| December 3, 2014

December 3, 2014

Trade Alert:

Buy WWWW January 16th 2015 $17.50 Puts at $1.10 or better

Company Background:

Web.com Group (WWWW) provides Internet services to small businesses.  They offer a range of Web services and products that enable small businesses to establish, maintain, promote, and optimize their online presence.

Short-Term Catalyst:

Web.com is a company that I was bullish on a few years back.  But the bullish case for this company has fallen apart this year.

Simply put, WWWW has failed to deliver the type of revenue and earnings growth investors expected.

Last quarter they had revenue of $137.4 million when they were expected to make $143.1 million.  And they actually lost 7 cents per share but adjusted earnings were 66 cents per share.

The key point here is revenue isn’t growing as fast as expected.  That’s the most important metric for a company like Web.com.  And it’s not the first time they disappointed investors.

Now WWWW is locked in a bearish downtrend.  The stock is down more than 50% from the 52-week high and showing no signs of a reversal.

The initial reaction to the latest disappointing earnings sent the stock down to a new 52-week low of $14.71.  Since then, WWWW has rallied up to $17.45.

It’s now at resistance of the downtrend and ready to make another move lower.

In short, this is an opportunity to buy put options on WWWW in anticipation of another leg down.

Trade Details:

Underlying Stock Symbol: WWWW
Current Bid-Ask Price: $0.85 – $1.00
Option “Buy Up To” Price: $1.10
Break-Even On Stock At Expiration: $16.40
Maximum Risk Per Contract: $110


Exit Strategy:

WWWW is trading at $17.45 per share.  Resistance levels will be at $19.00 and again at $20.00.  Remember, we want this stock to move lower.  Support levels will be at $15.00 and $14.00.  Conservative investors should look to exit at the first support or resistance level.  Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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