Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Jan 6, 2021 at 2:10 PM
  • Editor's Pick
  • Bernie's Content

To kick off the new year, we compiled 12 of our staff's favorite bull picks for 2021. But there's still some leftover holiday cheer over at Schaeffer's, so we wanted to add two names to the list. On Tuesday, we shared our optimism surrounding Appian (APPN), and today we are sharing our second pick, Charles Schwab Corporation (NYSE:SCHW).

SCHWTVChart

Charles Schwab completed the acquisition of discount brokerage rival TD Ameritrade on Oct. 6. Yet, it was not until early in November that investors had developed a heightened appreciation for the major potential upside for the company as a result of this giant acquisition, as the shares appreciated by about 30% from Nov. 4 into year's end. But it was the nature rather than the magnitude of this rally, that attracted us to SCHW as a potential “break-away” stock for 2021.

First, the advance was founded in the very strong business metrics the firm has reported since absorbing TD Ameritrade. Highlights from the November 2020 activity report (released in mid-December) included: 1) Net new client assets gained 168% from November 2019, and 2) New brokerage account openings for November surged year-over-year from 127,000 to 430,000.

Second, the granular daily price action underlying this year-end rally was characterized by a very bullish technical pattern, in which all pullbacks were contained at the sharply rising 10-day or 20-day moving averages. In addition, this rally plowed through the resistance in the $50 area that had characterized SCHW price action since the fourth quarter of 2018. With the “new” SCHW now on the threshold of $100 billion in market capitalization, the May 2018 all-time high at $60 is already within sights – with additional upside potential to the $70 area as the year progresses.

Lastly, a boon for options buyers is Charles Schwab stock is looking affordably priced at the moment. Specifically, the equity's Schaeffer's Volatility Index (SVI) of 34% sits in the 9th percentile of its annual range, meaning options players are pricing in incredibly low volatility expectations right now.

Published on Jan 6, 2021 at 2:00 PM
  • Options Recommendations

Buffalo Wild Wing's rival Wingstop Inc (NASDAQ:WING) has recently broken above its +50% year-to-date breakeven level, which it was having trouble doing for most of November and December. This area could act as support, as well as the myriad of moving averages the equity has pulled back to in recent weeks. Specifically, WING has retracted to the breakout level of a medium-term five-to-six-month downtrend. In other words, now is an opportune time to buy calls.

Looking toward short covering, short interest on WING is well off its highs, but continued covering could still produce tailwinds. In fact, during the most recent reporting period, short interest rose 10.2%, and now accounts for 10.6% of the stock's total available float.

There is also room for upgrades, with six covering brokerages sporting a tepid "hold" rating on the equity. Lastly, premiums look attractive on WING at the moment, based on its Schaeffer’s Volatility Index (SVI) of 45%, which ranks in the 10th percentile of its annual range. Our recommended call has a leverage ratio of 5.35, and will double in value on a 18.5% rise in the underlying security.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this WING commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Published on Jan 6, 2021 at 12:29 PM
Updated on Jan 6, 2021 at 12:42 PM
  • Midday Market Check

Stocks are substantially higher this afternoon, recuperating after a shaky morning heavily focused on Georgia's Senate runoff results. At midday, Democrat Raphael Warnock was projected to win against Republican Kelly Loeffler, and Democrat Jon Ossoff held the advantage against Republican David Perdue. Should both leading candidates win, Vice President-elect Kamala Harris' vote would break a tie, giving Democrats control of the Senate.

While some are concerned that a win for the Democrats could mean higher taxes and tougher restrictions for corporations, investors appear optimistic midday, with the Dow Jones Industrial Average (DJI) up roughly 460 points, after earlier hitting a new intraday high. The S&P 500 Index (SPX) is significantly higher as well, while the tech-heavy Nasdaq Composite (IXIC) is following suit. Also making headlines is the 10-year Treasury note yield, which rose above 1% for the first time since March.

Continue reading for more on today's market, including:

  • UnitedHealth stock drops following billion-dollar acquisition.
  • Major bank stock surges thanks to bull note, election buzz.
  • Plus, options swarm Bausch Health stock; cannabis stock surges as Democrats reach for Senate control; and Concord Medical stock plummets from record highs.

MMC 0106

One stock seeing notable options activity today is Bausch Health Companies Inc (NYSE:BHC), last seen up 6.4% to trade at $23.21, after the pharmaceutical name announced it will participate in the 39th Annual J.P. Morgan Healthcare Conference. So far today, 25,000 calls and 16,000 puts have already crossed the tape, which is six times the intraday average. Most popular by far is the weekly 1/8 22-strike put, where new positions are being opened, followed by the monthly January 2021 22-strike call. The equity has been chopping higher since an early October bull gap, with support from the 40-day moving average. and it up over 41% in the past three months.

Meanwhile, one stock near the top of the New York Stock Exchange (NYSE) today is marijuana producer Hexo Corp (NYSE:HEXO), last seen up 16% at $4.82. The entire sector is getting a boost today after the Democratic party won a key U.S. Senate race in Georgia, bringing the party closer to sweeping Congress and acting on their promise to legalize marijuana. While the security is still far off its pre-pandemic levels, HEXO is up 70% in the last six months. 

Near the bottom of the NYSE today is Concord Medical Services Hldg Ltd (NYSE:CCM), last seen down 5% to trade at $3.20, though a catalyst for the negative price action remains unclear. Shares have been cooling off from a major bull gap, however, which boosted shares to a Dec. 15, six-year high of $5.89. The security is still receiving support from the 20-day moving average, and sports a 23.5% year-over-year lead.  

CCM 40 Day

Published on Jan 6, 2021 at 10:59 AM
  • Intraday Option Activity
  • Buzz Stocks
 
Published on Jan 6, 2021 at 10:42 AM
  • Buzz Stocks
  • Earnings Preview

Was Albertsons' 2020 IPO Overlooked?

by Schaeffer's Digital Content Team

Albertsons Companies, Inc. (NYSE:ACI) is one of the largest food and drug retailers in the United States, operating more than 2,200 retail food and drug stores with over 1,700 pharmacies and 400 associated fuel centers across 34 states.

ACI did not become a publicly traded company until June of 2020. On June 26, shares of ACI common stock began trading at $16.00 per share. Since its initial public offering (IPO), Albertsons stock price has seen a 52-week low of $12.91 on Sept. 18 culminate in a record high of $17.82 on Monday.

ACI Stock Chart

Investors should take a closer look at Albertsons stock as the company gears up for its first earnings report of 2021 on Jan. 12. ACI scored a post-earnings pop of 5.8% back in mid October, and the company's first earnings report resulted in a 5.4% drop on the charts. For this upcoming report, options traders are pricing in a much larger 9.1% move after the quarterly report.

With less than 12 months as a public company, Albertsons announced its first ever cash dividend following the third quarter of 2020. ACI paid its investors out at $0.10 per share.

While other IPO’s like Airbnb (ABNB) and DoorDash (DASH) stole headlines for weeks, Albertsons' IPO stayed under the radar in 2020. This is kind of odd, as ACI appears to have all the qualities of a great value stock, which includes an amazing forward-price earnings ratio of 10.99 that might even still be a modest estimate. In addition, ACI has a consistent history of top and bottom line growth. Albertsons has added over $8 billion in total revenue since 2017, bringing its total stacked up to $68 billion over the past 12 months. In a similar fashion, the company has also added over $1.3 billion in net profit since 2017, bringing its total net profits up to nearly $1 billion over the past 12 months.

Albertsons stock is well positioned for more solid growth in 2021. The company has already begun administering vaccines and is preparing to meet the high demand for immunizations in the U.S. In December, Albertsons announced a series of proactive customer-oriented measures including the launch of a new website with important information for the public and the implementation of high safety standards in its pharmacies and stores. In the December press release, Albertsons also announced its plans to hire additional pharmacy staff nationwide to ensure it meets demand for vaccine distribution.

Published on Jan 6, 2021 at 10:27 AM
  • Buzz Stocks

The shares of Walgreens Boots Alliance Inc (NASDAQ: WBA) are up 2.5% to trade at $42.18 this morning, after it was reported that the company is selling its Alliance Healthcare businesses to AmerisourceBergen (ABC). The deal is worth $6.5 billion in cash and stock, and gives Walgreens a chance to focus more on its core pharmacy unit and retail business.

To put it mildly, WBA has had a choppy run on the charts over the last six months. The equity fell as low as $33.36 on Oct. 31, and was trading as high as $44.87 by Nov. 16. And while the security has shed 30.6% year-over-year, it looks poised to close above its 20-day moving average for the second session, after spending considerable time below the trendline.

Switching gears, today's options pits are seeing a flurry of call activity. In the first hour of trading, over 21,000 calls have exchanged hands -- double the intraday average and volume pacing in 99th percentile of its annual range -- versus just 2,214 puts. The most popular is the weekly 01/08 43-strike call, followed by the 44-strike call from the same series. 

Today's preference for calls is nothing new, In fact, Walgreens stock's 50-day call/put ratio of 6.55 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than all but 1% of all other readings from the past year. This means that options traders are picking up long calls at a much faster-than-usual clip.

Published on Jan 6, 2021 at 10:15 AM
  • Buzz Stocks

Oracle May Be the Next Big Thing in Dividend Stocks

by Schaeffer's Digital Content Team

Oracle Corporation (NYSE:ORCL) is quickly becoming one of the biggest software companies in the world. Recently, the software company made waves after joining the growing list of tech companies to move their headquarters out of California to Austin, Texas in December 2020.

Oracle stock scored a record high of $66.20 on Dec. 23. And while the shares have pulled back since then, the $62 level  --home to its previous peaks -- has so far contained the damage. Year-over-year, ORCL is up 19.4%, yet 14 of 22 brokerages in coverage maintain tepid "hold" ratings.

ORCL Stock Chart

Oracle also has a forward dividend of $0.96 and a forward dividend yield of 1.51%. In the last quarter, Oracle paid its investors out $0.24 per share in dividends. Oracle has consistently paid dividends since 2009. ORCL's first dividend payment was for $0.05 per share.

Oracle stock has maintained a long-term bullish trend since the dot-com bubble, and it looks likely to continue its upward path, albeit at a slow and steady pace. The company holds a massive market cap value of $189.56 billion but trades at a modest 19.04 price-earnings ratio. What is even more impressive is Oracle stock’s forward price-earnings ratio of 14.95.

Oracle will likely yield some decent returns for investors holding the stock long-term and the company has more than quadrupled its dividend in just over a decade, which makes ORCL a very intriguing dividend bonus play as well.

Lastly, Oracle stock's short-term options are attractively priced. Specifically, the equity's Schaeffer's Volatility Index (SVI) of 24% is in just the 9th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations for ORCL.  

Published on Jan 6, 2021 at 10:13 AM
  • Buzz Stocks

UnitedHealth Group Inc (NYSE:UNH) this morning said it will acquire Change Healthcare (CHNG) for $7.84 billion in cash, or $27.75 per share -- a 41.2% premium to Change stock's closing price on Tuesday. The company hopes to strengthen its healthcare technology services unit under the Optum division. UNH is down 2.2% at $337.31, while CHNG is surging, up 33.3% to trade at a fresh high of $24.31. 

While UNH is falling back today, the security did hit a peak of $367.95 in early November. The security has since traded just south of this area, stalling out at the $358 level and later the $351 mark. Though the shares are taking a breather, the 60-day moving average has provided solid support at the charts since this pullback, and the equity still sports a year-over-year lead of 18.3%. 

Meanwhile, sentiment in the options pits has been quite bearish. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) UNH sports a 10-day put/call volume ratio of 1.42, which stands higher than all but 6% of readings from the past year. This is echoed in the security's Schaeffer's put/call open interest ratio (SOIR) of 1.19, which sits in the 89th percentile of its annual range, suggesting short-term option traders have rarely been more put-biased. 

What's more, options are relatively affordable right now. This is per the equity's Schaeffer's Volatility Index (SVI) of 33% which stands higher than just 18% of readings from the past 12 months, indicating option players are pricing in relatively low volatility expectations at the moment. 

 

 

 

 

 

Published on Jan 6, 2021 at 9:26 AM
Updated on Jan 6, 2021 at 9:35 AM
  • Opening View
 
Published on Jan 6, 2021 at 7:00 AM
  • Indicator of the Week
    
Published on Jan 6, 2021 at 6:53 AM
  • Buzz Stocks

Today's Stock Market News & Events: 1/6/2021

by Schaeffer's Digital Content Team

Sentiment on Wall Street brightened during the second trading day of 2021 yesterday as investors brushed off rapidly increasing COVID-19 cases and continued uncertainty surrounding the Georgia runoff election to focus on the possibility of a strong economic recovery. Upbeat manufacturing data and a notable jump in oil prices helped boost overall investor sentiment, allowing all three market indexes to finish the day in the green.

The Dow Jones Industrial Average (DJI - 30,391.60) added 167.7 points on Tuesday. The S&P 500 Index (SPX - 3,726.86) tacked on 26.2 points and the Nasdaq Composite (IXIC - 12,818.96) added 120.5 points yesterday. The Cboe Volatility Index (VIX - 25.34) lost 1.6 points during yesterday's trading session.

The market heats up today as investors get ready to unpack the latest ADP employment report. In addition, factory orders data, and the Markit services PMI will be released. The latest meeting minutes from the Federal Open Market Committee (FOMC) are coming out. A solid handful of companies will also release their earnings report today as earnings season revs up.

The following companies are slated to release quarterly earnings reports today, January 6:

The Greenbrier Company, Inc. (NYSE:GBX -- $35.96) designs, manufactures, and markets railroad freight car equipment. Greenbrier will report its first-quarter earnings of 2021 before the bell today.

MSC Industrial Direct Co., Inc. (NYSE:MSM -- $82.32) distributes metalworking and maintenance, repair, and operations (MRO) products. MSC Industrial will report its first-quarter earnings of 2021 before the bell today.

RPM International, Inc. (NYSE:RPM -- $89.08) manufactures and sells specialty chemicals for the industrial, specialty, and consumer markets. RPM will report its second-quarter earnings of 2021 before the bell today.

The Simply Good Foods Company (NASDAQ:SMPL -- $30.45) operates as a consumer packaged food and beverage company. Simply Good Foods will report its first-quarter earnings of 2021 before the bell today.

Jefferies, Inc. (NYSE:JEF -- $24.92) operates as a diversified financial services company. Jefferies will report its fourth-quarter earnings after the market closes today.

Resources Connection, Inc. (NASDAQ:RGP -- $12.58) provides consulting services to business customers. Resources Connection will report its second-quarter earnings of 2021 after the market closes today.

The Schaeffer's Investment Research market research analysts just released their 11 top stock picks for '21 in our special report that is completely free to all Schaeffer's readers. To dig into the absolute best stock to buy in 2021,  just fill out this simple form and you will be quickly directed to a full report including Schaeffer's 2021 Top Stock Picks.

Looking ahead to Thursday, economic activity shows no signs of slowing down, with the first round of jobless claims data of 2021 due out. Investors will be looking at trade deficit data for November, and the ISM non-manufacturing index. All economic dates listed here are tentative and subject to change.

Published on Jan 5, 2021 at 4:28 PM
  • Market Recap

The Dow staged an impressive comeback on Tuesday, finishing the day with a 167-point pop after a morning spent swimming in red ink. Sentiment on Wall Street brightened during the second trading day of 2021 as investors brushed off growing COVID-19 cases and uncertainty surrounding the Georgia runoff election to focus on the possibility of a strong economic recovery. Upbeat manufacturing data and a notable jump in oil prices helped boost sentiment, allowing both the S&P 500 and Nasdaq Composite to reverse losses from earlier in the day and finish with modest gains. 

Continue reading for more on today's market, including:

  • Unpacking another one of Schaeffer's top picks for 2021. 
  • BBBY showed surprising resilience ahead of its quarterly report. 
  • Plus, behind Twitter's latest podcast acquisition; LULU gets an upgrade; and MU pops ahead of earnings.  

The Dow Jones Industrial Average (DJI - 30,391.60) added 167.7 points, or 0.6% on Monday. Twenty-two of the blue-chip components saw gains for the day, with Boeing (BA) leading the charge with a 4.4% pop. Visa (V), meanwhile fell to the bottom of the eight losers on a 1.5% dip.

Meanwhile, the S&P 500 Index (SPX - 3,726.86) tacked on 26.2 points, or 0.7% and the Nasdaq Composite (IXIC - 12,818.96) rose 120.5 points, or nearly 1%.

Lastly, the Cboe Volatility Index (VIX - 25.34) lost 1.6 points, or 6%. 

Closing Summary 0105

NYSE 0105

  1. Two analysts have already lifted their price targets ahead of Apple's (AAPL) highly anticipated earnings event, slated for later this month. Both Canaccord and Walkley upped their price estimates, citing the 5G upgrade cycle and strong demand for the iPhone 12. (MarketWatch)
  2. Department store staple Macy's (M) will be closing 45 of its locations by mid-year as part of its plan to shutter 125 stores by 2023.  (CNBC) 
  3. Unpacking Twitter's recent podcast acquisition
  4. Deutsche Bank has high hopes for Lululemon stock.
  5. Breaking down Micron stock's double upgrade ahead of earnings.  

There were no notable earnings reports today.

UVOL 0105

Oil Hits 10-Month Highs on OPEC+ Agreement

Oil surged to its highest level since February today following the Organization for Petroleum Exporting Countries and their allies' (OPEC+) decision to hold production outputs steady in February, which includes an additional 1 million barrel cut from Saudi Arabia. February-dated crude added $2.31, or 4.9%, to settle at $49.93 per barrel, and earlier touched an intraday high of $50.20. 

Uncertainty surrounding the Georgia runoff elections bolstered gold today, as investors turned toward the safe haven commodity. February-dated gold added $7.80, or 0.4% for the day, to settle at $1,954.40 an ounce.


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