EOT Trade Alert – May 13, 2015
Trade Alert:
Buy GDDY August 21st 2015 $24 Puts at $1.25 or better
Company Background:
GoDaddy (GDDY) provides internet and cloud bases technology solutions for small businesses.
Short-Term Catalyst:
GDDY is well known for their success as a tech startup. And it’s a company based in my hometown of Scottsdale, Arizona so I’m familiar with the company.
They’re most widely known for their Super Bowl commercials and sponsorship of the race car driver Danica Patrick.
GoDaddy recently became a publicly traded company. The stock is up 20% since the April 1st IPO.
But I’m not sure why… the company beat revenue estimates, but they fell short of the 35 cents per share in earnings analysts were expecting. In fact, the company lost a whopping 34 cents per share.
Now the company is taking steps to rein in spending. They cut ties with their sponsorship of Danica Patrick and will “redeploy” the marketing dollars in other ways.
I’m shocked that GDDY missed earnings estimates by such a wide margin and even more shocked that they’re making such a dramatic shift in marketing and company image after their IPO.
Simply put, this is a company that wasn’t ready to become public.
Now they’re doing whatever they can to prop up the stock and keep investors happy. But there’s little chance they’ll be able to turn things around.
The post-IPO euphoric period for the stock is coming to an end. And I’m expecting GDDY to take a nose dive over the next few weeks.
I think we’ll see shares of GDDY fall below the $20.00 IPO price.
Trade Details:
| Underlying Stock Symbol: | GDDY |
| Current Bid-Ask Price: | $1.00 – $1.15 |
| Option “Buy Up To” Price: | $1.25 |
| Break-Even On Stock At Expiration: | $22.75 |
| Maximum Risk Per Contract: | $125 |
Exit Strategy:
GDDY is trading at $27.00 per share. Resistance levels will be at $29.00 and again at $30.00. Remember, we want this stock to move lower. Support levels will be at $24.00 and $20.00. 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
