NEW DIRECTIONAL CALL PLAYS
Analog Devices, Inc. - ADI - close: 64.37 change: +0.65
Stop Loss: 62.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.0 million
Entry on April -- at $---.--
Listed on April 21, 2015
Time Frame: Exit PRIOR to earnings in late May
New Positions: Yes, see below
Why We Like It:
ADI looks like a strong relative strength trade. The SOX semiconductor index is up +3.0% year to date. The NASDAQ composite is up +5.8%. Yet shares of ADI have surged +15.9% to hit new 14-year highs.
The company's products convert analog signals into digital information. These signal processing integrated circuits are used in just about everything from industrial equipment, automobiles, consumer equipment, and communication products.
According to the company, "Innovation, performance, and excellence are the cultural pillars on which Analog Devices has built one of the longest standing, highest growth companies within the technology sector. Acknowledged industry-wide as the world leader in data conversion and signal conditioning technology, Analog Devices serves over 100,000 customers, representing virtually all types of electronic equipment. Analog Devices is headquartered in Norwood, Massachusetts, with design and manufacturing facilities throughout the world."
Looking at ADI's earnings performance last year they tended to be relatively flat or slightly above analysts' estimates. Business seemed to be improving last quarter. ADI reported their Q1 results on February 17, 2015. Wall Street was expecting $0.61 a share on revenues of $760.5 million. ADI beat the estimates with a profit of $0.63 a share, a +18.8% improvement from a year ago. Revenues grew +23% to $772 million.
Management raised their dividend by 8% to $0.40 a share. They also raised their Q2 guidance above Wall Street expectations. Following this February earnings report the stock received a parade of price target upgrades.
Wall Street now expects ADI earnings to rise from $1.98 a share in 2014 to $2.92 a share in 2015. According to Thomson Reuters estimates for 2016 are $3.23 a share (+11%) on revenues of $3.5 billion (+6%).
The stock surged to new highs again on March 30th. This was a reaction to a big upgrade from Barclays' analyst Blayne Curtis.
Curtis said, "We believe Analog Devices has secured a win with a high accuracy converter to drive 3D touch in upcoming (Apple) iPhones and iPads."
This design win will mean big business for ADI. It will also allow Apple introduce their new 3D/Force Tough technology. This allows users to do different tasks based on how much pressure they apply to their touch screen.
Curtis also raised his price target on ADI from $55 to $70.
Technically shares of ADI are consolidating below resistance near $65.00 with a bullish pattern of higher lows. The point & figure chart is already bullish and forecasting a long-term target of $81.00. If ADI can breakout past $65.00 we want to jump on board. Tonight we're suggesting a trigger to buy calls at $65.25.
Trigger @ $65.25
- Suggested Positions -
Buy the JUN $65 CALL (ADI150619C65) current ask $2.10
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