“Mentorship Program” Recommendations
- Week Beginning -
Monday, January 21, 2019

by Ian Harvey

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Option Trade – Advanced Micro Devices, Inc. (NASDAQ:AMD) Calls

Thursday, January 24, 2019

** OPTION TRADE: Buy AMD FEB 15 2019 20.000 CALL at approximately $1.60.

Place a pre-determined sell at $3.20.

Also include a protective stop loss of $0.65.

Advanced Micro Devices, Inc. (NASDAQ:AMD), a global semiconductor company, will report earnings  January 29, so the stock movement and the price of the option trade need to be continually observed; as the trade may need to be exited before the earnings report if there is sufficient profit to be made.

The report will be for the fiscal Quarter ending Dec 2018. Based on 8 analysts' forecasts, the consensus EPS forecast for the quarter is $0.06. The reported EPS for the same quarter last year was $0.06.

The same tailwinds which pushed AMD stock higher in 2018 remain intact today. The valuation is reasonable under realistic growth assumptions, the growth trajectory remains promising, and the company’s size relative to its addressable market implies further upside. There are also M&A rumors on the table.

Overall, there are reasons to believe that AMD stock is set have another big year, so long as certain tailwinds remain in play, AMD stock should have another strong showing in 2019.

About Advanced Micro Devices……

Advanced Micro Devices, Inc operates as a semiconductor company worldwide. It operates in two segments, Computing and Graphics; and Enterprise, Embedded and Semi-Custom. The company's products include x86 microprocessors as an accelerated processing unit (APU), chipsets, discrete and integrated graphics processing units (GPUs), and professional GPUs; and server and embedded processors, and semi-custom System-on-Chip (SoC) products and technology for game consoles.

Recent Movement…..

Chipmaker Advanced Micro Devices was the top-performing stock in the S&P 500 for 2018. In calendar 2018, AMD stock rose 80%, versus a 6% drop for the S&P 500.

Influencing Factors…..

AMD has made a big push into the CPU server market with its EPYC chips. Estimates for how much server market share AMD has gained through EPYC most normally come in around 5%, or in the mid-single-digit range. With the launch of new 7nm EPYC Rome chips, AMD projects to keep stealing share from Intel in 2019. Many industry analysts and insiders see AMD’s share rising from 5% in 2018, to 10% or higher in 2019.

This is an extremely valuable market supported by secular growth trends in AI and data. If AMD can continue to grow share in this market, not only does that boost present-day financials, but it also adds visibility and firepower to the long-term growth trajectory. That is a winning combination which usually leads to a winning stock.

AMD has been steadily gaining GPU market share through its Ryzen and Radeon products. Notably, AMD just scored a big win when cloud giant Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) announced that its huge cloud gaming project would use AMD’s Radeon GPUs.

If AMD can continue to grow share in this market, this will provide a double tailwind thanks to boosted near- and long-term fundamentals. That combination could power AMD stock higher in 2019.

The fundamentals for AMD stock are that this is a small company attacking big markets and successfully growing share in those markets. There are question marks surrounding the sustainability of those share gains, but if they persist, this will remain a double-digit revenue growth company with healthy margin drivers for the next five-plus years.

If AMD does remain a double-digit growth company, then $2 in EPS looks achievable by fiscal 2023. A growth average 20 forward multiple on that implies a fiscal 2022 price target of $40. Thus, this is a stock which could reasonably double within the next four to five years.

Past Earnings.….

Advanced Micro Devices last issued its earnings results on Wednesday, October 24th. The semiconductor manufacturer reported $0.13 earnings per share (EPS) for the quarter, topping the Thomson Reuters’ consensus estimate of $0.12 by $0.01. Advanced Micro Devices had a net margin of 5.51% and a return on equity of 47.21%.

The firm had revenue of $1.65 billion during the quarter, compared to analysts’ expectations of $1.71 billion. During the same quarter last year, the company posted $0.10 earnings per share. The firm’s revenue was up 4.4% compared to the same quarter last year. On average, equities analysts predict that Advanced Micro Devices, Inc. will post 0.34 EPS for the current year.

Analysts….

Several analysts have recently commented on the company…..

  • Royal Bank of Canada initiated coverage on Advanced Micro Devices in a report on Monday, September 24th. They set an “outperform” rating and a $40.00 target price on the stock.
  • Barclays raised their target price on Advanced Micro Devices from $15.00 to $25.00 and gave the stock an “underweight” rating in a report on Monday, October 1st.
  • Cowen reaffirmed an “outperform” rating and set a $33.00 target price (up from $30.00) on shares of Advanced Micro Devices in a report on Thursday, October 18th.
  • Finally, Robert W. Baird lowered Advanced Micro Devices from an “outperform” rating to a “neutral” rating and raised their target price for the stock from $20.00 to $28.00 in a report on Monday, October 1st. They noted that the move was a valuation call.

Three research analysts have rated the stock with a sell rating, twelve have given a hold rating, sixteen have given a buy rating and one has assigned a strong buy rating to the stock. The stock presently has an average rating of “Hold” and an average target price of $27.31.

Summary

Advanced Micro Devices, Inc. has a 12 month low of $9.04 and a 12 month high of $34.14. The company has a debt-to-equity ratio of 1.04, a current ratio of 1.76 and a quick ratio of 1.37. The firm has a market cap of $20.76 billion, a PE ratio of 247.00, and a P/E/G ratio of 2.85 and a beta of 3.38.


Option Trade – Parsley Energy Inc (NYSE: PE) Calls

Tuesday, January 22, 2019

** OPTION TRADE: Buy PE MAR 15 2019 20.000 CALL at approximately $1.20.

Place a pre-determined sell at $2.40.

Also include a protective stop loss of $0.50.

Texas-based oil and natural gas firm Parsley Energy Inc (NYSE: PE) has recently climbed above two key technical levels.

Barclays initiated coverage on Parsley Energywith an "overweight" rating and $38 price target – more than 100% premium above the present price. The brokerage firm said that the  firm's "steady activity program" will create a constant cash flow.

The security peaked above $31 on Oct. 9, before sinking to a three-year low of $14.17 on December 26. The shares quickly bounced from here, and are now trading back above a 23.6% Fibonacci retracement of this sell-off and their 40-day moving average.

Sentiment is mostly upbeat toward the energy name, with roughly 82% of covering analysts maintaining a "strong buy" rating, and not a single "sell" on the books. Plus, the average 12-month price target sits all the way up at $30.

About Parsley Energy……

Parsley Energy, Inc, an independent oil and natural gas company, engages in the acquisition, development, production, exploration, and sale of crude oil and natural gas properties in the Permian Basin in West Texas and Southeastern New Mexico. As of December 31, 2017, its acreage position consisted of 219,747 net acres, including 174,392 net acres in the Midland Basin and 45,355 net acres in the Delaware Basin; and 241.0 net producing horizontal wells and 731.5 net producing vertical wells, as well an estimated proved oil and natural gas reserves were 416.4 MMBoe.

Past Earnings.….

Parsley Energy last released its earnings results on Thursday, November 1st. The oil and natural gas company reported $0.45 earnings per share for the quarter, beating the Thomson Reuters’ consensus estimate of $0.44 by $0.01. Parsley Energy had a return on equity of 6.77% and a net margin of 21.70%. The company had revenue of $511.00 million for the quarter, compared to analysts’ expectations of $493.44 million. During the same quarter in the previous year, the business posted $0.12 EPS. The business’s revenue for the quarter was up 112.0% on a year-over-year basis. As a group, equities analysts forecast that Parsley Energy will post 1.53 earnings per share for the current fiscal year.

Future Earnings…..

Piper Jaffray Companies decreased their Q1 2019 earnings per share (EPS) estimates for shares of Parsley Energy in a research note issued to investors on Wednesday, January 9th. Piper Jaffray Companies analyst K. Harrison now forecasts that the oil and natural gas company will post earnings per share of $0.14 for the quarter, down from their previous forecast of $0.33.

Piper Jaffray Companies currently has a “Buy” rating and a $46.00 target price on the stock.

Piper Jaffray Companies also issued estimates for Parsley Energy’s Q2 2019 earnings at $0.16 EPS, Q3 2019 earnings at $0.29 EPS, Q4 2019 earnings at $0.35 EPS, FY2019 earnings at $0.94 EPS, Q1 2020 earnings at $0.33 EPS, Q2 2020 earnings at $0.34 EPS, Q3 2020 earnings at $0.37 EPS, Q4 2020 earnings at $0.40 EPS and FY2020 earnings at $1.45 EPS.

Analysts….

Imperial Capital reissued their outperform rating on shares of Parsley Energy in a research report published on Friday, January 4th. They currently have a $33.00 price target on the oil and natural gas company’s stock, down from their previous price target of $45.00.

Barclays started coverage on shares of Parsley Energy in a report released on Wednesday, last week. The firm issued an overweight rating and a $38.00 price objective on the oil and natural gas company’s stock.

Several other analysts have recently commented on the company…..

  • Zacks Investment Research raised Parsley Energy from a hold rating to a buy rating and set a $31.00 target price on the stock in a research note on Monday, October 22nd.
  • SunTrust Banks set a $35.00 price target on Parsley Energy and gave the company a buy rating in a report on Tuesday, November 27th.
  • Piper Jaffray Companies set a $46.00 target price on shares of Parsley Energy and gave the company a buy rating in a research report on Tuesday, October 23rd.
  • Goldman Sachs Group raised shares of Parsley Energy from a neutral rating to a buy rating and set a $30.00 price objective for the company in a research report on Tuesday, November 27th.
  • Citigroup raised shares of Parsley Energy from a neutral rating to a buy rating in a research report on Friday, December 21st.Morgan Stanley lifted their price target on Parsley Energy from $32.00 to $35.00 and gave the company a hold rating in a report on Wednesday, September 26th.
  • Finally, Seaport Global Securities set a $23.00 price target on Parsley Energy and gave the company a buy rating in a report on Thursday, December 20th.

One equities research analyst has rated the stock with a sell rating, five have issued a hold rating, twenty-seven have assigned a buy rating and one has given a strong buy rating to the company’s stock. Parsley Energy presently has an average rating of Buy and an average price target of $33.48.

Insider News….

Director A R. Alameddine acquired 5,000 shares of Parsley Energy stock in a transaction on Tuesday, November 27th. The shares were bought at an average price of $21.10 per share, with a total value of $105,500.00. Following the completion of the purchase, the director now owns 122,643 shares in the company, valued at $2,587,767.30.

Summary

Parsley Energy has a debt-to-equity ratio of 0.35, a quick ratio of 0.70 and a current ratio of 0.70. Parsley Energy has a fifty-two week low of $14.17 and a fifty-two week high of $33.43. The stock has a market cap of $6.10 billion, a price-to-earnings ratio of 27.90, a price-to-earnings-growth ratio of 0.49 and a beta of 0.23.