by Ian Harvey
September 22, 2019
EARNINGS PREDICTIONS RESULTS FOR WEEK BEGINNING SEPTEMBER 09
|DATE||TRADE||EXITING BEFORE EARNINGS||GAIN/LOSS|
|September 17, 2019||CBRL SEP 20 2019 162.000 PUT||44% P.P||-45%|
|September 17, 2019||ADBE SEP 20 2019 285 CALL||99% P.P||-75%|
|September 17, 2019||GME JAN 17 2020 4.000 CALL||28% P.P.||-97%|
|September 18, 2019||GIS OCT 18 2019 52.500 CALL||45% P.P.||44.5% P.P.|
|September 19, 2019||DRI OCT 18 2019 130.000 CALL||11% P.P.||-72.5%|
P.P. - POTENTIAL PROFIT
Options Trades to Consider Based on Expected Earnings Reports:
Tuesday, September 24, 2019
Auto retailer CarMax, Inc. (NYSE:KMX) will report earnings before the market opens. The consensus earnings estimate is $1.33 per share on revenue of $5.03 billion; but the Whisper number is higher at $1.38 per share.
Consensus estimates are for year-over-year earnings growth of 7.26% with revenue increasing by 5.54%.
The Consensus Estimate for used-vehicles sales, which contribute to bulk of CarMax’s revenues, is pegged at $4,300 million. This indicates an increase from the year-ago level of $3,971 million. Further, the estimate for revenues from other segments is $171 million, implying an increase from $155 million recorded a year ago.
The specialty retailer of used and new vehicles came up with better-than-expected results in the last reported quarter on the back of higher vehicle sales. Moreover, the bottom line increased 11.8% year over year.
CarMax has enjoyed strong gains in 2019 fueled in part by five straight earnings beats. Last quarter the company posted better than expected sales after two straight misses. The street expects another earnings beat.
Also, overall earnings estimates have been revised higher since the company's last earnings release.
With the Federal Reserve lowering rates twice already in 2019 borrowing costs will be lower for autos which should give the auto sector a boost and help keep strength in CarMax moving forward. The stock’s low valuation and falling interest rates should drive KMX stock higher as long as the company is able to deliver the positive earnings surprise that the market expects to see for the recent quarter.
Option trade to consider: Buy the KMX OCT 18 2019 87.500 CALL at approximately $2.30.
The cybersecurity software company BlackBerry Ltd (NYSE: BB)
will report earnings before the market opens. The consensus estimate is for a
loss of $0.01 per share; and the Whisper number is the same at $0.01 per share.
Consensus estimates are for earnings to decline
year-over-year by 150.00% with revenue increasing by 375.71%.
In the last reported quarter, the company’s EPS matched the Consensus
Estimate. BlackBerry surpassed the consensus estimate for earnings three times
in the trailing four quarters, delivering an average positive surprise of
The cybersecurity software company continues to invest in
the right opportunities to drive long-term growth and profitability.
Overall earnings estimates have been revised higher since
the company's last earnings release.
During the fiscal second quarter, BlackBerry’s new
Government Mobility Suite received Federal Risk and Authorization Management
Program (FedRAMP) Ready status.
FedRAMP’s monitoring and reporting for BlackBerry Government
Mobility Suite is provided by BlackBerry’s U.S. Cyber Security Operations
Center and Compliance staff.
BlackBerry expanded its partnership with LG Electronics to
accelerate the deployment of connected and autonomous vehicle technology for
automotive OEMs and suppliers worldwide. LG is using a range of BlackBerry QNX
software and services to build digital consolidated cockpits, including
infotainment systems, digital instrument clusters and telematics systems for
BlackBerry introduced CylanceGUARD — a managed detection and
response solution that leverages Cylance security experts and its artificial
intelligence platform. The combination of BlackBerry Cylance’s AI and ML
cybersecurity capabilities with BlackBerry Spark has made its endpoint
management and embedded software products more essential for businesses to
generate value from the Internet of Things.
The company aims to increase market share for BlackBerry
Cylance, while improving profitability and reducing the cash burn.
Analysts seem to be positive on BlackBerry with one
investment analyst rating the stock with a sell rating, six have assigned a
hold rating and three have assigned a buy rating to the stock. BlackBerry
presently has an average rating of “Hold” and an average price target of
Option trade to consider: Buy the BB OCT 18 2019 7.500 CALL at approximately $0.45.
Nike Inc. (NYSE: NKE), a seller of athletic footwear and athletic apparel worldwide, will report earnings after the market closes. The consensus earnings estimate is $0.71 per share on revenue of $10.45 billion; but the Whisper number is higher at $0.76 per share.
Consensus estimates are for year-over-year earnings growth of 5.97% with revenue increasing by 5.05%.
In June the company reported mixed quarterly numbers with a sales beat and a small earnings miss. The market overlooked the profit miss and focused on year over year revenue growth and recent earnings growth.
The athletic giant has grown profits at an annual rate of 8% over the last five years and analysts forecast profits to rise at 15.7% per annum over the next five years.
Nike has provided stable revenue growth annually. While always profitable, Nike has seen a bit more volatility on the income side of things. Nonetheless, the juggernaut remains the king of sports apparel.
Nike has been working hard on pressing its direct-to-consumer initiatives. Indeed, "NIKE direct" is the fastest growing portion of the business. In fiscal 2019, sales to wholesalers grew 6% last year, while Nike direct sales increased 13% to $11.75 billion.
Guggenheim’s Robert Drbul deems Nike a “best idea”, stating that investors could see an award worthy performance that amounts to even more gains on top of its 17% year-to-date growth.
Although Nike sources materials and manufactures its products all over the world, the athletic retailer relies on China for not only manufacturing but also for a significant portion of its revenue. However, aAccording to Drbul, the country could generate approximately 18% of Nike brand revenue for full year 2020 and remains an important piece of its manufacturing operation.
While Drbul does note that foreign exchange could weigh on results, the five-star analyst cites Nike as “one the best positioned companies to navigate the current environment”. He argues that the company’s continued focus on maintaining a strong relationship with both consumers and the Chinese government is evidenced by the $2.4 billion addition to its top line in the last three years.
Option trade to consider: Buy the NKE OCT 18 2019 90.000 CALL at approximately $1.30.
Thursday, September 26, 2019
The Dublin-based tech consulting firm Accenture Plc (NYSE: ACN) will
report earnings before the market opens. The consensus earnings estimate is
$1.71 per share on revenue of $11.08 billion and the Whisper number is $1.74
Consensus estimates are for year-over-year earnings growth of 8.23% with revenue increasing by 4.11%.
For the last reported quarter, it was expected that Accenture would post earnings of $1.88 per share when it actually produced earnings of $1.93, delivering a surprise of +2.66%.
Over the last four quarters, the company has beaten consensus EPS estimates four times.
The $127 billion IT giant has created massive wealth for investors over the last decade. However, Accenture stock is trading at a forward PE multiple of 25x. This multiple indicates that it’s overvalued even after accounting for its dividend yield of 1.5%.
Also, while the growth figures have been consistent and above average, the management efficiency measurements for Accenture are mixed. The return on equity is well above average at 42.2% while the profit margin is average at 14.0%.
Accenture experienced a pretty big rally off of its December low, gaining over 54% from the low to the high. Over the past few months, the rally seems to have stalled a little, and that has the stock on the verge of moving below its 13-week moving average.
The rally over the last nine months had put the stock in
overbought territory based on the 10-week RSI and the weekly stochastic
Short interest has increased by 23.3% and overall earnings
estimates have been unchanged since the company's last earnings release.
As well, sentiment indicators for Accenture, are slightly more bearish than the average stock. There are 24 analysts covering the stock, with 15 “Buy” ratings, six “Hold” ratings, and three “Sell” ratings. This puts the buy percentage at 62.5%, and that is slightly below average and reflects less optimism toward the stock.
The put/call ratio for Accenture is currently at 1.44, with 35,374 puts open at this time and 24,494 calls open. This ratio is higher than the average stock and indicates more bearish sentiment. Not only is the ratio higher than average, it has increased significantly in the last three months. The put/call ratio was at 0.73 on June 26, and the company released third-quarter results on June 27.
The stock has rallied sharply since December and hasn’t really had much of a break in that rally - even in May when the overall market fell. The similarity in the rallies from 2017 and now is also a concern. Don’t be surprised to see a pullback that brings the overbought/oversold indicators down closer to oversold levels.
Recently Accenture was downgraded by Zacks Investment Research from a “hold” rating to a “sell” rating.
According to Zacks, “Accenture has been steadily gaining traction in its outsourcing and consulting businesses. The company has been strategically enhancing its cloud and digital marketing suite through acquisitions and partnerships, thereby affecting its share price, which has outperformed its industry in the past year.. The company’s strong operating cash flow has helped it reward its shareholders in the form of dividends and share repurchases, and pursue opportunities in areas that show true potential. Accenture is currently a global leader in the Salesforce implementation service space. However, Accenture continues to face pricing pressure due to significant competition from strong companies like Genpact, Cognizant and Infosys. Global presence exposes Accenture to foreign currency exchange rate fluctuations. Buyout-related integration risks is a concern.”
Option trade to
consider: Buy the ACN OCT 18 2019 190.000 PUT at approximately $4.20.
Drugstore chain Rite Aid Corporation (NYSE: RAD)
will report earnings before the market opens. The consensus earnings estimate
is $0.08 per share on revenue of $5.42 billion; but the Whisper number is higher
at $0.10 per share.
Consensus estimates are for year-over-year earnings growth
of 900.00% with revenue decreasing by 0.03%.
For the last reported quarter, it was expected that Rite Aid would post earnings of $0.02 per share when it actually produced a loss of $0.14, delivering a surprise of -800%.
Over the last four quarters, the company has beaten consensus EPS estimates two times.
Rite Aid recently brought in a new CEO, Heyward Donigan, who
has worked in the healthcare industry for over 30 years.
The company has entered a strategic agreement with Adobe
(NASDAQ:ADBE) to create more personalized digital experiences, such as with
content creation, marketing, analytics and commerce. The goal is to develop a
seamless omni-channel platform.
Rite Aid has made a deal with AMZN, which involves using
Rite Aid stores as pick-up points for packages. By the end of this year, the
expectation is to have more than 1,500 Amazon Counter locations.
Analysts appear to be somewhat positive, particularly with their average price target of $13.75.
Option trade to consider: Buy the RAD OCT 18 2019 7.000 CALL at approximately $0.85.
Idaho-based Micron Technology, Inc. (NASDAQ: MU),
a memory chip manufacturer, will report earnings after the market closes. The
consensus earnings estimate is $0.43 per share on revenue of $4.51 billion; but
the Whisper number is higher at $0.49 per share.
The company's guidance was for earnings of $0.38 to $0.52
per share. Consensus estimates are for earnings to decline year-over-year by
87.92% with revenue decreasing by 46.56%.
has seen its shares skyrocket roughly 60% in 2019 to crush the broader semiconductor market’s 26% climb and the S&P 500’s 18.5%.
According to Goldman Sachs Micron Technology stock could rise, as the memory-chip maker’s earnings report will exceed expectations.
In July, analysts at Deutsche Bank and Goldman Sachs anticipated that memory chip demand would strengthen in the near term. On September 11, Longbow analyst Nikolay Todorov upgraded Micron stock to “buy” from “neutral” amid an improving memory market. Analysts at Susquehanna Financial, Mizuho Securities, and KeyBanc also upgraded their ratings on the stock. Analysts expect a recovery in memory chip demand through 2020.
DRAM and NAND shipments have been improving. In Micron’s third quarter of fiscal 2019, memory chip prices grew marginally, benefiting from inventory improvements. In the quarter, Micron’s DRAM and NAND selling prices fell 20% and 15%, respectively, but these rates of decline were lower than the second quarter’s declines of 22% and 25%, respectively.
Given the improving demand, Micron expects the DRAM market to return to marginal growth in the second half of this year. The chip maker also expects the NAND market to stabilize in the period.
Also, Micron stock is based in large part on Sanjay Mehrotra, who became CEO two years ago.
Mehotra has been making Micron more international, increasing hiring in India. Micron has the cost structure to compete against anyone, even the Chinese.
Artificial intelligence (AI), self-driving cars, the Internet of Things (IoT), and 5G will drive a permanent increase in demand for memory chips.
Moreover, bitcoin again sells for over $10,000. The decline of crypto played a significant role in the falling demand for memory. Hence, it stands to reason that a price recovery should lead to at least a partial revival in demand for memory as crypto mining again becomes more economical.
Furthermore, valuations remain reasonable. MU currently supports a forward price-to-earnings (PE) ratio of 19.8 and a trailing PE of around 5.9.
Micron has received rising earnings estimates. After falling for more than a year, earnings estimates for this year now stand at $6.23 per share. For fiscal 2020, they have risen to $2.56 per share.
As well, short interest has decreased by 21.7% since the company's last earnings release.
New technology has begun to drive what looks like a permanent demand increase in memory chips.
Moreover, both management sentiment and analyst estimates have shown beginning signs of a recovery. MU stock has recovered as a result.
Option trade to consider: Buy the MU OCT 18 2019 50.000 CALL at
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……
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Director of Stock Options Made Easy