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- Goldman Sachs Reports Lower Profits and Revenue
- Unusual Options Activity: Shake Shack (SHACK)
- Insider Activity: Fastly, Inc. (FSLY)
- U.S. Retail Sales Rise 0.4 Percent in June
| Goldman Sachs Reports Lower Profits and Revenue Posted: 17 Jul 2019 03:00 AM PDT
Market uncertainty led to lower performance this quarter. In a major day for earnings reports in the banking sector, Goldman Sachs (GS) reported that quarterly profits fell by 6 percent as investors largely stayed away from actively investing due to interest rate and trade war fears. The bank reported quarterly profits of $5.81 per share, or $2.42 billion, on revenue of $9.46 billion. This was higher than analyst expectations, but lower compared to the same quarter one year ago. Goldman Sachs is arguably the best-run investment bank on Wall Street. With a rise in investment banking revenue over the quarter, and with lower provisions for credit losses, the company is still managing to run well in an increasingly difficult market for banking of all stripes. Despite that reputation and its operational success, as measured by the growth of its book value, shares of Goldman have largely been unmoved in the past decade as the company has made some controversial investments around the world that have led to some periodic scandals. Action to take: The company's recent dividend boost makes shares a potentially attractive buy as well… but put in an open order to buy them under $210, a level the bank can easily drop to on market fears.  |
| Unusual Options Activity: Shake Shack (SHACK) Posted: 17 Jul 2019 03:00 AM PDT
Bet on moderate decline by January. Shares of Shake Shack (SHAK) have been volatile over the years. At least one trader is betting on a big move in shares again—with a decline in mind. On Tuesday, over 934 contracts traded on the January 2020 $65.00 put options. With shares trading around $74.50, that's a bet that shares will decline over 13 percent between now and January. Shake Shack currently operates 208 restaurants which it calls Shacks. The company sells burgers, hot dogs, fries, shakes, and related products. Share trade at a whopping 158 times earnings, and a still-outrageous 100 times forward earnings. The company has seen growing revenue growth, but a drop in earnings growth, indicating that its costs are rising. Action to take: With only 208 locations and a market cap of $2.75 billion, each Shack has a valuation over $13.2 million dollars—far higher than fast-food burger chains by multiples, and even by other high-end burger chains that have risen in recent years. With a valuation like that, investors may want to get in on this trade. The option can profit by a far larger percentage drop in shares, and shares can fall for valuation concerns as well as a drop in the overall market.  |
| Insider Activity: Fastly, Inc. (FSLY) Posted: 17 Jul 2019 03:00 AM PDT
Major fund holder bumps up stake. On Monday, the Abdiel Qualified Master Fund bought 137,515 shares of Fastly, Inc. (FSLY). With a total cost of nearly $2.8 million, this represented a 3 percent increase in the fund's stake. The fund, already an owner of more than 10 percent of the company's shares, has over 4.78 million shares of Fastly in its portfolio. Fastly operates an edge cloud platform for processing, securing, and serving its customer's applications. The edge cloud is a type of Infrastructure-as-a-Service that enables developers to work, secure, and deliver applications and other digital experiences. Programs can be delivered via app or sent on the Web. Fastly serves customers in digital publishing, media, technology, online retail, travel and hospitality, and financial services. Action to take: As an early-stage company founded in 2011 and went public earlier this year, Fastly has yet to make a profit, so there's little financial data to analyze. With shares trading under the IPO price, and with the company undergoing rapid growth to eventually reach profitability, it's easy to see why a major fund holder would add to their stake. Given how shares have bounced around, investors would be best off looking for an entry point after a down day. Use a limit order to buy shares under $20. That ensures a reasonable price without chasing the shares higher.  |
| U.S. Retail Sales Rise 0.4 Percent in June Posted: 17 Jul 2019 03:00 AM PDT
Data suggests economy continues to grow. On Tuesday, the U.S. Commerce Department released data on retail sales showing a seasonally-adjusted rise of 0.4 percent from one month earlier. This handily beat expectations of a 0.1 percent increase. Retail sales measures purchases at stores, restaurants, and even online purchases, so the data accurately captures retail activity. The data suggests that U.S. consumers are still going strong even as some data suggests the economy is starting to slow. Data for the month of May was adjusted to show a 0.4 percent increase as well, against an increase of 0.5 percent as initially reported. Core retail sales, which excludes items such as automobiles, gasoline, building materials and food services, showed an even faster growth rate of 0.7 percent, an increase of the revised 0.6 percent increase shown in May. Some data showed a decline. Receipts at service stations showed a 2.8 percent decrease, for instance, but that also reflects a drop in gasoline prices relative to seasonal averages. Most measures rose, with the largest increase coming from mail-order and online-retail stores, with a 1.7 percent increase, and a 0.9 percent increase at restaurants and bars. This data indicates that the economy is moving along at a fair pace, and that moves to stimulate the economy are not needed. However, with the Federal Reserve's shifting stance towards cutting interest rates in recent weeks, this strong retail data may suggest a slower pace to any such change.  |
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