NEW DIRECTIONAL CALL PLAYS
Williams-Sonoma Inc. - WSM - close: 80.78 change: +1.01
Stop Loss: 77.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 990 thousand
Entry on January -- at $---.--
Listed on January 29, 2015
Time Frame: Exit PRIOR to earnings in March
New Positions: Yes, see below
Why We Like It:
Normally when a company lowers their earnings guidance Wall Street tends to punish the stock price. WSM has lowered guidance several times but that didn't stop shares for outperforming the market with a +29% gain in 2014.
The company describes itself as "Williams-Sonoma, Inc. is a specialty retailer of high-quality products for the home. These products, representing eight distinct merchandise strategies â€“ Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams-Sonoma Home, Rejuvenation, and Mark and Graham â€“ are marketed through e-commerce websites, direct mail catalogs and 603 stores. Williams-Sonoma, Inc. currently operates in the United States, Canada, Australia and the United Kingdom, offers international shipping to customers worldwide, and has unaffiliated franchisees that operate stores in the Middle East and the Philippines."
They have an enviable position of mostly selling to high-end customers who make more than $150,000 a year. Unlike many retailers, WSM has an extremely healthy online presence. Their e-commerce business generated half of all sales, which certainly gives their margins a boost compared to rivals.
WSM seems to have perfected the beat estimates and guide lower game to management Wall Street's earnings expectations. Looking at the last four earnings reports in a row WSM has beaten estimates three out of the last four reports on both the top and bottom line. Every time management has guided lower for the next quarter. This strategy has definitely generated some volatility in the stock price. A quick look at WSM's daily chart and you'll see a lot of big gaps up and down as investors react to news. Yet the overall trend has been higher.
Today WSM sits at all-time highs.
Shares have been showing relative strength in 2015 with a +5.4% gain thus far. The point & figure chart is bullish and forecasting a long-term target at $105.00. Tonight I am suggesting a trigger to buy calls at $81.15. Please note that I am suggesting small positions to start. WSM is flirting with and apparently breaking out past a long-term trend line that you can see on the monthly chart below.
Trigger @ $81.15 *start with small positions*
- Suggested Positions -
Buy the MAR $85 CALL (WSM150320C85) current ask $1.75
Option Format: symbol-year-month-day-call-strike