Drug manufacturer Pfizer (PFE) has shed 35% over the past year amid a poorly-performing market for the pharmaceutical sector. One trader sees a rally in the coming weeks.
That’s based on the May 10 $28 calls. With 28 days until expiration, 39,706 contracts traded compared to a prior open interest of 411, for a 97-fold rise in volume on the trade. The buyer of the calls paid $0.57 to make the bullish bet.
Pfizer shares recently traded just over $26, so they would need to rise less than $1.00, or about 3%, for the option to move in-the-money. The stock appears to be retesting its 52-week low from early March of $25.61 per share.
Besides the poor share performance, Pfizer has seen revenues drop by 41% over the past year and the company is currently unprofitable.
Shares trade at 12 times forward earnings, making the stock a potential value play that could move higher from oversold values in the coming weeks.
Action to take: The drop in share price has pushed the dividend to 6.3%. Adding in the potential for an oversold move higher, and today’s investors could get a reasonable return. In time, Pfizer will likely come back into the market’s favor.
For traders, the stock is getting oversold now and looks ready to trend higher. The May $28 calls could see high double-digit gains given their low price and how close the trade is to trading in-the-money.
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.