Welcome back from the long weekend.
I hope you had a restful holiday break because we need to hit the ground running today. The US Department of Defense is making deals with a young vehicle electrification company that could send its stock to the moon.
It’s currently less than six dollars a share – which with a bargain you won’t find in any Cyber Monday sale – so let’s get to it.
I want to start off with a speculative trade idea that, ironically, hinges on a company that provides data to speculators – just not the investors.
Genius Sports Limited (NYSE: GENI) develops and sells tech and services to the sports, sports betting, and sports media industries. It has commercial relationships with more than 400 sports leagues and federations, 300+ sportsbook brands, and 100+ marketing customers.
Last Tuesday, the company reported third-quarter results that included a record-high revenue of $69.1 million – an increase of 70% over last year’s gains.
It also announced strategic partnerships with a full range of sportsbooks to provide them with its complete offering of NFL-related products. Over 97% of the U.S. market is now using NFL data exclusively through GENI.
But, they missed one key benchmark: earnings.
It lost $0.37 per share, much worse than the estimates of $0.12, and investors reacted. Share values dropped 25.29% that day, leaving the stock nearly 60% cheaper than its most recent peak back in May.
Now GENI may not have long-term fundamentals right now but considering all the agreements in play with major sports leagues and organizers, and the recent 25% haircut, I think GENI looks like a good short-term rebound opportunity.
Let’s buy GENI December 17, 2021 $12.50 Call (GENI211217C00012500) for $0.50 or less.
There’s no need to get too greedy here. Plan on exiting the GENI211217C00012500 position for a 50% profit or if shares of GENI trade down to $8.75.
I’m also watching XL Fleet Corp (NYSE: XL), a Boston-based company with an electric vehicle fleet solution that’s caught the attention of the Department of Defense.
With its tech, the fuel economy of any vehicle will rise 25-50%, on top of emissions reduction, which has earned the company a contract from the Defense Innovation Unit and the US Army’s Project Manager Transportation Systems. The goal is to prototype fuel-saving tech for military vehicles.
That news sent shares up 37.5% last Tuesday only to pull back by the market’s close. Right now, the stock should be up less than 10%.
Now, as much as I like XL’s products and the military deal, it’s never a good thing to give back so much in a single session. Shares might drift event lower before the stock finds its footing and starts trading higher again.
I’d also like to note that this stock has been a target of the short-squeeze Reddit crowd before, and will likely be squeezed again. The stock traded as high as $35 last December during the height of the EV craze. With the defense contract announcement, I think we could see that action again, so…
If shares of XL trade down to $4.60 before December 10, 2021, let’s buy the XL February 18, 2022 $5/$6 Call Spread for $0.40 or less. Plan on exiting the XL February 18, 2022 $5/$6 Call Spread for a 100% profit or if shares of XL trade down to $4.00.
Finally, I’m watching Dollar Tree Inc. (Nasdaq: DLTR), the discount retailer known for selling items at $1.00. On Tuesday, the company announced it would be raising prices to $1.25 starting in January. The company says it can no longer afford to stick to the $1.00 rule for some of its products, thus the price hike.
I’ve long been on the record as saying that inflation is far more than “transitory”, as the Fed would have you believe, and now we’re seeing it play out in the discount retail sector.
The market liked the price hike and shares were up nearly 10% in Tuesday’s session.
I also like the price hike because it will immediately improve the company’s margins, but a 10% jump in a single session is a bit too much. I’d like to see the stock come back down a little before establishing a trade.
If shares of DLTR close below $138.00 by December 10, 2021, I like buying the DLTR February 18, 2022 $140/$145 Call Spread for $2.25 or less. Plan on exiting the DLTR February 18, 2022 $140/$145 Call Spread for a 100% profit or if shares of DLTR trade down to $128.00.
Cheers,
— Shah
Source: Total Wealth