Don’t Let the Hype Fool You, Wall Street’s EV Dogpile Isn’t a Sign to Buy
Shah Gilani|August 2, 2021
Lucid Group (Nasdaq:LCID) started trading last Monday after the electric vehicle (EV) company completed a blank-check merger with Churchill Capital Corp. IV.
As you would expect, there was a lot of hype around this listing, and after the obligatory first-day pop, the stock dropped through the rest of the week.
I like Lucid, as a company. The cars are beautiful, and they represent a potential alternative to Tesla for higher-end buyers. That being said, the company hasn’t delivered a single car.
Investors are just piling into the stock hoping it will be the next Tesla. That might be a little premature.
I’m watching shares of LCID to see if they breakthrough last week’s intraday lows. If that happens, I like buying the LCID August 20, 2021 $22/$20 Put Spread for $1.00 or less.
At that price, this trade would have a 2-to-1 reward/risk profile.
Next up, I’m watching the large-cap Chinese tech platform stocks, especially Alibaba Group Holdings Limited (NYSE:BABA).
In case you’re not familiar with BABA, it’s basically the Amazon of China. On paper, the “Amazon of China” sounds great, and it was until recently when the United States Government and the Chinese Central Government started what I’ve referred to as a new economic cold war.
I’m not going to get into the details of the dispute between the two countries, because I covered it in last Thursday’s Total Wealth column, which you can read here.
What matters is that the rhetoric between the two countries is heating up, and China is increasingly threatening to delist Chinese companies that trade on U.S markets.
I think we’re still in the early innings regarding this conflict, which means I want to stay away, at least for now, from Chinese companies, especially the tech platform companies.
This week, if BABA trades back up to $208, I like buying the BABA September 17, 2021 $205/$200 Put Spread for $2.50 or less.
At that price, this trade also has a 2-to-1 reward/risk profile.
And finally, I’m watching DraftKings, Inc. (Nasdaq:DKNG), the digital sports entertainment and gaming company that provides sports betting and iGaming opportunities in the United States.
The company is scheduled to report earnings, Friday before the open.
The market is looking for a -$0.52 loss for the quarter, which is 30% lower than the -$0.40 loss in the same quarter a year ago.
That’s not great…
The estimate isn’t surprising to me considering the COVID-stimulus money, which people were using to day-trade and speculate, has all but dried up.
Without all that extra money sloshing around, people are likely less inclined to spend money wagering on sports.
But, football season is right around the corner and that might cause a significant increase to the company’s top line as avid sports fans start betting on games from now until the end of the year.
I wouldn’t be surprised if the company raised forward guidance. I’m not saying it will raise guidance, but it could, and if that happens we could see a fresh round of capital piling into the stock.
I’m watching for two things.
If the company does raise forward guidance and the stock trades above $53, I like buying the DKNG September 17, 2021 $50/$55 Call Spread for $2.50 or less.
Just like with LCID and BABA, this recommendation also has a 2-to-1 reward/risk profile.
So there’s this week’s watchlist. What are you watching? Let me know by dropping me a line at shah@totalwealthresearch.com.
I look forward to hearing from you,
Shah