As I write this, Rivian (RIVN) has 24 of the top 100 unusually active options in Friday trading. The electric vehicle (EV) maker’s share volume is 2x its 30-day average, while its options volume is 575,518, double the 30-day average.
If you’re like me and not all that enamored by its EV business, I’ve got two other stocks whose options are unusually active and possess businesses that are more to my liking.
Enjoy the weekend!
Why I’m Not Fond of Rivian
Before I get into my two options, it's only proper to explain why I'm not a fan of Rivian.
While there is no question that its stock is on a tear -- up 68% over the past month -- there are better EV stocks than the maker of attractively designed electric SUVs, pick-ups, and delivery vans.
As investors know, Rivian’s stock’s racing ahead because 300 of the company’s electric delivery vans (EDVs) will hit the streets of Germany this summer, joining a growing fleet of Amazon (AMZN) EDVs in the U.S.
But that’s not the only reason.
According to the Motley Fool, two analysts boosted their price targets this past week -- one by $2 to $28 and the other by $7 to $18 -- suggesting that analysts are warming up to its business.
Barchart.com data highlights that of the 18 analysts in its dataset, 11 rate it a Moderate or Strong Buy (4.11 out of 5) with a mean target price of $23.28, 5.1% below its current share price.
Now it’s possible that the data are yet to update the two changes in target prices. Let’s assume this is the case. That raises the mean price by 50 cents, to $23.78, still below the current share price.
The reality is that Rivian remains a company that’s lost $6.5 billion in the trailing 12 months on $2.2 billion in revenue. It’s got a long way to go on its pathway to profitability.
In the meantime, both Ford (F) and General Motors (GM) are a safer way to play the EV market without losing your shirt. And both are profitable.
The First Alternative Option
The fifth most unusually active option as I write this is the Pfizer Aug. 11 $33 put. It’s got a volume of 3,557, 31.20x the open interest. Should you sell the puts, the $0.24 bid price is an annualized yield of 7.0%. That’s not spectacular in the current interest rate environment, but it’s not awful.
The share price would have to drop by at least 7.5% over the next 35 days to be asked to buy the shares for $33. Worst case scenario, you must buy them for $32.76 a share.
Looking back on Pfizer’s share price in 2019, before 2020 and the pandemic's start, PFE stock traded at a high of $41.61 and a low of $32.53.
In 2019, Pfizer had revenue of $51.8 billion, with $12.6 billion in net cash flow from operations. In 2022, revenues were $100.3 billion, with $29.3 billion in net cash flow from operations.
So, excluding the $57 billion generated from Covid-related vaccines and pills drops its revenue to $43 billion, considerably less than in 2019. However, despite the decline in revenues in 2023 -- expected to fall to $69 billion at the midpoint of its guidance -- I don’t see its Covid-related revenues disappearing entirely over the next 2-3 years.
Buying PFE stock at $32.76 isn’t a terrible move if you invest for the long haul.
Cruising for my Second Option
The 37th most unusually active option on Friday is the Carnival (CCL) Sept. 15 $28 call with a Vol/OI ratio of 9.72x.
The cruise ship operator has a $0.18 ask price, a less than 1% deposit on its current share price of $19.12. The delta is 0.08593, which means if the share price increases by $2.09 over the next 10 weeks, you’ll double your money should you decide to sell your call.
Given Carnival’s share price is up 47% over the past month, and its share price traded near $70 in 2018, there’s no question it can increase by 11% by mid-September.
So, why not buy shares at the current price? If you think that the best days for cruise ship operators like Carnival are still ahead (I do), then by all means, go for it.
However, investors must weigh the probabilities, given the overall markets are up 16% year-to-date. A rising tide lifts all boats, goes the thinking. It also sinks all ships.
The latest jobs data suggests that while a recession is not on the horizon, more interest rate hikes may be needed to slow inflation, especially wage growth. That could push the country into a recession late in the year and into 2024.
That is to say that its share price could be tapped out in the near term.
Buying the call gives you an inexpensive way to reserve your right to buy CCL shares in 70 days for $19.30. If you can’t, you lose $18 per call contract. I’ve had bigger Starbucks orders.
Long-term, I do like the cruise stocks.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
