Nervous Nellies Close the Book on Investment Opportunities You Need on Your Portfolio
Good or bad, every earnings report comes with an opportunity for people like us.
Now that earnings season is here, companies are being hit left and right as nervous nellies pack up their bags and abandon their positions, or even the market entirely. That gives us the chance to take up their mantel or play on their fears.
That’s why I’ll have my eyes trained on Airbnb Inc (ABNB) this week.
The company revealed a report last Thursday that included unprecedented record highs. It’s reported revenue grew 67%, beating estimates at $2.19 billion. Then its net income came in over 280% higher than 2020’s third quarter.
Yet, Airbnb still fell short on expected Gross Booking Value (totaled $11.9 billion) and Nights and Experiences Booked (totaled 79.7 billion), two indicators showing fewer people are using the service and its add-ons than expected by analysts.
Because of this, shares traded down between four to five percent after hours, but early Friday morning Buy-the-Dippers crowded in. We’re now seeing prices above $200 – at least 12% higher than ABNB’s closing price Thursday night.
That’s quite the gap and one I’d rather not chase even higher.
ABNB’s price may come crashing back down as this back and forth between nervous nellies and retail wages on, which is why I’m looking for a specific trigger to make this play profitable for us.
If shares of ABNB came back down to $186.15 by November 19, let’s buy the ABNB February 18, 2022 $195/$200 Call Spread for $2.40 or less.
We can plan on exiting this position for a 100% profit or if shares of ABNB close below $173.96.
Then there’s the retail investor favorite DraftKings Inc (DKNG).
This company announced its third-quarter earnings early Friday morning, which includes a loss of $1.35 per share – 24 cents more than the Zacks Consensus Estimate and 37 cents more than last year’s losses.
With that, this is the fourth consecutive quarter that the company has missed earnings expectations. That’s never a good sign, but it is in line with a trend I’m seeing in its financials.
In the last three years of operation, DKNG has only increased its yearly losses, growing from $77 million lost in a year to $902 million. And that slide into losses occurred while the company has seen revenue explode nearly 10-fold over the same period.
Widening losses in the face of revenue growth and missed earnings estimates are a terrible combo. It’s no surprise that investors have been bailing on the stock, dropping prices 40% since its intraday high on March 22.
And I think it can go lower from here.
As more and more investors get cold feet, let’s buy the DKNG February 18, 2022 $40/$35 Put Spread for $2.00 or less (this spread is currently trading at $1.89).
Plan on exiting the DKNG February 18, 2022 $40/$35 Put Spread for a 100% profit or if shares of DKNG close above $48.00.
Beyond earnings reports, the next company I’m watching has made some major announcements recently and the markets responded.
Pfizer Inc (PFE) soared more than 11% Friday morning after it announced a COVID-19 pill (PAXLOVID) that has been shown in trials to cut the risk of hospitalization or death caused by the disease by 89%.
On its own, that’s great news – good enough to get shares moving higher, but I’m expecting another drop off. Not everyone in this dog pile is a long-term investor. They’ll take their profits and run, lowering the price on this stock back down and giving us the opportunity to grab this stock at a discount.
PFE has two more tailwinds heading its way, the first is the FDA’s emergency use authorization allowing its vaccine to be used on children 5 to 11 years-old. The second is the uptick in European COVID-19 cases. The PAXLOVID pill is just the beginning and we’ll make it out with 100% profits if we’re patient.
PFE trades back down to $46.00 by November 19, I like buying the PFE February 18, 2022 $49/$50 Call Spread for $0.40 or less.
Plan on exiting the PFE February 18, 2022 $49/$50 Call Spread for a 100% profit or if shares of PFE close below $43.85.
That’s what I’m watching this week, what about you?
Let me know in the comments below or by dropping me a line at firstname.lastname@example.org.