NEW DIRECTIONAL PUT PLAYS
The WhiteWave Foods Co. - WWAV - close: 40.11 change: -0.04
Stop Loss: 42.35
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 1.8 million
Entry on October -- at $---.--
Listed on October 01, 2015
Time Frame: Exit PRIOR to earnings in early November
New Positions: Yes, see below
America is slowly starting to eat healthier. That has been a huge tailwind for WWAV who is one of the fastest growing companies in the United States. I personally know a lot of consumers who buy plenty of WWAV's products from their plant-based beverages to their organic milks and creamers. Unfortunately, even a strong, growing company like WWAV can see its stock price retreat. After a two and a half year rally from $15 to $52 WWAV appears to be in correction mode. Actually that's being generous. Shares of WWAV are technically in a bear market with a -23% pullback from its early August highs.
WWAV is in the consumer goods sector. According to the company,
"The WhiteWave Foods Company is a leading consumer packaged food and beverage company that manufactures, markets, distributes, and sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products and organic produce throughout North America and Europe. The Company also holds a 49% ownership interest in a joint venture that manufactures, markets, distributes, and sells branded plant-based beverages in China.
WhiteWave is focused on providing consumers with innovative, great-tasting food and beverage choices that meet their increasing desires for nutritious, flavorful, convenient, and responsibly-produced products. The Company's widely-recognized, leading brands distributed in North America include Silk®, So Delicious® and Vega® plant-based foods and beverages, International Delight® and LAND O LAKES® coffee creamers and beverages, Horizon Organic® premium dairy products and Earthbound Farm® organic salads, fruits and vegetables. Its popular plant-based foods and beverages brands in Europe include Alpro® and Provamel®, and its plant-based beverages in China are sold under the Silk® ZhiPuMoFang® brand."
Earnings growth has been steady and the company has been making acquisitions. Their most recent report was August 7th when WWAV announced their Q2 results. Earnings were up +8% from a year ago to $0.24 a share. Revenues were up +10.3% to $924 million. That actually missed estimates of $928 million but on a constant currency basis WWAV's revenues were up +14%.
Here's an excerpt from WWAV's earnings release discussing their 2015 forecast, "The company expects continued strong growth in 2015 and is increasing its full year outlook for net sales, adjusted operating income and adjusted diluted earnings per share. Management is increasing its net sales growth expectations for full year 2015 to 15 percent to 16 percent on a constant currency basis, and 12 percent to 13 percent on a reported basis. For third quarter 2015, management expects net sales growth to be 18 percent to 19 percent on a constant currency basis, translating into 14 percent to 15 percent growth on a reported basis."
That forecast wasn't good enough for Wall Street. The stock retreated on this news. A few days later the market started to correct lower. Suddenly the floor just fell away from WWAV's stock. In five trading days the stock plunged from about $50 to almost $35 erasing five months of gains. The stock did see a big bounce back but that rebound has failed under new resistance in the $47.00 area (see chart).
Personally, WWAV is a long-term bullish candidate for me. They are also widely considered to be an acquisition target (which is a risk if you're short the stock). However, on a short-term basis the stock is underperforming. WWAV has spent the last few days hovering near round-number support at $40.00 but it looks like the stock is about to break down.
The stock market seems to be in a risk-off mood and traders are selling anything and everything, especially if it looks rich. Even with the -20% decline from its highs WWAV has a P/E near 50. The point & figure chart is bearish and forecasting at $22.00 target.
Tonight we are suggesting a trigger to launch bearish positions at $39.45.
Trigger @ $39.45
- Suggested Positions -
Buy the NOV $37.50 PUT (WWAV151120P37.5) current ask $1.60
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