Tech stock Sonos has risen nearly 300% since March, and TradingAnalysis.com founder Todd Gordon is betting on an even bigger move to the upside.
Sonos, which makes wireless speaker systems, has risen to a nearly $3 billion market cap after its surge. It’s stock is up another 11% just this year.
Gordon said earnings growth should fuel more gains for the stock, especially after its last earnings report blew past analysts’ estimates. The company earned 33 cents a share in its September-ended quarter on nearly $340 million in revenue, beating expectations on the top and bottom line. Shares soared 30% the day after it reported those results in mid-November.
“For the current fiscal year 2021, they’re expected to generate sales of $1.44 to $1.5 billion, and that’s about 11% to 15% growth,” Gordon told CNBC’s “Trading Nation” on Tuesday.
The technical setup also looks strong, according to Gordon.
“You’ve broken up through the IPO high,” he said, pointing to its post-debut peak of $23.60 hit in August 2018. “I do like the breakout in Sonos. As we take a look on the weekly MACD, which is moving average convergence divergence, it is still pointed up, looks fine, and the daily [MACD] you can see has begun to try to push in turn up, which is a bullish continuation signal.”
Gordon initiated a dual approach for exposure to Sonos – he bought an outright position in Sonos through its shares and put on a position through the options market. He said an upside call option could prove useful should any news break of Sonos as a takeout target. He bought a 30 call option with June expiration for $3.15 per spread.
“Remember, if you buy a 30 call at expiration [you] need to be at least the premium paid above that to breakeven so it would be $30 plus $2.15 which I’m going to pay,” said Gordon. “Everything above $33 should be profit so a little lottery ticket in there.”
Disclosure: Gordon holds SONO.
