Extreme Trades for the Week of June 10, 2018June 11, 2018
Trade No. 1 — Etsy Inc. (NASDAQ:ETSY)
ETSY operates as a commerce platform to make, sell, and buy goods online and offline worldwide. Its platform includes its markets, services, and technology, which enabled users to engage its community of sellers and buyers. The company offers approximately 45 million items across approximately 50 retail categories to buyers. It also provides various seller services, including direct checkouts, promoted listings, and shipping labels, as well as Pattern to create custom Websites; and seller tool and education resources to start, manage, and scale businesses to entrepreneurs primarily through Etsy.com. In addition, the company operates A Little Market, a handmade and supplies market for sellers and buyers.
With a new CEO at the helm, the stock went from being a near-term disaster to gaining considerale upside in recent months. Plus, it’s beginning to draw a lot of activist attention. TPG Capital and Black and White Capital for example have taken a stake in the company. In recent weeks, the company had even better news after its EPS for the first quarter came in at 10 cents. That was five cents better than estimates. Revenues of $120.91 million also beat expectations by $1.59 million. This represents 24.8% year-over-year revenue growth for the company. Users have driven more revenue to the platform as gross merchandise sales (GMS) rose 19.8% year-over-year to $861.08 million.
There are two ways to trade ETSY here.
One is to buy the stock at market prices. The other is to buy to open the ETSY September 21, 2018 35 calls at market.
Trade No. 2 — Telus Corporation (NYSE:TU)
TU provides a range of telecommunications products and services in Canada. It operates through Wireless and Wireline segments. The company’s telecommunications products and services comprise wireless and wireline voice and data services; data services, including Internet protocol; television services; hosting, managed information technology, and security and cloud-based services; healthcare solutions; business process outsourcing; and security solutions. It has 13 million subscriber connections, including 8.9 million wireless subscribers, 1.7 million high-speed Internet subscribers, 1.3 million wireline residential network access lines, and 1.1 million TELUS TV subscribers.
Later this year, the major carriers will start rolling out their 5G networks – and we want to be well positioned to profit from it. That’s because 5-G based opportunities could generate as much as $13 trillion annual revenue for carriers by 2026, according to Ericsson. 5G is the next generation of mobile network technology, the successor to the 4G/LTE technology that most mobile phones use now. It’s quite a big leap forward. Data delivery over 5G is 100 times faster than 4G and 10 times faster than even top-tier home broadband services.
Interesting to note, “Telus management had the foresight to embark on its generational fiber and small cell investment even before 2015,” Scotia Capital analyst Jeff Fan wrote in a research report earlier this year. Better yet, Telus just reported a gain of 121,000 new subscribers, its biggest quarterly net gain since 2011. Technically, the stock has been consolidating around $35 a share since April 2018. Near-term, we’d like to see the stock closer to $40 a share.
We recommend buying just the TU stock at market prices.
Trade No. 3 — J.C. Penney (NYSE:JCP)
JCP sells merchandise through department stores. The company primarily sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products, home furnishings, and large appliances; and provides services, including styling salon, optical, portrait photography, custom decorating, and home services.
While JCP does carry some risk at current prices, it also carries an interesting catalyst. As Sears Holding closes more of its stores, JCP is attempting to capture as much of the business that Sears is giving up. To do so, JCP has installed appliance showrooms in about 600 stores and is already expanding the brands that it already carries. Still, we have to remember the risk here. If JCP fails to seize upon this opportunity, it could lead to company failure.
There are two ways to trade JCP.
One is to buy the JCP stock at market prices. The other is to buy to open the JCP November 16, 2018 2 calls at market prices.