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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 152

As 2020 winds to a close, and as the market races to all-time highs, our six open covered call positions are all doing very well ... especially our December positions set to expire next Friday, December 18.

Cabot Profit Booster 152

As 2020 winds to a close, and as the market races to all-time highs, our six open covered call positions are all doing very well ... especially our December positions set to expire next Friday, December 18.

And while there will be a sell-off at some point (there always is), we will continue to ride our winners, and stick to the plan of holding a diverse portfolio made up of the strongest stocks. This brings me to today’s stock and covered call idea …

The Stock – Uber (UBER)

Uber continues to have the look and feel of a new leader thanks to two big forthcoming growth catalysts.

The first should involve its Rides segment, which was hammered during the pandemic; revenues fell 68% sequentially in Q2 but began to rebound last quarter and, despite some near-term headwinds (peer Lyft said last week Q4 results will likely come in near the low end of its guidance), big investors seem to be looking over the horizon as the world likely returns to normal in the middle of next year. (Impressively, even during the Q2 plunge, the Rides business was EBITDA positive.)

That segment should provide a nice cyclical uplift, but the real driver is Uber’s big move into Delivery services; this is a secular growth area as people become more favorable about having all sorts of things (take-out, groceries, even prescription meds in some markets) delivered to their door. Indeed, bookings in this newer segment are tracking about a year and a half ahead of where Rides was at this point in its life, and Uber’s recent $2.6 billion purchase of Postmates only expands the firm’s reach and technology. Bookings growth for Delivery has been accelerating (up 54%, 113% and 135% in the past three quarters) while cash flow is creeping toward breakeven.

In fact, taken together, Uber believes it’s on track for overall cash flow breakeven in 2021 as both Rides and Delivery grow in tandem. Analysts see total company revenues up 41% next year, and long-term, the potential for Delivery to grow manyfold is real as take-out delivery hits the mainstream and adjacent opportunities arise for both consumers and small businesses.

Technical Analysis

UBER has completely changed character during the past few weeks. After a year of post-IPO ups and (mostly) downs, the stock finally tightened up some in September and October and then staged a massive-volume breakout in early November. Better yet, UBER has remained in favor since, rising five weeks in a row to new highs as sellers are unable to put up a fight. Short-term, it is a bit extended to the upside, though we’re not expecting a huge retreat—you can start small here or look for dips of two or three points. Stop — 45

UBER-120820

The Covered Call Trade

Buy Uber (UBER) Stock at 54, Sell to Open January 55 Strike Calls (exp. 1/15/2021) for $2.50, or a Net Price of 51.50 or less

Static Return: $250 per covered call (4.85%)

Breakeven: 51.50

Covered Call Return (if assigned): $350 per covered call (6.79%)

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 51.50 or less. (In this case 54 minus 2.50 = 51.50. Or another example is you could pay 53.5 for the stock and sell the call for 2, which also equals 51.50)

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

CPB-120820