Additional Trading Ideas:
In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these may need to see a break past key support or resistance:
MGM, PAYX, MDLZ, WMT, TSN, SYY, DHI, IPG, PCTY, EPR, MXIM, CA, UDR, EPAY, PYPL
NEW BULLISH Plays
Proofpoint, Inc. - PFPT - close: 67.74 change: +1.25
Stop Loss: 64.35
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on December -- at $---.--
Listed on December 29, 2015
Time Frame: Exit PRIOR to PFPT's earnings report in late January
Average Daily Volume = 638 thousand
New Positions: Yes, see below
High-profile cyber security firms get a lot of press about their firewalls and other defensive capabilities. Yet email remains the biggest threat to corporations. PFPT has become a leading provider of security to protect companies through their secure email solutions.
PFPT is in the technology sector. They are part of the software industry. According to the company, "Proofpoint Inc. is a leading next-generation security and compliance company that provides cloud-based solutions for comprehensive threat protection, incident response, secure communications, social media and mobile security, compliance, archiving and governance. Organizations around the world depend on Proofpoint's expertise, patented technologies and on-demand delivery system. Proofpoint protects against phishing, malware and spam, while safeguarding privacy, encrypting sensitive information, and archiving and governing messages and critical enterprise information."
The company has beaten Wall Street estimates the last few quarters. PFPT has managed to post quarterly sales growth in the +35% range for the last four quarters in a row. Their most recent report, 2015's Q3, was their 49th consecutive quarter of sequential sales growth.
Speaking of PFPT's Q3 report, the company reported a loss of ($0.06) a share. That was better than Wall Street's estimates for a loss of ($0.11). Revenues were up +37.4% to $69.15 million, significantly above estimates. Management provided mixed guidance with an earnings forecast slightly below analysts' projections but revenues above expectations.
The stock shot higher on its Q3 results. By late November PFPT was trading at all-time highs in the $75.00 region. Then on December 3rd the stock plummeted due to bearish comments from noted short-seller Carson Block. Mr. Block is the founder of research firm Muddy Waters LLC and he tweeted that PFPT was his top short position. Block claims that PFPT is lying about their organic growth numbers and suggested insiders were selling at the highs. The stock plunged from about $73.00 to $62.50 and closed the day just under $70.00.
Multiple Wall Street firms defended PFPT saying that Block's comments were just "noise" and without any real substance. A few days ago FBR & Co listed PFPT as one of their best bets in the technology sector. According to FBR, "In our view, PFPT remains in the very early stages of a massive growth story with SaaS email security front and center as a product catalyst heading into 2016."
The stock has found support in the $63-66 zone the last couple of weeks. This looks like a new short-term tradable bottom in the stock. PFPT displayed relative strength today with a +1.8% gain. If this rally continues the stock could see some short covering. The most recent data listed short interest at 17% of the 39.0 million share float.
Tonight we are suggesting a trigger to launch bullish positions at $68.15. We'll plan on exiting prior to PFPT's earnings report in late January.
Option warning - PFPT does have options but I want to caution readers that the bid/ask spreads are relatively wide, which makes trading the options a bit more dangerous.
Trigger @ $68.15
- Suggested Positions -
Buy PFPT stock @ $68.15
- (or for more adventurous traders, try this option) -
Buy the FEB $70 CALL (PFPT160219C70) current ask $4.10
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike