Tag Archives: Earnings

BlackBerry($BBRY) Z10 UK Performance

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BBRY is having another good day today, a high of $16.89, but has now pulled back to $16.24. That being said, I would like to talk about some new data that came out.

Deutsche Bank conducted a survey in the UK to try and get an idea of how the new BlackBerry Z10 is performing. Analysts called 30 cell phone carriers in the UK and asked the same questions a new user who is in the market for a smartphone would ask. The negative that came out of the survey is that the BlackBerry Z10 isn’t being promoted much by carriers. The survey also found that sales representatives weren’t educated in using the new phone so they are hesitant in promoting something they aren’t sure how to use. This is not a good sign for BlackBerry. Below are some notes from the survey:

Results:

  • The iPhone 5 and Samsung Galaxy III are still the most recommended smartphones.
  • Out of the 30 phone carriers surveyed, only 2 recommended the BlackBerry as a smartphone.
  • A few sales representatives said they weren’t trained on the new BB10 operating software.
  • One sold have sold out of the Z10; some have sold many; and others have sold a few.
  • Reviews where mixed when they were asked to do a comparison between the iPhone 5, Samsung Galaxy III and the BlackBerry Z10.

After looking at these results, I’m more skeptical about the success of BBRY. The new phones are not released in the the US yet, so BlackBerry can still fix these issues that they’re facing abroad and not make the same mistakes when it gets to the US. I think the main reason carriers aren’t promoting the new BlackBerry Z10 is because they are not educated on all the new features of the phone. In my opinion, this is a mistake on BlackBerry’s part. Having unveiled this new phone so late in the game, BlackBerry should’ve held training sessions for sales reps. This way, sales reps would be familiar with the phone and would truly know why this phone might be better than any other smartphone currently on the market. Being familiar with the phone, they will be more likely to recommend the phone to users because they are able to explain all of the positives. Users with be more likely to sign a two year contract if they receive good reviews from the sales reps than if they don’t. Based on the survey, sales reps are currently recommending the iPhone 5 and the Samsung Galaxy III more often than the Z10.

That being said, I would look to take advantage of the volatility in the stock by using options to profit. However, I still am not 100% convinced that BlackBerry will be successful. I will still continue to see how BlackBerry deals with these problems and keep you updated on any new developments.

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The Week Ahead: 1/28/13 to 2/1/13

This week, we’re presenting you with a downloadable Excel file regarding some of the top tickers reporting this week, as well as the economic data for the week.  Every piece of data is from Briefing.com and is completely free, so we take zero credit for the compiling of the raw data – we are doing this to save you the time and effort of screening stocks that have a higher probability of being a name with a lot of tradeable opportunities:

Earnings Spreadsheet (Briefing Data)

Next week, we’ll be adding commentary on some of the companies reporting and the most prevalent economic data for that particular week.

– ZMoose

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UPDATE: As History Would Have It: An $AAPL Earnings Play

As many of you read my post two days ago outlining how to play Apple earnings, I want to check in and see how the position is performing. Despite the position being relatively expensive, Apple did not disappointing and is currently down 10 percent after hours, trading at $460.

If you recall, I created a strangle on Apple using the current January weeklys. I paid a net cost of $23.40 to establish the position using long position in a $490 put and $510 call. Since the position was relatively expensive to create, I had break even points at $463.60 and $536.40.  Obviously, the more important break even point in this situation is the $436.60.

Looking back, the position was probably too expensive and had already priced in the volatility. However, As of a few minutes ago, The position is in the money. I am looking for this position to continue deeper into the money for the following reason.

Apple has broken below its 3 year upward trend line, which in my opinion is the start of a significant down trend. Even after the dip below this trend line, technical indicators are not indicating that the stock is, by any means , oversold.

trend

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Breaking Down $AAPL Earnings

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After much anticipation, Apple released its first quarter earnings for FY 2013. As many of you know, this was a crucial earnings report following a 20% sell off over the last three months.

Apple announced that it had quarterly revenue and net profit of $54.5 billion and $13.1 billion, respectively or $13.81 per diluted share. These results can be compared to quarterly revenue and net profit of $46.3 billion and $13.1 billion a year ago, or $13.87 per diluted share. This is a 15.05 percent increase in revenue from a year ago, but a zero percent change in net profit. Furthermore, profit margin fell from 44.7 percent to 38.6 percent, yielding a 6.1 percent drop.

Despite narrowing margins, Apple sold a record 47.8 million iPhones. This can be compared to just 37 million iPhones sold in the year ago quarter. This is a almost a 30 percent increase in iPhone sales compared to the year ago quarter. Similarly, iPad sales increased from 15.4 million units to 22.9 million units, yielding a 49 percent increase. Sales of both mac and iPod fell modestly.

The tighter margins can be attributed to an increase in operating expenses compared to the year ago quarter. Specifically, spending in research and development increased 33 percent to $1.01 billion.

Sales in Europe, China and Japan increased 11, 67, and 25 percent respectively.  Currently, these three countries are supplying apple with 61 percent of its revenue.

Apple indicated that they expected revenue for the second quarter of FY2013 to be between $41 billion and $43 billion, with a gross margin between 37.5 percent and 38.5 percent. Furthermore, they expect gross expenses to be between $3.8 billion and $3.9 billion.

As we now await Q2 earnings for FY 2013, I expect international sales to increase and become an even bigger part of Apple’s revenue. The U.S. may not be saturated with regard to the entire mobile phone and tablet market, but it is saturated in the sense that people middle to upper class individuals who can afford Apple products can already afford them. On the contrary, international markets are largely untapped and whether it be through a cheaper iPhone or already existing products, I am expecting them to continue to tap these markets.

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As History Would Have It: An $AAPL Earnings Play

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What:

To profit from Apple’s earnings report this Wednesday, we are going to create a strangle using out-of-the-money options.

Why:

Date Estimate Actual Close Pre Earnings Close Post Earnings Percent Change
10/25/12 $8.75 $8.67 $609.54 $604.00 -0.91%
7/24/12 $10.36 $9.32 $600.92 $574.97 -4.32%
4/24/12 $10.06 $12.30 $560.28 $610.00 8.87%
1/24/12 $10.08 $13.87 $420.41 $446.66 6.24%
10/18/11 $7.28 $7.05 $422.24 $398.62 -5.59%

Simply put, I am making this trade based on history. Nothing more, nothing less.

Historically, Apple stock exhibits volatile and large price movements following it’s earnings releases. In fact, four out of the last five earnings reports have resulted in price movements of at least four percent. With that being said, it is not unreasonable to anticipate a significant price movement following Apple’s earnings report this Wednesday. In order to take advantage of this, we can employ a basic strangle using out-of-the-money options that will allow us to profit from a significant price movement, regardless of direction. A strangle also limits the loss of the position to the net cost.

How:

Price Call Strike Price Put
25.9 $485.00 $11.00
23 $490.00 $13.05
20.3 $495.00 $15.30
17.8 $500.00 $17.75
15.45 $505.00 $20.40
13.35 $510.00 $23.20
11.45 $515.00 $26.15
9.65 $520.00 $29.40

To successfully create a strangle, we need to take long positions in an out-of-the-money call and an out-of-the-money put. It is recommended that the strike prices of these out-of-the-money options be equidistant from the current price of the underlying instrument, which in this case is Apple common stock. The further out of the money the options are the cheaper it will be to establish the strangle and the smaller our max loss per contract will be. However, the further out of the money the options are, they less likely the strangle will expire in the money.

Currently, the price of the underlying Apple common stock is exactly $500.00 (Cool, I know). Using the January weeklys, which will expire this coming Friday (January 25th, 2012), I am going to take a long position in a call with a strike price of $510.00 and a put with a strike price of $490.00. These options are priced at a per contract cost of $13.35 and $13.05, respectively. Since we are taking a long position in both the out-of-the-money call and the out-of-the-money put, our net per contract cost is equal $26.40. Options contracts are usually denominated in terms of 100 shares meaning the absolute net per contract cost of this strangle is $2640.

Profit/Loss & Break-even:

Break Even

When using a strangle, there are two break even points. Ignoring the cost of commissions, there is a break even point below the strike price of the out-of-the-money put (B1) and above the out-of-the-money call(B2). B2 can be calculated by subtracting the per contract cost from the strike price of the out-of-the-money put. B1 can be calculated by adding the per contract cost to the strike price of the out-of-the-money call. In this particular example we can calculate B1 by subtracting $26.40 from $490, giving us a break even point of $463.60. Similarly, we can calculate B2 by adding $26.40 to $510, giving us a break even point of $536.40.

Profit Loss

Scenario 1: Max Loss

As I mentioned before, my max loss per contract is limited to the absolute cost of the contract. In this particular setup, my max loss is $2640.00. I will experience this max loss if the price of the underlying at expiration is between the strike price of the put and the call. Specifically, I will experience this max loss if the price of the underlying at expiration is between $490.00 and $510.00. In my opinion, this is not likely but could happen if Apple reports earnings consistent with estimates, no misses or beats.

Scenario 2: Loss

If the underlying price change of Apple is not big enough following Apple’s earnings report, I will experience a loss less then my max loss at expiration. This can happen if the price of the underlying is in one of two ranges. The first range is if the underlying price closes below the strike price of the out-of-the-money put, but above b1. Similarly, the second range is if the underlying stock price closes above the strike price of the out-of-the-money call, but below b2. The loss in these situations is equal to difference between the price of the underlying at the sale and the strike price, plus the cost of the contract.

For example, lets say the price of the underlying Apple stock is $520.00 at expiration. Since I am long the $510.00 January weekly, I will be able to buy 100 shares of Apple at $510.00 and sell them on the open market at $520. This means I will make a profit of $10.00 per share. Even though I profit on the sale of the Apple shares on the open market, I am still responsible for the cost of the contract, which is $26.40 per share. This leaves my net loss at $16.40 per share, or $1640.00. As you will notice, this is still a loss but is less then my max loss.

Scenario 3: Profit

This is the most desirable and most likely scenario in my opinion. There are two situations in which I will experience a profit. The first is if the underlying Apple Stock price at expiration is below B1, and the second is if the underlying Apple stock price at expiration is above B2. In the first situation, I will be able to sell the underlying shares higher then market price. In the second situation, I will be able to sell the shares at a higher then market price. If the underlying stock price when I exercise is less then B1, the Profit will be equal to the difference between B1 and the price of the underlying at expiration, minus the per contract cost of the strangle. If the price underlying Apple stock price when I exercise is above B2, the profit will be equal to the different in the underlying price at expiration minus B2, minus the per contract cost.

For example, lets pretend that the price of the underlying Apple stock at expiration is $545.00.Since we are long the $510.00 January weekly, we will be able to buy the underlying at $510.00 and sell at the market price of $545.00. Since we paid $26.40 for the strangle, our per share profit will be $8.60 ($860.00).

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The Week Ahead: 1/21 – 1/25

Earnings Reports

Company Ticker Date Estimate
3M MMM 24-Jan $1.41
Abbot Laboratories ABT 23-Jan $0.72
Apple AAPL 23-Jan $13.45
AT&T T 24-Jan $0.47
Baxter International BAX 24-Jan $1.26
General Dynaics GD 23-Jan $1.92
Google GOOG 22-Jan $10.61
Halliburton Co. HAL 25-Jan $0.61
HoneyWell HON 25-Jan $1.10
IBM IBM 22-Jan $5.25
Johnson & johnson JNJ 22-Jan $1.17
McDonalds MCD 23-Jan $1.33
Microsoft MSFT 24-Jan $0.75
Proctor & Gamble PG 25-Jan $1.11
Travelers TRV 22-Jan $0.17
United Technologies UTX 23-Jan $1.04
Verizion VZ 22-Jan $0.52

Economic Reports

Report Date Time Estimated Level Estimated Percent Change
Existing Home Sales 22-Jan 10:00AM ET 5.1M 1.19%
Jobless Claims 24-Jan 8:30AM ET 360k 6.94%
PMI Manufacturing Index Flash 24-Jan 8:58 AM ET 54 -0.37%
EIA Petroleum Status Report 24-Jan 11:00AM ET
New Home Sales 25-Jan 10:00AM ET 388K 2.92%
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