Medical device manufacturer
Baxter International (BAX) is down nearly 25% over the past year, amid ongoing losses and a collapse in growth. One trader sees shares continuing lower into 2025.
That’s based on the February 2025 $27.50 puts. With 59 days until expiration, 11,202 contracts traded compared to a prior open interest of 138, for an 81-fold rise in volume on the trade. The buyer of the puts paid $0.76 to make the bearish bet.
Baxter shares recently traded for about $29.50, so the stock would need to decline by $2, or just under 7%, for the option to move in-the-money. Baxter has been in a downtrend since mid-September, and shares are near their 52-week low of $28.62.
Baxter’s earnings have slid substantially over the past year, with earnings growth declining 94%, even as revenues rose by 3%. That’s taken shares to a PE ratio of 116, a hefty valuation by any standard.
Until there’s a clearer sign of a turnaround in earnings, it’s likely that shares have more room to fall.
Action to take: Interested investors should hold off for now, as any up days in shares will likely be a brief reprieve before the downtrend resumes.
For traders, the February 2025 $27.50 puts are well positioned, as they could move in-the-money before expiration and are relatively inexpensive. Traders can likely see mid-to-high double-digit returns on the puts.
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 company mentioned in this article.