October 29, 2019 | 8:30 AM by Fahad Khalid | fkhalid@jaguaranalytics.com

JaguarLive, October 24

  • Oct 24 2019 7:57 AM
    Good Mornings Jags!
  • Oct 24 2019 8:10 AM
    Top Economic News –
    – Overseas October Flash Manufacturing PMI misses everywhere. Japan’s manufacturing PMI in October contracted at the quickest pace since June 2016, slipping to 48.5 vs 49.2 expected. New orders shrank at their fastest pace since December 2012, while factory orders and future output were also in contraction. . In Australia, the manufacturing PMI dropped slightly to a 3.5-year low of 50.1 vs forecasts for contraction at 49.0. In Germany, the manufacturing PMI improved in October to 41.9 vs 42.0 expected while the services PMI worsened to 51.2.
    – Japan factory activity shrinks at quickest pace since 2016 in October – Reuters
    – Eurozone business activity still stuck in a rut  – Reuters
    – ECB leaves deposit rate at -0.5%, monthly QE of €20B to begin in November
    – Republican lawmakers push for approval of Hong Kong human rights bill that could further complicate US-China relations – Politico
    Next Up – Durable Goods Orders at 8:30 am ET, Jobless Claims at 8:30 am ET, US October Flash Manufacturing PMI at 9:45 am ET, New Homes Sales at 10:00 am ET, Kansas Fed Manufacturing Index at 11:00 am ET, Mike Pence Speech on China
  • Oct 24 2019 8:18 AM
    S&P futures are currently higher by 6 points, followed by NASDAQ up 48, and Dow Jones up 53 points. Wild earnings swings in past 24 hours though generally positive given low expectations with exception of Twitter. Overseas Manufacturing PMI missed everywhere with France being an exception as goods-producing economy continues to shrink. All eyes on Mike Pence speech on China today.

  • Oct 24 2019 8:22 AM
    Microsoft (MSFT) – Stock is now guided higher by +1% in pre-market after several positive comments came out in conference call. Solid quarter in all metrics. BAML says: “Blowout quarter with Commercial bookings off the charts at +35% y/y CC.”
    See full note from analyst HERE.
    “Commercial bookings were an unthinkable +35% CC driven by LT Azure contracts and Commercial RPO +26% y/y. Azure +63% CC showed only slight deceleration. However, underlying growth ex-EMS is significantly higher and the comps for EMS get easier in 4Q20, which may shed better light on real Azure growth. The growth engine, Com Cloud is now $46 bn run rate growing about 40% CC at GM of 66% (+300 bps), which could march higher y/y, validating our view that the Street is not appreciating the LT margin potential.”
  • Oct 24 2019 8:38 AM
    Raytheon (RTN) – Boom! Similar to Lockheed Martin few days ago, blow out quarter moments ago with sharp beat on top and bottom line. The setup for defense contractors continues to look strong for 2020 recovery after lackluster past 18 months and we discussed this view in webinar on Tuesday.
    – Q3 EPS $3.08 vs $2.86 estimate, beat
    – Q3 Revenues $7.45B vs $7.27B estimate, beat
    – FY2019 EPS Guidance $11.75 vs $11.73 estimate, beat
    – FY2019 Revenues Guidance $29.25B vs $29.04B estimate, beat
    Three out of four business segments of the company beat on estimates and all three of them with improving operating margins.
    – Q3 Integrated Defense Systems $1.76B vs $1.6B estimate, beat
    – Q3 Integrated Defense Margins 16.1% vs 16% estimate, beat
    – Q3 Intelligence Systems $1.86B vs $1.75B estimate, beat
    – Q3 Intelligence Systems Margins 8.7% vs 7.2% estimate, beat
    – Q3 Space & Airborne Systems $1.94B vs $1.79B estimate, beat
    – Q3 Space & Airborne Systems Margins 14% vs 13.4% estimate, beat
    – Q3 Missile Systems $2.17B vs $2.27B estimate, miss
    – Q3 Missile Systems Margins 10.1% vs 12.6% estimate, miss
  • Oct 24 2019 8:49 AM
    Central Puerto (CEPU) – New article published on home page. Production of Chronicle with help from Jay. There is a binary event coming up this weekend: Elections in Argentina on Sunday, October 27th. Taking a look at CEPU with a skewed risk-reward opportunity on the long side, which could either become permanently worthless or turn into a phenomenal multibagger depending on how the situation plays out going forward.
    See article HERE.

  • Oct 24 2019 9:03 AM
    3M (MMM) – The industrial stock that was featured in last Weekend Research. Modestly guided lower by -1% after posting another revenue miss and lower quality EPS beat.
    – Q3 EPS $2.58 vs $2.49 estimate, beat
    – Q3 Revenues $7.99B vs $8.17B estimate, beat
    – Q4 EPS Guidance $2.10 vs $2.41 estimate, huge miss
    – Q4 Organic Sales Guidance down -2% YoY
    – FY2019 EPS Guidance $9.04 vs $9.50 estimate, big miss
    The only reason why EPS beat was due to $0.14 gain booked from sale of the gas and flame detection business which was not in consensus forecast. The underlying business worsened in Q3 with revenues declining by -1.3% YoY which was worse than -0.9% YoY decline in Q2 and that’s despite 430 bps easier comparison in Q3. Company did given an update mid quarter about business being weak, but this is still worse than what they told us initially. Just goes to show that manufacturing / goods-producing business continues to be the weakest segment of economy given PMI contractions everywhere due to global trade order being disrupted from tariffs.
  • Oct 24 2019 9:10 AM
    MKS Instruments (MKSI) – Boom! Stock is ripping higher by +13% in pre-market and expected to open at new 52-week high. In sympathy expect Applied Material (AMAT) to open sharply higher as well along with all other semi equipment testing companies. We discussed this in webinar last week on October 15th (see HERE) that in early phase of upswing in semi capex spending cycle, which is currently led by 5G spending, semi equipment stocks are first batch of companies that tend to materially outperform. Highlights:
    – Q3 EPS $1.12 vs $0.87 estimate, huge beat
    – Q3 Revenues $462.5M vs $442.9M estimate, big beat
    – Q3 Gross Margins improved by +20 bps sequentially QoQ
  • Oct 24 2019 9:28 AM
    Boeing (BA) – I have said this over and over again. This is a design problem with 737 Max and a mere software patch just simply cannot fix it. They retrofitted wrong size engine into the body of plane. Where most pundits have remained optimistic about return of 737 Max to service, the recent issues simply compound the situation.
    See HERE an interesting article on NYPost today. Go down to 5th paragraph and it explains the meat of the problem:
    “No one has said it explicitly yet, but this relentless pressure to reduce emissions appears to have been a significant factor in the disastrous safety failures of the Boeing 737 MAX aircraft. The warning from Boeing’s catastrophes is that climate ideology can have fatal consequences. The 737 MAX was trumpeted as “Boeing’s game changer.” It reduced emissions by 14 percent and Boeing raced it into production to compete with a climate-friendly new offering from Airbus. But in order to achieve its green goal, Boeing had to use much bigger engines that didn’t fit in the usual position under the wing of the repurposed, 53-year-old 737 design. The engines had to be moved forward and hoisted higher. As a result, the aerodynamics changed, and the planes had a tendency to pitch up and potentially stall on takeoff. Boeing’s solution to this hardware defect was an imperfect software bandage that would automatically correct the pitch. In both crashes, preliminary investigations found this software kicked in even when the plane wasn’t stalling, with lethal consequences.”
    This is exactly what I discussed in JaguarMedia video on April 30th. It’s a design problem. See video HERE.
  • Oct 24 2019 9:36 AM
    Edwards Lifesciences (EW) – The calendar spread we recommended in webinar on Tuesday opens at $3.50 up +75% from $2.00 entry. Take full profits and step aside. Giddy up!
  • Oct 24 2019 9:39 AM
    Close EW, MSFT and MMM here? Thx!
  • Oct 24 2019 9:45 AM
    — Take profits in EW Nov/Oct (25) W 232.5 call calendar, up +50% to +75%
    — Take profits in MMM Nov 162.5/Oct (25) W 160 put diagonal, up +45%
    — Hold MSFT Dec 145 calls for a few more days
  • Oct 24 2019 9:48 AM
    BREAKING NEWS –
    – US October Flash Manufacturing PMI bounces back to 51.5 vs 50.9 estimate vs 51.1 prior month. Decent bounce. Only time will tell whether this is dead cat bounce.
    – US October Flash Services PMI also bounces back to 51.2 vs 51 prior month.
  • Oct 24 2019 9:52 AM
    Software (IGV) – Off to races this morning. Up nearly +2% after doing hammer reversal candle yesterday morning. Stealth recovery in ServiceNow (NOW) from low point of $190 after CEO change announcement to $240 today.
  • Oct 24 2019 9:54 AM
    Up/Down volume ratio is weakening since market opened. Internals are not looking pretty so far. Just an fyi …
  • Oct 24 2019 9:54 AM
    TWTR- calls are toast, but would you add to common pos?
  • Oct 24 2019 9:54 AM
    hey f what is your levels of support for TWTR?
  • Oct 24 2019 9:54 AM
    Morning Fahad, can you please comment on TWTR and would you still keep holding on to common?
  • Oct 24 2019 9:54 AM
    fahad, thoughts on TWTR – this seems way overdone
  • Oct 24 2019 10:05 AM
    Twitter (TWTR) – I am going to wait for a couple days because today is heavy volume distribution day, then I will add to my common stock position. As for December calls, those are toast but likely not worth closing at this time. This is a very large miss and clearly shocking. I wasn’t expecting this. I will have more detail thoughts later after I have collected all wall street research and listened to earnings call.
    – Q3 Revenues $823M vs $873M estimate, huge miss
    – Q3 EBITDA $262M vs $301M estimate, huge miss
    – Q3 EBITDA Margins 31.9% vs 34.1% estimate, big miss
    – Q3 mDAU 145M vs 142M estimate vs 139M in Q2, beat
    – Q3 Ad Engagements up +23% YoY
    It is rather quite surprising that Ad Engagements is up sharply and Daily Active Users are up sharply. And yet revenues are still down. The strong channel checks we discussed were indeed correct about engagement being strong. But the only explanation for revenue shortfall would be perhaps ad pricing deteriorated.
    Press release says:
    “… lingering headwinds we expect from the previously discussed revenue product issues we experienced in Q3. Specifically, we expect moderated performance in our Mobile Application Promotion (MAP) product and the previously discussed issues in our personalization and data settings will likely result in 4 or more points of reduced YoY, growth for total revenue in Q4, up from 3 or more points of impact in Q3.”

  • Oct 24 2019 10:08 AM
    Envista Holdings (NVST) – The recent spin-off from Danaher reported its Q3 earnings this morning and shares are modestly lower. Here was the breakdown:
    -EPS of $0.47 vs $0.43 estimate – Beat
    -Revenue of $659.3M vs $669.44M estimate – Miss
    -Specialty Product & Technology up 2.5% Y/Y
    -Equipment & Consumables down 3% Y/Y
    CEO Amir Aghdaei stated, “We are pleased with the results of the third quarter, our first as a public company. The team has made traction on several cost initiatives resulting in earnings, margins, and cash flow that exceeded our expectations. Revenue was slightly lower than anticipated, a result of our brand consolidation efforts and weaker equipment demand.”
    JPMorgan out with a note saying that while the broader end market has been stabilizing (i.e., ALGN reported a strong quarter last night), the weaker organic cc revenue growth (particularly in E&C) may cast doubt on the sustainability of the improvement, which could lead to a modestly negative reaction out of derivative dental names, including XRAY.
    Questions for the conference call will be:
    (1) Drivers of the soft performance in Equipment & Consumables and expectations for a pickup given easier comps in 1H20
    (2) Thoughts on drivers and sustainability of the strength seen in Specialty Products & Technology
    (3) Progress update on margin expansion trajectory given the softer OPM results this quarter
    (4) Updated view on FX and discontinued product headwinds heading into YE and 2020.
  • Oct 24 2019 10:15 AM
    3M (MMM) – JPMorgan’s Stephen Tusa out with a quick post-earnings note saying:
    “More of the same here with what we view as a messy and low quality quarter, with downside on sales, profits/cash that were in line with our below consensus estimates, and material benefits from below the line.”
    “Segment results were mixed, with the cyclical segments weak as expected, the highlight Consumer, and the concern Healthcare, which posted another weak growth quarter (1Q was 0.7%), breaking from LT guidance of ~4-6%, and a miss on margins. This profile is a negative given structurally lower growth at Consumer and a Healthcare business that is the cornerstone to value in a Bullish narrative.
    “Moving into next year, the comps should get easier, but we don’t have a positive view on the macro, and any rebound is likely tepid; we continue to see an algorithm here that struggles to deliver much profit growth, and off the lower base, the stock will look less cheap on a headline basis. Bottom line, another quarter removed from the big 1Q miss but not much here to change our view around structurally lower profit growth without balance sheet optionality given PFAS, a key negative differentiator versus our other OWs.”
  • Oct 24 2019 10:22 AM
    October Flash US Manufacturing PMI – Taking another look at this report issued today. First, please note the PMI report (both Mfg and Svcs) comes out twice per month. “Flash” just means it is mid-month and preliminary. See today’s report HERE.
    This report today is actually far worse than headline. Look closely to what’s happening in its internal components. Manufacturing backlogs of work across the private sector economy fell for the third month running in October. What really gets my attention is Employment component which fell for second month, declining at the steepest rate since December 2009, which survey respondents often attributed to more cautious hiring strategies and a lack of new work to replace completed projects. The rate of decline in employment levels was the largest recorded by the survey since December 2009.
    Chris Williamson, Chief Business Economist at IHS Markit, says:
    “Despite business activity lifting from recent lows, the survey data point to annualized GDP growth of just under 1.5% at the start of the fourth quarter, and a near-stalling of new order growth to the lowest for a decade suggests that risks are tilted toward growth remaining below trend in coming months. An increased rate of job culling adds to the gloomy picture, with jobs being lost among surveyed companies at a rate not seen since 2009. At current levels, the survey’s employment gauge indicates non-farm payroll growth slipping below 100,000.”

  • Oct 24 2019 10:30 AM
    He really wants to see negative rates in the US. Negative rates are destroying Europe with “zombie banks” everywhere. Let’s destroy the US banking sector too!

  • Oct 24 2019 10:39 AM
    I think its time to buy call options in both GLD and TLT again specially after seeing that tweet from Trump. Both have pulled back and formed a base and both are poised to now start moving higher. That employment component of Manufacturing PMI is troubling. I think Trump is completely wrong and hasn’t fully thought through terrible consequences of negative rates if that happens in the US. But he is right that the Fed has no chance but to cut rates. Two-edged sword. See charts of GLD and TLT below.

  • Oct 24 2019 10:46 AM
    Beyond Meat (BYND) – Foodwatch warns of baby milk: Three products are contaminated with aromatic mineral oil components. According to “eco-test” also the “Beyond Meat-Burger” is affected. – Handelsblatt
    Three baby milk products from Nestle and Novalac are contaminated with hazardous mineral oil, according to Foodwatch. On behalf of the consumer advocates, three certified laboratories had tested baby milk independently and with different methods of analysis. Four of the products purchased in Germany would have contaminated three suspected aromatic oil constituents (MOAH). Foodwatch also found contaminated baby milk in France and the Netherlands. As the magazine “eco-test” announced on Thursday, oil traces were also found in vegan burgers. The particularly hyped “Beyond Meat Burger” was contaminated with a “greatly increased” content of mineral oil constituents, writes the test magazine.”
  • Oct 24 2019 11:00 AM
    BREAKING NEWS –
    – Kansas City Fed Manufacturing Activity Survey declines to -3 vs -2 estimate vs -3 prior month. This goes along Durable Goods Orders report this morning which showed -1.1% decline in New Manufacturing Orders worse than -0.7% decline consensus, decelerating from +0.3% reading in prior month.
  • Oct 24 2019 11:06 AM
    Brazil (EWZ) – Large bullish risk reversal bought:
    – 22,500 January 41 puts sold to open for $1.10 credit
    – 22,500 January 45/48 call spread bought for $1.16 debit
  • Oct 24 2019 11:12 AM
    Varian Medical (VAR) – Email sent …

    Trade – Sell to close VAR November 135 calls for $0.90 credit or higher.

    This trade from July 23rd has come from dead with +10% rally in stock today after earnings. Company posted revenues that were 2.4% above consensus and announced shake up in top management. Oncology radiation business surprised to upside. But all this is too late for this position at this time with calls expiring in a few weeks. Cut loss and step aside if you still have these calls.

  • Oct 24 2019 11:31 AM
    MasterCard (MA) – Stock up $6 or +2.4% this morning after doji candle yesterday. That large bull who bought $4 million worth of November (1) Weekly 260 calls yesterday nailed the trade. Bought for up to $6.30 and now going for $11.
  • Oct 24 2019 11:36 AM
    SMAR up +10%
    HUBS up +5%
    NOW up +7%
    COUP up +8%
    ESTC up +4%
    OKTA up +4%
    SHOP up +6%
    TWLO up +5%
    TEAM up +4%
    ZM up +5%
    AYX up +5%
    Power candles in software space everywhere today. Thanks to Microsoft !!
  • Oct 24 2019 11:41 AM
    Brazil Bull 3x ETF (BRZU) – Mentioned earlier buyer of bullish risk reversal in EWZ. This BRZU is 3x levered ETF of Brazilian equities. Trading 2.7x daily average call volume with a buyer of 5,000 November (1) Weekly 33 calls for $1.00 offer. Exactly half million dollar bullish bet ahead of Argentinian elections this Sunday, October 27th.
    See CEPU write up on home page published this morning. May be MELI blasts higher next week because it was too hurt by Argentina few months ago.
  • Oct 24 2019 11:48 AM
    Market Internals Update – Advancing issues opened up at 2000 after which a prompt profit-taking exodus pushed its count lower to 1300, as European markets got closer to the 11:30 ET close, this has increased to 1550. Declining issues went from 850 to 1718, now at 1580.
    NYMO which I will remind is a function of Advance/Decline count, opened at +44.68, then dropped to +26.14. At this time it is showing +30.75, a 5-point drop from yesterday’s close.
    TRIN at 1.46 is a bearish print with Down volume leading the way at a 2.12:1 ratio. Put/Call ratio of 0.82 is bullish but not excessive.
    VIX is down 0.93%, just re-tested the morning’s low successfully. So far the session’s high is 14.34 with yesterday’s close of 14.
    SPY opened at $301.16 – this was a re-test of Tuesday’s high, without success in holding the mark. Since October 15th, the range has been $298/$300 with a few quick pops outside that did not last long. Volume remains comatose, tracking to 52% of daily average.
  • Oct 24 2019 11:54 AM
    **PENCE SAYS NIKE HAS CHECKED SOCIAL CONSCIENCE AT DOOR REGARDING HONG KONG
  • Oct 24 2019 11:54 AM
    **PENCE: CHINA’S ACTIONS IN HONG KONG CURTAIL LIBERTY, RIGHTS
  • Oct 24 2019 11:54 AM
    **PENCE: NBA ACTING LIKE `WHOLLY OWNED SUBSIDIARY’ OF CHINA
  • Oct 24 2019 11:55 AM
    **PENCE SAYS IN SIDING WITH CHINESE COMMUNIST PARTY AND SILENCING FREE SPEECH, NBA IS ACTING LIKE ‘A WHOLLY OWNED SUBSIDIARY OF THE AUTHORITARIAN REGIME’
  • Oct 24 2019 11:59 AM
    **PENCE SAYS A STRONG MAJORITY OF AMERICANS ARE BEHIND TRUMP’S APPROACH TO CHINA
  • Oct 24 2019 12:00 PM
    **PENCE SAYS US IS NOT SEEKING TO CONTAIN CHINA’S DEVELOPMENT
  • Oct 24 2019 12:00 PM
    **PENCE SAYS TRUMP ADMINISTRATION NOT SEEKING TO DECOUPLE U.S. ECONOMICALLY FROM CHINA
  • Oct 24 2019 12:08 PM
    BREAKING: Boris Johnson will seek a snap election Dec. 12 rather than try again to get his Brexit deal ratified by U.K. Parliament – Bloomberg
  • Oct 24 2019 12:17 PM
    Up/down volume ratio sharply diving here to session low …
  • Oct 24 2019 12:17 PM
    **PENCE TELLS PEOPLE OF HONG KONG ‘WE STAND WITH YOU… WE ARE INSPIRED BY YOU’
  • Oct 24 2019 12:22 PM
    And here comes the kicker, the meat of this speech:
    **PENCE SAYS “WE REBUILT CHINA OVER THE LAST 25 YEARS BUT THOSE DAYS ARE OVER. THE U.S. NOW RECOGNIZES CHINA AS A STRATEGIC AND ECONOMIC RIVAL
  • Oct 24 2019 12:23 PM
    I highlighted that word “economical rival” for a reason. Anyone here still believe this is just a trade war to fix trade imbalance and not an economic war?
  • Oct 24 2019 12:27 PM
    **PENCE SAYS CHINESE COMMUNIST PARTY DECOUPLING FROM WIDER WORLD
  • Oct 24 2019 12:28 PM
    **PENCE SAYS U.S. WILL CONTINUE TO SEEK FUNDAMENTAL RESTRUCTURING OF U.S.-CHINA RELATIONSHIP
  • Oct 24 2019 12:29 PM
    **PENCE SAYS U.S. STANDS BY HONG KONG DEMONSTRATORS
  • Oct 24 2019 12:29 PM
    China will not like that statement …
  • Oct 24 2019 12:32 PM
    Speech has ended.
    I feel like the context of this speech was to set necessary background on world’s stage so the US can further escalate tensions from here. Lots of discussion about Hong Kong. And clearly stating that China is seen as strategic and economical rival.
  • Oct 24 2019 12:46 PM
    SPY – Trading 19.5M shares as of right now vs 75M daily average. Only 26% of average so far half way through trading session. At current rate, today might end up being the lowest volume day of 2019.
  • Oct 24 2019 12:50 PM
    Going to webinar shortly, please join HERE
  • Oct 24 2019 1:18 PM
    Deckers Brands (DECK) – This retailer will be reporting earnings after the close and per JaguarScan, on 10/22, there was a buyer of 300 far out-of-the-money November 170 Calls for $3.50 offer side, a $105,000 bullish bet that remains in open interest.
    Following last earnings in July, BAML highlighted that HOKA (high-end technical running brand) was 29% of sales and over 100% of total DECK revenue growth in F1Q. Deckers said it expects HOKA to grow high-30% Y/Y in F2020 (significantly higher than initial guide of 25%) driven by momentum in new product launches and share gains in the running specialty channel.
    On August 19th, Pivotal Research analyst Mitch Kummetz upgraded Deckers to Buy from Hold. In a research note to investors, the analyst says there are now early indications that October/November weather could be favorable, which would suggest potential upside to Deckers’ FY20 sales and gross margin guidance, adding that he continues to like what’s happening with Hoka as brand momentum remains strong through the first half of the second quarter, with this being another source of potential upside to the year.
    Then, most recently on October 11th, Stifel commenting their checks in the last couple of weeks offer encouraging signs. Specifically, they see:
    -Lean UGG inventories entering the Fall/Holiday selling season
    -Limited allocations of Classics in the summer months have inspired retailer to request shipments earlier (Sept. vs. Oct.)
    HOKA momentum has continued and evidence is building of popularity outside of distance running styles (Sky Kaha Hiker, Recovery Slides, Hupana Slip and Flow, etc.)
    -Evidence of strong growth from the Koolaburra brand (more style depth including accessories)
    In addition, they add that despite largely uncooperative weather season to date, guidance has been positioned conservatively and expect DECK can again top estimates. “We note, management has established a pattern of guiding conservatively with revenue and EPS exceeding guidance and topping estimates for 10 straight quarters (last miss, Dec. Q of 2016).”

  • Oct 24 2019 1:47 PM
    Blackstone Group (BX) – This asset manager, which reported earnings yesterday morning, sees the following Call Roll:
    -5,000 December 43 Calls Sold to Close for $9.20
    -5,000 March 48 Calls Bought to Open for $5.75
    BMO Capital, in their post-earnings note today, commented that Fee-related earnings grew +27% Y/Y, driven by higher management fees and positive operating leverage. Total AuM and FPAuM grew +21% and + 15% Y/Y, respectively, and the FRE margin rose +538 bps Y/Y. BMO now expects BX to exceed its FRE targets of $1.70 per share in 2020E and $2.00 per share beyond 2020E.
    Meanwhile, during Blackstone’s earnings call, COO Jonathan Gray highlighted continued focus on logistics and live entertainment, which Dealreporter connected as potentially relevant to Six Flags (SIX), which it identified as a “theme park operator recently in the headlines for M&A,” according to contacts. The report on the private equity firm also said a “focus on entertainment may also bode well for Dave & Buster’s (PLAY),” according to contacts.

  • Oct 24 2019 1:59 PM
    Activision Blizzard (ATVI) – Adding to the recent Webinar discussion, Stifel has a couple notes out this morning previewing both BlizzCon as well as Modern Warfare. Snapshots are shown below:

  • Oct 24 2019 2:19 PM
    Arista Networks (ANET) – Shares not participating today, currently down over 3%, and JPMorgan had some cautious commentary this morning following earnings from Microsoft (MSFT).
    “As part of Microsoft’s F1Q20 earnings announcement yesterday, the firm reported capex (including capital leases) of $4.8 bn, and PP&E excluding capital leases of $3.4 bn, both of which marked a sequential deceleration in spend from F4Q’s (June-end) $5.3 bn and $4.1 bn (ex-leases), respectively, and tracked lower than previous guidance from the company for sequentially flat capex.”
    Guidance for slight moderation in calendar 4Q shows that it is unlikely that we see a ramp in spending as we exit the year, contrary to current investor expectations and what is likely to add to concerns relative to the longer term capex growth trajectory. Additionally, while we understand that correlation of the total capex to networking equipment purchases is not high on a short-term basis, the guidance for calendar 4Q implies a high-single digit capex increase in 2H19 over 1H19, and compares to the +15% increase in revenue for Arista from the top 5 cloud titans we have embedded in our calendar 2H19 revenue forecasts.”

  • Oct 24 2019 2:29 PM
    Webinar Update
    Micron (MU) Bullish discussion
    Trade idea is to buy December 47 calls for $2.82 or less.
  • Oct 24 2019 2:36 PM
    Corning (GLW) – Average LCD TV panel prices, tracked by IHS, declined by -4.8% M/M in October, significantly worse than the +0.2% increase the industry has seen historically going from the month of September to October (sixth consecutive M/M decline).
    Importantly, the industry commentary from IHS is calling for weak end-demand in 4Q19; albeit, with potentially aggressive promotional activity in the upcoming holiday season being a positive “wild card.” JPMorgan saying they remain cautious on Corning’s display business performance in the near-term, and will continue to monitor panel shipments further.

  • Oct 24 2019 2:57 PM
    Instructure (INST) – Last week, we highlighted a Bull Risk Reversal out in February. This morning, Oppenheimer was out with a note ahead of earnings on October 28th saying:
    “Our channel checks point to stable to improving business fundamentals and a more focused product strategy for Bridge. We think sentiment on the name is improving too, though investors want to see a more consistent quarterly results trend and/ or transparency on the medium-term growth and margin profile at the Dec. 3rd Analyst Day, before turning positive.”
    In addition, they believe the following investment traits remain underappreciated in INST’s valuation, and serve as catalysts:
    1) New CEO’s impact on the business results
    2) Medium-term financials transparency and/or faster path-to-profitability unveiled at the Analyst Day in Q4
    3) Divestitures of non-core dilutive assets
    4) Data analytics opportunity with DIG
  • Oct 24 2019 3:08 PM

    Webinar Summary – October 24th

    00:00: Market action & expectations: REPO market defined, exemplified and discussed as the FED doubled its target from $65B to $130B. BofA note from this morning discusses possible liquidity risk ahead. Many signs are discussed, overall volumes looked at, bid/ask spreads, short interest and volatility are also part of the view. Passive versus Active investing activity also viewed and discussed.

    27:40: Gold (GLD) technical improvement today, price has flatlined for nearly 5 weeks and appears to be moving higher. Treasury ETF (TLT) also set up similarly ahead of FOMC decision date on October 30th.

    31:45: Activision Blizzard (ATVI) attempting to break out once more, $56 level has presented opposition to upside since September. Earnings are due on November 7th ahead of which BofA has released a preview. The analyst does not expect a ‘good quarter’ as it faces very tough YoY comps. On the upside, ‘Call of Duty: Mobile’ downloads have now reached 130M which could mean around $2M per day in monetization opportunity which would theoretically add to 4Q revenue estimates, FY2020 EPS could be improved by $0.15. To date, consensus does not account any of this game’s revenue into its calculations and may be off by considerable amount. Closer catalysts include BlizzCon conference from November 1st-3rd. Seeing some call buying today which supports bullish case along with all the other mentioned reasons.

    41:40: Fortinet (FTNT) channel checks from Oppenheimer discussed, based on which the analyst expects 3Q2019 results that would “surpass the Street’s estimates”. Recent product launches, ongoing refresh cycle and healthy security spending are cited to be contributing factors as well. FTNT also could benefit from Microsoft’s (MSFT) commentary on increased hybrid cybersecurity activity. Technical setup supports a new leg higher that could re-test $88 range .

    50:20: Taiwan Semiconductor (TSM) continues to remains strong, today an article on AnanandTech discusses 5nm wafer ramp that is projected to ramp above 7nm production, slated to begin in 2Q2020. The author’s views are based on TSM’s CEO commentary on CapEx spend – this also likely benefits ASML Holdings (ASML). Other companies that would benefit from production ramps are MKSI and AMAT.

    59:50: Micron (MU) Bullish discussion. The company has already reported earnings after which shares pulled back sharply. Technically, it has built a base that has turned up recently, especially today which was helped by peer LAM Research (LRCX) earnings and forecast of foundry business growth that was off the charts. Management also noted ‘early signs of NAND recovery’ that would benefit all chip manufacturers. Even MU management had commented similarly in their report, saying DRAM/NAND average selling price improvement that started in mid02019 with expectations of increases ahead, as early as February 2020. Aside from political issues (US-China trade war), the risk is small. FY2020 consensus may end up to be behind as forecasts were cut in early 2019, without recent revisions. Longer view, 6-9 month Target $65, Stop Loss $41.50. Trade idea is to buy December 47 calls for $2.82 or less.

    74:45: Attendee Q&A: BSX (has a coupe of catalysts ahead, nice rise on very high volume that points to more upside, remaining long), TSM (keep holding January 50 calls), TSLA (cutting losses, upside on future commentary may change the stock’s sentiment), DHR (small miss on guidance, not much in the way of catalysts at this time though but a good point to go long), KEYS (can go long with January 100 calls either here or a bit lower near $100), LGF.b (still holding common, a spinoff of STARZ could unlock value, or it could get taken private otherwise likely remains depressed), RTN (benefiting from earnings and also recent mention by UTX that, once merged, they would divest some industrial businesses that are under-performing, roll call spread out to further months), MSFT (roll out to December 145 calls ), AMZN (no play on earnings tonight, competition is getting stronger especially from mega-cap names like MSFT & WMT), GLD (roll out November calls to at least December), VAR (close longs here), CIEN (close out calls, outlook needs to improve before looking at it again).

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  • Oct 24 2019 3:18 PM
    Gold Miners (GDX) – Up +2.6% today. Nice candle and approx $916,000 net call premium bought and $330,000 net put premium sold. This is classic “bullish falling wedge” formation.

  • Oct 24 2019 3:34 PM
    Macquarie Infrastructure (MIC) – Hammer reversal candle and stock is attacking VoP resistance. Unusual buyer of 1,100 November 40 calls for $0.75 offer. Approx $82,000 bullish bet ahead of earnings on October 31 before market opens.

  • Oct 24 2019 3:37 PM
    Salesforce (CRM) – All those bulls who bought 9,000 October (25) Weekly 145 calls for $1.40 yesterday ahead of Microsoft earnings, they closed their position today for up to $3.75. Well done!

  • Oct 24 2019 3:46 PM
    EHealth (EHTH) – Somebody just bought 1,500 November 65/80 call spread for $4.40 into earnings tonight after market close. Approx $660,000 bullish bet. Good size bet and strictly an earnings play with stock oversold.
  • Oct 24 2019 3:50 PM
    ICHR, UCTT also massive breakouts on huge volume, semi equipment
  • Oct 24 2019 3:51 PM
    Yup! Semi equipment very hot after MKSI earnings today
  • Oct 24 2019 3:51 PM
    Any notable activity in AMZN?
  • Oct 24 2019 3:53 PM
    Amazon (AMZN) – Lots of scattered action but overall the bias is bullish with $5.9M call premium bought and $877,000 put premium sold.
  • Oct 24 2019 3:53 PM
    CDNS: Managed to get my Jan21 risk reversal placed yesterday. Now looking at a Dec swing trade and buying Dec 65 calls. Will have tight stop at 62.25 for Dec position. Make sense? Thanks
  • Oct 24 2019 3:53 PM
    Yes, good call and makes sense.
  • Oct 24 2019 3:53 PM
    KN still like for earnings?
  • Oct 24 2019 3:54 PM
    Knowles (KN) – Yes, still like it into earnings.
  • Oct 24 2019 3:56 PM
    Time to double down on QSR? www.investors.com
  • Oct 24 2019 3:57 PM
    QSR found support at major VoP level around $67.50. Certainly looks attractive here with defined stop at $66.
  • Oct 24 2019 3:59 PM
    Fahad, got lucky with an RTN call spread. Nov 210/215 for 60 cents. up 400% (Sold short leg for great credit). Anyway can you suggest a roll or would you just take profit?
  • Oct 24 2019 4:00 PM
    Raytheon (RTN) – Just take profits and step aside. Giddy up!
  • Oct 24 2019 4:00 PM
    ASML: Holding Apr 280 calls (close short Nov 280 calls for decent gain a week ago). Now thinking of spreading by selling Apr 310 calls. Mid-point is 8.80 so a decent risk reward set up I think. But think I’ll wait a couple of days since MACD/RSI are starting to show momentum and might get better structure early next week. Appreciate your thoughts. Thanks
  • Oct 24 2019 4:01 PM
    ASML – I don’t think its necessary to roll yet. That November 280 short leg is still a distance away. Just hold the calendar spread.
  • Oct 24 2019 4:02 PM
    Amazon Kaboom! Down $100
  • Oct 24 2019 4:03 PM
    Amazon is cutting Q4 sales guidance …
  • Oct 24 2019 4:05 PM
    I didn’t take a short position on buy puts on AMZN into earnings but this sell off is exactly what I was worried about fundamentally. Its core end markets are slowing. The only big cap tech stock where I just struggle to find good things.
  • Oct 24 2019 4:07 PM
    Amazon (AMZN) – Highlights:
    – Q3 EPS $4.23 vs $4.59 estimate, miss
    – Q3 Revenues $69.98B vs $68.83B estimate, beat
    – Q4 Revenues Guidance $83.25B vs $87.39B estimate, miss
    – Q4 Operating Income $2.05B vs $4.19B estimate, huge miss
    That operating income guidance is a disaster.
  • Oct 24 2019 4:13 PM
    Intel BOOM!!
  • Oct 24 2019 4:13 PM
    INTC BOOM
  • Oct 24 2019 4:18 PM
    Intel (INTC) – Boom! Good quarter. Not one of my favorite semi at this moment as I believe there are better faster growing semis out there to bet on, but very nice quarter from Intel indeed. And this will further advance the rise in semi sector tomorrow.
    – Q3 EPS $1.42 vs $1.23 estimate, big beat
    – Q3 Revenues $19.19B vs $18.05B estimate, beat
    – Q4 EPS Guidance $1.24 vs $1.21 estimate, beat
    – Q4 Revenues Guidance $19.2B vs $18.83B estimate, beat
    – FY2019 EPS Guidance $4.60 vs $4.39 estimate, beat
    – FY2019 Revenues Guidance $71B vs $69.44B estimate, beat
    Case in point. While quarter is very good optically vs expectations, on YoY basis all these metrics are down. It’s all about consensus being too low into earnings. See snapshot below. Gross margins down, operating income down, revenues flat.

  • Oct 24 2019 4:21 PM
    Amazon down $160 point after hours … Is it going to break that major VoP support at $1610 ?
  • Oct 24 2019 4:22 PM
    — Netflix was up huge since start of year until July. Then it fave back all gains in past 3 months and went red on the year.
    — Amazon now appears to be doing the same. Going to be down on the year?
  • Oct 24 2019 4:23 PM
    Buddy, can you post EHTH earnings please?
  • Oct 24 2019 4:27 PM
    EHealth (EHTH) – Big Kaboom! First it was up, then it reversed hard. Another quarter of huge beat on top line revenues. But guidance is a bit disappointing.
    – Q3 EPS ($0.43) vs ($0.62) estimate, miss
    – Q3 Revenues $69.9M vs $55.9M estimate, huge beat
    – FY2019 EPS Guidance $1.96 vs $1.95 estimate, penny beat
    – FY2019 Revenues Guidance $375M vs $383M estimate, miss
    “Giudance assumes the impact of the non-cash charge related to the fair value of the earnout liability in connection with the acquisition of GoMedigap remains at $0.60 per diluted share.”
  • Oct 24 2019 4:32 PM
    Be careful about potential fade in INTC tomorrow … may have already started after hours.
  • Oct 24 2019 4:33 PM
    SHOP down -3% after hours in sympathy with AMZN
  • Oct 24 2019 4:34 PM
    Have a Great Night Jags!
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