Best Buy Co Inc. (NYSE:BBY) leads the way for our options trading activity today. I have written about trading BBY options from both the bullish and bearish perspectives in the past year. In my first coverage on Best Buy Options on June 26, 2014, I recommended buying BBY put options. In my second coverage of the stock on November 20, 2014, I recommended buying BBY call options and I gave the stock a $38 price target by January 2015.
Why Best Buy is Back in My Sights
Best Buy with its market capitalization of $13.96B is a multinational, multichannel retailer of technology products, including tablets and computers, televisions, mobile phones, large and small appliances, entertainment products, digital imaging and related accessories.
Shares of Best Buy showed impressive bullish momentum last week, and I think options traders might find a great opportunity to profit from BBY Call options. The stock had an impressive rally to set a new 52-Week high of $40.49 last Friday before it closed with 0.20% gains at $39.71.
A Breakout is Imminent
The chart above shows how the shares of Best Buy have traded within the last on year. From the chart above, you’ll observe that the shares of Best Buy have been trading northbound in the last 10 months as shown by the green arrow.
You’ll also notice that the stock has had a $40 resistance ceiling as shown in the blue line. An interesting point to note is that the stock has touched the $40 point about 5 times in the last three months before it made the $40.49 high last Friday.
The stock currently trades above its 50 and 200-day moving averages of $47.70 and $33.35 respectively. More so, it has an RSI of 61.95, which suggests that the buying action on the stock is still vibrant.
Why Shares of Best Buy Can Breakout Above $40
Best Buy reported its fourth quarter (Q4 2015) results last week on Tuesday, and the contents of the quarterly results shows that the company is poised for short and long-term growth. I am impressed with growth in the top and bottom lines as show below:
Best Buy reported earnings of $1.48 per share to beat the consensus estimate of $1.35 per share and to mark a 23.3% quarterly improvement. After accounting for one-time items and discontinued operations, the company’s quarterly earnings came in at $1.46 per share to beat $0.83 per share from the year-ago quarter. Best Buy reported revenue of $14.209B to mark a 1.3% year-over-year improvement. Interestingly, the company’s consolidated comparable store sales increased by 2%.
I am especially impressed by the company’s announcement of a special one-tome dividend of $0.51 per share as well as the announcement of a $1B share repurchase program over the next three years. The impressive financials paints a bright outlook for Best Buy and the company’s P/E of 11.35X will provide enough fuel to propel the stock for a breakout above $40.
How to Trade BBY Options
I am optimistic about BBY options and I recommend buying BBY call options. You’ll do well to start this week’s trading activity with the BBY Jun 2015 44.000 call (BBY150619C00044000) at an asking price of $1.00.
— Daily Option Alerts