Earnings season continues to offer traders a number of new buying opportunities in great names. That’s even the case when a company declines due to technical reasons rather than fundamental ones.
Take the case of Plug Power (PLUG). The hydrogen energy company sold off following an earnings miss. The miss occurred as the company recognized charges from the vesting of warrants. The warrants vested faster than expected in part due to the rising stock price.
Talk about being punished for being successful! That sounds a bit like the market getting ahead of itself. But with warrants vested, the share price is being cleared to move higher as a new supply of shares has already hit the markets. The company’s core business is expanding, and the earnings selloff has taken shares to one-month lows as a result.
Action to take: Backing out the impact of the warrants, the company’s overall earnings outlook is much stronger than the headline numbers suggests. Barring a big market correction from here, traders can likely see a strong rally.
Besides buying shares to play that trend, the June 2021 $50 calls, last trading for about $8.60, look attractive here. The options can likely deliver high double-digit gains in the next few weeks. Even better, they can be closed out well before expiration.