It’s no surprise why investors love tech stocks. Their ability to outperform the rest of the stock market can help boost portfolio returns and create life-changing wealth.
But there’s a downside. Traders who buy at the wrong time and get caught up in short-term volatility sometimes have to deal with losses until the next move higher. That can be painful, at least in the short-term.
The latest victims in the tech stock space have been investors in Salesforce.com (CRM). The company just reported earnings after the close of trade on Tuesday. Shares had already been falling but fell more as the company offered mixed guidance going forward.
However, the company did beat earnings, and is on track to remain profitable as the dominant player in the cloud-based software space.
Action to take: Tuesday and Wednesday’s drop are enough off of the stock’s recent high to represent a decent buying opportunity for forward-looking investors. The company does not pay a dividend at this time.
For traders, a rebound play in the next few months offers an attractive risk/reward profile. The March 2022 $300 calls, last going for about $15, offer a leveraged upside to a rebound in shares. With a 52-week high of shares around $311, a move higher should allow the option to deliver high double-digit returns in the months 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 of the companies mentioned in this article.