Saturday, April 29, 2017 - 5:54pm
Public Domain

Following NutriSystem Inc. (NASDAQ: NTRI)'s first-quarter results, Wunderlich said it believes part of the current premium valuation is attributed to expectations South Beach can develop into a sizeable revenue platform.

A Briefing On The South Beach Diet

Nutrisystem acquired South Beach Diet from SBD Holdings for $15 million in December 2015. South Beach Diet, created by Arthur Agatston, M.D., a cardiologist from southern Florida, is meant to help overweight patients improve their health by prescribing a safe diet for them.

Agatston's book "The South Beach Diet" became a runaway bestseller, boasting more than 23 million copies in print.

Nutrisystem revealed plans for South Beach Diet in December 2016, announcing its debut as a structured meal delivery weight-loss program.

"This past September we began our beta test of the South Beach Diet and we saw strong consumer interest in the brand and our overall opportunity to capitalize on the strong brand equity of the program," said Dawn Zier, president and CEO of Nutrisystem in December 2016.

"We will begin rolling out the all new South Beach Diet in January and it will ramp up over time, enabling us to capture a larger portion of the $10–15 billion addressable weight loss market."

Positive On South Beach Diet

Analyst Mitchell Pinheiro said he remains positive on South Beach's outlook but believes the stock price reflects the visible potential, particularly in light of its nascent stage.

In the first quarter, South Beach Diet added revenues of $8 million, $1 million above the analyst's estimate. The company also reiterated its 2017 guidance of $20 million to $25 million in revenues from this diet.

"While the program continues to be tweaked, we believe the performance was solid and expect further improvements in the product mix and marketing message as the year progresses, with an eye toward more meaningful growth in 2018," the analyst explained.

Q1 Review

Wunderlich noted the company reported first-quarter earnings per share of $0.25, exceeding its estimate of $0.10, with lower tax rate adding $0.02 relative to its estimate. Revenues rose 31 percent to $197 million, above the firm's estimate of $197 million.

The firm commended the new customer revenue, which spiked 35 percent, aided by strong new customer growth and reactivation revenue.

Other metrics:

  • Reactivation Revenue: $49 million, up 20 percent year-over-year due to the growing pool of recent new customers.
  • EBIT Margin: 4.4 percent, up 210 basis points, helped by higher gross margin.
  • SG&A Expense: down 160 basis points.
  • Marketing Expense: up 180 basis points.

Raising Estimates

Wunderlich raised its 2017 earnings per share estimate to $1.66 from $1.56, which is at the low end of the guidance range of $1.65–$1.75. The company attributed the revision to the better than expected first-quarter results. The revenue estimate is $656 million, also reflecting the first quarter strength.

"Given the momentum of 1Q, we believe this could prove conservative and represents potential upside to our estimate," the firm said.

The firm also raised its 2018 earnings per share estimate to $1.91 from $1.80 on revenues of $706 million, up 7 percent.

Additionally, the firm said its second-quarter estimate calls for 20 percent revenue growth.

"We project core Nutrisystem revenue growth of 6 percent, which we believe is conservative given the current momentum. We have left our South Beach revenue estimate unchanged at $57mm implying a growth rate of 49 percent," the firm added.

Downgrading Rating, Lifting Price Target

Wunderlich downgraded shares of the company to Hold from Buy but raised its price target to $60 from $52.

The downgrade was due to the firm's expectations that there aren't any sufficient near-term catalysts to drive the valuation multiple higher, with the firm seeing a more even risk/reward scenario over the next six months. That said, the firm remains positive on NutriSystem's fundamental outlook against a backdrop of consistently strong operating performance.

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Saturday, April 29, 2017 - 5:53pm
Public Domain

Ally Financial Inc (NYSE: ALLY), a notable player in the subprime auto loan market, warned investors its 2017 earnings per share will now grow less than previously expected.

Ally Financial isn't alone in its outlook, as major banks are becoming hesitant in issuing new subprime loans suing money from their balance sheets. According to a Bloomberg report, Wells Fargo & Co (NYSE: WFC) lowered the number of loans it made to subprime car buyers during the first quarter by 29 percent.

Wells Fargo's decision wasn't a result of a damage to its reputation for its account opening scandal, rather it was a calculated move to tighten its standards. The bank also joins JPMorgan Chase & Co. (NYSE: JPM) whose consumer and community banking head Gordon Smith said earlier this year it is looking to "dramatically" lower its own subprime auto lending activity.

Wells Fargo And JPMorgan Also Love Subprime Auto Loans?

How is that banks are shying away from their subprime auto lending activity but at the same time supporting it in the face of concerning data.

Bloomberg noted major banks are indirectly funding billions of dollars' worth of subprime auto loans by helping companies such as Santander Consumer USA Holdings Inc (NYSE: SC) borrow cash in the asset-backed securities market.

There may be some logic behind the seemingly confusing double-standard. Specifically, money managers including hedge funds tend to have a higher risk tolerance for riskier assets such as an auto subprime loan.

Related Links:

Will The Coming Subprime Auto Loan Calamity Affect Tesla?

FTC Subprime Auto Lending Investigation Could Be Early Sign Of A Deteriorating Market


Saturday, April 29, 2017 - 5:52pm
Public Domain

Apple Inc. (NASDAQ: AAPL) and Samsung Electronic (OTC: SSNLF)'s famed rivalry in the smartphone arena continues. Though the former appeals to its audience with its feature-rich phones, which are aesthetically designed and are easy to use, the latter has strived all through to match its rival in every step.

Maintaining Its Lead Despite Note 7 Debacle

Samsung's forte is its cost appeal, as it creates several models, each catering to different demographics of society. In 2016 alone, Samsung rolled out 31 models of smartphones from its stable compared to Apple's three.

Despite its flagship Galaxy Note 7 fiasco, which transitorily generated negative sentiment, Samsung still sold 311.4 million smartphone units of in 2016 compared to Apple's 215.4 million, giving Samsung a market share of 21.2 percent. Who knows what, if not for the Note 7 debacle, Samsung's numbers would have been?

Benzinga looked at how Apple would have fared in terms of valuation if it had sold as many units of smartphones as Samsung did in 2016.

The analysis was done based on the following assumptions:

  • Unit shipment figures for 2016 from IDC's research.
  • The ASP of iPhone was taken from the most recent quarter for which data was available (fiscal year first quarter or calendar year fourth quarter).
  • Revenues of other product/service categories were taken from Apple's fiscal year Q2, Q3 and Q4 of 2016 and fiscal year 2017 Q1. The corresponding quarterly numbers were summed up to get the calendar year 2016 figure. (This became essential because Apple's fiscal year ends in September and the shipment data available from IDC pertained to the calendar year 2016).

iPhone Revenues 44% More With Samsung Shipment Numbers

Assuming Apple sold 311.4 million units (Samsung's 2016 smartphone shipments) of iPhones instead of the 215.4 million it actually sold and applying an average selling price of $695 (the most recent quarterly statistics), the company would have generated annual revenues of $216.42 billion from the iPhone alone, roughly 44 percent more than it actually made.

Reconciled Calendar Year 2016 Revenues From Other Product Categories

  • iPad: $19.08 billion.
  • Mac: $23.42 billion.
  • Services: $25.46 billion.
  • Other Products: $10.81 billion.

Arriving At Valuation

Apple's calendar year 2016 revenues using Samsung's smartphone units would have been $295.19 billion.

Applying a price to sales ratio of 3.46, valuation would have been $1,021.36 as opposed to $753.72 billion currently.

Under this hypothetical scenario, Apple would trade at $194.55 compared to its current market price of $144, suggesting 35 percent upside from current levels.

Is Apple's think tank listening? A moot point, however, would be if Apple begins to focus on volume, and whether it can it do so without hurting margins and product quality.

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Saturday, April 29, 2017 - 9:33am
Public Domain

With the economy faring relatively well amid resurgence in consumer confidence and in turn spending, the milieu is relatively favorable for auto and auto-related stocks. Added to the positive macroeconomic backdrop, automakers have been very lavish in splurging incentives to lure customers.

Economic Data Points Positive

  • The conference board's consumer confidence reading for April released Tuesday showed a small decline in confidence from a near 17-year high. The headline consumer confidence index fell 4.6 points to 120.3 in April after it climbed solidly in March.
  • Latest data on personal consumption expenditure showed the metric was up 3.5 percent sequentially in the fourth quarter of 2016, which is a fairly robust showing.
  • The commerce department's retail sales report showed that sales of motor vehicles and parts dealers rose 3.8 percent year-over-year in the first quarter.

Healthy Auto Sales Data

Estimates by Edmunds show that auto sales rose to a record of 17.5 million in 2016, a 0.3 percent increase from 2015. December saw record sales of 1.68 million units.

That said, analysts expect a slight loss of momentum this year. Edmunds predicts new vehicle sales of 17.2 million units in 2017, which would mean that the industry is set to break the seven-year growth streak.

This has been confirmed by monthly sales numbers of the first three months of the year. Data released in early April showed most auto markets reported sales declines for March amid an inventory glut and rising incentives.

Against this backdrop, Benzinga looked at how much of returns an investor would have pocketed by staying invested in three categories of stocks namely:

    1. Automakers.
    2. Auto part retailers/Service Providers.
    3. Auto component suppliers.

An investment horizon of two years was taken into consideration for comparison purpose.

Automakers

  • Fiat Chrysler Automobiles NV (NYSE: FCAU): +5.26 percent.
  • Ford Motor Company (NYSE: F): -27 percent.
  • General Motors Company (NYSE: GM): -3.24 percent.
  • Honda Motor Co Ltd (ADR) (NYSE: HMC): -19.4 percent.
  • Toyota Motor Corp (ADR) (NYSE: TM): -21.6 percent.

GM Chart
Source: Y Charts

Auto Parts Retailers/Auto Dealers

  • Advance Auto Parts, Inc. (NYSE: AAP): +0.68 percent.
  • America's Car-Mart, Inc. (NASDAQ: CRMT): -28.3 percent.
  • Asbury Automotive Group, Inc. (NYSE: ABG): -28.2 percent.
  • AutoNation, Inc. (NYSE: AN): -31.4 percent.
  • AutoZone, Inc. (NYSE: AZO): +3.30 percent.
  • CarMax, Inc (NYSE: KMX): -13.5 percent.
  • Copart, Inc. (NASDAQ: CPRT): +68.79 percent.
  • Lithia Motors Inc (NYSE: LAD): -11.6 percent.
  • Group 1 Automotive, Inc. (NYSE: GPI): -14.6 percent.
  • O'Reilly Automotive Inc (NASDAQ: ORLY): +17.82 percent.
  • U.S. Auto Parts Network, Inc. (NASDAQ: PRTS): +78.11 percent.

KMX Chart
Source: Y Charts

Auto Component Suppliers

  • American Axle & Manufact. Holdings, Inc. (NYSE: AXL): -26.9 percent.
  • BorgWarner Inc. (NYSE: BWA): -32.5 percent.
  • Dana Inc (NYSE: DAN): -10.3 percent.
  • Gentex Corporation (NASDAQ: GNTX): +16.81 percent.
  • Genuine Parts Company (NYSE: GPC): +1.76 percent.
  • Magna International Inc. (USA) (NYSE: MGA): -19.9 percent.
  • Tenneco Inc (NYSE: TEN): +7.90 percent.
  • Visteon Corp (NYSE: VC): -3.27 percent.

AXL Chart
Source: Y Charts

The Winning Sector In The Auto Industry Is...

The average returns of automakers over a two-year horizon is a negative 13.2 percent and that of auto component suppliers is a negative 8.3 percent. On the other hand, auto parts retailers/service providers netted returns of a positive 3.7 percent in the same period.

However, the showing of auto parts retailers/service providers pales in comparison before the S&P 500 Index, which was up 13.44 percent in the same period.

Related Links:

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Saturday, April 29, 2017 - 9:32am
By Mark Dixon from Pittsburgh, PA - Trump-WomensMarch_2017-top-1060131, CC BY 2.

Historian Allan J. Lichtman took serious heat from the Left for predicting Donald Trump would win the presidency. Now, he’s hearing it from the Right because he’s predicting Trump is hurtling toward impeachment.

He counts the many ways in his latest book, “The Case For Impeachment,” (HarperCollins Publishers LLC), which came out in April as Trump closed in on his first 100 days in office, which officially end Saturday.

More crucial, Lichtman said, are the next 100 days. After failing to get legislative traction on core campaign pledges, Trump needs to make gains before myriad investigations into his Russian ties, treatment of women, conflicts of interest and other issues coalesce to kill his presidency.

“I think the next 100 days are more critical than the first 100 days,” said Lichtman, history professor at American University.

Promises Unkept

The litany of setbacks:

  • Attempts to overhaul healthcare? Tabled because of lack of Congressional support.
  • Promise of $1 trillion in infrastructure? Still no concrete plan.
  • Immigration reform? Blocked by federal courts.
  • The wall at the Mexican border? Dropped from the spending bill meant to keep the government running beyond this week.
  • Tax code overhaul? No action in Congress.
  • Fix free trade agreements? Softened his stance on China as a currency manipulator and suddenly blamed Canada for flaws with NAFTA. Aides said it would be scrapped, then backtracked.

“He campaigned as a dealmaker and has not gotten anything done,” Lichtman said, with the notable exception of getting Neil Gorsuch appointed to the U.S. Supreme Court.

Hurdles Ahead

Meanwhile, the next 100 days are bringing what could be a series of fresh obstacles that could coalesce into a juggernaut, including:

  • Conflicts of interest: The watchdog group Citizens for Responsibility and Ethics in Washington, or CREW, filed a lawsuit alleging Trump’s business holdings violate the Emoluments Clause of the Constitution.
  • Defamation and treatment of women: Gloria Allred, the Los Angeles lawyer representing Summer Zervos, a contestant on Trump’s TV show “The Apprentice” who alleges sexually molested her, wants Trump on the witness stand.
  • Russian connection: The FBI, the Pentagon and two panels in Congress are investigating team Trump’s ties to Russian oligarchs and whether the latter tampered with the U.S. election.
  • Decisions by courts that have temporarily blocked Trump’s attempt to punish cities that provide so-called sanctuary to undocumented immigrants and his ban on travel from mainly Islamic nations in which the Trump administration considers hotbeds of Islamic terrorism.
  • Pressure from business to overall the tax code, impose tariffs on imports and get started on infrastructure improvements.
  • Shore up his historically low approval ratings that may tempt Republicans to swap out Trump with his stolidly Christian conservative vice-president, Mike Pence.

The Pence Prerogative

“Pence figures into this significantly,” he said. “If Trump becomes a liability, they could turn against him.”

Lichtman is the author of 10 books. Using a predictive model and ignoring polls and pundits, he’s called the winner of every presidential election since 1984.

Lichtman said Trump’s maverick style is reminiscent of that of former President Andrew Johnson, who served from 1865 to 1869 after the assassination of Abraham Lincoln. Johnson was the first American president impeached by the House; his conviction by the Senate fell one vote short.

The Shadow Of Nixon

But Trump hews even closer to former President Richard Nixon, who resigned in 1974 because of abuse of power and cover-up allegations stemming from the Watergate scandal. Though Trump has no experience in public service and Nixon was the quintessential political lifer, Lichtman said the two men share some telling personality traits.

“Both men lack core guiding principles. They see themselves as beset by enemies and beset by the press,” he said. “Neither man has respect for American traditions. And both have a proclivity to lie.”

Lichtman, often called the predicting professor, writes in his book: “Counting Nixon, one out of every fourteen presidents has faced impeachment. Gamblers have become rich betting on longer odds than that.”

Related Links:

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Where Is All The Market Fear?
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Image Credit: "Trump, Women's March, 2017" By Mark Dixon from Pittsburgh, PA - Trump-WomensMarch_2017-top-1060131, CC BY 2.0, via Wikimedia Commons


Saturday, April 29, 2017 - 9:30am
Public Domain

President Donald Trump's proposed 2018 Federal Budget has allocated $2.6 billion for a border wall on the southern border. But is there better use for this money?

According to Statista, the same $2.6 billion could support 131,255 veteran caregivers for one year at a cost of $19,809 per year. This would mark an increase from the current funding, which supports just 36,600 caregivers.

In terms of infrastructure, the cash could resurface over 2,000 miles of four-lane roads at a cost of $1.25 million per mile, although the White House remains determined to propose a $1-trillion infrastructure fund project.

Or, the navy could buy 1,390 Tomahawk missiles at a cost of $1.87 million each, but the president's budget is already considered to be friendly for the military given a massive budget increase.

The city of Chicago is seeing rising murder rates and even caught the attention of Trump in early 2017. For $2.6 billion, the president could divert funds from the wall and fund the entire Chicago Police Department for 21 months at a cost of $124 million per year.

Finally, the wall could also fund 67,358 college degrees at a cost of $38,600 per degree, although there are some options for students to alleviate the financial burden of college.

Here's Statista informative chart showing various options of what else the border wall can finance.

Related Links:

Your Survival Guide To This Week's Potential Government Shutdown

The Border Wall Debate: A Look At The Borders Of Other Countries


Saturday, April 29, 2017 - 9:28am
Public Domain

Fellow millennials, are you upset you never received any lessons in financial literacy during your school years?

It is a common frustration among many to feel we were never taught what we really needed to know to prepare us for the outside world.

That might be changing. More and more schools across the country are coming together to combat this issue. W!SE (Working In Support of Education), a national educational nonprofit aimed at creating a national network of participants in its financial literacy certification program, announced the 2016 “100 Best W!se High Schools Teaching Personal Finance” at a ceremony in New York last week sponsored by Voya Financial Inc (NYSE: VOYA).

5 Best Schools Teaching Personal Finance In 2016

    1. New York City High School of Math, Science and Engineering at City College–New York.
    2. Richmond Community High School–Virginia.
    3. Marine Academy of Science and Technology–New Jersey.
    4. High Technology High School–Lincroft, New Jersey.
    5. Galileo High School–Danville, Virginia.

"W!se is leading the way in personal finance education preparing young people for a life of financial wellness," said Phyllis F. Perillo, founder, president and CEO of w!se. "We are proud to showcase the top 100 schools of distinction and warmly congratulate their dedicated teachers and administrators for outstanding achievement."

Schools from 46 states participated in the event, up from 36 states five years ago. "Financial Literacy is one of the most important issues of our time," said keynote speaker Anthony Scaramucci. "A financially literate nation is key to sustainable economic growth and I applaud w!se for giving young Americans the knowledge and skills to become our first generation of financially savvy adults."

Related Links:

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Millennials, It's Financial Literacy Month: Here's 20 Top Tips


Saturday, April 29, 2017 - 9:22am
Public Domain

Chipotle Mexican Grill, Inc. (NYSE: CMG) was recently in the news for jacking up prices, with analysts seeing logic in it, given ballooning expenses.

Stock Moves Out Of Range In Mid-April

Meanwhile, the investment community has become slightly optimistic on the shares, as reflected by the rally seen since late March, taking the stock to a new 52-week high. The stock was largely range bound between $370 and $450 until mid-April when it moved out of the range.

For the past one-year, the stock is up 6.74 percent.

CMG Chart
Source: Y Charts

A Technical Take

The recent rally has put the stock in overbought zone, as reflected by the 14-day relative strength indicator rising to 79.60. That said, the sentiment is still positive, given that the shorter-term 50-day moving average (currently at $429.13) continues to remain above the longer-term 200-day moving average (currently at $410.96) since the former broke above the latter in early March.

CMG Chart
Source: Y Charts

If the stock doggedly pushes forward, it could face serious resistance around the $511–$533 area, a peak last scaled before the recent consolidation began in April 2016.

Consolidation Phase

Consolidation, according to Investopedia is used to refer to the movement of a stock price within a well-defined pattern of trading levels.

A consolidation phase, a phase in which a stock moves sideways, can last for days or months, or even a year or two. In the case of Chipotle, the trading range was sustained for about a year. It usually represents a narrow trading band, within which there could be short rallies or retreats.

Essentially, the stock is moving to an established low and then rebounds to an established high and then repeats this move, without breaking below the established lows, termed as the support, and above the established highs, termed as the resistance.

Another way of looking at it is that it represents a period when traders are indecisive about the next price move and they stay positioned for the next move.

For confirming a consolidation phase, look for:

  • Steady support and resistance levels.
  • The trading range has to be narrow.

Consolidation: A Healthy Trend?

Experts view consolidation as healthy. If a stock continues to run up without any consolidation, it may prompt investors to be wary of any dip, resulting in largescale liquidation at the first sign of a pullback. In this case, the percentage by which the stock retreats could be far more than the pullback associated with a consolidation.

How To Trade Consolidation Phase

To trade a consolidation move with higher profits and less risk, traders need to look at volumes.

Volumes during a consolidation phase are generally low. When a security is approaching the support/resistance level, there is usually a pick-up in volumes. Especially when a security is about to break out, volumes increase more than the normal levels.

Traders can position themselves to buy a stock when it breaks above the resistance levels or sell a stock when it violates its downside support.

Once identify a breakout candidate is identified, confirmation of the breakout needs to be established by looking at volumes. Subsequently, one needs to set a reasonable objective, which can be done by measuring the distance between the support and resistance levels.

However, if the stock retests its previous resistance or support levels, then the breakout can be deemed as having failed. It is advisable that an investor exits by taking a loss.

Going by the volume trend, Chipotle's current breakout may not point to a sustainable upward move. Caution could be the watchword, even as investors go gung ho above the stock hitting its highest level for the year.

At the time of writing, Chipotle Mexican Grill is slipping 1.20 percent to $473.03.

Related Links:

Chipotle's 2017 Is 'Still A Stretch'

Why The Chipotle Bull-Bear Debate Is Focused On Comps


Friday, April 28, 2017 - 5:20pm

Speaking on Bloomberg Markets, Joe Tigay of Equity Armor Investments recommended a buy-write strategy in Facebook Inc (NASDAQ: FB).

The company is going to report earnings on May 3 and Tigay thinks that it would be a good idea to buy the stock and sell the May 19 expiration, 150 strike call for $3.60. The premium provides him a protection of 2.40 percent in case the stock trades lower. If Facebook closes above $150 at the May 19 expiration, he would have to sell the stock and his selling price would be set at $153.60.


Friday, April 28, 2017 - 5:07pm

Pete Najarian said on CNBC's Fast Money Halftime Report that he noticed unusually high bullish options volume in Oracle Corporation (NYSE: ORCL).

He explained that somebody bought 8,500 contracts of the July 48/50 call spread for $0.22 in the first half of the trading session. The trade breaks even at $48.22 or 7.25 percent above the closing price on Friday. If the stock jumps 11.21 percent or higher, the trade is going to reach its maximal profit of $1.78. Najarian likes the trade and he decided to buy the call spread.