MorningWord 4/3/17: You can go with this or you can go with that – BBBY, BBRY

by Dan April 3, 2017 9:28 am • FREE ACCESS

Usually, I start my Monday morning piece off with a quick recap of Friday’s Options Action, but, I was not on, which was the first time in a few months.

So let’s get right to the weekly implied movement for the S&P 500 (SPX), off of a $235.74 close in the SPY, the etf that tracks the SPX is pricing about a $2.10 move in either direction, a little less than 1%. This in a week where China’s President will be meeting with ours in Florida (so expect trade headlines), the Minutes from the Fed’s March 15th meeting will be out on Wednesday and the March employment report will be out on Friday morning.

Earnings announcements are expected to be light this week, but with the start of the new quarter we could see some pre-announcements. The only one of note to me that might be worth extrapolating to retailers or the consumer is Bed Bath and Beyond (BBBY), who will report Wednesday after the close. The options market is implying about a 5% one day move in either direction, which is about in line with its 10-year one-day post earnings average, above its 4 qtr average of about 3.25% but well below its 9% decline following its results in late December.  Shares of BBBY are down 50% from their all-time highs made in early 2014, and dangerously straddling what might prove to be a very important technical level at $40 going back to 2007:


Here is one, kind of a blast from the past with a very similar ticker symbol to BBBY, and that’s Blackberry (BBRY) which closed up 11% on Friday after posting results that were better than expected as the company appears to be benefiting sooner than some investors thought from move away from hardware to their existing focus on software licensing. A big part of their mobile software strategy has to do with the connected car, a fairly nascent, but competitive market, per WSJ, quoting CEO John Chen:

BlackBerry is also “likely” to develop software for car makers similar to its current deal with Ford Motor Co. , Mr. Chen said. In October, Ford and BlackBerry announced they would expand the use of QNX software within the auto maker’s fleet. On Thursday, Ford said it would hire 400 engineers from BlackBerry’s mobility solutions unit to help develop internet-connected vehicles.

BlackBerry owns about half of the “infotainment” market in the auto sector, with its software installed in over 60 million cars, Mr. Chen said. The company has no plans to build an autonomous car, but will provide software components within that burgeoning market, he added.

Management guided to non-GAAP profitability for the current fiscal year, with their cash balance at $1.7 billion, or about 40% of their $4.1 billion market cap, or about 25% net of debt, BBRY might find its way back on both value and growth investors radars’. Shares of BBRY are down 90% from its all-time highs in 2009, a year in which it booked $14.5 billion in sales, on it way to its peak just below $20 billion in 2011, to this year’s expected $1 billion, or about 90% from its highs. You get the point. But off of such a low base, dramatic increases might be possible in both sales and earnings, and given the incremental improvement in the quarter just ended and upbeat guidance, I am hard-pressed to see the stock below $6 a level that has served as massive support since 2012:

BBRY 10yr chart from Bloomberg

This one is worth keeping on your radar.

Here are a few bits and bobs we read this am:

A possible Trumpcare comeback – Axios…  don’t hold your breath. Why you ask —> also from Axios Trump’s legislative minefield (Five landmines in their near future)

How Uber Uses Psychological Tricks to Push Its Drivers’ Buttons – NYT 

“We’ve underinvested in the driver experience,” a senior official said. “We are now re-examining everything we do in order to rebuild that love.”

ESPN Has Seen the Future of TV and They’re Not Really Into It – Bloomberg

“I’m really tired of being painted as some sort of failing, sinking ship,” SportsCenter anchor Scott Van Pelt told the Washington Post in September. “It’s not like we’re losing money, we’re just not making as much. It’s a giant difference.”

Trump Plans Have Deal Makers Dreaming Big ($100-Billion-Cash-Takeover Big) – NYT Dealbook

Lower taxes and less regulation, the thinking goes, should contribute to strong stock prices. And when the markets are up, companies are more likely to strike big deals. Finally, the pro-business Trump administration, most deal makers believe, is likely to take a forgiving view when it comes to antitrust matters.

Trouble Bubbling Under at Chinese Banks – WSJ I know, I know, this is sooo 2013-2014

Beneath the surface, all’s not so well. Even though the balance of nonperforming loans remained stable last year at China’s big and midsize banks, their return on assets and equity continued to fade as credit costs—a measure of banks’ impairment charges—rose to their highest in six years.