Taser International, Inc. Earnings Preview: 2 Trades for TASR Stock

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Taser International, Inc. (TASR) is set to enter the earnings confessional on Monday, and Wall Street is expecting a plunge in earnings, but a rise in revenue. TASR stock has enjoyed a bit of a comeback since early February, and a positive surprise on Monday could go a long way to bolstering sentiment … and Taser stock’s rally.

Taser International, Inc. Earnings Preview: 2 Trades for TASR StockBest known for its nonlethal stun guns, Taser also offers Axon wearable video cameras for police officers, which have become a hot commodity lately. Taser will need all the help it can get on Monday, as Wall Street is forecasting a year-over-year decline of more than 55% in earnings, with per-share results expected to drop to four cents from nine cents a year ago.

Revenue, meanwhile, is expected to rise 8.3% to $50.72 million.

Fundamentally, Taser has had a rough year. The company has missed Wall Street’s expectations twice and bested them twice in the past four quarters. As a result, TASR stock is down more than 36% in the past 12 months.

Sentiment in the brokerage community for TASR stock, however, doesn’t reflect the company’s troubles. Data from Thomson/First Call reveals six buys, two holds, and no sell ratings. Additionally, the 12-month price target on Taser stock rests at $25 per share, representing a hefty premium of 45% to Wednesday’s close.

Short sellers are another matter entirely. As of the most recent reporting period, the number of TASR stock shares sold short rested at 10.5 million. This wealth of short interest represents more than 20% of Taser stock’s total float, or shares available for public trading, and could provide fuel for a short-squeeze rally.

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Furthermore, judging from the wealth of call open interest in TASR stock’s options backdrop, short sellers may be a bit worried. Currently, the March put/call open interest ratio for Taser stock rests at 0.50, with calls doubling puts among short-term options. This ratio rises slightly to 0.56 for the weekly March 4 series, but calls remain firmly in charge.

Overall, weekly March 4 series implieds are pricing in a potential post-earnings move of about 10.5% for TASR stock. This places the upper bound around $19 and the lower bound near $15.40. A rally would put Taser stock in contention with formerly staunch resistance at $20, while a decline would leave the shares plenty of breathing room above support in the $14-$15 region.

2 Trades for TASR Stock

Put Sell: Given that the market has been quite volatile lately, exercising caution with TASR stock options is the best way to protect your portfolio and profit. With premiums a bit elevated at the moment, and Wall Street in whipsaw mode, selling deep out-of-the-money puts might be a solid solution for TASR stock.

At last check, the weekly March 4 series $14 put was bid at 15 cents, or $15 per contract. The upside to this put sell strategy is that you keep the premium as long as TASR stock closes above $14 when March 4 options expire at the end of next week. The downside is that should TASR stock trade below $14 ahead of expiration, you could be assigned 100 shares for each sold put at a cost of $14 per share.

Call Spread: If your appetite for risk is more robust, a March 18 series $18/$20 bull call spread has potential for a solid return. At last check, this spread was offered at 55 cents, or $55 per pair of contracts. Breakeven lies at $18.55, while a maximum profit of $1.45, or $145 per pair of contracts, is possible if TASR trades at or above $20 when March options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/02/taser-tasr-stock-trades/.

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