Jill Malandrino of OptionsProfits and Scott Redler, Chief Strategic Officer of T3Live, tell you how to position a trade in front of earnings and why CRM may be facing big headwinds in the cloud space. Skip Raschke gives the options forecast and bearish call spread strategy.
salesforce.com ( CRM) is a core holding in many stock portfolios that are designed for growth. The problem is: There is no earnings growth that will be reported according to average projections by the analysts who are paid the big bucks to do that important analyzing. Go see for yourself! Look on the CRM stock page on Yahoo! finance. Peruse the CRM "Analysts Estimates" section. Read the earnings projected for this quarter. The average of the 40 analysts who follow CRM. You will find that projection being an uninspiring $0.31 per share. Notice then that CRM earned a non-whopping $0.32 per share in the same quarter in 2010. Yet, CRM is now valued almost 30 points higher since that one year ago. Hope springs into the clouds. But is this a forlorn hope?!?
Let's review the T3/OP video with Scott and Jill as they walk us through some levels on the charts and the fundamental concerns to the story.
I prefer tackling the downside when speculating on the price of CRM. I know that hope ends up in despair and that CRM is a huff and a puff away from getting crushed as any stock this year has suffered when not performing up to market expectations. Enter into this mix the fact that Oracle ( ORCL) and IBM ( IBM) are taking the company on in CRM's cloudy business! These are adversaries you do not want!
I have CRM technically positioned for another attempt to test the hands of the CRM longs. In addition, I have lots of new serious company as reflected in the total percent of traders that are now short CRM common stock. That total now exceeds 10% of the CRM float!
Trading at a ludicrous P/E ratio (over 600 but whose counting!) that belongs in the clouds, and not even showing growth to support that price earnings ratio, is one dangerous formula for a stock price disaster in the making. It certainly is a combination of statistics that deserves another round of playing CRM from the controlled risk short side via put options.
Trades: Sell to open 3 CRM November 105 calls at $24.00 and buy to open 3 CRM November 125 calls for $10.00.
The total risk for the spread is $6 per spread. As always, I will monitor the trade on this site in the comments section below.
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