Today’s recommendation is a British outfit that, as its stock symbol suggests, is thriving thanks to offerings that help workplace teams plan, interact, engage, track progress and more, all of which is becoming more difficult as workplaces become more mobile.
Cabot Profit Booster 109
The Stock – Atlassian (TEAM)
Atlassian, a British outfit that, as its stock symbol suggests, is thriving thanks to offerings that help workplace teams plan, interact, engage, track progress and more, all of which is becoming more difficult as workplaces become more mobile.
Atlassian’s core Jira software offering is the main driver, though it also does well with Trello (a visual collaboration product—one home designer we know uses it for big projects), its marketplace of apps (has produced north of $1 billion of revenue since 2012) and its recently launched Forge cloud development app platform, among many others. It’s a huge market, with every knowledge worker in the world a potential customer, and the stock is strong today because the firm’s growth (which has been rapid and reliable for years) is showing no signs of slowing down—in Q3, sales (up 37%) and earnings (up 48%) both topped expectations, while other sub-metrics like total customers (nearly 165,000, up 19% from a year ago) and free cash flow (up more than 60%) impressed. Just as important, analysts see the trends continuing, with earnings expected to rise in the mid- to upper 20% range both this year and next.
Technical Analysis
Like many cloud software names, TEAM isn’t early in its overall run—the stock originally broke out near 40 in October 2017. That said, the stock also isn’t overheated in the intermediate-term, as it corrected with most of its peers in the second half of 2019, tightened up in December and just got going this year. The earnings move two weeks ago was great, and the stock held its own during the market’s wobbles last week. As with most stocks, we’d lean toward buying on weakness. Stop – 133
The Covered Call Trade
Buy Atlassian (TEAM) Stock at 151, Sell to Open the March 155 Calls (exp. 3/20/2020) for $5, or a Net Price of 146 or less
Static Return: $500 per covered call (3.42%)
Breakeven: 146
Covered Call Return (if assigned): $900 per covered call (6.16%)
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 146 or less. (In this case 151minus 5 = 146. Or another example is you could pay 150 for the stock and sell the call for 4, which also equals 146)
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
