Key points
- Call option buying frenzies on these three stocks could indicate higher prices, and traders could be vindicated.
- Buffett is behind Pulte’s construction boom, and a takeover bid could send Spirit AeroSystems soaring.
- Hims & Hers Health stock just reached profitability and analysts believe EPS could be even higher.
- 5 stocks we like better than Citigroup
When traders rush into call options, it usually means they expect an event to occur that will soon push the underlying stock higher. Since options expire on a specific date, these traders must get their thesis right before expiration or they risk losing their entire investment.
Today, three values display unusual activity on call optionswhich could lead investors to reverse engineer these decisions and discover why stocks like Spirit AeroSystems Holdings Inc. NYSE:SPR, Him and She Health Inc. NYSE: HIMand even PulteGroup Inc. NYSE:PHM could outperform the market in the coming months.
Although in entirely different sectors, these stocks share a common tailwind created by the Federal Reserve (Fed) and potential interest rate cuts that could hit the market as soon as May or June 2024. Investors can watch traders’ expectations regarding these reductions after the FedWatch Tool At CME Group inc. NASDAQ:CME.
It’s all part of one machine
Because the Fed may cut interest rates later this year, analysts at The Goldman Sachs Group Inc. NYSE:GS expect a breakthrough in the United States manufacturing sectorso big, they were right in 2024 macroeconomic outlook report.
According to export figures, which increased by 6.4% during the February manufacturing ISM PMI indexforeign countries expect that a weaker dollar will make American products more attractive to buy.
Increased economic activity means job creation and increased business profits. Warren Buffett expected a construction boom as he bought stocks like PulteGroup. In the medical field, 66,700 jobs were created last month, while the overall economy created 275,000 jobs in total.
A hiring spree could help stocks like Hims & Hers, and a construction boom could be one reason traders have sided with Buffett in his PulteGroup gamebut what about the Spirit?
Spirit AeroSystems: a special situation
After a recent scandal involving a Boeing Co. NYSE:BA 737 MAX9 incidentthe media blamed Spirit for faulty equipment.
However, Boeing soon realized that the company was not really at fault but rather at fault. factory in Malaysia. Seeking to secure one of its most important supplies, Boeing is now “in talks” to create a takeover. bid and buy Spiritnews that sent the title on a 25% rally in March 2024.
Although the “talks” remain speculative, it is likely that Boeing could actually make its offer a reality. Now that airline stocks like Southwest Airlines Inc. NYSE:LUV provided lower guidance for the year due to delays at Boeing aircraft orders, the company could seek to consolidate its supply chain and avoid further conflicts.
In January 2024, analysts at Citigroup Inc. NYSE:C given a valuation of up to $39 per share for Spirit shares. Since this price target still stands today, investors could expect Boeing to send a bid around this valuation, which is 11% higher than current prices.
Wall Street wants to see 466% growth in Spirit’s earnings per share (EPS) this year, which could further prompt Boeing to reconsider an even higher offer. In both cases, the evidence has accumulated for traders to justify a call options buying frenzy.
He and she are on their way
After reporting its profitable first quarter, Hims & Hers stock rebounded strongly, but traders believe it can rebound even stronger. After rising as much as 85% since the earnings announcement, the stock could be positioned to continue delivering the type of results that others medical stocks I simply cannot provide.
Known to be low beta, medical stocks generally don’t move much. Because it’s a $3.4 billion company, Hims & Hers could have a much higher ceiling now that the company has proven profitable in the market, especially if analysts forecast EPS growth of 130% This year.
Compared to the sector, Hims & Hers stock trades at a price-to-book ratio of 9.8x, a 177% premium to the 4.5x multiple seen in the industry. There must be a good reason why investors are willing to overpay for the stock portfolio, and that reason could be future growth now that the company has reached profitability.
Citigroup analysts see the stock rising greater than $16 per share, while before February they only had a valuation of $12. Now that the company is delivering on its promises, investors can expect even higher price targets, supporting their call option positions.
Before you consider Citigroup, you’ll want to hear this.
MarketBeat tracks Wall Street’s top-rated and top-performing research analysts daily and the stocks they recommend to their clients. MarketBeat identified the five actions that top analysts are quietly whispering to their clients to buy now before the broader market takes off…and Citigroup wasn’t on the list.
Although Citigroup currently enjoys a “Moderate Buy” rating among analysts, top-rated analysts believe these five stocks are Better Buys.
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