The market bounced back very nicely from the previous week’s losses, ahead of the big Federal Reserve announcement this week. By week’s end the S&P 500 had rallied 3.2%, the Dow added 1.9%, and the Nasdaq rebounded 4.9%.
The Stock – Doximity (DOCS)
The percentage of physicians using telemedicine—which involves making video calls to patients—has grown from 15% in 2019 to a staggering 80% today. Doximity is the leading digital network for healthcare professionals in the country, with a substantial percentage of U.S. doctors (over 80%), medical school graduates, nurse practitioners and pharmacists included among its verified members.
The company’s Doximity Dialer feature, which enables telemedicine calls, is an integral part of its offerings and a reason why investors are enthusiastic about its future growth prospects. Some 47% of all billing physicians with Medicare telemedicine claims were Doximity Dialer users last year, according to Doximity’s annual State of Telemedicine report, making it one of the top telemedicine platforms behind Zoom. And with a total addressable market of nearly $19 billion, the company believes it has plenty of upside.
While the growth potential for telemedicine is huge, the lion’s share of Doximity’s revenue is currently from subscriptions among biopharma companies and healthcare providers that use the platform for employment recruiting, as well as to market new therapies and update disease management protocols.
In fiscal Q1 (ended June), Doximity’s top 20 customers (mainly pharmaceutical manufacturers) outpaced other segments of its clientele, with the firm not just retaining all of those clients but also seeing same-customer revenue growth of 21%. Meanwhile, the company’s 102 customers with more than $500,000 in annual spending grew by 16% (and accounted for 82% of total revenue), prompting a major Wall Street institution to raise its price target for Doximity shares (a reason for the strength). Growth isn’t projected to be rapid, but the stock is likely looking ahead to estimate-beating results.
Technical Analysis
Following a steep post-pandemic drop from its 2021 peak near 100, DOCS clawed its way from 20 to 32 between last November and January, then spent the next six and a half months building a launching pad for the next phase of its turnaround. Earnings gapped the stock to multi-month highs in August, with DOCS tightening up beautifully during the next month before following through to new highs last week. Stop — 32.5
The Covered Call Trade
Buy Doximity (DOCS) Stock at 40, Sell to Open October 40 Strike Calls (exp.10/18) for $1.40, or a Net Price of 38.6 or less
Static Return: $140 per covered call (3.62%)
Breakeven: 38.6
Covered Call Return (if assigned): $140 per covered call (3.62%)
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 Net Price, or 38.6 or less. (In this case 40 minus 1.40 = 38.6. Or another example is you could pay 40.15 for the stock and sell the call for 1.55, which also equals 38.6.)
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| Sprouts Farmers Market (SFM) | 96 | 106 | 80 | September 95 -- $5.20 | $11.00 |
| Coupang (CPNG) | 22.6 | 24 | 20 | September 23 -- $0.80 | $1.00 |
| Sweetgreen (SG) | 34.9 | 34 | 29 | September 34 -- $2.90 | $1.00 |
| Rocket (RKT) | 20.55 | 20.4 | 16.4 | October 20 -- $1.80 | $1.50 |
| Samsara (IOT) | 46.9 | 46.5 | 38 | October 45 -- $3.70 | $3.00 |
The next Cabot Profit Booster issue will be published on September 24, 2024.
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