by Ian Harvey
January 03, 2020
Long-term options may be winners in 2020 as it is expected that the bull rally will continue with another great year for stocks.
With the easing of trade tensions and Brexit worries, along with loose monetary policy from the Federal Reserve and the European Central Bank, the market is primed to have a great start for 2020.
Also, 2020 will be a year that will benefit from the reassertion of global growth as the negative overhang affecting the global economy and markets is lifted.
As well, global prosperity will continue to rise; some of the worst countries are now getting better; the pool of middle-class citizens is growing as global inequality among many countries has been declining for several decades; violent conflicts are less frequent; education has taken a major step forward; and technology has been a major driving force in many areas such as health care.
So, here at Stock Options Made Easy we have put together some long-term options on three stocks, for you to consider, that we feel will be big winners in 2020…..
Chinese Internet giant Alibaba is growing its revenue at a 27% compound annual rate (CAGR) from 2019 to 2022, and its EBITDA at a 30% CAGR. Despite Alibaba's big 2019 gains, valuation is still within range: Alibaba carries an enterprise value (EV - market cap minus net cash) equal to 18.5 times his 2020 adjusted EBITDA estimate, even with large investments in growth initiatives that are depressing near-term profits.
** LONG-TERM OPTION TRADE to consider: Buy the BABA JAN 15 2021 240.000 CALL at approximately $17.50.
Cloud computing giant salesforce.com’s current remaining performance obligations (CRPO - all of the contracted revenue that's expected to be recognized within 12 months) is still growing at a 20%-plus rate.
Salesforce still has several growth engines, including its Service Cloud and Marketing Cloud platforms, its cloud developer platforms and international expansion.
The Tableau Software acquisition is seen as a potential growth catalyst for Salesforce, as are adoption of Salesforce's Einstein AI/machine learning platform and untapped pricing power.
** LONG-TERM OPTION TRADE to consider: Buy the CRM JAN 15 2021 200.000 CALL at approximately $7.60.
Admittedly Uber is still posting massive losses, Uber's operating expenses and driver/rider subsidies have been gradually declining as a percentage of revenue since 2016. Further rationalization in the ride-sharing competitive environment will improve Uber's bottom line, as will long-term pricing power, insurance leverage and opex leverage.
Valuation for Uber could be based on EV/sales multiple of 4 times Uber’s revenue estimate, which is assuming a 30% revenue CAGR.
** LONG-TERM OPTION TRADE to consider: Buy the UBER JAN 15 2021 45.000 CALL at approximately $1.70.
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!