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Wells Fargo Resumes Comcast (CMCSA) Shares as Outperform

Posted: 28 Aug 2019 03:00 AM PDT

Analysts see 15 percent upside for media giant.

On Tuesday, Wells Fargo announced a resumption on its coverage of Comcast (CMCSA). The bank rated the company as Outperform, with a price target of $50 per share. At current prices, that's a 15 percent move higher in Comcast shares.

Currently, 23 investment firms following the company have the firm listed as a Buy, three list as an Overweight, and six list as a Hold. None of the analysts following the company have it listed as an Underweight or Sell.

Comcast is a media and technology company with cable communications and networks, broadcast television, film studios and theme parks, including Universal Studios, and the NBC network among others.

Action to take: The company's operations across media content and delivery put the company in a powerful place for investors, as evidenced by the 19 percent rally in shares in the past year. Trading at around 13 times earnings and paying a 2 percent yield, shares look like a buy here.

Assuming that Comcast's shares can continue higher in spite of a choppy market, speculators may want to look at the January 2020 $45 calls. That's a slight premium to where shares trade, but at just under $2.00 or $200 per contract, the option could be worth $5 come January if the company hits the price target of $50.

 

Insider Activity: Johnson Controls International (JCI)

Posted: 28 Aug 2019 03:00 AM PDT

Director makes quarter-million buy.

On Monday, August 26th, director Gretchen Haggerty bought 6,220 shares of Johnson Controls International (JCI). The cost came in just over $257,000, and represents a 93 percent increase in shares.

This is the first insider buy at the company since late 2017. Insiders have largely been sellers of shares at JCI year-to-date, at prices ranging from the current price to 8 percent higher, a typical pattern for a large, international company.

Johnson Controls International is a diversified industrial and technology company with a focus on building technologies and solutions as well as power solutions, including heating, ventilating, control systems, fire detection and suppression, and electronic security systems among other things.

Action to take: Trading at 15 times forward earnings, paying a 2.5 percent dividend yield, and with modest growth, the company will likely perform in line with the market. Buyers may want to consider shares under $35, a modest discount to where shares are currently trading near $42, but where shares could easily pull back to on a market decline.

Given the company's beta close to the market, speculators may want to consider a January 2020 $45 call, trading for around $1.00, or $100 per contract, to bet on a rally in share price, or a January 2020 $35 put option, trading around $60 per contract, as a hedge against the overall market.

 

U.S. Consumer Confidence Dips in August

Posted: 28 Aug 2019 03:00 AM PDT

Overall optimism still near highest levels since 2000.

The Conference Board index on consumer confidence reported a slight dip in August, from 135.8 in July to 135.1. This was still higher than analyst expectations of a drop to 129.5.

Consumer confidence is an index with a value of 100 as neutral. Numbers over 100 show strength, and numbers under 100 show a decline. The data still shows that consumers remain confident, even as other economic indicators hint at a slowdown.

As with other economic indicators, a deep dive indicates rising concerns over the U.S.-China trade war may be leading to a drop in the willingness of consumers to spend. As a result, consumer expectations for the future dropped from 112.4 in July to 107.0, a level still showing growth, but also showing a large slowdown in recent months.

The present situation gauge, however, rose to 177.2 from 170.9 last month. This is just shy of the highest figure on record of 179.7, set in November 2000.

In short, despite the fears swirling around the economy, consumers are continuing to drive the economy. However, consumer spending is a lagging indicator, and is subject to the whims of consumers. Should consumers start to pull back on spending in anticipation of a weaker economy, that act alone could cause a weak economy to materialize.

 

Unusual Options Activity: Melco Resorts & Entertainment Limited (MLCO)

Posted: 28 Aug 2019 03:00 AM PDT

Surge January 2020 put buying.

On Tuesday, over 3,050 contracts traded on the January 2020 $19 put options on Melco Resorts & Entertainment (MLCO). With a prior open interest of 163, this is a 19-fold surge in volume for the option contract.

With shares of the company currently trading just over $20, it's a bet on a 5 percent decline in shares in the next 142 days before the option expires.

Melco owns, develops, and operates casino and entertainment resort facilities in Asia, largely in Macau with additional operations in Manila. The company is headquartered in Hong Kong.

Action to take: Casino and resort companies tend to thrive when the economy is, but tend to trade out of favor when the economy slows and discretionary consumer income declines. This put option bet for a small decline appears to be in line with global indicators of an economic slowdown. As such, the January 19 put options look like an attractive bet to follow,

From an operational standpoint the company is in fine shape, trading around 17 times earnings right now and sporting 17 percent revenue growth and 75 percent earnings growth. We would be buyers of shares under $16, giving us an even better valuation and dividend yield, but for now, the share price trend is flat at best and negative at worst.

 
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