Like a bat out of hell, Micron (MU) came screaming back, as hoped.
Just days after taking as much as 59% on half of the MU put options, the MU calls are back as the underlying stock jumps $2 a share.
Apparently, China’s Tsinghua Unigroup is preparing a $23 billion bid for the company, or $21 a share. That would be a 19% premium to Monday’s close.
Hold the calls, as well as the second half of the put for protection.
As for new trades, online restaurant ordering service, GRUB took a nasty beating since missing earnings in April 2015. Shares are down 33% since it failed at double top resistance just under $48.
But as our technical pivot points – MACD, RSI and MFI – have kindly told us, this stock is oversold… ready to bounce in a big way.
And we’re not the only ones that think so.
Northland Securities recently initiated the stock with an Outperform rating with a $40 price target. RBC Capital upgraded the stock from Sector Perform to Outperform. And Guggenheim Securities initiated coverage with a Buy rating, too.
There’s plenty of reason for excitement. As Investopedia explains, “with GrubHub generating upwards of $73 million in trailing free cash flow, according to data from S&P Capital IQ, the company is actually churning out more than twice as much cash as its GAAP net income would suggest ($30.5 million). In other words, the company may be much more profitable than meets the eye.”
“GrubHub is generating so much cash, in fact, as to reduce its price-to-free cash flow ratio to 34.4 times. From the perspective of a “PEG” investor, or in this case, a price-to-free cash flow-growth investor, the fact that the price-to-free cash flow number is just 0.9 times the expected growth rate suggests the stock is cheap.”
We’re buyers on the cheap valuation. Consider buying to open the GRUB December 2015 35 calls up to $2.90.
We’ll talk again soon. If you have any questions, any comments, I’m always happy to help you.
Ian L. Cooper
Forgotten Profits