Weekly Issue: The NRF holiday forecast is another boost for us
KEY POINTS FROM THIS ALERT:
- We continue to rate the United Parcel Service (UPS) Jan 2018 130.000 calls (UPS180119C00130000) a Buy up to $1.00, with a corresponding stop loss at 0.30.
- We continue to rate the Walmart (WMT) Jan 2018 80.000 calls (WMT180119C00080000) calls a Buy at current levels. We continue to have a stop loss set at 1.80, but as those calls move higher in the coming weeks we will look to boost that level accordingly.
- We continue to rate the Corning (GLW) November 17, 2017 $31 calls (GLW171117C00031000) a Buy at current levels. Our protective stop loss for this position remains set at 0.25, and we’ll look to boost that level of protection in the coming days and weeks as the calls trade higher.
National Retail Federation (NRF) Holiday Forecast: Another Confirming Data Point for UPS Calls
Earlier this week we issued a special alert adding the United Parcel Service (UPS) Jan 2018 130.000 calls (UPS180119C00130000) to the Tematica Options+ Select List — click here to view the alert in case you missed it. We made this move given the clear prognosis for digital shopping to take consumer wallet share once again in the 2017 holiday shopping season. As we argued, odds are digital shopping will take a hefty bite as well out of Halloween related sales as well. All of this reinforces our view that UPS is one of the unsung heroes when it comes to digital shopping, a key aspect of our Connected Society investing theme.
As you can imagine, even though the calls traded off during the last few days, we were grinning ear to ear when the mack-daddy of holiday forecasting — the National Retail Federation (NRF) — issued its own 2017 holiday shopping forecast. The NRF sees a 3.6% to 4% rise in holiday retail sales during the November-to-December. Leave it to the NRF to point out there are 32 shopping days between Thanksgiving and Christmas, one more than last year, and an extra weekend day for shopping since Christmas falls on a Monday.
Moving past the initial forecast we find that even the NRF acknowledges the ongoing shift away from brick & mortar retail given its view that non-store sales, better known as online and mobile, are expected to rise 11%-15% percent to about $140 billion vs. 12.6% in 2016. We see that as the latest shot in the arm for these recently added UPS calls, which we continue to rate a Buy at current levels.
- We continue to rate the United Parcel Service (UPS) Jan 2018 130.000 calls (UPS180119C00130000) a Buy at current levels.
- We would be buyers of these calls up to $1.00, and the corresponding stop loss remains at 0.30 for now.
Wal-Mart Expected to See its Fair Share of Holiday Says, Especially with Toys “R” Us’ Troubles.
We also see these 2017 holiday shopping forecasts as a positive for the Walmart (WMT) Jan 2018 80.000 calls (WMT180119C00080000) calls we’ve previously recommended. Not only is Wal-Mart one of the largest retailers, it is expanding its online presence and is poised to gain incremental spending on toys this year along with Amazon (AMZN) owing to the bankruptcy of Toys “R” Us. Market research firm NPD Group recently said U.S. toy sales grew 3% in the first half of 2017 and said it expects holiday season sales to bring full-year growth to 4.5%, helped by the upcoming Star Wars movie.
We’ve seen this competitor closing, share gaining movie before when Best Buy (BBY) benefitted from the closer of Circuit City and then again with store closures by hhgregg (HGGGQ). The sequel was had with Dick’s Sporting Goods (DKS) given the closings of Sports Authority, Sports Chalet and other sporting good and outdoor retailers in the last few years. Also helping Wal-Mart this year is its holiday season layaway program that caters to Cash-Strapped Consumers. As we’ve discussed at TematicaResearch.com, lackluster wage growth, credit card debt topping $1 trillion-plus new data from the U.S. Department of Education showing 42.3 million Americans owe a total of $1.33 trillion in federal student loans means there will be no shortage of Cash-Strapped Consumers this holiday shopping season.
- We continue to rate the Walmart (WMT) Jan 2018 80.000 calls (WMT180119C00080000) calls a Buy at current levels.
- We continue to have a stop loss set at 1.80, but as those calls move higher in the coming weeks we will look to boost that level accordingly.
Before we move on, a quick housekeeping note with regard to Wal-Mart – last week we were stopped out of the Wal-Mart (WMT) January 19, 2018, 82.50 calls (WMT180119C00082500) when they crossed the 1.50 stop loss.
Still Waiting for the Catalyst for Corning Calls to Kick In — the Launch of iPhone X
With regard to the Corning (GLW) November 17, 2017 $31 calls (GLW171117C00031000), they rallied back this week to finish slightly in the green. As a reminder, we continue to wait for the debut of Apple’s (AAPL) iPhone X in early November as it is likely keeping potential iPhone 8 and 8 plus owners in a holding pattern until it hits shelves and they can truly compare the models. The next known catalyst for these calls will be when Corning reports its 3Q 2017 earnings on October 24.
- Ahead of both of these events, we continue to rate the Corning (GLW) November 17, 2017 $31 calls (GLW171117C00031000) a Buy at current levels.
- Our protective stop loss for this position remains set at 0.25, and we’ll look to boost that level of protection in the coming days and weeks as the calls trade higher.
