In addition to tonight's new candidate(s), consider these stocks as possible trading ideas and watch list candidates. Some of these stocks may need to see a break past key support or resistance:
FDX, PH, MD, JBHT, WDC, WHR, DVA, ADSK,
DLR, KMB, OA, AVB, HRL
NEW DIRECTIONAL CALL PLAYS
Dollar Tree, Inc. - DLTR - close: 80.52 change: +0.54
Stop Loss: 76.90
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 3.6 million
Entry on January -- at $---.--
Listed on January 06, 2016
Time Frame: Exit PRIOR to February option expiration
New Positions: Yes, see below
Last year DLTR shares delivered a very bumpy ride for investors but the stock did manage to outperform. 2015 saw the S&P 500 index flat with a -0.7% loss. The NASDAQ gained +5.7%. Yet DLTR added +9.7%. More importantly DLTR has been showing relative strength THIS year and appears to be breaking out past resistance.
DLTR is part of the services sector. According to the company,
"headquartered in Chesapeake, VA, Dollar Tree is the largest and most successful single-price-point retailer in North America, operating thousands of stores across 48 contiguous U.S. states and five Canadian provinces, supported by a solid and scalable logistics network. At Dollar Tree, we are committed to serving the best interests of our shareholders. We seek to enhance shareholder value not only through exceptional business performance and practices, but also through responsible and effective communication. To help put Dollar Tree, Inc.'s financial performance into perspective, our Investor Relations site provides the latest company information relevant to the individual."
One of the big stories for DLTR last year was its $9.5 billion acquisition of rival Family Dollar (FDO). This more than doubled DLTR's stores and more than doubled its annual sales.
DLTR's earnings results have been mixed and the stock has seen some big moves on its recent reports. On September 1st DLTR reported their Q2 results that missed estimates and guided lower. Shares plunged. Fortunately for investors DLTR bottomed in the $60-62 area in the October-November time frame.
On November 24th DLTR reported its Q3 results, which looks like their first full quarter as a combined company (with Family Dollar). Earnings were $0.38 a share. That missed analysts' estimates. Revenues were up +136% from a year ago thanks to the merger and above expectations at $4.95 billion. Management lowered their Q4 guidance but raised their full year 2016 revenue guidance above Wall Street estimates. Investors bought this news and shares of DLTR have been outperforming the broader market for the last several weeks.
DLTR's CEO Bob Sasser commented on his company's Q3 performance,
"I am pleased with our Company's third quarter performance. Dollar Tree delivered same-store sales of 2.1%, which represented our 31st consecutive quarter of positive same-store sales. This was against a 5.9% comp from the prior year, our strongest quarter of 2014. While not included in our comp calculation, Family Dollar delivered positive same-store sales of low to mid-single-digits, as a percent, each month during the quarter." Sasser added, "Our integration project is on schedule and we are on track to achieve our stated synergy goals. Today, I am even more enthusiastic about the long-term opportunity this merger provides for our customers, our suppliers, our associates, and our shareholders."
In early December analyst firm RBC upgraded DLTR to one of their "top picks" and raised their price target on the stock to $90. RBC believes DLTR can achieved +20% to +25% growth in 2016-2017. Analyst firm Cantor Fitzgerald is also bullish on DLTR. A couple of weeks ago they issued an note on the company saying, "We expect a re-acceleration of SSS growth and believe there is opportunity for the company to realize cost synergies from the Family Dollar acquisition that doubles the $300 million guidance by year three." Cantor upped their DLTR price target from $85 to $105.
Currently the point & figure chart is bullish and forecasting at $90.00 target.
DLTR spent a good chunk of December consolidating sideways in the $75-80 zone. Now the stock is breaking out, which is impressive considering the stock market's weakness. The S&P 500 is already down -2.6% in 2016 and the NASDAQ is down -3.4%. DLTR is up +4.2% year to date and broke through resistance near $78.50 and now the $80.00 level. Tonight we are suggesting a trigger to buy calls at $80.85.
Trigger @ $80.85
- Suggested Positions -
Buy the FEB $80 CALL (DLTR160219C80) current ask $3.40
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