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Profit Booster
Make Money 3 Ways from Great Growth Stocks

Cabot Profit Booster 179

This Friday is the expiration of June options, and for the time being it looks like the Profit Booster portfolio will have yet another spectacular month of returns as IGT, PGNY, RRC are trading well above the strike price of the calls we sold, while FNKO is at the strike, which is also a good situation.

Cabot Profit Booster 179

This Friday is the expiration of June options, and for the time being it looks like the Profit Booster portfolio will have yet another spectacular month of returns as IGT, PGNY, RRC are trading well above the strike price of the calls we sold, while FNKO is at the strike, which is also a good situation.

As always, expect a breakdown of where we stand with these positions Thursday afternoon, or Friday morning, ahead of expiration.

Moving on to this week’s pick, it’s a company/stock that was red hot many years ago, then cooled off, but has come back alive in recent months.

The Stock – GoPro (GPRO)
Why the Strength
GoPro was a very hot IPO a few years ago, but its high-end action cameras ended up serving more of a niche market than many thought (more sizzle than steak fundamentally), producing a multi-year slide as business languished.

But now GoPro is doing well for a couple of reasons, the first of which is that, brand-wise, the firm is as strong as ever, owning 80% of the action camera category and boasting a massive social media presence.

Beyond that, though, has been a change in the business model, with a major shift away from one-off camera sales and toward subscription revenue. That’s right: GoPro currently has north of one million subscribers (up 165% from the prior year and 24% from the prior quarter) that pay $50 per year to get up to $100 off a camera purchase, reimbursement if the camera suffers major damage, automatic cloud backup of content, access to special app features and deals on accessories, too.

There’s also its Quik subscription service, giving people advanced editing tools for photos and videos no matter what camera or cell phone they’re taken with.

Along with some revamped cameras, it’s all led to solid (albeit seasonal) results—sales and earnings boomed in Q1 as e-commerce revenue more than tripled and subscription revenue (though just 5% of the total) picked up in a big way. More important, the subscription business is set to raise margins and goose the bottom line, which Wall Street sees surging to 66 cents per share this year and growing more in 2022.

It’s not changing the world and isn’t a real glamour stock anymore, but GoPro’s moves have put the wind at its back.

Technical Analysis
GPRO was in the garbage bin a year ago, but as its business model transition has taken hold, the stock has continued to make progress—albeit with a ton of big corrections along the way. The latest of those started in March and lasted eight weeks, dragging shares from 14 back to 9 as growth stocks were weak. But since early May, GPRO is acting better—the stock rallied back to its 50-day line two weeks ago, and after some tightness, showed great-volume buying last week. Volatility will be extreme. Stop – 10.5

CPB_Weekly-Issue_06-15-21_GPRO

The Covered Call Trade
Buy GoPro (GPRO) Stock at 12.40, Sell to Open July 13 Strike Calls (exp. 7/16) for $0.50, or a Net Price of 11.90 or less

Static Return: $50 per covered call (4.2%)

Breakeven: 11.90

Covered Call Return (if assigned): $110 per covered call (9.24%)

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 11.90 or less. (In this case 12.4 minus 0.50 = 11.90. Or another example is you could pay 12.50 for the stock and sell the call for 0.60, which also 11.90 equals)

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
If our stop is hit, I will send an alert giving detailed instructions on how to exit the trade. But don’t get too worried about setting the stop. I will manage that for you.

Stock Name and SymbolPrice BoughtCurrent Stock PriceStopOption - Price of Call SoldCurrent Option Price
Funko (FNKO)22.0822.8019.0June 22.5 -- $1.98$0.80
International Game Technology (IGT)22.9524.5017.5June 23 -- $1.40 $1.50
Progyny (PGNY)60.0063.0048.0June 60 -- $3$3.00
Range Resources (RRC)14.6615.5012.0June 14.5 -- $0.81$1.00
Marathon Oil (MRO)13.6013.6011.5July 14 -- $0.69$0.55

The next Cabot Profit Booster issue will be published on June 22, 2021.

Cabot Wealth Network
Publishing independent investment advice since 1970.

President & CEO: Ed Coburn
Chief Investment Strategist: Timothy Lutts
Cabot Heritage Corporation, doing business as Cabot Wealth Network
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