Thursday 28th August 2014
I've bought a few $60 September Puts for 83 cents in the drugstore retailer, Walgreen (WAG, mkt cap $58bn). I reckon this decent value for a stock which looks a bit iffy.
I happened to notice that WAG's CFO, Mr Wade Miquelon, recently walked, seemingly for over-guiding 2016 prospective EBIT by a hefty $1.1bn or c.16%. How one manages to make an error on that scale I do not know, but it's usually a precursor to matters getting worse before they get better; something is often going on in the background.
My target is $55 on a two to three week basis. Technically that would coincide with down channel support. The fact that WAG has gapped down on a grand scale through its 200 day moving average does also not bode well. Indeed the chart to me looks like it's setting up for a second service roll over.
Valuation wise WAG is still on a punchy 16.3x forward earnings; earnings which are still being downgraded. Indeed, WAG's historical forward P/E rating has typically been sub 14x in the six years prior to Q4 2013.
September $60 Puts at 83 cents ... could be a nice little 9/2 bet.
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My target is $55 on a two to three week basis. Technically that would coincide with down channel support. The fact that WAG has gapped down on a grand scale through its 200 day moving average does also not bode well. Indeed the chart to me looks like it's setting up for a second service roll over.
Valuation wise WAG is still on a punchy 16.3x forward earnings; earnings which are still being downgraded. Indeed, WAG's historical forward P/E rating has typically been sub 14x in the six years prior to Q4 2013.
September $60 Puts at 83 cents ... could be a nice little 9/2 bet.
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| Walgreen - share price Source: Bloomberg |
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| Walgreen - longer term share price Source: Bloomberg |
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| Walgreen - consensus earnings downgraded Source: Bloomberg |
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| Walgreen - forward P/E and EV/EBITDA multiple Source: Bloomberg |
