The market only declined -1.5% for the week but the technical damage was much worse.
The Dow and S&P lost -1.5% for the week but the S&P-600 lost -2.8%, Russell 2000 -2.65%, banks -4.7%, energy -3%, etc. Many of the stocks that had been recent gainers plunged even more than that despite a minor rebound in some sectors later in the week. This was first major market decline since before the election. It was only a minor dip, relatively speaking but it felt a lot worse because of the 109-day streak without a 1% drop. We forgot what it felt like to see sudden declines in previously bulletproof stocks.
On Monday the S&P gapped down -22 points and the Dow lost -188. When the markets gap lower by that much, all bets are off. Stocks plunge on a lack of buyers and as soon as the gap is over the dip buyers return. The Dow rebounded 150 points but failed to return to positive territory with a 45-point loss for the day. The S&P rebounded 20 points but still closed with a small loss.
The Dow, S&P and Nasdaq are making new lows since late February. The rebounds are nice because it calms the nerves but the fact remains the markets are making new lows. If you move away from the intraday charts and look at the bigger picture there is a market breakdown in progress.
I am using the line charts because they smooth out the intraday noise and show the actual trend based only on the close. The Dow broke below the February support intraday but rebounded back above that 20,525 level. That is not important. It still lost ground and posted a lower low. The support is broken. The support at 20,800 is broken, 20,600 is broken and we came within 12 points of support at 20,400 today.
The Dow has declined for 7 days and that is the longest streak since September 2011. We are due for a bounce but I am betting it does not hold. The calendar is against us.
The S&P chart is identical with a clear support break, lower low and solid resistance. The index has risk to 2,250 unless there is a sudden and sustained surge of buying to lift it back over the 2,360 resistance level. Even then, that might not be enough to halt the current trend.
The Nasdaq has been the strongest index but the 5,800 support level has been broken intraday three times in the last week. Monday was a lower low at 5,769 but the rebound was strong. Whether the Nasdaq can keep the Dow and S&P from collapsing is unknown but it will not be for lack of trying.
Money has been rotating out of the big cap stocks into small caps but the rebound has been lackluster. The support at 820 is still holding on a closing basis but we are always just a day away from a possible meltdown that could trigger cascade selling to significantly lower levels. There is a lot of blank space on this chart below 820.
There is a really light economic calendar this week and it will be ignored with all eyes on Washington and the fallout from the health care debacle.
The next five weeks are typically volatile. The period before April 15th is erratic as money leaves the market to pay the tax bill and investors restructure their portfolios for the Q1 earnings cycle. After April 15th there is typically a sharper drop for 3-5 days but a late month pickup as Q1 earnings begin to be reported. Then we hit the "sell in May" cycle which could be especially fierce this year.
Until the Dow and S&P quit making lower lows we are at risk for a major decline. Too many intraday dips can lead to a washout as traders pull their bids to let the market find a bottom. If the tax plan suddenly appeared to be on course that could resurrect the market but I have zero confidence that will happen because it will be a multi-month process even more difficult than health care. Most investors have not yet realized this fact.
Send Jim an email
NEW DIRECTIONAL CALL PLAY
I struggled with what recommendation to add this week. We were blown out of 5 positions on the market decline last week and although the futures are positive tonight, I could not bring myself to add another bullish position. The potential for a market decline over the next several weeks increases with each day that passes due to calendar issues, tax bills due and political events in Washington.
The Dow and S&P are making new lows, the Nasdaq, Russell and S&P-600 are moving sideways. There is not a lot of bullish conviction even though the big dip at the open on Monday was bought. I elected to go with the Dow/S&P trend and the normal market weakness over the next 3-5 weeks.
I weighed the various ETFs including the SPY, DIA, QQQ, IWM, etc and chose the SPY because the S&P is setting new lows.
SPY - S&P-500 SPDR ETF - ETF Profile
The SPDR S&P 500 trust is an exchange-traded fund which trades on the NYSE Arca under the symbol. SPDR is an acronym for the Standard & Poor's Depositary Receipts, the former name of the ETF. It is designed to track the S&P 500 stock market index.
The S&P-500 is in danger of a material drop, possibly to 2,250 or the equivalent 225 level on the SPY ETF. The chart is unsupported and we are entering into a typically volatile period of the year over the next five weeks. I am recommending we buy a put on the SPY only IF the SPY trades at 232.75. Before Monday's dip that would have been a new five-week low. Regardless of what happens on Tuesday we will be ready for the next leg down.
I believe if the market goes lower this week it could be the beginning of a major decline.
With a SPY trade at $232.75
Buy June $230 put, currently $3.97, initial stop loss $239.25
If there is a trade you would like me to consider or you have comments on this newsletter please click the email link below.
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Check the graphic below for any new stop losses in bright yellow. We need to always be prepared for an unexpected decline. Any items shaded in blue were previously closed.
Current Position Changes
UBNT - Ubiquiti Networks
The long call position was entered at the open on Tuesday.
HAIN - Hain Celestial
The long call position was entered at the open on Tuesday.
IWM - Russell 2000 ETF
The long call position was stopped by the market decline.
QQQ - Nasdaq 100 ETF
The long call position was stopped by the market decline.
QRVO - Oorvo Inc
The long call position was stopped by the market decline.
SWKS - Skyworks Solutions
The long call position was stopped by the market decline.
ZEN - Zendesk
The long call position was stopped by the market decline.
Original Play Recommendations (Alpha by Symbol)
ATVI - Activision Blizzard - Company Profile
No specific news. Earnings by GameStop (GME) last week showed the console game business was slowing. That is due in part to the strong performance of Activision's strong showing on PCs and handheld devices. The Call of Duty update for 2017 is rumored to be moving back to a World War II setting. This is going to be issued by Sledgehammer Games. They alternate years with Activision in version releases. This also helps to keep the games fresh rather than just be an update of an existing scenario.
Shares are still trying to break out to a new high but resistance is tough.
Original Trade Description: March 6th.
Activision Blizzard, Inc. develops and publishes online, personal computer (PC), video game console, handheld, mobile, and tablet games. The company operates through two segments, Activision Publishing, Inc. and Blizzard Entertainment, Inc. The company develops, publishes, and sells interactive software products and content through retail channels or digital downloads; and downloadable content to a range of gamers. It also publishes subscription-based massively multiplayer online role-playing games; and strategy and role-playing games. In addition, the company maintains a proprietary online gaming service, Battle.net that facilitates the creation of user generated content, digital distribution, and online social connectivity in its games. Further, it engages in creating original film and television content; and provides warehousing, logistical, and sales distribution services to third-party publishers of interactive entertainment software, as well as manufacturers of interactive entertainment hardware products. The company serves retailers and distributors, including mass-market retailers, consumer electronics stores, discount warehouses, game specialty stores, and consumers through third-party distribution, licensing arrangements, and direct digital purchases in the United States, Canada, Canada, the United Kingdom, France, Germany, Ireland, Italy, Sweden, Spain, the Netherlands, Australia, South Korea, China, and internationally. Company description from FinViz.com
Activision reported Q4 earnings of 92 cents that beat estimates for 73 cents. Revenue of $2.45 billion beat estimates for $2.35 billion.
The new Overwatch game was the fastest Blizzard title to hit 25 million registered players. Monthly active users (MAU) rose 5 million at Activision to reach 51 million. Bllizzard's MAU fell 1 million to 41 million but set a record for Q4. Kind Digital users fell from 394 million to 355 million. Since King Digital is phone games the numbers tend to be volatile. Users spent 43 billion hours playing ATVI's suite of games in Q4 compared to the 45 billion hours peopls spent watching Netflix.
Shares spiked despite weak guidance. They guided for Q1 for $1.05 billion and earnings of 18 cents. The street was looking for $1.2 billion and 31 cents. For the ful lyear they guided for $6.3 billion and $1.85 in earnings. That missed street estimates for $6.68 billion and $2.03. Fortunately, ATVI normally guides low and then crushes the estimates when they report.
Earnings May 11th.
Shares spiked from $39 to $47 on the earnings. Post earnings depression appeared for four weeks and shares sank back to $45. Over the last several days the uptrend has resumed and Monday was a new high close at $47.81.
Long May $50 call @ $1.29, see portfolio graphic for stop loss. .
CAH - Cardinal Health - Company Profile
No specific news. Shares dipped to $80.83 on Friday and came within 8 cents of being stopped out. Since that level has formed as support I lowered the stop loss by 50 cents to give the stock a little cushion for movement.
Original Trade Description: February 20th
Cardinal Health, Inc. operates as a healthcare services and products company worldwide. The company's Pharmaceutical segment distributes branded and generic pharmaceutical, over-the-counter healthcare, specialty pharmaceutical, and consumer products to retailers, hospitals, and other healthcare providers. It offers distribution, inventory management, data reporting, new product launch support, and contract pricing and chargeback administration services to pharmaceutical manufacturers; pharmacy and medication therapy management, and patient outcomes services to hospitals, other healthcare providers, and payers; consulting, patient support, and other services to pharmaceutical manufacturers and healthcare providers. This segment also operates nuclear pharmacies and cyclotron facilities that manufacture, prepare, and deliver radiopharmaceuticals, as well as operates direct-to-patient specialty pharmacies; offers logistics, marketing, and other services; and repackages generic pharmaceuticals and over-the-counter healthcare products. The company's Medical segment distributes a range of medical, surgical, and laboratory products and services to hospitals, ambulatory surgery centers, clinical laboratories, and other healthcare providers, as well as to patients in the home. This segment also develops, manufactures, and sources medical and surgical products comprising surgical drapes, and gowns and apparel; exam and surgical gloves; fluid suction and collection systems; cardiovascular and endovascular products; and wound care and orthopedic products, as well as assembles and offers sterile and non-sterile procedure kits. In addition, it offers supply chain services, including spend, distribution, and inventory management services to healthcare providers; and post-acute care management, and transition services and software to hospitals, other healthcare providers, and payers. Company description from FinViz.com
Cardinal reported earnings of $1.34 compared to estimates for $1.24. Revenue of $33.1 billion just missed estimates for $33.4 billion. Pharmaceutical revenues rose 5% to $29.7 billion. Medical segment revenues rose 8% to $3.4 billion. Pharmaceutical segment profits fell 14% to $537 million because of the loss of a major customer. They expect this to be made up in future quarters by the solid performance of Red Oak Sourcing. Medical segment profits rose 50% to $159 million thanks to a higher contribution from Cardinal Health Branded products.
They guided for full year earnings of $5.35-$5.50 and growth of about 4%.
Earnings May 9th.
Analysts believe Cardinal guided conservatively and will beat guidance because of the growth in their own branded products. Shares spiked on the earnings, faded for three days and are now surging. We are going to target resistance at $85 for an exit.
Long Jun $82.50 calls @ $2.85, see portfolio graphic for stop loss, target $85 to exit.
HAIN - Hain Celestial - Company Profile
No specific news. Shares are holding at the $37 level while we wait for the next headline.
Original Trade Description: March 20th
The Hain Celestial Group, Inc. manufactures, markets, distributes, and sells organic and natural products in the United States, the United Kingdom, Canada, and Europe. Its grocery products include infant formula; infant, toddler, and kids foods; diapers and wipes; rice and grain-based products; flour and baking mixes; breads, hot and cold cereals, pasta, condiments, cooking and culinary oils, granolas, granola bars, and cereal bars; canned, chilled fresh, aseptic, and instant soups; Greek-style yogurt; chilies and packaged grains; and chocolates and nut butters, as well as plant-based beverages and frozen desserts, such as soy, rice, almond, and coconut. The company's grocery products also comprise juices, hot-eating, chilled and frozen desserts, cookies, crackers, gluten-free frozen entrees and bars, frozen pastas and ethnic meals, frozen fruits and vegetables, cut fresh fruits, refrigerated and frozen soy protein meat-alternative products, tofu, seitan and tempeh products, jams, fruit spreads and jelly, honey, marmalade, and other food products. In addition, it provides snack products, such as potato, root vegetable, and other vegetable chips, as well as straws, tortilla chips, whole grain chips, pita chips, puffs, and popcorn; specialty teas, including herbal, green, black, wellness, rooibos, and chai tea lattes; ready-to-drink beverages comprising organic kombucha and chai tea lattes; personal care products consisting of skin, hair and oral care, deodorants, baby care items, acne treatment, body washes, and sunscreens; and poultry and protein products, such as turkey and chicken products. The company sells its products through specialty and natural food distributors, supermarkets, natural food stores, mass-market and e-commerce retailers, food service channels and club, and drug and convenience stores in approximately 70 countries worldwide.
Company description from FinViz.com
We played Hain before back in the fall. Basically, they have not filed their quarterly reports since last May because of a review of accounting procedures. They have suffered over the last year and have reportedly spent $20 million in the complete accounting review for years past and a review of their procedures. They are facing class action suits and SEC probes but none of these things will have a lasting impact.
They are facing a new deadline of May for their reports or they will be in default with their lenders. While they will not say when they will file the back reports, they continue to assure investors there was no wrongdoing and these types of corporate autopsies for prior years take time.
They are so undervalued compared to their peers and their historical norms, it is silly not to have a long position. Once they file the reports this will all be behind them.
I am recommending we buy the August $40 call and forget about it. At $2 it is not a lot of money and they could quickly return to the $50s once they file the reports.
Long Aug $40 call @ $1.97, see portfolio graphic for stop loss.
IWM - Russell 2000 ETF (LONG CALL)- ETF Profile
I thought I had the stop loss far enough away from the ETF price to avoid being stopped. That proved to be wrong when the ETF plunged from Tuesday's high of $138.60 to Monday's low at $132.40. That $6 decline wiped out all our gains and turned the position into a loss.
My market view is currently bearish. I am going to reload this position when it appears we have found a bottom. This 3-5 week period is typically volatile so I am not going to add it back into the portfolio today.
Original Trade Description: Jan 3rd
The Russell ETF mimics the movements of the Russell 2000 Index with a 1:10 ratio.
The Russell 2000 has failed to break support but it was the strongest gainer in the post election rally. At one point, the Russell was up 20.1%. That suggests in a market decline it could also be the fastest decliner.
Analysts are in agreement that the markets will finish 2017 significantly higher with estimates as high as 25,000 for the Dow and 2,500 for the S&P. If the regulations currently stifling small business are removed and the tax rates changed to 15% as Trump has promised, this sector will show a major boom in earnings and could be the largest gainer in 2017.
I considered buying calls on the SPY, DIA, QQQ and IWM. I decided to use the IWM for the reasons stated above.
I am going to use a dip trigger on this position to enter the play. We already have a put position on the ISM and we will exit it at the same time this position is triggered. I am putting the trigger at $126 but there is no guarantee we will reach that level. The IWM traded at $115 just before the election.
I am using the August calls because they were only $1 more than the June strikes and we get two extra months. I do not expect to hold the position that long since the summer months are normally weak for the market. We can sell them in June with a lot of time premium left.
Position 3/9/17 with an IWM trade at $135.00
Exit 3/27/17: Long August $140 call @ $4.24, exit $3.16, -1.08 loss.
JACK - Jack in the Box - Company Profile
No specific news. Shares have stalled at $100 and resistance from last September. No material decline, just no movement.
Original Trade Description: March 13th.
Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants and Qdoba Mexican Eats fast-casual restaurants primarily in the United States. As of October 02, 2016, it operated and franchised approximately 2,255 Jack in the Box restaurants in 21 states and Guam; and approximately 699 Qdoba Mexican Eats restaurants in 47 states, the District of Columbia, and Canada. The company was founded in 1951. Company description from FinViz.com
Shares of JACK were crushed in late February when they reported earnings of $1.18 compared to estimates for $1.24. Revenue of $487.9 million also missed estimates for $498.5 million. They guided for the full year to earnings of $4.25 to $4.50. Analysts were expecting $4.71.
They blamed the closig of several stores, employee severance pay and lower margins at the Qdoba chain.
If you have stopped at a Qdoba recently you know they have raised prices significantly on products that are not the mainline menu items. All the prices have gone up but some as much as 30%. That means Q1 revenues and earnings should be significantly better assuming the higher prices did not run off the consumers. However, a change in a main menu food item from $3.49 to $3.79 is not a disaster. Where they raised prices the most was in the sides where prices rose from 79 cents to $1.49 on some items. That is a major increase but it would only affect a portion of their sales.
Earnings May 29th.
After earnings the stock fell from $107 to $93 and stayed there for just over a week. Over the last two weeks shares have slowly ticked higher to $98. The post earnings depression appears to have faded and investors are coming back into the previously high flyer. Finding stocks that are not overbought in this market is a tough task and a quality stock like JACK that was severely beaten up suddenly looks like a value stock.
I am not recommending the $100 strike because the options are too expensive. I am going to stretch out to the $105 strike but that means we need the rebound to continue unabated in order to be profitable.
Long June $105 calls @ $2.80, see portfolio graphic for stop loss.
NTCT - Net Scout - Company Profile
No specific news. Shares are holding over support while we wait for the market to move higher.
Original Trade Description: February 27th
NetScout Systems, Inc. provides real-time operational intelligence and performance analytics for service assurance, and cyber security solutions in the United States, Europe, Asia, and internationally. The company offers nGeniusONE management software that enables customers to predict, preempt, and resolve network and service delivery problems, as well as facilitate the optimization and capacity planning of their network infrastructures; and specialized platforms and analytic modules that enable its customers to analyze and troubleshoot traffic in radio access and Wi-Fi networks, as well as gain timely insight into services, applications, and systems. It also provides Intelligent Data Sources under the Infinistream brand name that provide real-time collection and analysis of data from the network; network monitoring fabric switching solutions that deliver targeted network traffic access to an increasing number of monitoring systems; and a suite of test access points that enable non-disruptive access to network traffic with multiple link type and speed options. In addition, the company offers portable network analysis and troubleshooting tools, which help customers identify key issues that impact network and application performance. Further, it provides security solutions that enable service providers and enterprises to protect their networks against DDoS attacks; and threat detection solutions that enable enterprises to identify and investigate advanced threat campaigns that present tangible risks to the integrity of their networks. Company description from FinViz.com
Jeff Ubben at ValueAct added NetScout as a new position with 1,645,000 shares. Ken Fisher of Fisher Asset Management owned 3.6% at the end of Q4.
The company specializes in network assurance and network performance management.
They reported earnings of 60 cents compared to estimates for 55 cents. Revenue of $311.4 million also beat the street's estimate for $310 million. They guided for full year earnings in the range of $1.87-$1.90 on revenue of $1.2 billion.
Earnings May 2nd.
Shares exploded out of the earnings report and moved to a new 52-week high at $38. They paused there for the last week but closed at a new high by a few cents on Monday. I believe a breakout is about to appear.
Long June $40 call @ $2.45, see portfolio graphic for stop loss.
QQQ - Nasdaq 100 ETF - ETF Profile
All good things must come to an end. The QQQ position was stopped out on Tuesday's big market drop. Fortunately, the stop loss was tight and we did exit with a nice gain. I will reload this position once the market appears to have bottomed over the next 3-5 weeks.
Original Trade Description: February 6th
PowerShares QQQ, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock", is an exchange-traded fund based on the Nasdaq-100 Index. The Fund will, under most circumstances, consist of all of stocks in the Index. The Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The Fund and the Index are rebalanced quarterly and reconstituted annually.
The Nasdaq 100 big cap index has been leading the charge higher. The Nasdaq 100 and Nasdaq Composite may have been alternating days in the lead but the big cap index has seen the least volatility. The index bounced off uptrend resistance the prior week but it is back knocking on the door again today. The NDX was the only broad market index to post a gain on Monday and it closed only one point from a new high.
I believe the NDX is going to break through that resistance at 5,200 and that should trigger a new leg higher on short covering and price chasing by portfolio managers. They are currently holding cash back to buy the dips but the dips are very shallow. A breakout could convince them they are going to be left behind if they do not act.
I could just as easily predict a failure at resistance but every analyst prediction for a market failure in 2017 has proven wrong. I would rather invest $2.50 in a call option than try to bet against the trend.
Closed 3/21/17: Long May $128 Call @ $2.52, exit $4.75, +$2.23 gain.
QRVO - Qorvo Inc - Company Profile
No specific news. The Tuesday market crash knocked QRVO through our stop loss at $65.85 to end the position.
Original Trade Description: February 13th.
Qorvo, Inc. provides technologies and radio frequency (RF) solutions for mobile, infrastructure, and defense and aerospace applications worldwide. It operates through Mobile Products (MP) and Infrastructure and Defense Products (IDP) segments. The MP segment offers RF front end modules that combine high-performance filters, power amplifiers (PA), low noise amplifiers and switches, PA modules, transmit modules, antenna control solutions, antenna switch modules, diversity receive modules, and envelope tracking power management devices. This segment supplies its RF solutions into mobile devices, including smartphones, notebook computers, wearables, tablets, and cellular-based applications for the Internet of things. The IDP segment provides high power gallium arsenide, gallium nitride power amplifiers, low noise amplifiers, switches, radio frequency filter solutions, CMOS system-on-a-chip solutions, fixed frequency and voltage-controlled oscillators, filters, attenuators, modulators, driver and transimpedance amplifiers, and various multichip and hybrid assemblies. This segment supplies its RF solutions to wireless network infrastructure, defense, and aerospace markets; and connectivity applications for commercial, consumer, industrial, and automotive markets. Company description from FinViz.com
Triquint Semiconductor (TQNT) and RF Micro Devices (RFMD) merged in January 2015 and Qorvo was born.
Qorvo is a major Apple supplier. They will have outstanding Q3/Q4 earnings but they guided slightly lower for Q1. They blew out Q4 earnings at $1.35 compared to estimates for $1.26. Revenue of $826 million also beat estimates for $821 million.
They guided for the current quarter for earnings of 80 cents on revenue of $630 million. They said they were forecasting a decline in earnings because two China customers Oppo and Vivo along with Samsung, had postponed the launch date of their next smartphone models. Qorvo is still supplying the chips but the revenue will be delayed a quarter until those delayed launches begin to occur.
The stock dipped for about 30 minutes on the news and then began to rise again. Shares closed at a new 52-week high on Monday.
I believe this is an opportunity to get an Apple supplier well in advance of the iPhone 8 and the earnings from the other three manufacturers as well.
I am recommending an option to get us past the next earnings report where they should guide higher. Depending on our gains at the time we may hold over the report.
Earnings May 3rd.
Closed 3/21/17: Long May $70 call @ $3.59, exit $2.4, -1.15 loss.
SWKS - Skyworks Solutions - Company Profile
No specific news. The Tuesday market crash knocked us out of the position at $94.85
Original Trade Description: February 27th.
Skyworks Solutions, Inc., together with its subsidiaries, designs, develops, manufactures, and markets proprietary semiconductor products, including intellectual property worldwide. Its product portfolio includes amplifiers, attenuators, circulators/isolators, DC/DC converters, demodulators, detectors, diodes, directional couplers, diversity receive modules, filters, front-end modules, hybrids, LED drivers, low noise amplifiers, mixers, modulators, optocouplers/optoisolators, phase shifters, phase locked loops, power dividers/combiners, receivers, switches, synthesizers, technical ceramics, voltage controlled oscillators/synthesizers, and voltage regulators. The company provides its products for automotive, broadband, cellular infrastructure, connected home, industrial, medical, military, smartphone, tablet, and wearable applications. Company description from FinViz.com
Skyworks is major supplier for Apple and will benefit greatly from the sales of the updated iPhone 7 models expected to be announced in March and the iPhone 8 expected to be announced in September. This is going to be a very strong year for Apple and its suppliers.
For Q4, the company reported earnings of $1.61 compared to estimates for $1.58. Revenue of $914.3 million beat estimates for $902.7 million. The company said the soaring demand for IoT products fueled the growth and was expected to continue for the rest of the decade. Gartner Group said there were 6 billion internet devices today and that would expand to more than 20 billion by 2020. Every device needs a communications chip.
Skyworks also announced a new $500 million share buyback program. The prior program had $95 million remaining and was replaced with the new program.
Skyworks is expecting revenue growth or 8% to $840 million in the current quarter with earnings of $1.40. Analysts were expecting $818 million and $1.24.
Earnings April 20th.
Closed 3/22/17: Long May $100 call @ 3.89, exit $2.79, -1.10 loss.
TRIP - Trip Advisor - Company Profile
TRIP rallied again on Thursday on rumors they were in acquisition talks with Priceline. These rumors have been persistent over the last several weeks so maybe something is actually happening this time.
Original Trade Description: March 6th.
TripAdvisor, Inc. operates as an online travel company. The company operates through two segments, Hotel and Non-Hotel. Its travel platform aggregates reviews and opinions of members about destinations, accommodations, activities and attractions, and restaurants, which enables users to research and plan their travel experiences, as well as book hotels, flights, cruises, vacation rentals, activities and attractions, and restaurant reservations. The company operates TripAdvisor-branded Websites, including tripadvisor.com in the United States; and localized versions of the Website in 48 markets and 28 languages. It also manages and operates 23 other media brands that provide travel planning resources across the travel sector, such as airfarewatchdog.com, bookingbuddy.com, citymaps.com, cruisecritic.com, familyvacationcritic.com, flipkey.com, gateguru.com, holidaylettings.co.uk, holidaywatchdog.com, housetrip.com, independenttraveler.com, jetsetter.com, thefork.com, niumba.com, onetime.com, oyster.com, seatguru.com, smartertravel.com, tingo.com, travelpod.com, tripbod.com, vacationhomerentals.com, and viator.com. The company's Websites feature 465 million reviews and opinions on 7 million places comprising 1,060,000 hotels and accommodations; 835,000 vacation rentals; 4.3 million restaurants; and 760,000 activities and attractions worldwide. Company description from FinViz.com
TRIP re;orted Q4 earnings of 16 cents that missed estimates for 30 cents. Revenue of $316 million missed estimates for $325 million. Shares fell from $52 to $40 over the three weeks since the earnings report.
TRIP missed earnings for two main reasons. They have been investing "significant" amounts of money into new processes and marketing that will pay off in the future. Secondly, they just implemented an "Instant Booking" platform that was different enough that customers became confused and they lost a lot of revenue in Q4.
However, sales on the platform improved in December and spiked higher in January as the company refined its processes and made it easier to understand. They spent money marketing the benefits of the platform and apparently business is improving significantly in Q1.
TRIP has had earnings challenged for the last three quarters as they invest heavily in developing for the future.
Earnings May 17th.
Shares appear to have bottomed at $41 having spent the last five days at that level. While we cannot be certain this is the bottom, the option is cheap enough to induce me to take the risk. Once the stock begins to bounce, it should attract some more buyers looking for a bargain. With the market starting to turn choppy, any actual decline will make stocks like this look appetizing since they have already been crushed.
Update 3/13/17: Shares spiked on Wednesday to $44 after Cowen said the chairman's comments the prior week suggested there were some takeover conversations in progress. The chairman said the "company's appeal to a potential buyer acts as a floor on the stock." He named Facebook, Amazon and Alibaba as potential buyers. That is very unusual for a board member to suggest there may be interest by other parties and then name them. Another analyst said the comments were actually negative since the board member was using the takeover appeal to "prop up the stock." Personally, I hope the chairman stimulated some interest by those companies.
Long June $45 call @ $2.10, see portfolio graphic for stop loss.
UBNT - Ubiquiti Networks - Company Profile
No specific news. The rebound stalled and shares are moving sideways in a weak market. We have plenty of time.
Original Trade Description: March 20th.
Ubiquiti Networks, Inc. develops networking technology for service providers and enterprises worldwide. The company's service provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems, and routing; and enterprise product platforms provide wireless LAN infrastructure, video surveillance products, switching and routing solutions, and machine-to-machine communication components. Its products and solutions include radios, antennas, software, communications protocols, and management tools designed to deliver carrier and enterprise class wireless broadband access and other services in the unlicensed RF spectrum. The company also provides technology platforms, such as airMAX platform, which includes proprietary protocols that contain technologies for minimizing signal noise; EdgeMAX, a disruptive software and system routing platform; AirFiber, a point-to-point radio system; and sunMAX, an end-to-end plug and play solar solution. In addition, it offers UniFi Enterprise Wi-Fi System that includes Wi-Fi certified hardware with a software based management controller; UniFi Video IP cameras for data transmission and power-over-Ethernet; UniFi Switches that deliver performance, switching, and PoE+ support for enterprise networks; and UniFi Security Gateway that extends the UniFi enterprise solutions to provide routing and network security. Further, the company provides mFi that consists of hardware sensors, power devices, and management software, which allow devices to be monitored and controlled remotely through Wi-Fi; and develops AmpliFi platform, a Wi-Fi system solution designed to serve connected home. It also offers embedded radio products; and mounting brackets, cables, and power Ethernet adapters. Company description from FinViz.com
UBNT shares were crushed in February from $64 to $46 when they reported earnings of 71 cents that missed estimates for 75 cents. However, revenue of $213.5 million blew past estimates for $205 million. They ended the quarter with $612.7 million in cash and long-term debt of $184.2 million.
Earnings rose 24.1% and revenues by 31.9% but that was not good enough for investors. Revenue in the enterprise technology segment roas 87.4% to $98 million thanks to the new UniFi product family. North American revenues rose 64.8% and European/Middle East/Africa rose 26.9% and Asia Pacific 11.5%. South America was the weak spot with a 17.9% decline.
Earnings May 11th.
The stock was crushed because UBNT has a habit of beating on earnings and the unexpected decline was a shock. However, business is great and they are launching new products that are significantly faster.
I believe the massive $18 drop was overdone and shares are rising again. Analyst expectations are still bullish and only one downgraded the stock after earnings.
Long June $55 call @ $2.90, see portfolio graphic for stop loss.
ZEN - Zendesk Inc - Company Profile
No specific news. Shares collapsed with the market crash last week to stop us out at $26.50.
Original Trade Description: February 20th.
Zendesk, Inc., a software development company, provides software as a service customer service platform for organizations. It provides single customer service interface to organizations to manage all their one-on-one customer interactions; track and predict common questions; and provide a seamless path to answers. The company's platform also enables organizations to gather customer data and engage with customers based on the insights the data provides; and offers tools for organizations to understand their customers and track the efficiency and effectiveness of their customer service. It also provides live chat software that enables the organizations to communicate in real-time with their customers through online chat; and analytics software, which enable organizations to analyze and visualize data from a diverse set of applications. The company operates in 150 countries and territories, and provides service through customer service platform in approximately 40 languages. Company description from FinViz.com
Zendesk reported a lower than expected loss of 4 cents compared to estimates for 6 cents. Revenue of $88.6 million beat estimates for $87.3 million. For the current quarter, they guided to a loss of $6-$7 million on revenue of $92 million. Analysts were expecting -$5.4 million on revenue of $91.9 million.
ZEN is tracking well with analyst estimates and the business is rapidly growing. Revenue in Q4 rose 41% and earnings for this relatively new company are heading for positive territory.
Earnings May 10th.
The company builds software for better customer relationships. They service more than 94,000 corporations in 150 countries and 40 languages. The provide all types of customer support including help centers, chat, telephone, instant message and email. Their products connect to most common database products to enable personal support based on the customers history and current needs.
Zendesk is rapidly attacking the startup market since new companies cannot spend a lot of money on an in house support staff. They are rapidly growing with guidance for full year 2017 revenue rising 35% to $420 million compared to analyst estimates for $410 million.
They reorganized internally in 2016 and the changes caused a slight disruption in Q3 and the stock fell from $31 to $20. Shares have recovered to $28 after a $4 spike post earnings. After three days of post earnings depression, they are moving up again.
Closed 3/22/17: Long July $30 call @ $2.05, exit $1.00, -1.05 loss.
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