How to Play Investor Disappointment this Earnings Season
Shah Gilani|July 4, 2022
On Thursday, Walgreens Boots Alliance Inc. (WBA) reported third-quarter results that disappointed investors, and the stock was down more than 5% in early trading.
For the quarter, the company reported revenue of $32.6 billion, down 2% from the same period a year ago.
On the bottom line, earnings came in at $0.33 a share, which was down 76.08% from $1.38 a share, last year.
The stock has already lost more than 26% from the beginning of 2022 as fears about COVID-19 waned and vaccine revenue dropped.
On top of vaccine revenue declining, the company also reached a $683 million deal last month to resolve claims related to the distribution of prescription opioid medications in Florida.
At this point, I think we could see additional softening in vaccination revenue and more potential opioid-related lawsuits on the horizon.
Neither of which are good for the company or share prices.
At this point, let’s buy the WBA August 19, 2022 $35/$32.5 Put Spread for $0.50 or less. Plan on exiting the WBA August 19, 2022 $35/$32.5 Put Spread for a 125% profit or if shares of WBA close above $41.25.
Sticking with COVID-related news…
On Thursday, Pfizer Inc. (PFE) said that it’s submitted a new application to the U.S. Food & Drug Administration seeking formal approval for the sale of its COVID oral treatment Paxlovid.
The application follows a new $3.2 billion agreement with the U.S. government for 105 million doses of its Comirnaty Covid vaccine at around $30 per dose. That’s nearly 60% higher than the $19.50 price it originally negotiated with its partner, BioNTech, in late 2020.
Unlike WBA (which actually has to administer vaccinations to generate revenue), Pfizer merely needs to create the vaccines and let the government buy them.
As a result, Pfizer now expects to post a record revenue of $100 billion in 2022 with gains led by Comirnaty sales, which are expected to top $32 billion.
After trading sideways for much of 2022, I like targeting PFE, right here.
At this point, I like buying the PFE July 29, 2022 $53/$54 Call Spread for $0.40 or less. Plan on exiting the position for a 100% profit or if PFE closes below $49.00.
Cheers,
Shah