The S&P rebounded from support at 2,815 but failed at resistance at 2,885. Nothing goes straight up or straight down. The major sell off of the prior week was overdone and due for a bounce. The rebound to 2,885 failed three times and traders ran to the exits at the close on Friday. Sunday nights have had a bad habit of double-digit futures losses and nobody wanted to be long over the weekend.
Stop Loss Updates
Check the graphic below for any new stop losses in bright yellow.
We need to always be prepared for an unexpected decline.
Check the graphic below for any profit stops in green.
We need to always be prepared for a profit exit at resistance.
Current Position Changes
LYFT - Lyft
The short position was entered at the open on Monday.
TSLA - Tesla Inc
The long position was entered at the open on Monday.
BULLISH Play Updates
TDOC - Teledoc Health - Company Profile
No specific news. This was one the best performing stock of the week with no material decline despite the weak market.
Original Trade Description: May 4th
Teladoc Health, Inc. provides telehealth services. It offers a portfolio of services and solutions covering 450 medical subspecialties, such as flu and upper respiratory infections, cancer, and congestive heart failure. The company provides its services through mobile devices, the Internet, video, and phone. It serves employers, health plans, health systems, and other entities in approximately 100 countries worldwide. Teladoc Health, Inc. has a collaboration with Cincinnati Children's Hospital Medical Center to develop a consumer pediatric telehealth platform. The company was formerly known as Teladoc, Inc. and changed its name to Teladoc Health, Inc. in August 2018. Teladoc Health, Inc. was founded in 2002 and is headquartered in Purchase, New York. Company description from FinViz.com.
Teladoc is a subscription medical service where you can access a live doctor almost at will for $49 a month. Business is booming.
Q1 revenue rose 43% from $89.6 million to $128.6 million. They still posted an earnings loss because they are in customer acquisition mode. Long-term the subscription model will be a money maker. US paid memberships rose 28% to 26.7 million.
Subscription revenue in the US grew 33% to $81 million. International revenue more than doubled to $30 million. Gross margins were 65.3%. The cash on hand at the end of the quarter was $480 million.
Some insurance companies cover the Teledoc fees. An individual pays $49 a month for a suite of services that includes unlimited doctor consultations. US visit-fee-only access, which are users not covered by insurance, rose 7% to 10.2 million. Total global visits rose 75% to 1.06 million.
When you consider all the hassle of making an appointment with your regular doctor, driving to the appointment and back and waiting an hour in the office to see the doctor for 5 minutes, this seems like a bargain. A patient can pick up their phone and be talking to a doctor in minutes. If they have a video camera on their phone or computer, they can talk face to face, which is handy if you have some external affliction.
What does a normal doctor visit consist of other than blood pressure, pulse, sometimes temperature and a lot of waiting for the doctor to walk in for 5 minutes and write a prescription and leave.
The company affirmed full year guidance of $535-$545 million, a 29% boost in revenue. Adjusted EBITDA of $25-$35 million.
Long July $65 Call @ $3.30, see portfolio graphic for stop loss.
Optional: Short July $75 Call @ $1.40, see portfolio graphic for stop loss.
Net debit $1.90.
USO - US Oil Fund - ETF Profile
Sabre rattling over Iran caused a minor rebound in crude prices. Never fear, Memorial day driving demand is coming.
Original Trade Description: May 4th
The United States Oil Fund LP (USO) is an exchange-traded security designed to track the daily price movements of West Texas Intermediate (WTI) light, sweet crude oil. USO issues shares that may be purchased and sold on the NYSE Arca.
The investment objective of USO is for the daily changes in percentage terms of its shares' NAV to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the daily changes in price of USO's Benchmark Oil Futures Contract, less USO's expenses.
USO's Benchmark is the near month crude oil futures contract traded on the NYMEX. If the near month futures contract is within two weeks of expiration, the Benchmark will be the next month contract to expire. The crude oil contract is WTI light, sweet crude oil delivered to Cushing, Oklahoma.
USO invests primarily in listed crude oil futures contracts and other oil-related futures contracts, and may invest in forwards and swap contracts. These investments will be collateralized by cash, cash equivalents, and US government obligations with remaining maturities of two years or less.
The USO rallied to nearly $14 in mid-April as WTI prices moved to $65. Oil prices tend to peak around Memorial Day and hold that level or slightly higher into the July 4th weekend.
We found out this weekend that one million bpd of Russian oil will be offline for the next couple weeks and that will squeeze global supply. We are also only two weeks past the elimination of waivers on Iranian oil and that removed another million barrels from the market. Turkey and China are the only two countries to defy the sanctions and continue purchases.
The stage is set for a potential oil rally back over $65. That would put the USO back near $14 or higher depending on what kind of ramp we get into Memorial Day and the beginning of the driving season.
I am recommending we buy an inexpensive July call option and target a 100% return over the next couple weeks.
Long July $13.50 call @ 39 cents, no initial stop loss. Target 85-cents to exit.
BEARISH Play Updates
LYFT - Lyft Inc - Company Profile
Lyft was sued by investors who lost money after the IPO in hopes of getting some recovery. Shares rebounded $9 intraweek but began to decline again on Friday after resistance held. With Uber and Lyft hemorrhaging cash, no sane investors is going to hold long term until earnings improve and the cash drain slows.
Original Trade Description: May 11th
Lyft, Inc. operates a peer-to-peer marketplace for on-demand ridesharing in the United States and Canada. It provides Ridesharing Marketplace, which facilitates lead generation, billing and settlement, support, and related activities to enable drivers to provide their transportation services to riders. The company also offers a network of shared bikes and scooters in various cities to address the needs of riders for shorter routes; Express Drive program, a flexible car rentals program which connects drivers who need access to a car with third-party rental car companies; and concierge for organizations to manage the transportation needs of their customers and employees. In addition, it integrates third-party public transit data into the Lyft app to offer various enterprise programs, including monthly ride credits for daily commutes, supplementing public transit by providing rides for the first and last leg of commute trips, late-night rides home, and shuttle replacement rides. The company was formerly known as Zimride, Inc. and changed its name to Lyft, Inc. in 2013. Lyft, Inc. was incorporated in 2007 and is headquartered in San Francisco, California. Company description from FinViz.com.
We were stopped out of our Lyft put position a week ago and I am reinstating it. The monster earnings loss of $1.138 billon in Q1 is just a preview of things to come.
Lyft reported an adjusted loss of $9.02 per share. That is a small improvement from the loss of $11.40 in the year ago quarter, but it is a huge amount of money. Revenue was $776 million compared to the loss of $1.138 billion. They guided for revenue of $800-$810 million for Q2 and $3.275-$3.3 billion for the full year. Active users rose to 20.5 million, up from 14 million. Average revenue per rider rose from $28.27 to $37.86.
The big question now that Lyft is public is how long can it continue to lose $1 billion per quarter with total revenue at $800 million? With Uber and Lyft both losing tons of cash, cheap rides are going to end. If ride prices double to an average of $75 as needed to breakeven, riders will disappear.
Earnings August 6th.
Long July $45 put @ $3.50, see portfolio graphic for stop loss.
TSLA - Tesla Inc - Company Profile
We got a horrible fill when the market gapped down on Monday and Tesla fell with it. However, continued negative news is pushing shares lower and we are profitable. Evercore ISI reiterated a sell rating and $200 price target, down from $240.
Elon Musk sent a memo to employees saying the company only had 10 months of cash at the Q1 burn rate and he was going on a "hard core" cost cutting program. Tesla just raised $920 million in a bond sale in March to bring their cash balance up to $2.2 billion. That is a lot of money unless your cash burn rate is $3 billion a year.
Original Trade Description: May 11th
Tesla, Inc. designs, develops, manufactures, and sells electric vehicles, and energy generation and storage systems in the United States, China, Netherlands, Norway, and internationally. The company operates in two segments, Automotive, and Energy Generation and Storage. The Automotive segment offers sedans and sport utility vehicles. It also provides electric vehicle powertrain components and systems to other manufacturers; and services for electric vehicles through its company-owned service centers, Service Plus locations, and Tesla mobile technicians. This segment sells its products through a network of company-owned stores and galleries. The Energy Generation and Storage segment offers energy storage products, such as rechargeable lithium-ion battery systems for use in homes, commercial facilities, and utility grids; designs, manufactures, installs, maintains, leases, and sells solar energy systems to residential and commercial customers; and sell renewable energy to residential and commercial customers. The company was formerly known as Tesla Motors, Inc. and changed its name to Tesla, Inc. in February 2017. Tesla, Inc. was founded in 2003 and is headquartered in Palo Alto, California. Company description from FinViz.com.
Tesla has so many headwinds you could not list them all. They are short on cash. They have multiple gigafactory construction projects underway at the same time. They have multiple models from sedans to semi trucks in pre production planning. Each one could consume $1 billion or more in manufacturing start up costs. The gigafactory in China is multiple billions to construct and populate with equipment and inventory. Sales of the Model S and Model 3 are slowing. Competition is heating up with Mercedes, Volkswagen, Jaguar and BMW starting to deliver new models of electric cars and in large quantities. GM is prepping to deliver multiple models of reasonably priced cars.
Even worse, there is suddenly a large number of used Teslas for sale. For instance TrueCar has more than 940 used Teslas for sale. The electric car fad is now over and they are becoming common place. Instead of only one car maker to choose from now there are six or more with all price ranges. I have seen the Jaguar and I would much rather have that than a Tesla. The Tesla brand is over priced and over hyped.
The constant headlines of Elon Musk in trouble with the law, the SEC, the courts, individual suits, etc, is tarnishing the brand. Musk used to be the wonder kid that could do anything. As his recent promises become even more unbelievable and undeliverable, he is being written off as a spoiled rich kid and the Tesla brand is losing its luster. He has a coming trial date on his comments calling a British cave rescue diver a pedophile and a child rapist. The diver sued him for defamation.
Goldman has a price target of $210. RBC $210 and Cowen $200. Bank of America just resumed coverage with an underperform rating (sell). Evercore has an underperform.
Shares are slowly slipping away after breaking strong support at $249.
Unfortunately, options are expensive and this will have to be a spread.
Long July $225 put @ $17.61, see portfolio graphic for stop loss.
Short July $205 put @ $10.40, see portfolio graphic for stop loss.
Net debit $7.21.