nutanix's zero-margin pass-through hardware revenue, resulting in 47% year-over-year growth in software and support revenue and gross margins improving to 68% versus 63% in fiscal 2017.

According to management's first quarter 2019 guidance, software and support billings are projected to grow 50% to 55% year-over-year and gross margins are expected to be 78%, up from 62% a year ago.

Also, demand for hyperconverged infrastructure (HCI) is surging. A report by International Data Corporation (IDC) measured worldwide HCI system sales growth of 78% in the second quarter of 2018. According to the IDC report, systems running Nutanix's hyperconverged software represented $497.7 million in total second quarter 2018 vendor revenue, or 34.2% market share.

Nutanix's new software focus puts the company in position to continue meeting the growing demand and maintain its position at the top in a growing industry.

Nutanix is operating exceptionally well and management is focused on the long term.

Option trade to consider: Buy the NTNX DEC 21 2018 42.500 CALL at approximately $2.65.


Cloud-based customer relationship management company salesforce.com, inc. (NYSE:CRM), which has a "strong buy" consensus rating from the Street's top analysts, will report earnings after the market closes. The consensus earnings estimate is $0.50 per share on revenue of $3.37 billion; but the Whisper number is for $0.55 per share. The company's guidance was for earnings of $0.49 to $0.50 per share. Consensus estimates are for year-over-year earnings growth of 31.58% with revenue increasing by 25.75%.

Salesforce boasts over 150,000 business clients, including giants like U.S. Bancorp USB. The cloud-based customer relationship management firm’s stock had been moving along quite well until the recent selloff.

Salesforce has a great earnings track record, with the company posting better than expected profits and sales for each of the last ten quarters, and the market expects another strong report this week.

Growth across all its four major cloud service offerings, namely Sales Cloud, Service Cloud, Platform and other, and Marketing & Commerce Cloud continue to boost the company's subscription and support revenues, the major contributor.

Salesforce's diverse cloud offerings are helping it expand clientele, therefore driving top-line growth. The rapid adoption of the SaaS-based Salesforce platform demonstrates solid demand for the company's cloud-based solutions.

As well, higher enterprise spending on cloud computing is a key catalyst. Also, enhancement of customer experience is aiding growth of the company's cloud segment.

Short interest has decreased by 26.6% and overall earnings estimates have been revised higher since the company's last earnings release.

Nomura Instinet analyst Christopher Eberle recommended buying shares of San Francisco-based cloud-based sales software giant Salesforce while the stock trades at a discount. "Salesforce’s breadth and depth of products combined with its maniacal customer focus, recurring revenue model, and strategic value to its customers make CRM a core long-term holding in the software space," wrote Eberle.

Option trade to consider: Buy the CRM DEC 21 2018 125.000 CALL at approximately $5.00.


Wednesday, November 28

Weibo Corp (ADR) (NASDAQ:WB), a social media platform for people to create, distribute and discover Chinese-language content, is expected to report earnings after the market closes.

The consensus earnings estimate is $0.72 per share on revenue of $453.78 million; but the Whisper number is for $0.73 per share. The company's guidance was for revenue of $465.00 million to $475.00 million. Consensus estimates are for year-over-year earnings growth of 46.94% with revenue increasing by 41.79%.

Intensifying competition in the advertising market is a headwind. As well, anticipated sluggishness in the short video app user growth rate is a concern.   

Weibo’s advertising revenues are also expected to be hurt from lower advertising spending related to new mobile games due to the suspension in mobile game license approval in China. The suspension has delayed launch of new games by prominent developers.

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

Option trade to consider: Buy the WB DEC 21 2018 55.000 PUT at approximately $3.80.


Dicks Sporting Goods Inc. (NYSE:DKS), an omni-channel sporting goods retailer offering an assortment of sports equipment, apparel, footwear and accessories in its specialty retail stores in the eastern United States, is confirmed to report earnings before the market opens. The consensus earnings estimate is $0.26 per share on revenue of $1.87 billion; but the Whisper number is higher at $0.30 per share. Consensus estimates are for earnings to decline year-over-year by 13.33% with revenue decreasing by 3.82%.

After a tough 2017, DKS found strength during the first half of 2018 but the stock has been trading sideways over the last five months. The company has a streak of four straight earnings beats, but sales lagged estimates two of the last four quarters. Earnings growth has been problematic in recent years, with earnings growth of just 5% per annum over the last five years.

The hunting and electronics categories are expected to remain pressured this year, and due to ongoing investments, costs are increasing. Shipping costs are also rising as the company’s digital business gains momentum, which could drag on its bottom line and profitability.

Short interest has increased by 50.8% since the company's last earnings release.

Of the 30 analysts covering Dick’s Sporting Goods stock, 70% recommend “hold,” 27% recommend “buy,” and 3% recommend “sell.”

Option trade to consider: Buy the DKS DEC 21 2018 33.000 PUT at approximately $1.45.


Thursday, November 29

Palo Alto Networks Inc. (NYSE:PANW), a cyber-security company, worth $153 billion, will report earnings after the market closes. The consensus earnings estimate is for $1.05 per share on revenue of $631.70 million; but the Whisper number is for $1.11 per share. The company's guidance was for earnings of $1.04 to $1.06 per share on revenue of $625.00 million to $635.00 million. Consensus estimates are for year-over-year earnings growth of 36.36% with revenue increasing by 24.97%.

For the last reported quarter, it was expected that Palo Alto would post earnings of $1.17 per share when it actually produced earnings of $1.28, delivering a surprise of +9.40%.

Over the last four quarters, the company has beaten consensus EPS estimates four times.

Palo Alto shareholders have endured a volatile 2018 so far, with the cybersecurity stock soaring to an over 60% return before falling to single digits in recent weeks. Most of the slump can be attributed to the broader market unease that's hurt many tech-focused companies -- particularly those that had logged significant gains earlier in the year.

Palo Alto's management said back in September that sales should rise to between $625 million and $635 million in fiscal first-quarter results set to publish on Thursday. That would translate into gains of about 26%, or roughly on par with the pace it set over the prior year.

Morgan Stanley analyst Keith Weiss penned a bullish note on the cybersecurity company. "At ~11 enterprise value to calendar 2019 free cash flow, Palo Alto Network represents the best-priced FCF growth within our software coverage group.”

He further wrote, "While the recent management transition does hold risks, we see room for the multiple (as well as estimates) to move higher" if investors give the company more credit for its potential to grow free-cash flow substantially. Weiss rates the stock at overweight with a $266 price target.

Option trade to consider: Buy the PANW DEC 21 2018 170.000 CALL at approximately $8.00.

 

Dollar Tree, Inc. (NASDAQ:DLTR), an operator of discount variety stores offering merchandise at the fixed price of $ 1.00, will post its quarterly numbers before the market opens. The consensus earnings estimate is $1.15 per share on revenue of $5.55 billion; but the Whisper number is lower at $1.14 per share. The company's guidance was for earnings of $1.11 to $1.18 per share. Consensus estimates are for year-over-year earnings growth of 13.86% with revenue increasing by 4.39%.

Factors to Effect Report….

  • …..Higher freight and distribution expenses along with deleverage in SG&A rate due to increased store payroll expenses are denting the company’s margins.
  • …..Higher costs associated with the integration and re-banner process might negatively impact the company’s quarterly results.
  • …..Also, management expects increased store payroll, higher wages and escalating domestic freight costs to persist throughout fiscal 2018.
  • …..Higher costs remain a threat to the company’s margins and overall profitability for the impending quarter.

Shares of Dollar Tree are off 18 percent this year. Dollar Tree is trading at near a five-year low and is being punished for its purchase of rival Family Dollar, which it has begun renovating and rebranding the struggling Family Dollar stores.

Short interest has increased by 38.7% and overall earnings estimates have been revised lower since the company's last earnings release.

Option trade to consider: Buy the DLTR DEC 21 2018 80.000 PUT at approximately $2.80.

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.



Back to Stock Options Made Easy Home Page from Earnings Predictions for the Week Beginning November 26, 2018