Shares of communications infrastructure firm CommScope Holding Company (COMM) have shed more than half their value in the past year. However, one trader sees shares as potentially rebounding strongly from here.
That’s based on the May $11 calls. With 91 days until expiration, 7,738 contracts traded compared to a prior open interest of 103, for a 75-fold rise in volume. The buyer of the call options paid $0.75 to make the trade.
With shares currently around $9.50, the stock would need to rise about 12 percent for the option to move in-the-money.
In addition to shares sinking 37 percent over the past year and more than half from their highs, the company saw a slight drop in revenue with a 2 percent decline in the past year. The company is currently unprofitable, but shares do trade at less than 7 times forward earnings.
Action to take: The company looks like an interesting play on the further buildout of the internet and streaming services from here, including a partnership with Meta Platforms (FB) that could give it a role in being an infrastructure play on the Metaverse. Shares don’t currently pay a dividend, and the prospect of a quick turnaround is risky, but could pay of well for traders.
Given the option action in this smaller-cap play, as well as industry partnerships, it’s possible a bigger announcement is coming in the next few weeks that could materially move shares higher. If so, the May calls could see triple-digit returns for traders.
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.