Shares of healthcare product producer Bausch Health Companies (BHC) have lost three quarters of their value in the past year. One trader sees a rebound in the weeks ahead.
That’s based on the February $8 calls. With 42 days until expiration, 26,688 contracts traded compared to a prior open interest of 665, for a 40-fold rise in volume on the trade. The buyer of the calls paid $0.37 to make the bullish bet.
Shares recently traded just under $7, so the stock would need to rise $1.15, or about 17 percent for the option to move in-the-money. That’s still well under the stock’s 52-week high of $28.08 per share.
Bausch saw flat revenues over the past year, but earnings soared by 112 percent. Shares trade at under 9 times current earnings, and for less than 2 times forward earnings. However, the company has a sizeable debt load to contend with which may hold back shares.
Action to take: Speculators may like shares here. The stock is somewhat off its lows, and may bounce around up to the $10 range before potentially pulling back. With the company’s current balance sheet however, it’s not quite worthwhile for investors.
For trader, the February calls play to a modest move higher in shares in the coming weeks. That could play out, and the low cost of the option could lead to high double-digit returns or better.
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.