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3 Monster Stock Prediction For Earnings The Week of July 30
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF AAPL AND TSLA
Apple gets its turn this week to report results, and unlike past quarter chatter around the iPhone, demand has been relatively quiet. Thankfully. It is likely because this current iPhone cycle is nearing its conclusion and the focus will begin shifting to the new slate of phone to be announced sometime in early September.
Analysts are looking for the company to report that earnings increased by more than 30 percent in the fiscal third- quarter to $2.18 per share. Revenue is expected to have climbed over 15.5 percent to $52.43 billion. Analyst estimates have been relatively unchanged for the company over the past month.
The straddle for expiration on August 17 is pricing in a rise or fall in the stock of about 5 percent from the $190 strike price, placing the stock in a trading range between $181 and $200. The number of calls at that strike price massively outweighs the puts by a ratio of about of about 3 to 2, with 21,000 open calls to only 14,000 open puts. The $200 calls have an open interest that is nearly double the number of open contracts at the $180 puts. It suggests to me that more trades are betting on shares of Apple to rise following results than falling.
Apple stock has held firm above the $180 strike price since its earnings call in May. With the stock currently trading around $190, the $186 level represents near-term support.
Service revenue may be the big thing to watch, and if Apple can show significant service revenue growth, it may be enough to get the stock move higher after results. That will make it the critical metric I will be watching, service growth and how much services revenue sales attribute to total sales.
Prediction Apple rises post results.
Tesla is set to report results on Wednesday after the close, and all eyes will be on the company’s Model 3 ramp, its cash balances, and guidance for profitability. To say it is a big quarter for Tesla is an understatement.
Analysts forecasts are calling for second-quarter revenue to grow by over 41 percent to $3.94 billion. But analysts have been cutting those estimates over the past month, reducing estimates by over 6 percent.
The long straddle is pricing in a rise or fall for Tesla’s stock of about 12 percent from the $300 strike, for expiration on August 17. It places the stock in a massive trading range of $264 to $336. The puts outweigh the calls at that strike price by more than 2 to 1, with 5,400 open put contracts. The $280 puts and the $320 calls have nearly the same levels of open interest at roughly 2,500 open contracts a piece. The near money contracts are looking for a declining, but likely not below $280, as the bets at $280 are not that large.
Support in the chart is firm at $275, which is likely why the options are not seeing the stock falling much below $280. Should the stock rise, resistance appears firm around $330.
For Tesla, it may come down to whether or not the company can guide profitablity, and has demonstrated its Model 3 production rate is sustainable. The Bloomberg Model 3 tracker blog has gone radio silent since the end of June. But it is suggesting a trend at over 6,000 Model 3’s per week.
On June 29, the highest VIN registered was at 56,400, roughly. As of July 28, the highest VIN recorded was at roughly 77,000. That is about 21,000 VINS registered in July, which comes to about 735 Model 3 per day, or 5,150 Model 3’s per week on average. We will see.
Tesla has a lot riding on the results, and Elon Musk isn’t as cheery as a month ago on Twitter. My gut says he is working extra hard to prove the shorts wrong. Prediction Tesla rises posts results.
Square’s stock may come under increased focus this week, especially given that Twitter stock got crushed on Friday. Fairly or not, Jack Dorsey runs both companies, and that might be enough to make investors extra shaky.
Analysts are looking for substantial second-quarter growth out of the company, with earnings expected to climb by 61 percent to $0.11 per share, and revenue to rise by 54 percent to $369 million. Over the past month, Analysts have upped their earnings estimates by over 7 percent, while revenue estimates have climbed by 2 percent.
The options are decidedly bearish, with nearly 22,000 open put contracts to only 15,600 open call contracts at the $70 strike price for expiration on August 17. The straddle is implying a rise or fall of about 11 percent from the $70 strike price, placing the stock between $62.50 and $77.60. Another negative for Square, the $65 puts have nearly 10,000 contracts, to the $75 calls 4,200 open contracts. Again, betting looks negative all around.
The chart looks bullish, with a bullish relatively strength index which has been steadily trending higher since April. Additionally, the stock price has been trending nicely higher as well. Support rests around $67.50 and then $62
With expectations extremely high, and the markets adverse reaction to Visa and MasterCard’s strong results, it may be hard for Square to beat estimates by enough to please the market, sending the stock higher.
Prediction: Square beats on top and bottom, but it isn’t enough to satisfy Wall Street’s crazy expectations, shares fall post results.
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Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
#apple $tesla $square #earnings