by Ian Harvey
February 17, 2019
Spotify Technology SA (NYSE: SPOT)
Popular streaming music service Spotify Technology SA (NYSE: SPOT) surprised investors on multiple fronts beating estimates by reporting its first-ever quarterly profit on February 7. SPOT defied expectations by using much of this profit to purchase two firms involved with podcasting; but unfortunately Spotify stock fell following this news.
This is where “Armchair Traders Members” enter the scenario, after the report and the pullback, to execute a call option and gain profits of 100%. Spotify stock climbed 11.95% higher during the week, pushing the buy price of the call option to more than double.
Spotify has become one of the world's largest streaming services. Spotify's pivoting into podcasts allows for the creation of original, proprietary content. And if Spotify creates podcasts that attract listeners, SPOT stock will almost certainly benefit.
As a content creator, Spotify has a chance to offer what its competitors cannot match.
Spotify is experiencing greater growth from markets where it charges less per month for its service compared to growth in countries like the U.S. where it charges more per month. Also, Spotify is growing the number of users that sign up for the service via student plans or family plans. So Spotify is gaining leverage from its marketing expenses by pushing more student and family plans instead of trying to get each individual to sign up for a $9.99 per month (or equivalent) account.
Spotify's gross margin expanded 220 basis points to 26.7% in the fourth quarter, 25.8% excluding non-recurring items. So, with lifetime value holding steady, each subscriber is generating significantly more gross income over the life of their subscription than a year ago.
GREED CAN BE THE UNDOING OF A GOOD PROFIT!
PATIENCE PAYS OFF!
YOU NEED TO BE IN TO PROFIT!
…….from……““Armchair Trader Series” Recommendations
The Details Presented Previously……..
Spotify Technology SA (NYSE: SPOT) continued to report robust revenue, user and margin growth all throughout 2018 despite concerns regarding rising competition and lack of a competitive moat to protect against that competition.
The streaming music market has huge growth potential, and Spotify has huge brand and technology advantages over its peers. The market still has to realize this in 2019; therefore, expect sentiment to adjust, and Spotify stock will bounce back from the burst bubble it suffered as a once high-flying favorite on Wall Street.
Wall Street has misread Spotify's latest earnings report and guidance, and that misunderstood stocks like these give investors an opportunity to make some money. Spotify is very much on the right track.
The stock was rocked after a seemingly mixed quarterly earnings released recently. After Spotify reported lower-than-expected sales, tight cash flow and conservative guidance across the board including subscriber growth, shares sold below $129 at one point.
However, the company beat expectations on operating profit and gross margin, which was 120 basis points higher than was asked for. At this point, CEO Daniel Ek and his team have established a track record of giving cautious guidance—under promise—and then beating it—over delivering.
The music player is a subscriber growth story with 116 million monthly users—supported by ads—and 96 million subscribers. Monthly active users grew 29 percent year over year and premium subscribers grew 36 percent, which beat expectations.
There are a lot more positives outweighing the negatives!
Spotify has a 9 percent interest in Chinese music streaming company Tencent Music and has planned as much as $500 million worth acquisitions this year. CEO Ek said he wants to make Spotify "a Netflix type of story"in investments as it makes a play for podcast companies Gimlet Media and Anchor.…..
** OPTION TRADE: Buy SPOT APR 18 2019 145.000 CALL at approximately $5.35
Place a pre-determined sell at $10.70.
Also include a protective stop loss of $2.20.
The Result So Far………
Dow component Boeing’s stock surged Wednesday after the company reported year-end results that smashed Wall Street's expectations, with record revenue and airplane deliveries driving the blowout.
Boeing reported a massive fourth-quarter earnings result of an adjusted $5.48 per share, beating expectations of analysts by 91 cents. Revenue was also strong, at $28.3 billion — more than $1 billion than analysts expected.
The aerospace giant reported $101.1 billion in annual revenue, breaking the $100 billion mark for the first time. Boeing also provided a strong 2019 forecast. Boeing expects next year's earnings of $19.90 to $20.10 per share. Wall Street was expecting $18.31 a share for full-year 2019 earnings.
Fourth-quarter earnings from operations jumped 40 percent from a year earlier as margins expanded. The company posted $4.2 billion in earnings from operations, compared with nearly $3 billion a year earlier.
So, for “Armchair Traders Members”, who managed to execute this trade recommended by Stock Options Made Easy, and then exit Friday; a profit of 100% was to be made. The cost of the call option on Monday, February 11 was $5.35; and climbing to $11.65 during Thursday trading.
Therefore, one options contract would provide a profit of $535.00.
ANOTHER WIN FOR THE WEEK!
AS ALWAYS THE DECISION IS YOURS!
Spotify pulled back slightly on Friday, February 15, but by close of the market the stock price was higher than Thursday’s closing.
The reasoning behind the recommendation of Spotify, given to “Armchair Traders Members” on Monday, February 11, still stands. Spotify appears to be in a position to continues its upward momentum.
Therefore, you may wish to consider a NEW Trade……..
** OPTION TRADE: Buy SPOT APR 18 2019 155.000 CALL at approximately $6.30. Sell price is left to your own judgment.
As you would have by now realized, some of our trades are based on earnings predictions. This is not to say all trades recommended to members follow this pattern, but it is obvious that it did not apply in this case; although the result of the earnings report before the trade certainly helped boost the profits when presented. During earnings season this strategy of predicting earnings has been very profitable.
Sometimes it is our approach to predict whether a company will beat or miss estimates, whether the stock will appreciate or depreciate as a result and what strategies investors and traders can use – such as found with the “Earnings Predictions Program”. This type of prediction is based on thorough investigation and fundamentally based research, and the results have been exceptional.
An Important Note: That any 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. GREED can be the undoing of a nice profit!
Strategies to Consider……
When To Exit A Trade Based On Earnings?.....Read Article
"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……
Our proven track record says it all!!
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