TradingTips.com

TradingTips.com

Insider Activity: GameStop (GME)

Posted: 26 Sep 2019 03:00 AM PDT

Multiple directors add shares of struggling game retailer.

Two directors took the opportunity to pick up shares of GameStop (GME) near all-time lows. Director Kathy Vrabeck bought 20,000 shares, paying nearly $106,000 to do so, and director Raul Fernandez bought 4,900 shares, paying just under $25,000.

The buys come after the company eliminated its dividend earlier in the year and an activist investor targeted the company, suggesting it make a huge buyback with its cash hoard to unlock shareholder value.

Other directors at the company have been buyers in recent weeks, and the last insider sales occurred in 2017 at prices at least 70 percent higher than where shares currently trade. Fears surround the retail operation as video games have largely shifted to a digital distribution model.

Action to take: We like value proposition in shares right now, and in the physical retail space we see at least one company per niche surviving the largely-completed push to digital. Stock buyers should look to add shares around $5.50.

Speculators may want to consider the April 2020 $6 calls to bet on further upside. Trading around $1.10, they're a cheaper way to control 100 shares over the next few months relative to buying shares, so on the off chance that the company does falter, it would cost traders less to play a bounce in shares.

 

Analysts Mixed on Harley Davidson’s New Rider Plan

Posted: 26 Sep 2019 03:00 AM PDT

Changing consumer tastes make for tough bullish case.

Harley Davidson (HOG), industry-leading motorcycle manufacturer, held its first investor meeting in over two and a half years, where they outlined a plan to add one million new riders by 2027. That would increase their U.S. ridership to 4 million, about a 33 percent increase from the current 3 million.

Analysts, looking at the company's new potential products and programs, were underwhelmed, even as shares rose more than 3 percent on the day.

Harley Davidson has long faced challenges from the limited market for motorcyclists relative to the general driving population, and as its baby-boomer era demographic continues to age. Some analysts see the company's biggest issue as retaining existing customers. Shifting consumer sentiment towards goods like motorcycles are also likely to weigh.

Shares of Harley Davidson trade at 10 times forward earnings and pay investors a 4.2 percent dividend yield.

Action to take: While shares look attractive here, the company's struggles indicate that they continue to face challenges that may prevent a massive move higher in shares. Investors should wait for an opportunity to buy shares closer to their 52-week low of $30 rather than $35.

Speculators expecting the company's new products and efforts to succeed should consider the February 2020 $40 call options. Trading around $1.10, this is another inexpensive way to bet on a rise in shares, and shares have traded as high as $46 in the past year, making for a reasonable bet relative to the likelihood of a further rally.

 

Unusual Options Activity: Uber (UBER)

Posted: 26 Sep 2019 03:00 AM PDT

 

Bet on shares to move higher by spring.

The March 2020 $34.00 call options on Uber (UBER) saw over 10,100 contracts trade against a prior open interest of 391, a 35-fold surge in volume. The bet, with shares trading around $31, indicates that shares should move at least 9.6 percent higher in the next 176 days before the option expires.

Shares of the recent IPO have traded as high as $47 per share, back in late June, about a month after going public.

Since then, share prices have slid into the low $30 range, so the bet indicates at least some recovery in shares. As a nearly stage company, Uber is currently unprofitable, and the rideshare company stated in its IPO documents that it may never be profitable.

Action to take: We think investors should invest elsewhere. The company's business model makes it a difficult stock holding, particularly as shares are considered a "failure" for dropping from their IPO price, even in spite of love from analysts.

For speculators, however, it's a different story. Shares are oversold in the short-term and a bounce could be in the cards, especially if the company beats on its next earnings expectations. The March 2020 $34 call options are a reasonable bet on some kind of a bounce in the next few months and have plenty of time for the trade to play out.

 

Raymond James Upgrades KB Home Ahead of Earnings

Posted: 26 Sep 2019 03:00 AM PDT

Homebuilder sees second upgrade from investment firm this year.

Shares of homebuilding company KB Home (KBH) rallied to 20-month highs following an upgrade from Raymond James ahead of the company's earnings report.

Raymond James raised their rating to outperform, citing the improving fundamentals in the housing market, and the potential upside in shares relative to current estimates of earnings and revenues. This is the second upgrade on shares in the past three months from Raymond James.

Shares of the homebuilder are up 24 percent in the past year, about 12 times higher than the return on the S&P 500 Index. Heavily-watched indicators for housing suggest that the space is still growing, albeit at a slower pace.

Shares of KB Homes trade at 10 times forward earnings, and insiders own 12 percent of the company, a sign that their interest is aligned with that of shareholders over the long term.

Action to take: There has been plenty of residual fear in the homebuilding companies in the past decade, and the current price relative to the housing market suggests more upside in shares from here. Investors should consider buying shares up to $35.00, although as shares just slightly missed on earnings, they can get in at a far lower price.

Speculators may want to look at the April 2020 $37 calls, which trade for around $1.40 and offer more upside in shares against the potential loss of the option premium. In a further double-digit rally for shares, the option could at least double before expiration.

 
Posted by: at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)