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Cody Kiss & Tell: Gene repair, Silver, Earnings, iPhone sales, and more

Cody Willard

Cody Willard

— 6 min read

Here is the transcript to this week’s Live Q&A Chat. Visit the Trading With Cody Chat room on the Trading With Cody iPhone App, the Trading With Cody Android App or at https://twc.scutify.com/members/. If you have any questions about our service, just email us at support@tradingwithcody.com.

Q. Feels good to be hedged here after non-stop rally. Any thoughts on VMware’s earnings?

A. I like to quote an old mentor of mine who used to say “may you always lose money on your hedges,” because usually that means you’re making money on your actual portfolio. My SPY puts have been a total loser since we nibbled on them a couple times in the past couple weeks, but I am being patient in adding more hedges just yet. I wouldn’t want to have feel like I need to be longer right now. All that said, remember that feelings in trading/investing/hedging are the enemy, of course. I have no edge for you on how to game the stock and the earnings over the last 90 working days for $VMW, sorry.

Q. Hey Cody. I am hearing and reading a lot of negative commentary regarding Apple’s iPhone numbers that will be reported on Monday. Do you have any thoughts? Apple and the supply chain could get hurt a little. I own some $AVGO. Thanks.

A. The Apple iPhone buzz has been that sales are “worse than expected” pretty much consistently for the last five years, no? Wall Street analysts get ahead of themselves in modeling out XX million units sold and then if Apple doesn’t meet that XX, the world goes around saying iPhone sales are soft. Fact is that the component suppliers to Apple could get hurt if iPhone unit sales are down too much and inventory gets built in the supply chain and then the chances of write-downs hit. Are those concerns about the last 90 days of iPhone sales overblown right now? Are they already more than priced into the stocks like $AVGO? I can tell you that I’d rather own Apple iPhone suppliers $QCOM and $SNE than $AVGO, but I can’t say I have a feel for what’s priced into $AVGO right now.

Q. $FFIV reports earnings tonight. Thoughts?

A. The bar for $FFIV is rather low after $JNPR recently said that enterprise networking spending is soft. I think $FFIV could pop 5-10% if the earnings are strong, could be flat with in-line and could get hit 5-10% on soft earnings. I’d rather be long than short $FFIV into the report as I think their business was stronger than Juniper’s. But I’m just holding my $FFIV common stock steady for now, to no surprise I’m sure.

Q. How about any analysis for $QCOM‘s earnings tonight?

A. $QCOM expectations are also low going into their earnings report, as $INTC has supposedly made inroads to getting some share of Apple’s iPhone business as well as the fact that rumors abound of Apple iPhone sales weakness. I expect a pretty good quarter out of $QCOM but the question will be whether the iPhone and smartphone businesses are soft into the next 90 days. I’d also rather be long than short $QCOM into their report, and would probably look to buy more if the stock gets hit back into the high $40s if the market doesn’t like the report. For now, steady as she goes.

Q. Hey Cody. Google reports earnings tomorrow. Last quarter the stock went to over $800 in after-market trading, only to come crashing back down to earth to below $700. The market was concerned about capex spending. Especially on Google fiber buildouts. Are you going to do anything before the report? The $760 strike covered calls that expire this Friday are trading at $17 per share. What you think about that too?

A.  I don’t do much covered calls because I don’t want to risk losing my stock. Feet to fire, Google’s going to need another strong top-line and bottom-line report to pop the stock, but I do think it’s likely they deliver a strong top-line and bottom-line. I hope all this helps.

  • Subscriber Follow-up: Yes, thanks. Earnings are very volatile, as we all know.

Q. Question regarding payments – don’t know if you have covered before. I could argue you have that in portfolio with $AMZN and especially $AAPL, but have you looked at $SQ or $PYPL and do you have thoughts on sector plays in general?

A. I’m not a fan of Paypal, having been a disgruntled customer of the service for many years. I wrote up a report a few months ago about why I won’t buy Paypal but didn’t want to short it either. I haven’t looked at $SQ recently but have never felt comfortable with their long-term road map.

Q. $IBM is on my mind today. I have been looking to short it and with the earnings behind, once again showing real weakness and a company that has a lot of time before it can right the ship, it does feel like it might be time to jump back in on the short end for a quick trade. Markets do need to pullback, earnings are over for them, and I can’t find anything that would be a catalyst to move the stock up. Exit point might be $135 or so on the downside. Thoughts?

A. The risk to shorting $IBM is twofold — 1. the stock is “cheap” on a P/E basis (regardless of the fact that I don’t like their financial engineering of the E). 2. Artificial Intelligence is likely to head into a bubble in coming months and quarters and IBM’s Watson is the Xerox of AI right now. I’d be long $IBM if their balance sheet were stronger and their earnings less managed.

Q. The subject is silver. I know your feelings on gold — buy and hold the real thing; ETF’s wouldn’t be able to deliver the goods if push came to shove; debt considerations with miners. Do you have the same reservations regarding silver? Others? None? It looks like silver spot pricing is beginning to move, and it may finally be in something of catch-up mode. Any advice/guidance here? My one holding, $SLW long-term calls, has spiked up recently. Thanks.

A. If you want to bet on the price of silver for the next three weeks or three months or one year, $SLV is a decent way to do that. If you want to hedge your portfolio with silver for the long-term risks of currency devaluation and financial disruption, then of course only silver coins and a little bullion are the way to go. Your silver mining stock, $SLW, has $1.5BB in debt and $100 million in cash and it sounds like a leveraged up way to bet on silver getting to $25 or $30 so they can make enough money to service/pay back that debt and earn some profits for shareholders. I’m not interested in a over-leveraged silver miner stock, personally.

Q. $EDIT is a recent IPO that does gene repair – almost no sales, losses as far as you can see – but it survived its IPO and is currently near its highs. Have you looked at this company?

A. Having had a daughter last year that was diagnosed with the genetic disorder, Trisomy 13, I’ve done some reading on gene repair and it’s a promising, exciting field, but might be many years away from being in the marketplace. $EDIT looks like a decent lottery ticket on the gene repair industry though, with $140MM cash and no debt after its IPO earlier this year.

Q. Are there any other companies you have looked at in gene repair that are public?

Q. $ISRG is up on large volume today after earnings – breaking decisively above consolidation under $600 it has been in for a while. I have $850 target we discussed before (via options as earnings were due).

  • Rock on with $ISRG, good for you. #RoboticsRevolution.

Q. Any thoughts on $GIMO – seems to have consolidated a long time and may be perking up now?

A. Gigamon is an interesting network/app infrastructure play. $GIMO‘s got a $1BB market cap with $200MM or $6 per share net cash on the balance sheet. Analysts expect nice 20% top-line growth this year and slightly less than that next year with earnings growing slightly faster than that. The stock isn’t cheap but not outrageously expensive with those growth metrics and trading at 30x 2016 earnings estimates.

Ok folks, that’s a wrap. Thanks!

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