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- RBC Lowers Nvidia Price Target Before Earnings
- Inflation Rises Faster Than Expected
- Unusual Options Activity: Kraft-Heinz (KHC)
- Insider Activity: General Electric (GE)
| RBC Lowers Nvidia Price Target Before Earnings Posted: 14 Aug 2019 03:00 AM PDT
Graphics processing company still gets outperform rating. Graphics processing company Nvidia (NVDA) will report earnings after the market close on Thursday—and RBC is reiterating is Outperform rating on the stock. However, it did lower its price target on the company to $190 from $200. Nvidia is expected to report $2.55 billion in revenue and $1.15 in earnings per share when it reports earnings. With shares around $155, RBC's price target is 22.5 percent higher. The company makes processors for computers and gaming purposes, as well as other design, video editing, special effects and other applications including artificial intelligence and machine learning. The company's products can also be used for cryptocurrency mining, which attracts interest when crypto prices are on a tear. Action to take: Shares are well off their all-time highs, down over 40 percent in the past year. Despite all the market fears out there, the company is working on many products that can be applied to the next generation of technology. Shares look interesting for the long haul, and aren't overpriced relative to the S&P 500 Index at 22 times forward earnings… but shares can be bought on a down day for the stock, possibly on the next trade war fear to sweep markets. For speculators, a January 2020 call option, with a strike price of $165 or $170, looks like a compelling speculation ahead of earnings on Thursday.
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| Inflation Rises Faster Than Expected Posted: 14 Aug 2019 03:00 AM PDT
Seasonal increase in gasoline and shelter fuel inflation reading. Data from the Bureau of Labor Statistics for July indicate that inflation, as measured by the Consumer Price Index, rose by 0.3 percent. This beat expectations of 0.2 percent, and was in line with the June reading, which also came in at 0.3 percent. The biggest increases came from gasoline and shelter, which rose even on a seasonally-adjusted basis. The energy space would have risen even further, were it not for a large drop in natural gas prices. The index for food prices remained unchanged, just as it had in June. A decline in the food at home index was offset by an increase in the food away from home index, suggesting that consumers are dining out more, a modest sign of economic growth. All items showed a 1.8 percent increase for the 12 months ending in July, against a 12-month increase of 1.6 percent for the 12 months ending in June. This is still just shy of the 2 percent inflation price target used by the Federal Reserve, and suggests that there is room to cut interest rates without fueling runaway inflation. The July index also showed increase in the indices for medical care, airline fares, household furnishings, apparel, and personal care. The only notable decline was the index for new vehicle purchases, although that tends to rise in the autumn as the next year's models come out.
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| Unusual Options Activity: Kraft-Heinz (KHC) Posted: 14 Aug 2019 03:00 AM PDT
September calls bet on a rebound in shares. It's been a tough year for Kraft-Heinz (KHC). But at least one trader is betting that the company's post-earnings drop will see a bounce within the coming weeks. On Tuesday, over 12,600 contracts traded on a September $27.50 call option, a nine-fold surge in volume. With 37 days to go, it's a bet that shares will rally about $1.20 from their current price of about $26.30, or about 4.6 percent. Kraft-Heinz, the branded food giant, has written off over $16 billion in value year to date, mostly reflecting that it overpaid to merge the two companies together, and is more of an accounting issue rather than a fundamental decline. However, sales are also down slightly in the past few years, as consumers have shifted to being less brand conscious than in the past. Shares are down over 55 percent in the past year, against a modest gain for the stock market. Action to take: We like the option trade as a speculation. At around $0.55, or $55 per contract, it's set up nicely to take advantage of a short-term bounce in shares. Longer-term investors should consider shares here, as the drop in price has pushed the dividend yield north of 6 percent— a great entry price even if shares continue to struggle for some time.
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| Insider Activity: General Electric (GE) Posted: 14 Aug 2019 03:00 AM PDT
CEO, Director pick up over $3.5 million in shares. On Monday, August 12th, CEO Lawrence Culp of General Electric (GE) picked up over 331,680 shares, paying just under $3 million to increase his stake in the company by 54 percent. On the same day, director Thomas Horton picked up over 55,200 shares, paying nearly $500,000. These buys come after the company reported solid earnings, but warned that its commitments to Boeing created some risk as the 737 Max jets remain grounded. General Electric is an industrial conglomerate, with operations related to power such as turbines, both renewable and fossil fuels, aviation parts, as well as healthcare, transportation and capital. The company has been working to streamline in recent years to shed its far-flung divisions and focus on its industrial roots. Action to take: We do see a turnaround happening in shares at long last—and with shares still well off their lows from late December, the market is starting to see some value here as well. Shares look like an attractive buy under $10, with a 20-30 percent upside likely in the next year if the turnaround goes well. Returns could be even higher as Boeing resolves its issues as well, meaning speculators may want to look at a January 2021 $10 or $12 call to take advantage of a pop higher in shares in the coming months.
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