New Watch List Entries
None, no new watch list candidates
Active Watch List Candidates
CVS - CVS Health Corp
DIS - The Walt Disney Co.
Dropped Watch List Entries
ATVI and LGF have graduated to our active play list.
FEYE has been removed.
New Watch List Candidates:
No new watch list candidates tonight.
See my comments in the New Plays section.
Active Watch List Candidates:
CVS Health - CVS - close: 110.49
CVS managed another weekly gain. The stock is up six out of the last seven weeks. Shares garnered a new price target ($117).
I am still expecting a pullback and do not want to chase CVS here. Earnings are coming up on August 4th.
We will keep our buy-the-dip trigger at $107.00 for now.
Trade Description: July 19, 2015:
Healthcare stocks have been strong performers this year. CVS is no exception with the stock up +14% year to date.
According to the company, "CVS Health is a pharmacy innovation company helping people on their path to better health. Through its 7,800 retail pharmacies, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, the company enables people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costs."
Their most recent earnings report was May 1st. CVS announced its Q1 results were $1.14 per share. That beat estimates by six cents. Revenues were up +11% to $36.33 billion, also above estimates. CVS did lower their Q2 guidance but left their 2015 forecast unchanged.
Wall Street loves a deal and CVS has been busy making deals. On May 21st the company announced they were buying Omnicare (OCR) for $12.7 billion. OCR is a pharmacy benefits provider to seniors citizens. This deal is expected to close by the end of 2015. CVS believes OCR will add 20 cents in earnings to their fiscal 2016. CVS CEO Larry Merlo commented on the deal, "The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy dispensing channel. It also creates new opportunities for us to extend our high-quality, innovative pharmacy programs to a broader population of seniors and chronic care patients."
CVS didn't stop there. On June 15th they announced a deal to buy all of the pharmacies inside Target stores (TGT). Here's an excerpt from the company's press release explaining the Target pharmacy deal:
CVS Health to acquire Target's pharmacy and clinic businesses for approximately $1.9 billion. Through this agreement, CVS Health will acquire Target's more than 1,660 pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services. Target's nearly 80 clinic locations will be rebranded as MinuteClinic, and CVS Health will open up to 20 new clinics in Target stores within three years of the close of the transaction. The new clinics will be part of CVS/minuteclinic's plan to operate 1,500 clinics by 2017. In addition, CVS Health and Target plan to develop five to 10 small, flexible format stores over a two-year period following the deal close, which will each be branded as TargetExpress and include a CVS/pharmacy.
Wall Street also reacted positively to the Target pharmacy news.
Rival pharmacy operator WBA reported earnings on July 9th that beat estimates by 15 cents and WBA raised their guidance. That should bode well for CVS who reports earnings on August 4th.
Shares of CVS are trading at all-time highs near $110. We don't want to chase it here. Tonight I am listing a buy-the-dip entry trigger to jump in on a pullback. Prior to the July rally the June high was $106.88. I'm suggesting a buy-the-dip trigger at $107.00.
Buy-a-dip trigger: $107.00, start with a stop loss at $103.40.
BUY the 2016 Jan $115 call (CVS160115C115)
Option Format: symbol-year-month-day-call-strike
Originally listed on the Watch List: 07/19/15
The Walt Disney Co. - DIS - close: 118.91
Shares of DIS are still showing relative strength. The stock eked out another weekly gain even though the rest of the market was sinking. Shares are currently stuck under short-term resistance near $120.00 but they look like they want to breakout. The stock garnered bullish analyst comments last week including a new buy rating and a new $138 price target.
I still do not want to chase DIS here. Odds are good the stock could see some profit taking when they report earnings on August 4th. We will keep our buy-the-dip trigger at $113.55 for now.
Trade Description: June 28, 2015:
Scrooge McDuck isn't the only one with a wealth of riches these days. Long-term investors in DIS have been rewarded with big gains in recent years. From Mickey Mouse to the thousands of characters owned by Marvel to Pixar, everything DIS touches has turned to gold lately.
Disney is an American icon. The company is over 90 years old. They have grown into a massive content generating giant. Today DIS runs five business segments. Their media networks include broadcast, cable, radio, publishing, and digital businesses headlined by their Disney/ABC television group and ESPN Inc. DIS' parks and resort business includes Disneyland, Disneyworld, plus theme parks in Tokyo, Paris, Hong Kong, Shanghai, and a cruise line.
The company's products division licenses the company's horde of names, characters, and intellectual property to a wide range of products. They've also jumped into the online world with their Disney Interactive division. Last but not least is the Walt Disney Studios segment. Disney started making movies 90 years ago. Today their studio business includes Disney animation, Pixar Animation, Disneynature, Disney Studios Motion Pictures, Disney music group, Touchstone Pictures, and Marvel Studios.
Their movie business has been a money maker over the years with huge hits like the Pirates of the Caribbean franchise, Tangled, Wreck-it Ralph. In 2013 they released the animated film "Frozen", which has turned into the largest grossing animated movie of all time. Pixar has a stable of successful movies that have grossed almost $9 billion. DIS is also mining gold in Marvel Entertainment's library of over 8,000 characters of comic book history. Marvel had two big hits in 2014 Captain America: Winter Soldier and Guardians of the Galaxy. Their 2015 Avengers: Age of Ultron was also a big winner at the box office grossing more than $1.3 billion worldwide. Of course not every Disney movie crushes it. Their recent Tomorrowland was a big disappointment and they could lose more than $100 million on the film.
Back in 2012 Disney purchased Lucasfilm and all the Star Wars properties from George Lucas for $4 billion. The company is busy filming the next three episodes of the Star Wars franchise. The next Star Wars film it titled "The Force Awakens." It will be episode seven in the franchise. The movie doesn't hit theaters until December 2015 but analysts are already predicting that "The Force Awakens" will generate $1.2 billion at the global box office.
DIS management loves movie franchises because they can fuel years of sequels, park rides, and merchandise. The approach seems to be working.
Revenues and net income have hit all-time highs for five consecutive quarters. Their 2015 Q1 results saw earnings per share up +23% to $1.27. Their Q2 results saw earnings grow +14% to $1.23 per share. Their domestic theme parks showed a strong surge in both attendance and in customer spending.
Analysts are forecasting DIS earnings to grow +17% this year.
The recent success of movie "Jurassic World", which was produced by Universal (not a Disney company), has generated even more excitement for DIS' upcoming Star Wars films. Jurassic World has broken all sorts of records and was the fastest movie to reach $1 billion in global box office sales. This has analysts expecting even bigger numbers from Star Wars. The next Star Wars film: "The Force Awakens" (episode seven), doesn't hit theaters until December 2015.
Morgan Stanley analyst Benjamin Swinburne is forecasting "Force Awakens" to do almost $2 billion in box office sales. This could boost DIS' bottom line by more than $1 billion. Plus the merchandising associated with Star Wars will bring a bountiful harvest for DIS too. Consumers spend close to $3 billion a year on licensed toys, clothing, and similar merchandise. The Star Wars movies will rake in the money in this category. DIS plans to release a Star Wars movie every year between now and 2020 (six more movies).
The stock surged to new all-time highs back in early May after its Q2 earnings report. Shares followed that rally with a six-week consolidation allowing DIS to digest its gains. A couple of weeks ago DIS started to rally again and broke through major resistance in the $112.00 area. Today the stock is at all-time highs.
Credit Suisse recently upped their price target to $130. Meanwhile the point & figure chart is bullish and forecasting at long-term target of $160.00.
We want to be ready to take advantage of weakness in DIS due to any broader market sell-off. Just because stocks might plunge on the Greece debt story doesn't mean DIS' business is going to change. Any dip near support should be a buying opportunity. Tonight I am suggesting a buy-the-dip trigger at $111.00. We'll start with a stop loss at $107.00.
You could definitely play the 2016 calls but tonight I'm listing the 2017s.
Buy-the-Dip trigger @ $113.55 (use a stop at $107.00)
BUY the 2017 Jan $125 call (DIS170120C125)
07/12/15 adjust the trigger to $113.55
07/05/15 move the trigger to $112.00
Option Format: symbol-year-month-day-call-strike
Originally listed on the Watch List: 06/21/15
FireEye, Inc. - FEYE - close: 46.74
I'm giving up on FEYE, at least for now.
Shares have been bouncing around the $46-50 zone the last few days. That is unlikely to change until FEYE reports earnings. More aggressive traders may want to hold on one more week. FEYE is due to report earnings on July 30th (this Thursday).
I would rather wait until after FEYE reports earnings and let the dust settle before considering bullish positions.
Tonight we will remove FEYE as an active candidate.
Trade did not open.
07/26/15 removed from the newsletter, suggested entry was a close in the $50.25-51.25 zone.
Originally listed on the Watch List: 07/12/15