This Week’s Top Trade Ideas – February 7

In my weekly segment where I take a look at recent trade ideas from across the web and give some of my own picks, I have another batch of setups to keep tabs on.

1. Conservative Guidance Drags Silicon Motion Shares Lower

Silicon Motion just printed its Q4 earnings report a few days back and the stock is still reeling as management issued a conservative outlook for its full-year guidance. The company has managed a transition from external storage to SSD and embedded memory to keep up with changing industry trends, changing its product mix significantly by 2015.

Even so, the company remains particularly conservative when it comes to printing growth forecasts as it often underestimates its potential. For instance, in 2016 it predicted 0-10% revenue growth but wound up seeing a 54% jump. For now, investors seem to have hit the panic button on downcast estimates but there’s a strong chance that actual performance will surpass these forecasts and put Silicon Motion shares back on a bullish run.

2. Macy’s Buyout Rumors Sparks Sears Short Squeeze

Traders got a glimpse of the short squeeze potential on Sears Holdings Corp when rumors of Hudson’s Bay potential buyout of Macy’s swirled last week. The stock surged 8% in minutes as short interest represented roughly 68% of available shares.

This makes the stock a dangerous short bet since short interest has grown 15.5% recently as market watchers continue to set lower expectations for the company. Note that Sears will be printing its earnings report later on in the month and any ray of hope for a recovery could lend significant upside potential, at least in the short-term.

3. International Speedway Performance Slowing

Shares of International Speedway have been cruising sideways for the past few years and it has had a pretty rough 2016. Last year, ratings and attendance continued to tumble, leading to weaker admissions revenues. To make things worse, management has lost credibility so investors are worried about capital allocation decisions.

At the moment, shares are trading around the top of the range at $37 and could be looking at downside until $31. A break below that range support could pave the way for a move to the high $20 levels.

4. Ridesharing Trend Signals Downside for Medallion Financial

Over the past few years, ride sharing has definitely grown and disrupted the transportation market with companies like Uber and Lyft. Not only has this trend hurt margins for traditional car services but it has also weighed on the outlook for Medallion Financial Corp, which conducts business through consumer, taxi medallion, and commercial lending.

In effect, getting a taxi medallion has become less practical for those who want to invest in transportation businesses, compared to Uber and Lyft which don’t charge drivers for signing up for the service. In fact, several medallion owners are already going bankrupt and might default on loans, which doesn’t bode well for Medallion Financial.

In its Q3 2016 earnings, the company already reported a loss of $3.6 million in its medallion lending business and this could keep growing in the succeeding quarters. Note that Medallion Financial and its subsidiaries have lent over $7 billion to the taxi industry and the company’s stock is trading 25.5% down year-to-date as of the end of January.

5. Trend Pullback in ARTX

This week’s trade from the Trade Ideas team is ARTX. Trade Ideas are currently on a roll with 3 out of 3 of their last picks making decent profit. This trade looks like it could be another winner.

Please Note: A previous version of this post was destroyed after a hacking attempt on this website. I managed to salvage most of the article and re-post it here. The website is now secured.