Markets

S&P 4,000 Thursday – It’s Up to AAPL to Seal the Deal

July 28, 2022

887

We’re back baby!

Even with a 0.75% rate hike yesterday, the S&P 500 blasted back over 4,000 and that is just what we were hoping for this week as the Nasdaq, now 12,540 – is exceeding the expectations we had on Monday, when I said:

As you can see from this list, we’ll have a very firm handle on the Nasdaq by the end of the week and all we’re looking for from a technical standpoint is for the Nasdaq to stay over 12,000 and the S&P to hold 4,000 and the rest is very likely to sort itself out.

Now you can see why, on July 14th, I was “optimistic” during my Bloomberg interview. We are still working through the 10 favorite trade ideas I listed that day. LEVI, CROX, WSM, F, LOGI, JPM and THC have already started moving higher while RH, BBY & BIG are still floundering and, as I was reminded this morning, WBA is still under $40, which is $34Bn and the company makes about $4Bn a year so not even 9 times earnings to buy Walgreens-Boots.

We just reviewed their Earnings Presentation this morning in our Live Chat Room and I can’t believe the negativity on this place where 67M people were vaccinated since last year. ALL those people came to the store. If they each spent $10 while they were there, that’s $670M of retail business and earnings were indeed up 13.9% from last year.

I guess people think Covid is “over” but it’s not by a long shot and we will be needing boosters for years to come. Other than our Money Talk Portfolio, we had cashed in our WBA positions so now is a good time to add them back.

For our Long-Term Portfolio, let’s:

- Sell 10 WBA 2024 $40 puts for $6 ($6,000)
- Buy 25 WBA 2024 $35 calls for $6.80 ($17,000)
- Sell 25 WBA 2024 $45 calls for $2.35 ($5,875)

That’s net $5,125 on the $25,000 spread that’s half in the money to start. To the downside, we risk being assigned 1,000 shares at $40 and, if we lose the $5,125 entirely, our net cost of 1,000 shares would be $45.125 per share. On the other hand, we are starting out half in the money on a $25,000 spread with $19,875 (387%) upside potential in 18 months.

In reality, we’re going to be thrilled to buy more if WBA goes lower and the puts can be rolled to 2025 $35 puts when they come out. Having 25 spreads also paves the way for us to sell short calls while we wait. The October $40s, for example, are $1.60 for 85 days (and we have 540 days to sell) so just selling 10 of those for $1,600 gives us 32% of our cash outlay back – but we’re too optimistic to do that just yet.

BBY we are not going to play at the moment as the company just guided lower for Q2 (earnings will be out Aug 30th) but Revenue is projected at $10.26Bn vs $10.83Bn expected – a 5% miss – so we’ll be looking for an over-reaction to take advantage of in our Earnings Portfolio.

“As high inflation continued and consumer sentiment deteriorated, demand in the consumer electronics industry softened even further, leading to Q2 results below the expectations we shared in May,” said BBY CEO Corie Barry.”

BBY has a gloomy outlook but they’ll figure it out and, with net profits still around $2Bn, I don’t mind paying $16.75Bn for the company ($74.50/share) while they ride out the storm. When times were good, they were getting $140/share – so I’d rather buy them when they are down – we’ll see what kind of sale prices we get off this guidance!

8:30 Update: Speaking of gloomy, Q1 GDP came in much better than the prior estimate of -1.6% at -0.9% but not as good as Leading Economorons had projected at -0.5% (based on what, I have no idea). So we are getting better – just not that fast. Core PCE prices were 4.4%, cooling off from 5.2%, so that’s good too. No reason for the market to be upset about this so it’s all up to AMZN and AAPL this evening – really just AAPL, with their $2.5 TRILLION Dollar market cap.

AAPL never really got cheap again after we sold it so we only have it left in our Butterfly Portfolio so I almost hope they do miss and give us an entry but I don’t think they will as they just hired Lamborghini’s chassis designer, Luigi Taraborrelli, to join their EV division. AAPL already has a partnership with Ferrari so I guess we can see which way they are heading in EV design – not exactly cost-cutting moves.

Still, China lockdowns and supply issues are a wildcard for Q2 sales and guidance – so we’ll see what they have to say this evening.

That brings us back to our final laggard, Big Lots (BIG) and boy do people not understand their model. Like any Retailer, BIG is dealing with cost pressures in gross margins due to freight and inventory shrink (theft) while operating costs are heightened due to supply chain inflation and labor inflation (increasing wages to store employees).

BUT, when you hear about stores like TGT and WMT taking hits as they seek to rebalance their inventory – think about Big Lots scooping that inventory up at low prices and then selling it to discount shoppers.

BIG generates $4.4M per location vs $2-3M at Dollar Tree or Dollar General yet BIG has a Market Cap of just $565M at $19.50 with $5.7Bn in sales and they made $178M last year (this year probably even). DLTR is valued at $36Bn with $1.8Bn (20x) in profits on $28Bn in sales and DG is valued at $55.5Bn with $2.5Bn in profits (20x) on $37Bn in sales.

Big has 1,400 stores vs 8,000 for DLTR and 18,000 for DG so it’s got plenty of room to grow and that’s how we look at it – as a long-term investment. The company has authorized $160M to buy back it’s own stock – 1/3 of it if they spend it at this price!

We already have BIG in our Long-Term Portfolio and, at this point, we’re going to buy back the 20 short 2024 $55 calls for 0.35 ($700) and roll our 40 2024 $30 calls at $2.40 ($9,600) to 60 of the 2024 $15 ($6.50)/30 ($2.40) bull call spreads at net $4.10 ($24,600) and, after earnings, we’ll see about selling some short calls (we already sold short puts).

Our original net was $5,620 and now we’re spending net $15,700 to end up with 60 of the 2024 $15/30 spreads ($90,000 potential) that are $24,000 in the money with 10 2024 $30 puts. In April , we had rolled for $8,000 and doubled down for $14,500 for a total net of $43,820 so, at $30, our potential gain is now $46,180 (105%) despite BIG being down 50% from our initial entry in October of last year.

As a new trade on BIG for our Earnings Portfolio, let’s:

- Sell 10 BIG 2024 $20 puts for $6 ($6,000)
- Buy 20 BIG 2024 $20 calls for $4.80 ($9,600)
- Sell 20 BIG $2024 $30 calls for $2.40 ($4,800)

That’s a net credit of $1,200 so our worst-case is owning 1,000 shares of BIG for net $18.80 ($18,800). The upside potential at $30 is $20,000 and anything over $19 is a profit. Don’t you just love options?!?

PLENTY of things for us to buy in a recovering market – especially when CEOs don’t have faith in their own company as they buy into the incessant doom and gloom we are all being bombarded with.

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1020

Member

July 28, 2022 8:58 am

Good Morning.

phil

Author

July 28, 2022 9:47 am

Good morning!

Looks like GDP was good enough.

Nasdaq, S&P 500, Dow Jones cut losses; GDP recession sign eases Fed fears

SP500 +0.24%
Jul. 28, 2022 9:31 AM ET
6 Comments
Major market averages are volatile Thursday morning as investors try to digest a second-straight quarter of GDP contraction.
The Nasdaq (COMP.IND) trades higher by 0.3%, S&P (SP500) is up 0.3%, and the Dow (DJI) has gained 0.2%.
Amid another wave of earnings, Meta is dragging on the market, sliding post-results as analysts fret over ongoing challenges.
Preliminary Q2 GDP fell 0.9%, compared with expectations for a 0.5%. Two quarter of negative GDP is one shorthand definition of a recession (although some argue the NBER as the final arbiter). Either way it’s a soft economy.
But in a case of bad news is good news, equities could benefit on anticipation that this will prompt the Fed to rein in tightening even further. Stocks surged yesterday after Jay Powell said that the fed funds rate was already in the range of neutral with the latest hike of 75 basis points.
Bond yields erased gains. The 10-year Treasury yield (US10Y) is down 6 basis point to 2.66% and the 2-year yield (US2Y) is down 13 basis points to 2.84%.
“We think market rates have peaked,” ING said. “Specifically, the 3.5% area reached by the 10yr Treasury yield in mid-June was most likely it.”
“We argue that it’s not about the level per se. It’s about the cycle, and the fact that the influential 5yr area is now signalling a turn in the cycle. Specifically, the 5yr yield is no longer sitting above an interpolation between the 2yr and 10yr (and trading cheap), but is now trading rich.”
Also adding to evidence of a weakening economy, weekly jobless claims remained elevated. They unexpectedly rose to 256K.

See the stocks making the biggest moves this morning.

BBY is actually going higher on the news – I guess not as bad as expected.

META down 6% but not too devastating as it’s just back to the lows:

https://charts2.finviz.com/chart.ashx?t=meta\&p=w&s=y

RICK just bought out a big strip club in Florida for $10M in cash and $15M in notes and supposedly it drops $4M to the bottom line. RICK sold off very sharply on Covid and I can’t understand how anyone goes to a strip club these days but people still do. In fact, they only lost $6M in 2020 and made $30M last year and expect $45-50M going forward so this new club will add 10% to that and $55/share is only $510M in market cap.

https://charts2.finviz.com/chart.ashx?t=rick%20&ty=c&ta=1&p=d&s=l

So, if you want to pay for your lap dances, try:

Sell 5 RICK Feb (as far as it goes) $50 puts for $6.50 ($3,250)
Buy 10 RICK Feb $55 calls for $10 ($10,000)
Sell 10 RICK Feb $65 calls for $5 ($5,000)

That’s net $1,750 on the $10,000 spread with $8,250 (471%) upside potential in just 7 months.

stockbern

Member

July 28, 2022 9:57 am

SPWR up today. We got 2024, but still

phil

Author

Reply to stockbern

July 28, 2022 10:04 am

They are passing that bill finally. We knew it would happen eventually – either that or it wouldn’t matter as the World turns to ash around us…

https://charts2.finviz.com/chart.ashx?t=spwr%20&ty=c&ta=1&p=d&s=l

phil

Author

July 28, 2022 10:05 am

Wow, El-Erian pooping the party:

Mohamed El-Erian: We’re not out of stagflationary danger yet
Now!
Former PIMCO head Mohamed El-Erian said Thursday that stagflation remained a threat, as the latest GDP figures showed that the economy was weakening “really fast” and the most recent Federal Reserve meeting ended with mixed messages.
“I think the bottom line is that we’re not out of stagflationary forces yet,” the advisor to Allianz and Gramercy told CNBC.
El-Erian acknowledged that higher interest rates would bring down inflation but this reduction won’t happen fast enough “given how fast the economy is weakening.” He argued that this would put the Fed in “a dilemma” about how to handle monetary policy in a potentially stagflationary environment.
The commentary followed the release of the latest reading of U.S. GDP, which showed that the economy shrank by 0.9% in Q2. This followed a contraction of 1.6% in Q1, fueling fears that the U.S. had already entered a recession.
Meanwhile, the GDP data followed a Fed decision on Wednesday, with the central bank raising interest rates by another 75 basis points. The stock market rallied following the policy announcement after Fed Chair Jerome Powell issued dovish comments.
El-Erian criticized the Fed’s communication strategy, saying that the central bank maintained a more hawkish stance in its official release that was undercut by Powell’s comments.
In terms of his preferred policy, El-Erian weighed in on the side of fighting inflation, contending that some price increases could linger.
“I hope [the Fed] focuses on putting the inflation genie back into the bottle. I think the worst outcome is that next year, we are in a recession and inflation has proven very sticky,” he said.
The former PIMCO head added that this could lead to a “double whammy” that would be hard to combat, leading to his preference for a strong anti-inflation stance.

phil

Author

July 28, 2022 10:11 am

Stifel agrees with me:

Kraft Heinz upgraded to ‘Buy’ at Stifel after earnings reveal strong pricing power
Jul. 28, 2022 8:23 AM ET
Kraft Heinz’s (NASDAQ:KHC) post-earnings plunge has created an attractive entry point for investors, according to Stifel analyst Christopher Growe.
Shares of the Chicago-based food and beverage giant fell over 5% on Wednesday despite beating on top and bottom line earnings estimates and raising full-year sales forecasts.
Growe told clients on Thursday that the stock’s drop has provided “strong upside” opportunity as the stock faces a steep discount to its peers. Additionally, he indicated the operational improvements and international sales growth for the company are not being appropriately appreciated.
As such, he upgraded the stock from “Hold” to “Buy” given the opportunity.
“We see the combination of strong pricing taking hold, the potential for less negative elasticity levels, some relief in the input cost environment, and continued robust International growth as keys to driving the shares higher,” Growe wrote “Our upgrade of the shares follows the company’s solid showing in 2Q22 – sales and EBITDA were both above expectations driven by both stronger price realization and volume growth.”
While he acknowledged inflation as a lingering concern across consumer products, Growe indicated he remains impressed by the company’s resilience to these pressures as displayed in the second quarter earnings release. Indeed, he anticipates gross margins to only grow into the back half of 2022.
Growe assigned a $43 price target, suggesting over 15% upside from Wednesday’s closing price.

And I was rooting for JBLU – the last thing we needed was more FTR

JetBlue CEO: Spirit merger ‘one of the biggest things in a decade’ for airline competition
SAVE +3.93%
Jul. 28, 2022 8:22 AM ET
JetBlue CEO Robin Hayes acknowledged Thursday that a newly signed deal to acquire Spirit Airlines (NYSE:SAVE) will receive “a significant amount of regulatory scrutiny,” but he argued that the transaction will ultimately add to the competition in the airline industry.
“[The merger is] really creating what I think could be one of the biggest things in the last decade or so in helping the industry in the U.S. remain competitive,” the head of JetBlue (NASDAQ:JBLU) told CNBC.
Hayes’ comments followed news that JBLU had reached a merger agreement with SAVE after a drawn-out bidding war with Frontier Air Group (ULCC). SAVE had entered into a previous merger deal with ULCC but terminated that commitment as part of its new combination with JBLU.
Under terms of the transaction, JBLU will purchase SAVE for $33.50 per share in cash, or a total of around $3.8B.
A combination between JBLU and SAVE would create the fifth-largest U.S. airline, behind American (AAL), Delta (DAL), Southwest (LUV) and United (UAL).
The size of the combined airline caused many to fear the merger would be struck down by regulators. However, Hayes argued that creating a fifth major competitor would provide the best value for travelers, lowering fares and improving customer service.
“The best thing that we can do to create a more vibrant, a more competitive industry is to really empower this new larger JetBlue,” Hayes said.
The ranks of critics of the JBLU offer included Spirit CEO Ted Christie, who had defended the firm’s previous agreement with ULCC as much more likely to avoid regulatory scrutiny. During the bidding war, Christie had also called JBLU “childish” and “cynical.”
Appearing in the same interview as Hayes, Christie backed off these earlier comments, stating “a lot’s been said over the last few months, always with our stakeholders in mind.” He noted that he was contractually obligated to defend the ULCC deal when that agreement was in place.
On why the agreement finally came together this week after months of wrangling, the CEOs acknowledged that the financial terms matched what JBLU had been offering “for a while.” However, SAVE needed assurances that it could continue to compete during the lead-up to closing, in case regulators blocked the purchase.
Along those lines, Hayes noted that JBLU has already agreed to “unprecedented divestiture commitments” as part of an effort to assuage worries about competition.
For more on the merger deal, see why Seeking Alpha contributor Dhierin Bechai calls the agreement “a desperation buy for JetBlue.”

https://charts2.finviz.com/chart.ashx?t=jblu%20&ty=c&ta=1&p=d&s=l

Can’t say they are a buy as they are way overpaying but I think it will work long-term.

F popping as well on earnings.

https://charts2.finviz.com/chart.ashx?t=f%20&ty=c&ta=1&p=d&s=l

Mastercard Q2 earnings bolstered by robust consumer spending

MA +0.58%
Jul. 28, 2022 8:15 AM ET
2 Comments
Mastercard (NYSE:MA) stock is rising 1.3% in Thursday premarket trading after the payment card network company’s Q2 earnings and revenue topped Wall Street expectations as consumers’ spending increased in the quarter, and cross-border travel surged even with elevated inflation.
“Increasing inflationary pressures have yet to significantly impact overall consumer spending but we will continue to monitor this closely,” CEO Michael Miebach said.
Q2 adjusted EPS of $2.56, beating the $2.36 consensus, increased from $2.76 in the prior quarter and from $1.95 in the year-ago quarter.
Q2 gross dollar volume of $2.1T vs. $1.9T in Q1.
Cross-border volume growth of 58% Y/Y, local currency basis; compares with 53% in the prior quarter.
Switched transactions increased 12% Y/Y in Q2, vs. +22% in Q1.
Q2 adjusted operating expenses of $2.3B, increased from $2.2B in the prior quarter and from $2.1B in the year-ago quarter.
Adjusted operating margin of 57.9% vs. 57.5% in Q1 and 53.2% in Q2 2021.
Q2 adjusted net revenue of $5.49B vs. $5.26B consensus, increased from $5.14B in the prior quarter and from $4.53B in the year-ago quarter.
Conference call at 9:00 AM ET.

Earlier, Mastercard (MA) non-GAAP EPS of $2.56 beats by $0.20, revenue of $5.5B beats by $240M

Show me the Recession!!!!

yodi

Member

July 28, 2022 10:15 am

Phil I hate to tell you your vavorite stock is going to play with the 38th now.

Even look at PFE great beat down 3.2%. I like FSLR today!

phil

Author

July 28, 2022 10:16 am

Qualcomm slides as analysts lower estimates, citing ‘weakening’ smartphone market
QCOM +2.30%
Jul. 28, 2022 7:57 AM ET
3 Comments
Qualcomm (NASDAQ:QCOM) shares slid on Thursday after the chipmaker offered weaker-than-expected fourth-quarter guidance as the “weakening” smartphone market is finally hitting the company.
UBS analyst Timothy Arcuri, who rate Qualcomm (QCOM) shares neutral, lowered his estimates for the fourth-quarter to $11.43B and $3.13 per share, down from $12.35B and $3.35, noting that “headwinds are likely to persist” after the company lowered its 5G smartphone guidance by roughly 75M units.
“Comps in China are bottoming, but these demand headwinds in general are likely to persist and there is the potential that in an effort to avoid leaving [money] on the table again like it did earlier this year due to component shortages, [Apple] sets a high bar for the supply chain and a final shoe could drop late this year,” Arcuri wrote in a note to clients.
Arcuri, who also lowered full-year 2022 estimates, noted that Qualcomm (QCOM) continues to diversify away from Apple (NASDAQ:AAPL) and “materially” expanded its business with Samsung (OTCPK:SSNLF). It extended its licensing agreement through 2030 and will supply the South Korean electronics giant with chips for premium Galaxy handsets, PCs, tablets, extended reality devices and other electronics.
And while other businesses such as automotive and internet of things continue to grow, the company is still largely reliant on smartphones, as an estimated 70% of revenue is “directly tied” to modem and chipset revenue and licensing over the next few years, Arcuri added.
Qualcomm (QCOM) shares fell nearly 3.5% to $148.13 in premarket trading.
Bank of America analyst Tai Liani, who has a buy rating and a $180 price target on Qualcomm (QCOM), also cut fourth-quarter and 2023 estimates, noting that even as premium handsets are “resilient,” there is still overall weakness, citing the low to mid-tier.
“The deflating handset demand is a risk, yet we believe it is already reflected in expectations, and remain confident in the company’s long-term revenue opportunities and diversification strategy beyond handsets,” Liani explained.
Oppenheimer analyst Rick Schafer noted that the mid-point of the fourth-quarter guidance came in at $11.4B, with earnings per share of $3.15, roughly 5% below Wall Street estimates, due to the aforementioned handset weakness and continued worries over a weakening global economy, accounting for roughly 20 cents per share in earnings.
“We acknowledge [Qualcomm’s] diversification efforts away from handset but stay sidelined as RF/Auto/IoT strategies prove out and Apple baseband risk remains,” Schafer wrote.
Qualcomm (QCOM) and several other chip companies may decide to oppose the $52B CHIPS Act on grounds that the legislation does not do enough to support them and heavily favors manufacturers.

That would be the non-AAPL smartphone market. QCOM may get good news soon as AAPL may be giving up on making their own 5G modem – turns out to be harder than it looks.

Harley Davidson rides past earnings estimates despite production problems
HOG +3.59%
Jul. 28, 2022 7:55 AM ET
Harley-Davidson (NYSE:HOG) shares jumped notably in premarket trading on Thursday after posting better-than-expected results for the second quarter and reaffirming full-year guidance.
For the reported quarter, the Milwaukee-based motorcycle manufacturer notched GAAP EPS of $1.46 and $1.47B in revenue. The figures beat consensus estimates by $0.39 and $230M, respectively. The company also noted that revenue would have been 5 percent higher sans a two week shutdown of production during the quarter. Wholesale shipments fell 15% during the quarter due to the shutdown, being offset slightly by pricing actions taken by management.
The resilient report allowed the company to reaffirm full-year targets, including 5-10% revenue growth for the HDMC business alongside operating margin of 11-12%.
“Reaffirming our guidance for the year, despite the production suspension, demonstrates the effectiveness of our Hardwire (OTC:HDWR) strategy and the power of our brand.” CEO Jochen Zeitz said. “Now with the suspension being behind us, we are fully focused on mitigating the impacts of the volume loss with the ambition to deliver on our Hardwire II goals, in year two of our five-year strategy.”
Shares rose 4.96% prior to Thursday’s market open on the better-than-expected results.
To be sure, the company clarified that its outlook assumes that “manufacturing, logistics and material costs moderately improve in the back-half of the year as overall operations performance stabilizes” and also anticipates that the company moves “beyond the peak levels of inflation experienced in 2021.”
Read more on the planned SPAC listing of the LiveWire electric motorcycle business.
Beyond Meat slips as J.P. Morgan casts doubt McPlant going full time
BYND –6.33%
Jul. 28, 2022 7:52 AM ET
1 Comment
The test of a Beyond Meat (NASDAQ:BYND) burger at McDonald’s (MCD) could be over, J.P. Morgan said Thursday.
Shares of BYND are down 3% in premarket trading.
“We believe that McDonald’s … has broadly discontinued its US test of the McPlant burger,” analyst Ken Goldman, who has an Underweight rating on BYND, wrote in a note.
“We recently spoke with MCD employees at 25 locations that previously carried the product; each said the item is no longer on the menu. Not surprisingly, the reason sometimes being cited is that the product did not sell well.”
“We don’t have a great deal of information outside of this, including to what extent BYND’s guidance relied on McPlant expanding in 2H22,” Goldman said.
“We are also not commenting on how Beyond’s products are performing in counties like the UK; last quarter, CEO Ethan Brown (said) he was pleased by the ‘continued strong performance’ in Europe with McDonald’s,” he added. “But clearly this isn’t good news for the narrative.”
It was reported earlier this month that BYND might be having trouble with its fast food partnerships.
ArcelorMittal’s Q2 profit dips below $4B as steel shipments fall, warns of risks
Jul. 28, 2022 7:37 AM ET
1 Comment
ArcelorMittal (NYSE:MT) -0.4% pre-market Thursday after reporting mixed Q2 results but warning of potential energy supply restrictions in the face of inflationary pressures.
Q2 net income slipped to $3.92B from $4.01B in the year-earlier quarter, while EBITDA ticked higher to $5.16B from $5.05B a year ago; both results beat analyst estimates of net income of $3.72B and EBITDA at $5.09B, according to consensus figures provided by the company.
Q2 steel shipments fell 6.3% Q/Q to 14.4M metric tons, mostly because of the war in Ukraine, where ArcelorMittal (MT) has operations, but Q2 revenues rose 14% Y/Y to $22.14B, as the steelmaker’s average selling price jumped 30%.
ArcelorMittal (MT) warned that inflationary pressure were causing significant headwinds, and the potential for energy supply restrictions presented clear but uncertain risks to economic activity in Europe.
But the company said it was well placed to manage gas supply risk, with sites spread out in nine European countries, meaning it expected to meet market demand.
ArcelorMittal (MT) said it would launch a new stock buyback program worth ~$1.4B to be completed by May 2023.
The company also announced an agreement to buy Brazil-based slab producer Companhia Siderurgica do Pecem for ~$2.2B.
Southwest Airlines stock slides on cost, capacity concerns
LUV -8.76%
Jul. 28, 2022 7:34 AM ET
4 Comments
Southwest Airlines (NYSE:LUV) shares slipped on Thursday as capacity and cost concerns overshadowed a record-breaking revenue report.
For the second quarter, the Texas-based air carrier notched non-GAAP EPS of $1.30, beating expectations by $0.12, and a 67.8% jump in revenue from 2021 to a record $6.73B, also surpassing expectations. The record net income and revenue report came despite inflationary pressures and “suboptimal productivity levels”, according to CEO Bob Jordan.
“Travel demand surged in second quarter, and thus far, strong demand trends continue in third quarter 2022,” Jordan said.
However, the company noted that June is likely to represent a peak for revenue for 2022, while inflation and fuel cost increases are expected to continue to impact results. For example, full-year fuel costs are expected to rise $0.20 per gallon from prior expectations, while fuel hedging expenses increase $0.04. Overall, cost per available seat mile is expected to increase 12% to 15% versus a prior estimation of no change at all.
“The Company continues to experience cost inflation in third quarter 2022, in particular with higher rates for labor, benefits, and airports,” the release explained. “The Company also expects cost headwinds from operating at suboptimal productivity levels as headcount is expected to increase in third quarter 2022 while capacity levels are expected to remain relatively in line with third quarter 2019.”
To be sure, Jordan added that the company expects to remain profitable into the year end, cutting costs and capacity to increase efficiency. Available seat miles are expected to fall 4% for the full year.
“We plan to begin moderating overall hiring in second-half 2022 as our focus shifts to 2023 planning and executing on our goals to better optimize staffing to flight schedules, reduce cost inefficiencies, and return to historic efficiency levels,” he explained.
Shares fell 5.62% in premarket hours after voicing the capacity and cost concerns for coming quarters.
Elsewhere, the airline lamented delays in deliveries from Boeing (BA).
“We are experiencing delays in our aircraft deliveries from The Boeing Company, and we now estimate 2022 deliveries to be 66 versus the previously expected 114, ending the year with 765 aircraft,” Jordan said.
Read more on recent airfare trends.

phil

Author

July 28, 2022 10:18 am

PFE continues to be a cash machine:

Pfizer tightens 2022 earnings guidance as COVID franchise outperforms
PFE -3.10%
Jul. 28, 2022 7:32 AM ET
1 Comment
Pfizer (NYSE:PFE) reported better than expected financials for 2Q 2022 on Thursday and raised the lower end of the earnings guidance amid forex impact while the performance of its COVID franchise continued to exceed forecasts.
Revenue for the quarter jumped ~47% YoY to $27.7B, driven by the contribution of the COVID-19 shot Pfizer (PFE) co-developed with BioNTech (BNTX).
The vaccine branded as Comirnaty added direct sales and alliance revenues worth of $8.9B to surpass expectations for the quarter with ~13% YoY growth.
Meanwhile, the company’s COVID-19 antiviral pill Paxlovid contributed $8.2B revenue to exceed Street forecasts.
However, Pfizer’s (PFE) revenue adjusted for COVID-19 vaccine and pill only grew ~1% YoY operationally as JAK inhibitor generated $430M revenue with ~27% YoY decline.
Meanwhile, vaccine franchise generated $10.5B with ~13% YoY growth as Prevenar group of vaccines exceeded Street forecasts to add $1.4B revenue with ~15% YoY growth.
The revenue from blood thinner Eliquis reached $1.7B with ~18% YoY growth, while sales of the anti-smoking agent Chantix/Champix fell ~99% YoY amid a global pause in shipments.
Pfizer (PFE) beat the consensus for earnings as cost of sales as a percentage of revenues decreased 5.8% YoY, driven by a favorable change in sales mix and forex impact.
While the company raised the 2022 guidance for revenue on an operational basis, the revenue outlook remains unchanged from the previous estimate after adjusting for unfavorable forex impact.
However, Pfizer (PFE) has raised the lower end of the adj. diluted earnings per share guidance by $0.05 to revise the forecast to $6.30 to $6.45 from $6.25 to $6.45.
According to contracts signed as of mid-July 2022, the full year outlook for COVID-19 vaccine and pill remains unchanged at $32B and $22B, respectively, as forex impact has offset the favorable operational updates. The analysts polled by Bloomberg expected the company to set 2022 sales guidance for COVID-19 vaccine and pill at $34.3B and $23.4B, respectively.
“In multiple meaningful ways, we made significant progress this quarter on our strategies to bring value to our patients and shareholders….” Pfizer (PFE) Chief Executive Albert Bourla said ahead of the earnings call.
“In the second quarter, we recorded the largest amount of quarterly sales in our history,” he added.
Read: On Wednesday, Pfizer (PFE) announced its next gen COVID-19 vaccine updated for Omicron variant entered a mid-stage trial.

MRNA still being ignored:

https://charts2.finviz.com/chart.ashx?t=mrna%20&ty=c&ta=1&p=d&s=l

phil

Author

July 28, 2022 10:23 am

TTE can’t figure out what to do with all their money:

TotalEnergies declares €0.69/share interim dividend

TTE -3.92%
Jul. 28, 2022 7:19 AM ET
1 Comment

TotalEnergies (NYSE:TTE) declares second 2022 interim dividend of €0.69/share, similar to the first 2022 interim dividend.
Payable to shareholders on Jan. 12; for shareholders of record Jan. 3; ex-div Jan. 2.
Payable to ADS holders on Jan. 25; for ADS holders of record Dec 30; ex-div Dec 29.
See TTE Dividend Scorecard, Yield Chart, & Dividend Growth.

Apple’s iPhone, services to take the spotlight with tech giant’s quarterly results
AAPL -0.98%
Jul. 28, 2022 7:00 AM ET
2 Comments
The biggest of the Big Tech companies will be in the spotlight Thursday as Apple (NASDAQ:AAPL) is set to deliver its fiscal third-quarter results after the close of trading.
Analysts currently estimate Apple (AAPL) will post a profit of $1.15 a share on $82.97B in revenue for quarter that ended in June. During the same period a year ago, Apple (AAPL) earned $1.30 a share on sales of $81.4B.
Needless to say, the iPhone will get a lot of attention from investors and analysts. While Apple (AAPL) has made services a major area of its focus of late, the iPhone still makes up more than half of Apple’s (AAPL) quarterly revenue, and remains the company’s engine driver. But, supply issues have hovered over the tech sector for months, and the market for mobile phones may be headed for a sales slowdown, especially among consumers.
Evidence of that came from Qualcomm (QCOM), which on Wednesday said its mobile handset business had performed well, but also gave a weaker-than-expected quarterly outlook that raised concerns about consumers’ possibly tightening their belts when it comes to buying new smartphones in the months ahead.
Dan Ives, of Wedbush Securities, said in a research note that he believes demand for the iPhone is “holding up slightly better than expected” despite supplies issues that continue to affect the tech sectors. But, Ives added that Wall Street “ultimately is looking past [the] June [quarter] numbers to the September and December quarters” and what Apple has planned for the expected iPhone 14.
Ives added that Apple’s (AAPL) services business likely performed well during the quarter, should add $80B to the company’s sales this year, and should “grow at a steady ‘double digit’ clip into 2023.”
And, when it comes down to it, Ives said Apple (AAPL) can always count on the strength of “an unparalleled installed base” of 1B iPhones worldwide and 1.8B iOS devices that “continues to remain Apple’s unique advantage over other technology stalwarts.” Ives also estimates that almost 25% of those 1B iPhones haven’t been upgraded in more than three years, which sets the company up for a potentially huge buying cycle with its upcoming iPhone 14.
Meanwhile, Apple (AAPL) reportedly recently lured at top executive from Lamborghini to come to Apple (AAPL) and help direct its electric vehicle efforts.

Valero Energy Non-GAAP EPS of $11.36 beats by $2.16, revenue of $51.64B beats by $10.91B

VLO -1.03%
Jul. 28, 2022 6:36 AM ET
21 Comments

Valero Energy press release (NYSE:VLO): Q2 Non-GAAP EPS of $11.36 beats by $2.16.
Revenue of $51.64B (+86.2% Y/Y) beats by $10.91B.
Reduced debt by $300 million through the acquisition of the 4.00 percent Gulf Opportunity Zone Revenue Bonds (GO Zone Bonds), reducing Valero’s debt by $2.3 billion since the second half of 2021

That’s $11.36 per $112 share FOR ONE QUARTER!

https://charts2.finviz.com/chart.ashx?t=vlo%20&ty=c&ta=1&p=d&s=l

Pharmboy

Member

July 28, 2022 10:25 am

Hey PSW. Finally able to get into the ‘new’ and improved site! Very well done.

A few things to note:

LQDA is legit. 😎 Patent dispute is put to rest. I like them still at $5.
GLUE now has options. Watch them. Sell puts to start a position – the puts have wide spreads and are thinly traded. $7.5s for about a buck.

I will look into a few more for our future endeavors.

phil

Author

July 28, 2022 10:26 am

Meanwhile, SAVE is trading miles below their $33.50 buyout offer. I’d play it but, if it doesn’t go through and I’m stuck with SAVE – no thanks!

https://charts2.finviz.com/chart.ashx?t=save%20&ty=c&ta=1&p=d&s=l

I guess you could take the 2024 $25 ($5)/$30 ($2.50) bull call spread for $2.50 and make 100% if the deal closes and the deltas are tight so you can risk less than $1 with a lot of play.

phil

Author

Reply to phil

July 28, 2022 10:28 am

You can pair it with a JBLU short put. If the deal doesn’t go through, JBLU will pop as most people don’t like the deal. You can sell the 2024 $8 puts for $2 so you get assigned at the current price and the rest is free money towards the spreads.

yodi

Member

July 28, 2022 10:31 am

You have to be fast to sell short term calls today. FLSR Aug 95 call was over 3$ now 2.20

Still like BX loaded up 14 days ago at 87- 88 today 98 again, need to catch them when they down.

phil

Author

July 28, 2022 11:23 am

Nice resiliency this morning.

VIX not worried.

Oil rejected at $100 yet again:

Very wide spread with Brent now:

Long $18.50 was a good call!

Last edited 15 days ago by phil

phil

Author

July 28, 2022 11:35 am

PFE/Yodi – Traders be crazy.

Welcome back Pharm!

https://charts2.finviz.com/chart.ashx?t=lqda\&p=w&s=y

Interesting. Just added to the Russell as well.

GLUE looks cool too:

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Scary what they can do these days.

As Long Covid is, essentially, an inflammatory disease – this could be very big.

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phil

Author

July 28, 2022 11:58 am

Wow, big pop in the LTP:

Security Value: $1,046,485
Cash on Hand: $1,000,730
Total Value: $2,047,215
Portfolio Ret.: 309.4%

That’s up from $1,902,490 on Tuesday afternoon

STP has actually gained (so we’re still bullish overall with the extra short calls) so we’re really close to $4M – which was our target for Dec.

Security Value: $-345
Cash on Hand: $1,801,570
Total Value: $1,801,225
Portfolio Ret.: 800.6%

That’s from $1,721,538

As I noted Tuesday – we have our adjustments ready to fire to get more bearish on the STP and try to lock in this progress but if AAPL has good earnings then they could be good for $500Bn in gains by themselves and we’d hate to miss that rally – about 3% of the Nasdaq’s entire cap!

phil

Author

July 28, 2022 12:04 pm

Of course our best barometer is the Money Talk Portfolio – as we don’t touch it and it was at $194,331 on the 13th, when we did the review and, without the new positions, we’re at $222,484 – a very good two weeks!

phil

Author

July 28, 2022 12:08 pm

We decided on JPM and LOGI for our new trades and they are both winners so far. Here’s the rest of our consideration list at the time – look for laggards!

LEVI is almost certain: https://www.philstockworld.com/2022/06/21/two-percent-tuesday-weak-bounces-accomplished-now-what/#comment-8125624
CROX is good too: https://www.philstockworld.com/2022/06/21/two-percent-tuesday-weak-bounces-accomplished-now-what/#comment-8125627
WSM is worth mentioning but too expensive: https://www.philstockworld.com/2022/06/21/two-percent-tuesday-weak-bounces-accomplished-now-what/#comment-8125628
RH has the same price issue: https://www.philstockworld.com/2022/06/21/two-percent-tuesday-weak-bounces-accomplished-now-what/#comment-8125629
BBY is a good one “Winter is coming!“: https://www.philstockworld.com/2022/06/21/two-percent-tuesday-weak-bounces-accomplished-now-what/#comment-8125678
TROX is was loving in the same comment as BBY.
NFLX too expensive but worth a mention.
F is a strong contender: Two Percent Tuesday – Weak Bounces Accomplished – Now What?
SONY is another good one: Which Way Wednesday – Powell has some Splainin’ to Do to Congress
BIG is also interesting: https://www.philstockworld.com/2022/06/30/faltering-thursday-powell-says-fed-must-accept-higher-recession-risk-to-combat-inflation/#comment-8126520
MT may be a winner! https://www.philstockworld.com/2022/06/30/faltering-thursday-powell-says-fed-must-accept-higher-recession-risk-to-combat-inflation/#comment-8126531
LOGI still stupidly cheap (same link).
DIS should rate a mention: https://www.philstockworld.com/2022/07/07/federally-forgiven-thursday-light-at-the-end-of-the-tunnel/#comment-8126814
We talked about IMAX in that comment too.
THC we just added to the Earnings Portfolio: https://www.philstockworld.com/2022/07/07/federally-forgiven-thursday-light-at-the-end-of-the-tunnel/#comment-8126820
And, of course, JPM.

jeddah62

Member

July 28, 2022 12:40 pm

Phil – BIG,
.. and they have massive short interest (38%) so one ounce of good news and the squeeze will be like the 4th of July!

eca2424

Member

July 28, 2022 12:50 pm

Phil- Any thoughts on GILD? They are stuck low in their range. I have the 60/75 BCS, just meh.

phil

Author

July 28, 2022 1:43 pm

BIG/Jeddah – I’m not expecting any great news, just hoping they muddle through and put up good holiday numbers.

GILD/Eca – Another cash machine. $60.50 is $76.4Bn and they make $8Bn so below 10x but $20Bn in debt means take $600M off earnings for more interest. Still in very good shape for the long-term. GILD got their current CEO from Roche and they are looking to establish more oncology lines. They spent a fortune to get a breast cancer drug that’s been delayed ($3Bn impairment charge so far). Otherwise, they look like this:

So, if they hit their targets for the rest of the decade, it’s going to be a nice investment. With a 5% dividend ($2.92), you are almost better off doing that as they aren’t likely to be very exciting until 2026.

Given that you have the $60/75 spread and assuming it’s 2024, I’d roll the $60s ($7) to the $50s ($13) for $5 if you can and if not, then the stock must be holding up. There’s also the 2024 $50 puts to sell for $3.70, which also helps pay for the roll. Oct $65 calls are $1 so selling 1/3 of those 5 times will also give you $1.50 per long towards a roll.

As a new trade, I’d go for the 2024 $55 ($10)/$70 ($3.20) bull call spread for $6.80 and sell 1/2 the $50 puts for $3.70 and that’s net $4.95 per long and then recoup the $1.50 selling short calls over time. That’s got at least $10 upside per unit.

As a dividend play, you can buy 500 shares for $30,350 and sell 5 of the 2024 $55 calls for $10 ($5,000) and the $50 puts for $3,700 and that’s net $21,650 to be called away at $27,500 plus about $2,000 in dividends is $7,850 at $55 vs $10,000 at $70 on the options spread. It’s a nice, conservative way to play them.

Sadly, we only have $100,000 cash in the Dividend Portfolio and we need it for adjustments ($300,000 in positions) – we can’t really add new ones until we close stuff.

phil

Author

July 28, 2022 3:03 pm

Looking like another nice day.

Now all AAPL and AMZN have to do is not screw things up.

Energy stocks tomorrow should be a no-brainer (also adds to /ES earnings):

Exxon, Chevron Q2 preview: Stage is set for record profits

CVX +0.81%
Now!
Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) and are scheduled to announce Q2 earnings results on Friday, July 29th, before market open.
Both companies are expected to post strong results, especially after a better-than-expected show a day earlier by their oil and gas peer, Shell (SHEL).
The consensus estimates for Chevron is $5.03 in EPS and revenues of $57.69B (+53.4% Y/Y). Exxon, meanwhile, is expected to post an EPS of $3.89 (vs $1.10 in Q2/2021) and revenues of $111.67B (+64.9% Y/Y).
Exxon’s EPS estimates have been raised 13 times over the past three months, while revenue estimates have seen 5 upward revisions. Meanwhile, Chevron has seen 9 upward revisions of EPS estimates and 2 upward revenue estimate revisions.
Recent strength in oil prices have pushed Chevron’s and Exxon’s shares in the year so far, and will boost their Q2 earnings. Although U.S. WTI crude has moderated recently due to lower U.S. gasoline demand, prices have been propped up in the June quarter as global demand outstripped supply.
Chevron is up +26.08% YTD while Exxon is +45.48%, and shares are up across peers as well:

Exxon has already signalled a bumper Q2 profit, expecting refining profits to have jumped by as much as $5.5B, while earnings from its oil and gas production have climbed as much as $3.3B. Refining margins likely added $4.4B-$4.6B during the quarter.
Excluding a writedown from the loss of Russian production, the oil and gas giant could rack up a record quarterly profit of more than $16B, after reporting $8.8B in Q1 adjusted earnings.

SA contributors are also highly optimistic about the upcoming results, noting strength across the entire oil sector, Exxon’s massive free cash flow and Chevron’s improved cost efficiencies and strong asset base.

A deep dive in Samsung’s Q2 results

Jul. 28, 2022 2:55 PM ET

Samsung Electronics (OTCPK:SSNLF) Q2 shows a a 21.3% decline in revenue KRW77.2T
Segment wise: DX, DS, SDC, and Harman segment sales jumped 22%, 24%, 12% and 23% Y/Y respectively.
Gross profit margin was 40.1%, better than last year’s 39.5%.
Net profit dropped 2% to KRW11.1T.
GAAP EPS of KRW1613.
EBITDA margin stable at 30%.
2H Outlook: Results to grow with the release of new products by major smartphone customers; TV earnings to improve with the full-fledged releases of new products.
Contributor writes: With the stock down almost 25% from its peak, we believe there is a strong buying opportunity for Samsung stock.
Another contributor says: Samsung is writing record revenues and profits.

More Durable Goods:

Deere ticks higher after CNBC commentator mentions positively

DE +1.27%
Jul. 28, 2022 2:19 PM ET
2 Comments

Deere & Co. (NYSE:DE) rose 1.4% after a CNBC commentator mentioned the company positively.
CNBC commentator Steve Weiss said he’s buying the maker of tractors, forestry and construction equipment.
“I think it’s very cheap,” Weiss said on the business network. “You are at about 13x this year on an EBITDA basis, you are at about 9x-10x next year and there ROE, there return on equity, is just eye popping. This is a position, this is not a trade.”
“It’s just a great story and I’ve regretted not owning it for a while, now I get my opportunity,” Weiss added.
Deere is scheduled to report its latest results Aug. 19.
Earlier this month Deere was upgraded to buy at Citi after shares hit 18-month low.

phil

Author

July 28, 2022 3:11 pm

Friggin’ WSJ:

GDP fell at 0.9% annual rate; second straight drop meets a common definition of recession

Businesses have been trimming their inventories, the housing market has buckled under rising interest rates, and high inflation has taken steam out of consumer spending.

Inventory Swing a Culprit Behind U.S. Recession Talk

Live Updates: Stocks Climb

Are We in a Recession Now?

Mortgage Rates Fall to 5.3%

Heard on the Street: A Recession Isn’t Necessary for Investors to Feel Lousy

https://images.wsj.net/im-593127?width=687&height=344

It shows right on the chart that the Recession is already milder in Q2 and expected to reverse nicely in Q3 – as I’ve said before – a Recession is just a label for what already happened – we’re a month into Q3 and we’re investing out of fear of what we’re calling what already happened in Q2 – that’s kind of idiotic, isn’t it?

But the WSJ is not done telling the retailers to GET OUT:

CAPITAL ACCOUNT

Recession or Not, the Recovery Has Ended

The Fed engineered the slowdown to combat inflation, a sign of how the pandemic has set back economic capacity.

Recession Worries Put Biden Administration on Defensive

Two straight quarters of economic contraction are putting the Biden administration on the defensive about the economy, as Republican opponents suggest the latest data indicates a recession is under way.