EOT trade alert June 26, 2014

| June 26, 2014

June 26, 2014

Trade Alert:

Buy P August 2014 $30.00 Calls at $1.95 or better

Company Background:

Pandora Media (P) provides Internet radio services in the US.  They make money through the advertising sales.  They offer displays, audio advertising, and video advertising products to advertisers for delivery on computer, mobile, and other connected device platforms.  The service can be accessed ad free through Pandora One, a paid subscription service to listeners.

Short-Term Catalyst:

Pandora is a great idea…

Radio the listener is control of what they listen to.  It’s why the company has 200 million registered users and 76.2 million active users.

It’s such a great idea that many other companies would love to get a piece of the action.  And there’s always a company that’s rumored to be a ‘Pandora Killer’… we’ve heard that Apple (A), Google (GOOG), and Amazon.com (AMZN) would be the end of Pandora at one time or another.

But it hasn’t happened… Pandora has reached a critical mass.  A simple copycat isn’t going to pull Pandora users away.  There needs to be something new to pry Pandora’s customers away.  And so far no one has been able to deliver.

In fact, Pandora’s business model has been able to deliver consistent revenue growth despite the introduction of new competition.  The only problem with Pandora is they’re not profitable.

That puts P into the momentum growth stock category.

Right now is a great time to buy call options on momentum growth stocks.  The entire category led the markets higher through 2013 and early 2014.  Then it went through a major correction from March through May.  During that time, P fell more than 40% from $40 to $22.50.

Now, P and other momentum growth stocks are back on the upswing.  Let’s grab call options on P now to profit from the next leg higher.

Trade Details:

Underlying Stock Symbol: P
Current Bid-Ask Price: $1.76 – $1.87
Option “Buy Up To” Price: $1.95
Break-Even On Stock At Expiration: $31.95
Maximum Risk Per Contract: $195


Exit Strategy:

P is trading at $28.85 per share.  Resistance levels will be at $32.00 and again at $36.00.  Remember, we want this stock to move higher.  Support levels will be at $24.00 and $22.50.  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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