NEW DIRECTIONAL CALL PLAYS
NXP Semiconductors - NXPI - close: 74.85 change: +0.71
Stop Loss: 71.75
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.9 million
Entry on November -- at $---.--
Listed on November 22, 2014
Time Frame: 8 to 12 weeks
New Positions: Yes, see below
Why We Like It:
NXPI is in the technology sector. The company classified as part of the semiconductor industry but they make a host of electronic parts and components. The company describes itself on their website as follows,
"The electronics industry is being driven by four mega trends that are helping shape our society: Energy Efficiency, Connected Devices, Security and Health. Connecting to these trends and enabling Secure Connections for a Smarter World, NXP Semiconductors N.V. (NASDAQ: NXPI) creates solutions for the Connected Car, Cyber Security, Portable & Wearable and the Internet of Things. Through our innovations, customers across a wide variety of industries â€“ including automotive, security, connected devices, lighting, industrial and infrastructure â€“ are able to differentiate their products through features, cost of ownership and/or time-to-market."
The company has seen a dramatic turnaround. NXPI was born in 2006 when Phillips Electronics sold its semiconductor business to private equity firms.
By 2009 they were $6 billion in debt and losing money. Today they have cut their debt in half.
Investors business daily noted that companies like NXPI and its rival AVGO, another bullish looking stock, should both benefit thanks to a new trade deal with China. The U.S. and China have recently decided to remove some tariffs on almost $1 trillion worth of high-tech products.
As we approach the holidays shares of NXPI could get a boost thanks to Apple (AAPL). Investors expect AAPL to see a very strong fourth quarter with its new iPhone 6 and 6+ and AAPL is trying to revive its tablet business with a refresh of its iPad models. NXPI provides components to the iPhone, the iPad, and is rumored to produce equipment for AAPL's new Apple Pay technology.
NXPI's revenues have been strong all year. The company has actually beaten Wall Street's earnings estimates on both the top and bottom line the last four quarters in a row. Revenues were up +15.9%, +14.8%, +17.3% and in the most recent quarter +21.3%. NXPI's last earnings report was October 23rd. The company reported a profit of $1.35 a share, which was four cents above estimates. Revenues came in at $1.51 billion. Management issued bullish guidance on its Q4 EPS number while its revenue estimate was only in-line with Wall Street.
The stock received several price target upgrades in November. Recently as mutual funds issued their 13F filings it was unveiled that Appaloosa Management, the fund run by influential manager David Tepper, had initiated a new position in NXPI last quarter.
Technically shares of NXPI have been digesting gains in a sideways consolidation the last couple of weeks. Shares managed to end the week at a new all-time high. There looks like short-term resistance at $76.00. Tonight I'm suggesting a trigger at $76.05.
Please note this is a slightly more aggressive trade as NXPI appears to have potential resistance at a trend line of higher highs (see chart).
Trigger @ $76.05
- Suggested Positions -
Buy the 2015 Jan $80 call (NXPI150117c80) current ask $2.20
Option Format: symbol-year-month-day-call-strike