TradingTips.com

TradingTips.com

RBC Capital Reiterates Outperform Rating on Netflix (NFLX)

Posted: 27 Aug 2019 03:00 AM PDT

Investment firm sees 52 percent upside in Netflix shares.

On Monday, RBC Capital reiterated their existing Outperform rating on Netflix (NFLX) shares. The investment firm cited a survey on Netflix's customer penetration in the United States, the United Kingdom, and the subscriber churn rate.

RBC capital reiterated their existing $450 price target on shares, about 50 percent higher than the current share price and far higher than the average price target by other financial firms around $390 per share.

Netflix, the streaming media giant, has struggled this year as competitors have kept subscriber growth lower than expected. Shares are down over 20 percent in the past year, and shares trade at a pricey 52-times earnings. With revenue growth up 26 percent in the past year, but earnings down by nearly 30 percent, it's clear that the company continues to face headwinds.

Action to take: Shares are certainly oversold following a post-earnings slump in the share price. We like shares under $300 as a trade and a bet on higher markets. Speculators may want to look at January 2020 $300 calls as a leveraged play as well, where a 40-50 percent profit could be made should the shares bounce higher.

Over the longer-term, however, we think there may be better value in other media companies at current prices, as most companies in the sector are showing both earnings and revenue growth right now and aren't as heavily dependent on streaming subscribers.

 

Markets Rally as U.S./China Look to Restart Trade Talks

Posted: 27 Aug 2019 03:00 AM PDT

Trump walks back Friday tweet storm.

Stocks jumped higher on Monday, as President Trump announced at the G7 meeting in France that Chinese officials called on Sunday night to restart talks on trade.

This ended a slump in market futures over the weekend, following the market's steep drop last Friday. "They want to make a deal," stated Trump, and that the calls were "very productive."

Although some Chinese officials stated that they were unaware of any calls, officials stated that they remain opposed to new tariffs.

The U.S.-China trade war has dominated markets for over a year now, with news developments causing big swings in the market. With China denying that any calls have even been made, it's clear that trading algorithms are basing their moves on Trump-related headlines rather than a more objective measure.

By making these comments on Monday, President Trump has made what he calls "second thoughts" on his tweets on Friday where he indicated a strong response to China's announcement on the imposition of $75 billion in tariffs on American goods.

Action to take now: We see these trade war uncertainties as here to stay until a comprehensive deal is signed. Until then, expect markets to remain volatile. We caution traders to scale back the size and aggressiveness on their trades to avoid being hard-hit on market drops stemming from trade war fears.

 

Unusual Options Activity: Kraft Heinz (KHC)

Posted: 27 Aug 2019 03:00 AM PDT

Surge in deep in-the-money put option.

On Monday, over 2,900 contracts traded on the October $35 put options on Kraft-Heinz (KHC). This represented a 23-fold surge in volume on the options, which had a prior interest of 126 contracts outstanding.

With shares around $25.50, the put options traded at $9.50, all in-the-money. With 52 days left to go on the trade, the option appeared to offer investors nearly no time premium.

Kraft-Heinz shares traded up with the overall market on Monday, although the company did announce that it was changing its CFO, following a year of struggling financials marked by large accounting write-downs.

Action to take: Shares are attractive here in terms of valuation and the 6-plus-percent dividend yield and look attractive for the long-term. Should the company stop making write-downs, shares will likely trade on a normalized basis at less than 10 times earnings here, a steep discount to the overall market.

However, it's rare to get an option with nearly no time premium, and any move down in shares—even from a poor day in the markets—could increase the value of that put option even further. Speculators bearish on the stock may want to follow this trade, but with a high probability of the trade being exercised, it'll require deep pockets to play out.

 

Insider Activity: Fossil Group (FOSL)

Posted: 27 Aug 2019 03:00 AM PDT

EVP makes $2 million buy.

On Friday, August 23rd, Gregory McKelvey bought 200,000 shares of Fossil Group (FOSL), where he serves as Executive Vice President. The total purchase price came out to just over $2 million, and increases his stake in the company by nearly 60 percent to over 536,000 shares.

This follows on a 20,000 share buy on August 22nd by EVP Darren Hart, and an EVP buy back in May for 5,000 shares.

Before that, insiders were net sellers of shares, at prices anywhere from 22 to 56 percent higher.

Fossil Group designs, develops, and distributes fashion accessories globally, including watches, jewelry, smartwatches, handbags, sunglasses, and others, under a variety of names. The company owns and operates 63 retail stores and 113 outlet stores in the United States.

Action to take: Multiple large insider buys at the VP level are a good sign that shares may be oversold. Stock buyers should look at shares up to $11.50, about where they rallied to on news of this $2 million insider buy—but look to sell after a 15-20 percent bounce, given the company's relative valuation and lack of a dividend.

Speculators should take a close look at the March 2020 $14 calls, trading for around $1.45 or $145 per contract. While out-of-the-money, a further rally higher in shares could give a better percentage return compared to owning the stock.

 
Posted by: at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)