Cabot Profit Booster Issue: March 4, 2025

Before we dive into this week’s covered call idea we need to exit three trades that have broken our stops. Here are those details:

Sell your SHOP Stock
Buy to Close the SHOP March 120 Calls

Sell your AFRM Stock
Buy to Close the AFRM March 75 Calls

Sell your CFLT stock
Buy to Close your CFLT March 35 Calls

Moving on …

For the second straight week growth stocks got hit hard, which weighed on the Nasdaq. Though interestingly, as money rotated out of the 2024 leaders, it raced into slow and steady stocks that have been left behind in years past. By week’s end the S&P 500 had lost 1%, the Dow had gained 1%, and the Nasdaq had fallen 3.5%.

The Stock – Exelixis (EXEL)

Exelixis (EXEL)

The science of genomics is revolutionizing cancer treatment by allowing researchers to identify specific genetic mutations within a patient’s tumor, in turn facilitating a targeted approach to treating it. At the forefront of this approach to oncology is California-based biotech Exelixis, which uses genomics to develop drugs for treating cardiovascular disease, obesity and diabetes, but with a special focus on cancer therapies.

On that front, the firm’s blockbuster Cabometyx (also marketed as Cometriq) is its main commercial offering and a central revenue contributor. The company further leverages its existing medications while expanding research into developing new therapies, including the investigational Zanzalintinib for treating various types of advanced or metastatic cancers (and which Exelixis sees as a future revenue driver). Trial results of Zanzalintinib combined with the immunotherapy cancer drug Atezolizumab for treating metastatic colorectal cancer are expected in the second half of this year. Additionally, Exelixis has an opportunity to get Cabometyx approved for another indication—to treat advanced neuroendocrine tumors—in April.

On the latest earnings call, Exelixis said its IND pipeline (which includes investigational compounds that are in clinical development for cancer and other serious diseases) is full for the next several years, with plans for a “significant number” of data presentations at major scientific meetings throughout 2025. The company’s financials are solid, as highlighted by recent Q4 results: Revenue of $567 million increased 18% year-on-year, and EPS of 55 cents beat estimates by six cents. For full-year 2025, it expects revenue of $2.25 billion (up 4% if realized), led mainly by Cabometyx sales. Share buybacks are a big part of the attraction, too—a $500 million buyback plan announced last August should be completed in Q2, with another $500 million program set to launch after that.

The trial results will be key, but Exelixis looks like a reliable, profitable and reasonably valued biotech with upside if new indications are approved and the pipeline progresses.

Technical Analysis

EXEL has made good progress over the past year, but mainly in stair-step fashion, with a nice ramp last July and August and, after a couple of months of sideways action, another rush higher into the 37 area in November. EXEL again went sideways from there, with a big shakeout in January, but shares have marched to new highs in the past three weeks. If you’re game, we’ll set our entry range down a bit toward support. Stop – 32.5

The Covered Call Trade

Buy Exelixis (EXEL) Stock at 39, Sell to Open April 39 Strike Calls (exp. 4/17) for $2, or a Net Price of 37 or less

Static Return: $200 per covered call (5.4%)

Breakeven: 37

Covered Call Return (if assigned): $200 per covered call (5.4%)

Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.

However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 37 or less. (In this case 39 minus 2 = 37. Or another example is you could pay 38.50 for the stock and sell the call for 1.50, which also equals 37)

For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …

Open Positions

The next Cabot Profit Booster issue will be published on March 11, 2025.

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