Drug manufacturer AstraZeneca (AZN) is down 30% from its peak last summer, and shares are now down on a 12-month basis. One trader sees a potential bounce higher in the weeks ahead.
That’s based on the March 21 $72.50 calls. With 73 days until expiration, 5,037 contracts traded compared to a prior open interest of 116, for a 43-fold rise in volume on the trade. The buyer of the calls paid $0.92 to make the bullish bet.
AstraZeneca shares recently traded for about $66, so the stock would need to rise by about $6.50, or just under 10%, for the option to move in-the-money. Shares have started to trend higher over the past few months after hitting a 52-week low of $60.47.
The stock’s flat performance in 2024 reflects market expectations, not AstraZeneca’s reality. Revenues rose by 18% over the past year, and earnings also rose by 4%. While not a massive growth play, that’s at odds with drug manufacturers that struggled and declined.
Action to take: Investors may like shares here for a reasonable valuation of 14 times forward earnings, and the upward momentum in shares. AZN pays a 2.3% dividend at today’s prices.
For traders, the March 21 $72.50 calls play well to the upside momentum currently underway in shares. Given the low price of the option, traders can likely see mid-double-digit returns in the weeks ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
