The total options volume early in afternoon trading on the final Friday in February is 24.4 million. That’s 60% of the average daily volume.
A pleasant surprise: Tesla (TSLA) isn’t leading today's unusual options activity. For once, investors have something else to choose from. Sorry if you’re a Tesla fanatic.
Anyway, as I look at the top 10 put contracts exhibiting unusual options activity halfway through the final day of the week, three jump out at me as potential income generators and long-term hold.
Here’s my rundown.
Bumble’s Very Bzzzy!
The company behind several successful dating apps is having a busy day in the options Market. Its current volume is 10,317, 1.5 times the 30-day average volume. Bumble’s (BMBL) put/call open interest ratio is a high 2.2. The put contracts are getting more action.
Atop the unusual options activity leaderboard is the April 21 $17.50 put with a volume of 8,517, 27.92x the open interest.
Based on a bid of $0.25 and 56 days to expiration, we’re looking at a potential annualized return of 9.3% on the premium income. The $17.50 strike is 27% below the current $24.13 share price. With less than two months until the put’s expiration, it’s unlikely that put sellers will be required to buy the shares.
However, a $17.50 buy makes sense for Bumble for several reasons.
The company reported better-than-expected Q4 2022 revenues on Wednesday. Sure, it was only $6 million higher than the analyst estimate of $236 million, but a beat is a beat. Its stock jumped more than 5% on the news.
Of course, it’s never good when you report a $159.2 million loss in a single quarter, but the lion’s share ($141 million) was for white label contracts it held in 2021, its Badoo brand, and its right-of-use asset in Moscow. Unfortunately, there’s not much you can do about that last one.
The reality is that Bumble’s best foot forward is with the Bumble brand and app. In 2022, the Bumble App generated $694.3 million in revenue, 31.4% higher than a year earlier. Moreover, it continues to grow revenue in the mid-to-high 20s every quarter.
Meanwhile, total paying users increased by 10% in 2022, to 3.2 million, with average revenue per user (ARPU) of $23.03, 7% higher than a year ago. If it keeps both of these moving higher, it won’t have any problem growing its profitability.
Trading at 3.6x its annual revenue, a buy at $17.50 would reduce that multiple to 2.5x. That’s growth at a very reasonable price.
Nvidia Delivered the Goods
Nvidia (NVDA) reported very optimistic earnings Wednesday after the close. Investors liked them. As a result, its stock gained 14% in Thursday’s trading.
On the top line, its revenue for 2023 was $27.0 billion, flat to a year ago, with adjusted earnings per share of $0.88, 33% lower than in 2022. However, it is the company’s growth pipeline that’s got investors excited about the future.
“AI is at an inflection point, setting up for broad adoption reaching into every industry,” said Jensen Huang, founder and CEO of NVIDIA. “From startups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI.”
Nvidia is opening up its AI platform to companies through its AI-as-a-Service platform. That means plenty of recurring revenue.
Nvidia expects its Q1 2024 revenue to be $6.5 billion at the midpoint of its guidance, $190 million higher than the consensus estimate.
Oppenheimer raised their price target for NVDA by $25 to $275, well above where it’s currently trading, with an Outperform rating.
I continue to view Jensen Huang as one of America’s finest CEOs. It will be back in the $300s before you know it.
As for the put option to sell, I’m looking at the April 6 $182.50 contract. Based on a bid of $1.77 and 41 days to expiration, the potential annualized return on the premium is 8.6%.
The $182.50 strike is 22% below the current $232.34 share price.
Analysts Like This Chinese E-Commerce Company
No, I’m not talking about Alibaba (BABA). Instead, I’m interested in JD.com (JD), the second-largest e-commerce company in China.
I am trying to remember the last time I mentioned or covered JD.com in an article of mine.
The company’s stock’s gotten pummeled in the past five days of trading. Its shares are down more than 16%. Investors are worried that the company will significantly cut its online prices to win back market share lost to Pinduoduo, Alibaba, and other Chinese competitors. Unfortunately, there is no simple solution for the company moving forward.
How will these lower prices work?
It’s less about lower prices and more about keeping its customers happy. It’s setting up a comparison tool so its online shoppers can compare prices with its competitors. If a price is higher at JD.com, the shopper will get a rebate worth double the cost of the item.
The rebate won’t be for all items sold on its site. But, in the end, JD.com should be able to use this subsidy program to grow its users. That will lead to increased profits from a larger revenue base.
The move will prove to be beneficial.
The put option to sell for JD.com is the April 21 $37.50 contract. Based on a bid of $0.98 and 56 days to expiration, the potential annualized return on the premium is 17.0%.
The $37.50 strike is 16% below the current $232.34 share price.
More Options News from Barchart
- 3 Reasons Why Bullish Unusual Options Volume for Cars.com (CARS) Makes Sense
- Warner Bros Discovery Earnings Disappoint But Its Free Cash Flow Was Strong
- JP Morgan Bull Put Spread Could Net 15% In 2 Weeks
- Baidu’s Put Options Look Interesting After Wednesday’s Big Volume
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
/Chipset%20held%20over%20rush%20hour%20traffic%20by%20Jae%20Young%20Ju%20via%20iStock.jpg)
/Super%20Micro%20Computer%20Inc%20logo%20on%20building-by%20Poetra_RH%20via%20Shutterstock.jpg)
