Last Friday, Winnebago Industries Inc (WGO) crushed earnings estimates and reported record fiscal first-quarter earnings and revenue, all while dealing with ongoing supply chain constraints and increased production costs.
Let’s look at some numbers…
- Revenue is up 46% over last year, totaling $1.156 billion
- Net income increased 73.52% year-over-year to $99.6 million
- And adjusted earnings per share grew 97% to $3.51.
To put that into perspective, FactSet only expected WGO to make $1.029 billion in revenue and $2.34 in earnings per share. WGO has crushed it, surprising Wall Street.
But not me.
I recommended WGO in the summer of 2021 to my Money Map Report subscribers on news that RV ownership was at a record high with 11.2 million households owning an RV in 2021. Twenty years ago, only 6.9 million households could claim the same.
At the time, 51% of RV owners were 55-years old. That’s important because it means younger buyers, many of them Millennials were looking at RVing as a preferred type of vacation.
That’s great for the RV industry and WGO, because it means a whole new generation of buyers giving the industry and the company what could amount to a multi-decade tailwind.
Shares jumped in Friday’s pre-market trading, but they gave back some of those gains as the overall market pulled shares back down.
At this point, I like buying the WGO February 18, 2022 $70/$75 Call Spread for $2.00 or less. Plan on exiting the WGO February 18, 2022 $70/$75 Call Spread for a 100% profit, or if shares of WGO close below $66.00.
But that’s not the only company worth watching this week. I’ve also got my eyes on Cerner Corporation (CERN), the North Kansas City, Missouri-based provider of electronic health record software.
On Friday, news broke that Oracle (ORCL) is in talks to acquire CERN for approximately $30 billion.
The news droves shares of CERN up more than 16% in early Friday trading, but they slid back giving up some of those gains by Friday mid-day.
Here’s where it gets interesting.
As I write this, with shares of CERN trading at $89.19, the company’s market cap is 26.22 billion, yet the Oracle deal is expected to be valued at $30 billion. For CERN’s market cap to reach $30 billion, shares would need to be trading at approximately $102.00, or an additional 14.36% higher than the current price.
Of course, there’s no guarantee the final deal will be valued at exactly $30 billion, but Friday’s news at least gives us a good price target to work with.
If shares of CERN pull back to $87.50 by the end of 2021, lets buy CERN March 18, 2022 $87.50/$90 Call Spread for $1.25 or less. Plan on selling the CERN March 18, 2022 $87.50/$90 Call Spread for a 100% profit.
And finally, I’m watching UP Fintech Holding Limited (TIGR), the Chinese online brokerage.
Chinese officials are planning to ban online brokerages such as Futu Holdings Ltd and UP Fintech Holding Ltd from offering offshore trading services to mainland clients.
The ban would block millions of retail investors in mainland China from trading securities easily in markets such as the United States and Hong Kong.
Friday’s news is just the latest development in a broad regulatory crackdown over the past year, in sectors ranging from technology to education and real estate.
Earlier this month, the Chinese Central Government essentially forced Didi Global (DIDI) to withdraw from the New York Stock Exchange. As a result, shares of DIDI are now down 64.46% from their intraday high on June 30, 2021 when the stock started trading here in the U.S.
I wouldn’t be surprised if we see more Chinese companies forced out of U.S. markets in 2022, and that’s giving us a great opportunity for a speculative trade.
Shares of TIGR are already down more than 83.46% since June 29, 2021 and I think they’re going even lower from here.
If shares of TIGR trade back up to $5.75 by the end of 2021, I like buying the TIGR July 15, 2022 $5/$2.50 Put Spread for $1.20 or less. Plan on selling the TIGR July 15, 2022 $5/$2.50 Put Spread for a 100% profit or if shares of TIGR close above $6.50.
Until next time,
— Shah
Source: Total Wealth