“Mentorship Program” Recommendations
- Week Beginning -
Monday, June 08, 2020

by Ian Harvey

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Option Trade – Glu Mobile Inc. (NASDAQ: GLUU) Calls

Thursday, June 11, 2020

** OPTION TRADE: Buy GLUU SEP 18 2020 9.000 CALL at approximately $1.30. (Max. $1.50)

Place a pre-determined sell at $2.60.

Also include a protective stop loss of $0.55.    

The futures, at the time of writing, are down a lot – therefore you should be able to buy in at a lot less then recommended! Play it smart!

Mobile gamer, Glu Mobile Inc. (NASDAQ: GLUU) shares have skyrocketed 120% since mid-March; and saw its shares climb 27.9% last month. On May 7, the mobile game maker reported a solid first-quarter earnings report, with bookings up 15% year over year.

That news was followed with a business update in late May that showed momentum continuing into the second quarter. Management raised its second-quarter and full-year guidance on the back of strong performance from its core growth games, in addition to early results from new releases.

About Glu Mobile……

Glu Mobile Inc develops, publishes, and markets a portfolio of free-to-play mobile games for the users of smartphones and tablet devices. The company publishes titles in four genres, including home décor, sports and action, fashion and celebrity, and time management. It creates games based on its own brands, including Contract Killer, Cooking Dash, Covet Fashion, Deer Hunter, Design Home, and QuizUp.

Influencing Factors.....

Glu Mobile has been focusing more on its growth games lately, including Design Home, Covet Fashion, and MLB Tap Sports Baseball. The 2020 edition of Tap Sports Baseball is off to a strong start, with the highest first-quarter bookings in history. Design Home also turned in record bookings last quarter. 

In the business update issued on May 28, CEO Nick Earl said, "Our three growth games, along with Diner DASH Adventures, Kim Kardashian: Hollywood and Disney Sorcerer's Arena, are performing above our expectations, with several setting new records for daily bookings along the way." 

The company’s first quarter revenue jumped 12%. This growth was driven by a 15% climb in bookings, with record quarterly bookings from Design Home and the highest Q1 bookings in the Tap Sports Baseball franchise’s history.

Moving Forward.....

Glu is poised to expand within the booming global gaming industry that is projected to climb from $151 billion in 2019 to nearly $200 billion by 2022. Better still, mobile gaming is expected to account for nearly half of this market. And Glu on Thursday, May 28 upped its Q2 bookings guidance, citing better-than-expected sales during the coronavirus lockdown environment.

Glu upped its Q2 bookings range to between $162.5 and $167.5 million, up from its prior $150 to $155 million guidance. “We’ve seen significant momentum in the business and broad-based growth across our live game portfolio driven by successful live operations execution and continued positive industry trends… with several setting new records for daily bookings along the way… These positive trends are driving increased scale and better than anticipated flow through to the bottom line…” CEO Nick Earl said in prepared remarks.

Looking ahead, the current estimates call for Glu’s Q2 sales to climb 64%, up from the 44% projected sales expansion prior to the update. Meanwhile, its adjusted quarterly earnings are projected to come in flat from the prior-year quarter at +$0.06 per share. And its adjusted fiscal 2020 revenue is expected to climb 88%.          

Also, Glu’s earnings revision activity has turned far more positive in the last several days.

Analysts Opinions.....

UBS, which has set a Street-high price target of $13. That target implies 42% upside from yesterday's close.

The company is seeing higher engagement and a growing installed base and can see potential from international growth, the firm says.

Also, Tyler Parker of KeyBanc Capital Markets maintained an Overweight rating on Glu Mobile with a $10 price target.

Glu Mobile has witnessed broad-based strength across its live services portfolio, with record quarters expected from Design Home and Covet Fashion as well as positive trends in other games, Parker said in a Thursday note.

The full-year guidance has been raised only to reflect the higher projections for the second quarter, the analyst said.

While the company may witness a return to more normalized levels of engagement and monetization as stay-at-home restrictions ease, there seems to be upside to the implied expectations for the second half of the year, he said.

Parker raised KeyBanc's adjusted EBITDA estimates for fiscal 2020 and 2021 from $53.9 million to $63.2 million and from $79.2 million to $84.2 million, respectively.

Street analysts are Bullish on the whole.

So…..

Since the first-quarter earnings report, Glu Mobile has experienced continued growth across its games. As a result, management raised its second-quarter guidance, now calling for bookings to increase 62% year over year based on the midpoint of the range between $162.5 million to $167.5 million. Full-year bookings are expected to be between $502.5 million and $512.5 million, representing an increase of 19.9% over 2019. 

What's more, the company has decreased its user acquisition investment in May, which will allow more revenue to flow to the bottom line, improving profitability. 


Option Trade – Pinterest Inc (NYSE: PINS) Calls

Wednesday, June 10, 2020

** OPTION TRADE: Buy PINS AUG 21 2020 22.000 CALL at approximately $2.60. (Max. $2.90)

Place a pre-determined sell at $5.20.

Also include a protective stop loss of $1.05.    

Despite trading well below its 52-week highs, Pinterest Inc (NYSE: PINS) potential remains intact. Pinterest is a unique medium.  Unlike Amazon, which gives its users what they want, Pinterest helps users discover new things in the range of their interests. This unique platform is about discovering and getting inspired so this remains a powerful appeal to advertisers.

Its ad load is still significantly below peers like Facebook, and the company is still in the early stages of finding ways on monetizing the relationship between pinners and advertisers. And it has a lot of room to do so.

Pinterest is growing aggressively into that opportunity with 51% revenue growth last year to $1.14 billion, while monthly active users (MAUs) grew 26% to 335 million. So despite the setback in advertising spend, the important growth objective to expand and engage users which can be later monetized on was achieved during the crisis. Pinterest is growing faster than both Facebook and Twitter.

Earnings.....

Pinterest last issued its quarterly earnings data on Tuesday, May 5th. The company reported ($0.10) earnings per share (EPS) for the quarter, missing analysts’ consensus estimates of ($0.09) by ($0.01). Pinterest had a negative return on equity of 73.06% and a negative net margin of 120.48%.

The firm had revenue of $271.94 million for the quarter, compared to the consensus estimate of $270.69 million. During the same quarter in the prior year, the firm earned ($0.32) EPS. The company’s revenue was up 34.7% on a year-over-year basis.

Analysts expect that Pinterest will post -0.76 EPS for the current year.

Influencing Factors.....

Pinterest has released several updates to its shopping features over the last couple of months. Pinners -- what Pinterest calls its users -- can now find products based on pins they've saved to boards, new searches, and even by taking a new photo in its Lens camera. It's creating style guides based on common search terms, artificial intelligence, and its deep catalog of images to recommend trending styles.

It also partnered with Shopify to enable merchants to easily import their catalogs to Pinterest and create shoppable pins. And it partnered with publishers and personalities to curate products.

Pinterest wants to make shopping in its app "like flipping through the pages of your favorite catalog that feels handpicked for you."

Pinterest's efforts to improve organic product discovery through new search features and curation -- along with bringing more products onto the platform -- ought to drive more checkouts. The trend is already growing. Pinterest says engagement with Product Pins increased 44% over the past year, and traffic to retailers more than doubled. As pinners habituate shopping via Pinterest, the value of shoppable ads on the platform increases.

About half of Pinners used the app for shopping in early 2019, according to a Cowen survey. That number has only gotten bigger over the last year based on the data Pinterest has recently reported around increases in shopping on its platform.

Moving Forward…..

Over the past five quarters, Pinterest's user base has grown by 102 million monthly active users (MAU), with roughly 90% of these MAUs coming from international markets. Last year, average revenue per user (ARPU) from international users more than doubled to $0.54 from $0.25. If Pinterest is successful in continuing to build its overseas MAUs and improve engagement, there's no reason increased advertising dollars couldn't lead to international ARPU growth of 400% or more over the next decade.

The Pinterest growth story is also about e-commerce. With users already focused on sharing their interests, Pinterest aims to capitalize on this by helping small and medium-sized businesses reach a larger pool of potential consumers. If Pinterest is successful in creating a healthy revenue stream from e-commerce, it'll only enhance the company's ad-dominant sales growth approach.

Analysts Opinions.....

Pinterest has earned an average recommendation of “Buy” from the twenty-seven research firms that are covering the company. Thirteen research analysts have rated the stock with a hold recommendation, eleven have given a buy recommendation and one has assigned a strong buy recommendation to the company. The average 1-year target price among brokerages that have issued a report on the stock in the last year is $23.43.

Several analysts have recently commented on the company…..

  • Nomura Instinet restated a “buy” rating and issued a $28.00 price target (down previously from $32.00) on shares of Pinterest in a research report on Wednesday, May 6th.
  • Pivotal Research boosted their price target on Pinterest from $19.50 to $22.00 and gave the company a “hold” rating in a research report on Wednesday, May 6th.
  • Argus lowered Pinterest from a “buy” rating to a “hold” rating in a report on Wednesday.

So…..

Pinterest has a 52 week low of $10.10 and a 52 week high of $36.83. The firm has a market capitalization of $11.90 billion, a P/E ratio of -6.43 and a beta of 1.54. The firm’s 50 day moving average price is $18.59 and its two-hundred day moving average price is $19.00. The company has a debt-to-equity ratio of 0.08, a quick ratio of 11.60 and a current ratio of 11.60.


Option Trade – Nio Inc – ADR (NYSE: NIO) Calls

Tuesday, June 09, 2020

** OPTION TRADE: Buy NIO AUG 21 2020 7.000 CALL at approximately $0.85. (Max. $1.00)

Place a pre-determined sell at $1.70.

Also include a protective stop loss of $0.35.

Shanghai-based EV manufacturer Nio Inc – ADR (NYSE: NIO) looks as if it is seeing a turning point. In Q1 2020, NIO delivered a total number of 3,838 ES8 and ES6 as the country was heavily impacted by COVID-19.

Nio was trading at about $2.00 at the start of the year. Based on the data, there should be plenty of upside left for Nio stock. In fact, it’s entirely possible that the shares could double again from here. After all, this was a $10 stock a year and a half ago.

Nio stock has worked its way back up to the 52-week high of about $6. Besides, there’s a glimmer of hope on the horizon for the Chinese automotive market, and hence for Nio.

As Baird analyst David Leiker points out, automotive production in China cratered by 44% during this year’s first quarter. There was a bounce-back in April, however, as nationwide production was flat for that month on a year-over-year basis.

And China is still the world’s largest electric-car market, so Nio’s got a big, albeit weather-beaten, playground to play in.

After the COVID-19 induced slackness in January and February, the company began taking a turn for the better in March, reporting 116.8% month-over-month increase in deliveries to 1,533 vehicles. The momentum continued into April, as Nio delivered 3,155 vehicles in April.

"We remain fully committed to the vision of building the best user enterprise by offering high-quality premium smart electric vehicles in the years to come," Li said.

"We expect to achieve the delivery goal for the second quarter 2020, while continuously improving gross margin and narrowing operating loss," CFO Steven Feng said in a statement.

In its first-quarter earnings report released May 28, Nio guided to second-quarter deliveries of 9,500-10,000 vehicles.

About Nio…..

Founded in 2014, the company originally operated under the name NextCar, changing it to NIO in July 2017. In its Chinese form, the name translates to "Blue Sky Coming," which stems from management's vision of a future with azure skies absent the pollution from

Raising $1 billion during its initial public offering, NIO debuted as a publicly traded company on the American market in September 2018. On its first day of trading, the stock opened at $6, closed at $6.60, and traded as high as $6.93 for a reasonable pop.

On Sept. 24, 2018, the company achieved a new Guinness World Record when Chen Haiyi from China ascended the Purog Kangri glacier in Tibet and reached an altitude of 18,751 feet in the NIO ES8, setting a record for the highest altitude achieved in an electric car. According to the company, the feat was meant to demonstrate the EV's prowess in high altitude and extreme cold.

While NIO's vehicles may only be seen on the roads of China, the company is drawing on talent from a worldwide pool of employees. In San Jose, California, for example, the company's North America headquarters is home to more than 500 employees who primarily focus on software development. According to the company, the London office works on "commercial Formula E [race car] management, strategic management, and our supercar development." Nearly 200 employees in the Munich office concentrate on product and brand design.

Influencing Factors.....

it is extremely difficult to believe that China would allow the automotive market to be dominated by a foreign brand - Tesla. Not only is the EV market an extremely lucrative market but it also has significant strategic importance for China to boost its high-end manufacturing. Therefore, NIO, as the current leading domestic EV player in China, will be backed by supportive government policies to ensure its survival, unless some other domestic brand proves to be superior.

Such a supportive policy can be shown by the recent changes in subsidies for EVs. Previously, the Chinese government planned to end the new EV subsidy in 2020. Given the economic hurdle caused by the pandemic, the finance ministry announced the tax exemption till 2022 and the new plan to cut subsidies by 20% in 2021 and 30% in 2022. Though this renewed policy provides some breathing room to the EV companies, the subsidies will apply only to cars costing less than 300,000 yuan ($42,376). That is likely to exclude premium electric vehicles (i.e. potential premium EV from BMW or the premium models from Tesla).

What differed this subsidy extension is that this 300,000 yuan threshold does not apply to vehicles equipped with swappable batteries, indicating the government's hope to see swappable batteries develop. Under this new policy, NIO appears to be the biggest beneficiary in this new policy as they are the only premium EV company with battery swap services.

NIO said they own more than 1,200 battery swap-related patents on the vehicle battery pack, battery swap stations, and cloud service solutions. It also has 131 battery swap stations in 58 cities.

Earnings.....

Nio’s first-quarter financial results paint a picture of a company in distress but starting to regain its footing. For instance, the company delivered 3,838 cars during that quarter. That’s not too different from the 3,989 vehicles that Nio delivered during the same quarter of the previous year, long before the coronavirus craziness commenced.

Moreover, the quarterly sales figure topped the analyst community’s expectations. On average, they were projecting $180 million in quarterly sales for Nio. The actual result was roughly $194 million. So, add another one to the win column for Nio.

Plus, we have to bear in mind the timeline of the coronavirus’s spread in China, which peaked earlier than it did in the United States. China’s financial struggles accelerated mainly during that first quarter. Against this backdrop, Nio’s not-too-awful quarter was really quite impressive.

And then in April, Nio managed to deliver 3,155 vehicles. To give you some context on that figure, it’s more than twice March’s deliveries.

Summing up his evident relief, Nio CEO William Bin Li observed, “We have witnessed the order growth to have rebounded to the level prior to the Covid-19 outbreak since late April.”

Analysts Opinions.....

Goldman Sachs upgraded the stock to a Buy rating with a price target of $6.40 per share. Analyst Fei Fang cited abating liquidity risk and a narrower cash burn following the "battery incident," as well as a 37% improvement in delivery volumes between January and April.

It's the first time that a domestic premium car brand has had a waiting list of buyers, joining the likes of Toyota Motor Corporation (TM), Tesla, Inc. (TSLA), and select Lexus models, added Fang in the research note.

“We believe ES6 and ES8 volume strength has transitioned from being promotion-driven to reputation-driven,” Fang told investors, adding that never before has a domestic premium Chinese auto brand had a waiting list.

The China Association of Automobile Manufacturers announced an 11.7% increase in May vehicle sales to 2.14 million. While it's the second consecutive monthly increase, year-to-date sales are still down an estimated 23.1% to 9.7 million. Sales are forecast to drop 15% to 25% for the full year, depending on how the remainder of the pandemic turns out.

With NIO stock enjoying a 39% year-to-date gain, analysts have a cautiously optimistic Moderate Buy consensus.