Day: June 2, 2017

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Scientific Games Options Are Active!

Yesterday 8,000 contract of January $25 Call options traded at $3.10 for $2.48M

Today 2,000 contracts of January $22 Call options at $4.50 each for $900k

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#ScientificGames Corporation $SGMS develops technology-based products and services, and associated content for the gaming, lottery, and interactive gaming industries worldwide. Its Gaming segment sells new and used gaming machines, electronic table systems, video lottery terminals (VLTs), conversion game kits, and spare parts; and slot, casino, and table-management systems, as well as leases VLTs and electronic table games.  It is also involved in supplying player loyalty programs.

The company holds its Annual Shareholders meeting on June 17th in Las Vegas. A review of the Company’s 14-a, its proxy statement, does not show any extraordinary items to be discussed at the meeting. Routine corporate actions such as confirmation of directors and its CPA are on the agenda. The company is scheduled to report its Q2 quarterly results on or about August 7th.  It reported its first quarter results on April 27th. It reported revenue of $725.40 and its EPS of  (-$1.14) was 42 cents below the estimates.

Price Action

$SGMS last traded at $23.60. It has a 52-week trading range of $8.07 – $24.55.

SGMS call options have been very active lately.

Option Action

  • Yesterday, a trader purchased 8,000 contract of January $25 Call options at $3.10 each. That is a bullish bet of $2.48 million.  Open Interest on the contract is 9,112 contracts.
  • Today, a trader purchased 2,000 contracts of January $22 Call options, $4.50 each for a total bullish bet of $900,000. Open Interest on the contract is 11,524 contracts.
  • Another trader today purchased 350 contract of October $22 call options at $3.60 each. That is a bullish outlay of $126,000. Open Interest on the contract is 19,709 contracts.

Based on the amount of money that is bet on this stock, we could speculate several reasons for the bet. The obvious guess would be that the company is a takeover target. Another speculation would be that the company may receive a new contract.

Whatever the news or event may be, someone is placing large long term bullish bets that SGMS is heading higher.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

 

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Qdoba Moves Jack In the Box

Jack In the Box would net $223M from the sale of Qdoba

After Qdoba sale, Jack in the Box’s free cash flow would rise to 6%

 

The shares of fast food chain owner Jack in the Box (JACK) are climbing after Wells Fargo upgraded the stock and Oppenheimer said the company’s risk/reward ratio will be “intriguing” if it can sell Qdoba.

Jack in the Box announced on May 17 that it was exploring strategic alternatives for #Qdoba, it’s burrito chain.

UPGRADE:

Wells Fargo analyst Jeff Farmer upgraded Jack in the Box to Outperform from Market Perform, arguing that the stock does not fully reflect the benefits that the company will obtain from selling Qdoba.

Estimating that the company would net $223M from the sale of Qdoba, the analyst predicted that it would repurchase $423M of its stock in the wake of the deal, lowering its share count by 14%.

Moreover, following a deal, $Jack in the Box’s EBITDA margin would increase by 10.5 percentage points and its return on invested capital would rise by over three percentage points, Farmer estimated. He raised his price target on the shares to $125 from $114.

INTRIGUING:

The risk/reward ratio of Jack in the Box’s stock is “intriguing,” assuming the company sells Qdoba, contended analyst Brian #Bittner.

Selling Qdoba would enable Jack in the Box to more effectively lower its costs and debt levels, Bittner believes.

After unloading Qdoba, Jack in the Box’s free cash flow would rise to 6% before share buybacks, versus the average of its peers of 4%-5.5%, the analyst stated.

Additionally, Jack in the Box can benefit from its delivery initiatives and discount deals, as well as commodity inflation that could force its competitors to scale down their discounts, Bittner believes. He kept a $125 price target and an Outperform rating on the shares.

PRICE ACTION: In midday Friday trading, Jack in the Box (JACK) rose 2.3% to $109.32. Note that the quick service restaurant sector has been outperforming other parts of the Restaurant sector.

Other stocks to watch: MCD, QSR, WEN, DPZ, YUM, and SONC.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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Broadcom sheds light on iPhone 8 Launch

The amount of content that Broadcom supplies for each iPhone 8 sold will increase 40% versus the last version of the device

Broadcom’s revenue per iPhone 8 could rise to $16 or more

 

broadcom_chip

Wireless component supplier #Broadcom Limited (AVGO) appeared to indicate yesterday that the rollout of Apple’s (AAPL) new iPhone 8 would be slower than the launches of the iPhones that debuted in 2016.

However, Broadcom also suggested that it would obtain more revenue from each new model iPhone than the current generation of the device.

A number of Wall Street research firms, including JPMorgan, Loop Capital and Craig-Hallum, remain upbeat on Broadcom in the wake of its results and guidance.

NEWS:

The “initial ramp” of the company’s “major North American” customer’s next generation phone “[appears] slower this year, compared to prior year,” Broadcom CEO Hock Tan said on the company’s earnings call, apparently referring to the iPhone 8. He added: “But we believe, this will likely accelerate in our fourth quarter. Our third fiscal quarter outlook reflects this expectation.”

Asked a follow-up question from an analyst about whether the “slow ramp” comments were a matter of timing or magnitude, Tan replied:

“It’s timing. I think, it is timing and last year, the similar ramp was earlier — was stronger in Q3 probably because it was earlier. And here the initial volume in our fiscal Q2 was smaller, made up with content on our side, but definitely Q4 is forecasted to be larger.”

The amount of content that Broadcom supplies for each iPhone sold will increase 40% versus the last version of the device, the company also indicated.

ANALYST REACTION:

The 40% increase in Broadcom’s content per iPhone was a positive surprise, according to Loop Capital analyst Betsy Van Hees. Broadcom is poised to benefit from its strong position in multiple, varied end markets, while it will also be boosted by its operating leverage, and accretion from its acquisition of Brocade (BRCD), according to Van Hees. She continues to identify the stock as a top pick and raised her price target on the shares to $285 from $270.

#Broadcom’s revenue per iPhone could rise to $16 or more, estimated Craig-Hallum analyst Anthony Stoss. Since the iPhone 8 probably won’t be delayed, Broadcom may surpass its guidance for its July quarter by a significant amount, the analyst stated. He raised his price target on the stock to $290 from $260 and reiterated a Buy rating on the name.

#JPMorgan analyst Harlan Sur raised his price target for Broadcom to $300 from $260, saying diversified growth and Apple iPhone content gains drove the Q2 beat and “strong” Q3 outlook.

OLED BEHIND DELAY?

Recent media reports have indicated that leaked photos purportedly showing Apple’s “iPhone 8” indicate that the next iteration of its highest-end phone may feature a curved glass OLED screen, no identifiable home button, a stainless-steel chassis and a dual-camera system. However, Apple Insider has reported, citing notes issued by influential KGI Securities analyst Ming-Chi Kuo, that Apple’s iPhone 8 may experience supply shortages through the end of 2017 due to the smartphone’s expected adoption of new technologies, including its OLED display.

The Nikkei Asian Review has recently added that analysts have speculated that OLED handsets could be delivered in late October or November, after the phone’s usual September release.

BAIRD SURVEY: Meanwhile, #Baird analyst William Power tells investors that his Apple survey to gauge demand for the next iPhone shows “solid, though not euphoric” demand, adding that there appears to be higher upgrade interest from older models than in past.

Better battery life and wireless charging were the most desired features mentioned by those surveyed, he noted. The survey doesn’t change his overall outlook, said Power, who continues to recommend purchase of the stock into the iPhone 8 launch.

PRICE ACTION: In morning trading, Broadcom $AVGO rose 7% to over $251 per share while Apple $AAPL added 0.4% to $153.73.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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May’s Job Report Disappoints!

U.S. nonfarm payrolls rose only 138k in May, disappointing estimates for a near 200k gain

The unemployment rate dropped to 4.3% versus 4.4% previously

 

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U.S. nonfarm payrolls rose only 138k in May, disappointing estimates for a near 200k gain, following a downwardly revised 174k increase in April (was 211k) and a 79k gain in March.

The unemployment rate dropped to 4.3% versus 4.4% previously.

Average hourly earnings rose 0.2% as was the case in April (revised from 0.3%). The workweek was steady at 34.4.

For the internals, the labor force plunged 429k after April’s 12 rise, with household employment tumbling 233k from 156k.

Private payrolls were up 147k compared to the 253k jump in the ADP, while government subtracted 9k.

Jobs in the goods producing sector were up 16k, with construction increasing 11k and manufacturing falling 1k.

The service sector added 131k jobs, led by education/health with a 47k gain, while business services jobs were up 38k.

Declines were registered in trade/transport and information services.

The disappointing report will knock bond yields lower but shouldn’t seriously impact expectations for a Fed rate hike on June 14. The dollar is lower following the job report as some hope that FOMC may not raise interest rates at its next meeting.

Stocks to watch: MAN, RHI, KELYA, TMH, ASGN, KFRC

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

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