02252016 MELI PME

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by Bill Baker, J.D. (bb)
Editor and Publisher SINL

On 02182016, MELI closed at 98.80. After the market close on 02252016, Mercado Libre (MELI) reports 4th quarter 2015 earnings. Will this earnings report represent a significant MELI price moving event (PME) to the upside or downside? Or will MELI head back to its February 2016 low of 84.19 that it reached on 02092016. 

There has been a significant downward bias in the stock market since MELI's 3rd quarter 2015 earnings were reported on 11042015 after the market closed. On 11042015, MELI closed at 107.00. After earnings on 11052015, MELI opened at 118.64, reached a high of 122.65 and closed at 116.43.

On 02252016, MELI must significantly exceed earnings and revenue projections and provide a pristine, sunshine filled business forecast in order MELI shares to break above 110 and get anywhere near their 11052015 price points. On the other hand, MELI shares will most likely fall below 80 if there is an earnings miss accompanied by a negative conference call forcast. MELI shares will decline post earnings. 

MELI EARNINGS PLAY STRATEGY

We need:
1) time - minimum 3 months
2) long puts and calls
3) to target 50 - 150 price range

On 02182016 MELI closed at 98.80 +.56 (.57%)
Option Contracts (02182016 close prices):

SEP 16 '16 150.00 call b. 1.05 x a. 2.55 TV: 5.979 D: .2602
SEP 16 '16 145.00 call b. 1.45 x a. 3.10 TV: 6.896 D: .2886

JUN 17 '16 135 call b. 1.20 x a. 2.30 TV: 4.315 D: .2421
JUN 17 '16 145 call b. .40 x a. 1.40 TV: 3.210  D: .1892

JUN 17 '16 55 put b. .30 x a. 1.25

TV=Theorectical Value -- D=Delta
 

GOOG GOOD?

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02162016

by Bill Baker, J.D.
Editor and Publisher SINL

I have been reducing my put hedges and am positioned for rebound opportunities. Over the long weekend, I wrote a new story about Alphabet:

New SINL story titled, "Alphabet Soup" about #Alphabet #Google #earnings and #option investment strategies http://www.sinl.com/sinl-blog/2016/2/13/alphabetsoup

When the equity markets recover we could see GOOG and GOOGL finally reach the $1,000 per share price point that many traders see in GOOG's / GOOGL's future. Hitting the $1,000 per share price point would represent a 317.60 point move for GOOG which closed at 682.40 on 02122016 and a 293.11 point move for GOOGL which closed at 706.89 on 02122016.

Recent internet sector stock price declines have resulted in GOOG retreating from its 02022016 post earnings high of 789.87 and GOOGL retreating from its 02022016 post earnings high of 810.30. Based upon these numbers, I think that there is at least 100 points of upside for GOOG and GOOGL in any serious rally that we may see during the next two months. 

Alphabet Soup

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02162016

by Bill Baker, J.D.
Editor and Publisher SINL

On 02102016 I discussed Amazon (AMZN) stock price movements, option strategies and the 01282016 earnings report. Now, I'm going to take a look at GOOGLE's (GOOGGOOGL) recent earnings report, stock price movements and option strategies.

GOOGLE GOOD

Alphabet, Inc. (GOOGGOOGL) -- After the market close on 02/01/2016, Google parent Alphabet, Inc. reported earnings for its fourth quarter that ended 12312015. Net income for the entire Alphabet entity amounted to $4.92 billion ($7.06 per share). For the same period last year, quarterly net income was reported as $4.68 billion ($6.79 per share). Alphabet's revenue increased to $21.33 billion which represented an 18% increase over last year's $18.1 billion of reported revenue.

TO THE MOON

The 02/01/2016 Alphabet earnings report was the first time that Alphabet separately identified the revenue, capital expenditures and operating income for its "moonshot" initiatives and its Google online advertising search businesses, Android and YouTube. Alphabet's "moonshot initiatives" include, but are not limited to: Google Fiber, Google Capital, Google Ventures, Nest, Verily (formerly Google Life Sciences), X, Calico, Sidewalk Labs. The good news was that during 2015, Alphabet's "moonshot initiatives" generated $448 million in revenue. The bad news was that when all was said and done, Alphabet reported an overall loss of $3.57 billion from these ventures. During 2014, Alphabet's "moonshot initiatives" generated $327 million of revenue and an overall loss of $1.94 billion.

Alphabet's spending on the diverse project initiatives presented in the previous paragraph has reduced its profit margin from 30.98% in 2011 to 25.8% in 2015. A February 2. 2016 Reuters article reported that:

"The operating profit margin for its Google unit was 31.9 percent in the most recent quarter, compared to 25 percent for Alphabet."

SOONER RATHER THAN LATER

With each passing year, the pressure will increase for one or more Alphabet "moonshot" initiative to become successful and profitable. Alphabet's high growth/profit core Google, YouTube, Android businesses will provide Alphabet with the financial cover it needs to pursue its "moonshot" initiatives without adversely affecting GOOG or GOOGL share prices, However, because Alphabet is pouring billions of dollars into these "moonshots" each year, analysts and investors will be closely monitoring the progress and profitability of these expensive initiatives. That being said, sooner rather than later would be the time for one or more of the Alphabet  "moonshots" to start showing both success and profitability.

Right now and into the foreseeable future, Alphabet is well positioned to realize tremendous growth and profitability from its growing core Google, YouTube and Android businesses. Alphabet's stable of attractive "moonshot" initiatives provide an attractive layer of high risk, high reward investments on top of the proven, high growth, high return Google core that will eventually show slower growth as these core businesses mature.

Alphabet spread its "moonshot" bets among a wide array of cutting edge technology investments in diverse, unrelated sectors that affect almost every aspect of the world economy.  This will insulate the "moonshot" initiative program from sector specific slowdowns while at the same time allowing participation in evolving ultra growth sectors.   

GOOG AND GOOGL OPTION INVESTMENT IDEAS

On 02122016, the Nasdaq closed at 4337.51 +70.68 (1.66%); the DJIA closed at 15,873.84 +313.86; the S&P 500 closed at 1,864.78 +35.70 (1.95%). GOOG closed at 682.40 -.71 (-.10%); GOOGL closed at 706.89 +.53 (.08%). 

On the first day of trading (02022016), after Alphabet reported earnings for its fourth quarter that ended 12312015 after market hours on 02012016; GOOG stock reached a high of 789.87 and GOOGL reached a high of 810.35. Both GOOG and GOOGL have declined more than 100 points since 02022016. 

That being said, GOOG and GOOGL could quickly make a move toward the 1000 per share price point that they have been poised to hit before being set back by a consistently weak market. Specifically, the share prices of internet stocks, such as AMZN, LNKD and GOOG, have been beaten down despite publishing strong earnings reports. As far as GOOG and GOOGL are concerned, these shares should rally when the tech sector recovers during the next two months.

Here are  a few GOOG and GOOGL option ideas:

Buy 10 GOOG June 17 '16 900 calls (1.55 x 2.55)
or

Buy 10 GOOG June 17 '16 940 calls (.60 x 1.30)
and
Buy 10 GOOG June 17
 '16 400 puts (.55 x 1.80)
or

Buy 10 GOOG June 17 '16 420 puts (.60 x 2.55)

02102016 Option Methodologies ( AMZN )

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by Bill Baker, J.D. 
Editor and Publisher, SINL

02102016 

Today we are seeing how much pent up buying power is locked into the equity markets. This rally was sparked by Fed Chairwoman Yellen's comments giving hope to the idea that the Federal Open Market Committee (FOMC) may need to rethink increasing interest rates. 

02102016

Amazon (AMZN) -- After the market close on 01282016 Amazon reported earnings for its fourth quarter that ended 12312015. AMZN's net sales rose 21.8% to $35.75 billion missing the contrived analyst's expectations of $35.93 billion. AMZN's net profit rose to $482 million or $1.00 per share. A year earlier, AMZN's net profit was $214 million or 45 cents per share. The average analyst's contrived net profit number was $1.56. etc., etc., etc. 

On 02092016, AMZN closed at $482.07 which is significantly below its $635.35 01282016 close price.

AMZN shares are down $153.28 due in part to a methodical, managed stock market crash engineered to minimize the damage to major institutions that have been using the equity and debt markets as high stakes casinos. AMZN shares have also lost value after reporting excellent revenue and sales numbers that were overshadowed by a ridiculous net profit expectation contrived by analysts. Amazon was not able to reach this bizarre earnings expectation even after Amazon more than doubled their year over year net profit. AMZN shorts anticipating this contrived shortfall realized a huge profit.

Regardless of the who, what, when, where, why of Amazon's stock price retreat, AMZN is now at $482.07. Let's take a look at some AMZN option spread strategies that may give us the opportunity to profit from future AMZN price moves.  

Since January 1, 2016, the stock market has been going through a slow burn bearish phase. The present market condition is going to resolve itself during the next few months. We are eventually going to see a total capitulation and collapse or an explosive recovery where investors, who have been scared off by the recent downturn, are caught flat footed, waiting on the sidelines as stocks reach new highs day after day after day.

That being said, if you click on this link, you will be taken to an online spreadsheet where I have presented a few AMZN put and call positions.

Based upon 02092016 closing prices, one way to play AMZN (487.02 02092016 close price) would be to set up the following option spread:

Buy 10 AMZN JUL 15 '16 735 calls (1.75 x 2.39)
Buy 10
AMZN APR 15 '16 310 puts (1.26 x 1.41)

February 2016 Earnings Season Plays

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Option spread, straddle, strangle candidates:

CMG reports earnings on 02022016 after market close
06172016 CMG option plays

ICE reports earnings on 02042016 before market opens

FLT reports earnings on 02042016 after market close

LNKD reports earnings on 02042016 after market close

BIDU reports earnings on 02092016 after market close

TSLA reports earnings on 02102016 after market close

ATVI reports earnings on 02112016 after market close

 

Alphabet Inc. (NASDAQ: GOOG, GOOGL) reports earnings after market close on February 1, 2016

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The Alphabet, Inc. fourth quarter 2015 earnings announcement provides, in part:

"MOUNTAIN VIEW, Calif. (January 8, 2016) – Alphabet Inc. (NASDAQ: GOOG, GOOGL) will hold its quarterly conference call to discuss fourth quarter 2015 financial results on Monday, February 1st at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time)............"

$1,000

Will Alphabet's fourth quarter earnings report and conference call be the catalysts that propel  GOOG (closed at $742.95 up $11.99 / share on 01/29/2016) and GOOGL (closed at $761.35 up $13.05 / share on 01/292/2016)  to the symbolic $1,000 / share mark and beyond during the next few months? On the other hand, will these price moving events cause Alphabet suffer the same fate as AMZN (closed at $587.00 down $48.35 / share on 01/29/2016 following 01/28/2016 after hours earnings announcement) which fell victim to specious, contrived analyst projections after reporting stellar earnings and sales growth that justified a significant price increase and not a $48 haircut?

PAST EARNINGS

After the market closed on 10/22/2015, GOOG reported $7.35/share 3rd quarter earnings beating the consensus analyst estimate of $7.21. Beat consensus by .14

GOOG Prices:

10212015 open $654.15 high $655.87 low $641.73 close $642.61

10222015 open $646.70 high $657.80 low $644.01 close $651.79

10232015 open $727.50 high $730.00 low $701.50 close $702.00

10262015 open $701.55 high $719.15 low $701.26 close $712.78


After the market closed on 07/16/2015, GOOG reported $6.99/share 2nd quarter earnings beating the consensus analyst estimate of $6.74. Beat consensus by .25

07152015 open $560.13 high $566.50 low $556.79 close $560.22

07162015 open $565.12 high $580.68 low $565.00 close $579.85

07172015 open $649.00 high $674.47 low $645.00 close $672.93

07202015 open $659.24 high $668.88 low $653.01 close $663.02

ALPHABET BREAKS OUT GOOGLE AND MOONSHOT EARNINGS FOR FIRST TIME

For the first time, Alphabet will report the revenue, expenses, operating income and capital expenditures for Google and its separate 'moonshot' initiatives unit that includes, but is not limited to: Google Life Sciences, Sidewalk Labs, Google Ventures, Google Capital and research lab Google X, Calico and Nest Labs.

PLAYING THIS PRICE MOVING EVENT

03182016 CALLS



 

 

 


 

Earnings Season Play. Will Amazon's earnings ignite an internet stock rally or feed the bear market?

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by Bill Baker, J.D.
Editor and publisher, SINL

In sentiment to the Facebook (FB) post earnings rally, Amazon (AMZN) has rallied more than 30 points in intraday trading with the expectation that Amazon's earnings report will exceed expectations after the market close today.

As I see it, Walmart's (WMTclosure of more than 100 stores across the United States is good news for Amazon and may be a strong indication that the brick and mortar retail sales model is succumbing to Amazon's online retail juggernaut. 

Macy's (M), J C Penney (JCP), Sears (S), Nordstrom (JWM), etc. are all casualties in the paradigm shift from brick and mortar to online retail sales. 

Amazon's model is the future for retail sales. Regardless of where the price of AMZN ends up after it reports earnings, it is clear that the brick and mortar retail titans of the 20th century must attempt to adopt Amazon's business model or they will go out of business.