EOT Trade Alert – February 5, 2016
Trade Alert:
Buy STMP February 19th 2016 $85.00 puts at $2.90 or better
Company Background:
Stamps.com (STMP) provides Internet-based postage solutions in the United States. It offers solutions for mailing and shipping various mail pieces. The products and services are a USPS approved PC Postage service that allows customers to print electronic stamps directly onto envelopes, plain paper, or labels using a personal computer, printer, and Internet connection.
Short-Term Catalyst:
STMPS has ridden a wave of bullish momentum over the last year. During that time, the stock doubled in value.
The gains have been fueled through the acquisitions of ShipStation, ShipWorks, and Endicia over the last few years. They’ve become the dominant force in the internet-based mailing and shipping services industry.
These acquisitions have led to some impressive earnings growth over the last year. And in the long run, STMP’s is in position to benefit from consumers doing more online shopping.
Here’s the thing…
Investor expectations are simply too high.
Acquisitions are rarely smooth and seldom end up being as beneficial to earnings as management would like investors to believe.
Right now STMP has a sky high valuation that will require nearly flawless execution of the recent acquisitions to support. I think their 4th quarter earnings will disappoint investors when they report on February 11th.
Let’s grab put options on STMP ahead of quarterly earnings.
Trade Details:
| Underlying Stock Symbol: | STMP |
| Current Bid-Ask Price: | $2.00 – $2.92 |
| Option “Buy Up To” Price: | $2.90 |
| Break-Even On Stock At Expiration: | $82.10 |
| Maximum Risk Per Contract: | $290.00 |
Exit Strategy:
STMP is trading at $86.74 per share. Resistance levels will be at $90.00 and $95.00. Remember, we want this stock to move lower. Support levels will be at $85.00 and $80.00. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.
Chart:
Category: EOT Trade Alert
