Earnings Predictions
for the
Week Beginning September 03, 2018

Exiting Options Trades BEFORE Earnings Reports Was Profitable Last Week!

by Ian Harvey

September 03, 2018

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

The U.S. stock market started the week strong, as a trade deal between the U.S. and Mexico sparked a major upside.  However, Tesla continued its downward spiral as Elon Musk continued his tweeting.

The S&P 500 and Nasdaq set new record highs, particularly with tech stocks surging.

The positive momentum hit a roadblock late Thursday, though, on reports President Donald Trump is preparing to go ahead with a new round of Chinese tariffs.

For the week, the Dow finished up 0.7% at 25,964.82; and for August, the Dow gained 2.2%.

The S&P 500 was also up 1.0 percent at 2,901.52; and for August3.0%.

Meanwhile, the Nasdaq Composite set a record high moving above the round 8,000 mark for the first time ever; finishing the week up 2.1% to settle at 8,109.54; and for August a gain of 5.7%.

Moving Ahead…..

Markets are closed today, but plenty is happening for the rest of the week. As well as plenty of jobs data to digest, several Fed officials are set to speak. And there is a continuation of signs suggesting that this rally could continue throughout September.

Reviewing the Earnings Predictions from Last Week….. 

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 as noted in the chart below…..


“Taking Profits before EARNINGS for LAST WEEK”!

DATE TRADE GAIN
August 27, 2018 PAHC SEPT 21 2018 55.000 CALL P.P: 116%
August 28, 2018 BOX SEPT 21 2018 27.000 CALL P.P: 40%
August 29, 2018 CRM SEPT 21 2018 155.000 CALL P.P: 60%
August 30, 2018 LULU SEPT 21 2018 140.000 CALL P.P: 19%
August 30, 2018 ZUO SEPT 21 2018 35.000 CALL P.P: 46%

TOTAL potential profit for these 5 trades= P.P: 281%.

However, athleisure giant, Lululemon Athletica inc. (NASDAQ:LULU), after earnings, provided potential profits of 226%. Since the return at the stage before earnings, this would have been worth holding until after the earnings report. Therefore, taking the other 4 trades before earnings and then LULU after earnings, the potential return would now be 488%.

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!

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”.

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……

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!

Options Trades to Consider Based on Expected Earnings Reports:

Tuesday, September 04

Workday Inc. (NASDAQ:WDAY), the provider of cloud-based solutions for human capital management, will report after the market closes. Wall Street expects the company to earn 26 cents per share on revenue of $663.09 million. But the Whisper number is for $0.30 per share. This compares to the year-ago quarter when earnings came to 24 cents per share on revenue of $525.32 million.

Consensus estimates are for year-over-year earnings growth of 36.84% with revenue increasing by 26.17%. Overall earnings estimates have been revised higher since the company's last earnings release. Workday's fiscal year earnings are projected to soar over 23%.

Workday has grown to become a top player not only in Cloud applications for financial management, but also areas such as human capital management, payroll and analytics.Despite what has become a highly competitive market, Workday continues to find ways to grow, producing revenue of $619 million in the second Quarter, up by 29% year over year and surpassing Wall Street forecasts by $9.8 million. Also, subscription revenue surged 31%.

Shares of Workday have surged over 22% in the last month in a sign that investors might expect big things from the firm's Q2 financial results. Plus, the company, which provides enterprise cloud solutions for human resources and finance, has seen its stock price climb over 41% in the last 12 months on the back of solid growth.

Option trade to consider: Buy the WDAY SEPT 21 2018 160.000 CALL at approximately $3.00.

RH (NYSE: RH) formerly Restoration Hardware Holdings, Inc, a retailer in the home furnishings marketplace, reports late Tuesday. The consensus earnings estimate is for $1.74 per share on revenue of $660.92 million; but the Whisper number is for $1.77 per share. The company's guidance was for earnings of $1.70 to $1.77 per share on revenue of $655.00 million to $662.00 million. Consensus estimates are for year-over-year earnings growth of 167.69% with revenue increasing by 7.41%.

A strong housing market continues to drive demand, not only from new home buyers, but also current homeowners that are looking to upgrade their current homes while home prices remain high.

And RH has soared in 2018, and the stock is very close to its all-time high. The stock’s recent strength has pushed its valuation higher, but its forward P/E is just 21, due to the company’s expected 29.1% annual earnings growth over the next five years. Recent earnings strength and its expected future growth have helped propel RH upwards.

Driving Factors…..

  • RH's efforts toward redesigning its supply chain network and rationalizing product offerings are driving growth, and the trend is expected to have continued in the to-be-reported quarter as well.
  • The company's initiatives like RH Modern, RH Teen, RH Hospitality, redesign of RH Interiors Source Book and the rollout of Design Ateliers across its retail Galleries are expected to result in comparable brand revenue (comps) growth.
  • RH is working on various cost-saving initiatives such as redesigning its supply chain, reducing inventory, improving product margins and so on.
  • Overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the RH SEPT 21 2018 165.000 CALL at approximately $10.00. 

Wednesday, September 05

Industrial distributor HD Supply Holdings Inc (NASDAQ: HDS), providing a broad range of products and value-added services to customers in various sectors such as maintenance, repair and operations, infrastructure and power and specialty construction, will report earnings after the market closes. The consensus earnings estimate is for $0.96 per share on revenue of $1.58 billion; but the Whisper number is for $0.99 per share.

The company's guidance was for earnings of $0.92 to $0.97 per share. Consensus estimates are for year-over-year earnings growth of 50.00% with revenue increasing by 16.86%.

HDS has posted better than expected numbers on both the top and bottom line the last three quarters, and the market expects another beat for the company’s most recent quarter.

Analysts expect earnings to rise 9% per annum over the next five years, so there is still plenty of upside left in the stock as long as the company is able to consistently put up quarterly numbers that are in-line or better than expected.

Driving Factors…..

  • Overall economic conditions remain upbeat, which should support demand for industrial goods suppliers moving forward.
  • Its Facilities Maintenance category is showing strong market fundamentals due to demand and building age.
  • The company also continues to focus on its construction category. Focusing on both residential and non-residential customers enables it to have a broader reach.
  • Identifying $30 billion in annual sales in the market it currently operates in, the company will continue to capture this share through a few of its outlined methods.
  • The company has no significant debt due until 2021 and with a growing stream of free cash flow, should have no problem refinancing or repaying this debt when the time comes.
  • HD Supply has grown its revenue from existing divisions, while overall revenue has decreased since its IPO due to divestitures and asset sales. As the company has tried to operate more simply it has held on to its best-performing divisions.
  • Short interest has decreased by 5.6% and overall earnings estimates have been revised higher since the company's last earnings release.

Option trade to consider: Buy the HDS SEPT 21 2018 45.000 CALL at approximately $1.80. 

Thursday, September 06

Five Below Inc. (NASDAQ:FIVE), a specialty retailer offering a range of merchandise for teen and pre-teen customers, reports earnings after the market closes. The consensus earnings estimate is $0.38 per share on revenue of $335.05 million; but the Whisper number is for $0.40 per share.

The company's guidance was for earnings of $0.36 to $0.38 per share on revenue of $332.00 million to $335.00 million. Consensus estimates are for year-over-year earnings growth of 26.67% with revenue increasing by 18.26%.

Five Below shares have shot up this year as investors gained confidence that the youth-focused retailer has a long runway for growth ahead. Its last quarterly report was highlighted by a 27% spike in sales and rising profitability, and those positive trends support management's hopes to roughly triple the company's sales footprint over the long term.

Driving Factors…..

  • With half the fiscal year behind it, and with holiday season preparations well underway, Five Below will be in an ideal position to update its fiscal-year outlook.
  • Gross profit margin expanded by more than a full percentage point last quarter to reach 33% of sales. That's a healthy sign, since it means the retailer didn't have to resort to aggressive promotions to keep its sales rising.
  • Short interest has decreased by 44.8% and overall earnings estimates have been revised higher since the company's last earnings release.

Five Below’s stock dramatically outperforming the market so far this year, investor focus will be intense around the company's upcoming second-quarter earnings report. The teen retailer's last few quarterly announcements have shown the type of sales growth that can support management's long-term hopes to roughly triple its existing store footprint over time.

Option trade to consider: Buy the FIVE SEPT 21 2018 120.000 CALL at approximately $3.75.

Cloud identity management company Okta Inc (NASDAQ: OKTA) will report earnings after the market closes. The consensus estimate is for a loss of $0.19 per share on revenue of $84.74 million and the Earnings Whisper ® number is ($0.14) per share.

The company's guidance was for a loss of $0.21 to $0.20 per share on revenue of $84.00 million to $85.00 million. Consensus estimates are for year-over-year earnings growth of 34.48% with revenue increasing by 38.93%.

And with the stock up over 100% so far this year, it's fair to say that there is an expectation of good news.

Driving Factors…..

  • Okta's last quarterly report was highlighted by a 60% sales spike as the company continued to gain big clients for its security software offerings.
  • Okta has a beta of -1.03, indicating that its stock price is 203% less volatile than the S&P 500.
  • Overall earnings estimates have been revised higher since the company's last earnings release.
  • Sixteen equities research analysts have rated the stock with a buy rating.

Option trade to consider: Buy the OKTA SEPT 21 2018 65.000 CALL at approximately $1.95.

Palo Alto Networks Inc. (NYSE:PANW), a cyber-security company, will report earnings after the market closes. The consensus earnings estimate is for $1.17 per share on revenue of $633.19 million; but the Whisper number is for $1.22 per share.

The company's guidance was for earnings of $1.15 to $1.17 per share on revenue of $625.00 million to $635.00 million. Consensus estimates are for year-over-year earnings growth of 37.65% with revenue increasing by 24.37%.

Driving Factors…..

  • Palo Alto is growing rapidly in the cybersecurity space thanks to its innovative next generation cyber security solutions. Over the past two years, the company launched several subscription-based products, including WildFire, AutoFocus, Aperture, Traps and Virtual, which have been witnessing strong adoption among organizations.
  • Increase in its existing customers' expenditures is contributing to overall growth due to successful sales execution in acquiring new clients.
  • The company's innovative product portfolio and continued efforts is opening new avenues for existing customers.
  • Acquisitions have been one of Palo Alto's key strategies to enhance its product portfolio as well as expand the company's global reach. The acquisitions of public could security provider, Evident.io and Israel-based automated endpoint security provider, Secdo are expected to be accretive to the company's portfolio.
  • The company's existing cloud partnerships with companies like Amazon's AMZN Amazon Web Services and Alphabet's GOOGL Google Cloud are positives.
  • Short interest has decreased by 12.2% and overall earnings estimates have been revised higher since the company's last earnings release.

Since the beginning of the year, PANW stock has rallied nearly 60%. Palo Alto Networks shares have powered higher and taken out several key technical resistance indicators. PANW stock now rests just shy of all-time high territory.

Option trade to consider: Buy the PANW SEPT 21 2018 240.000 CALL at approximately $5.60.

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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