Despite an exciting new lineup for 2025, recreational vehicle manufacturer Winnebago Industries (WGO) might not have enough gas in the tank. That’s according to Barchart content partner Zacks Investment Research, which noted that the nearly 150 new models — offering a range of innovation, quality and outdoor connectivity — hasn’t stopped WGO stock from coming under pressure.
Yes, researchers note that the offerings “underscore Winnebago’s adaptability and forward-thinking approach.” Unfortunately, the company is also struggling against various challenges. As such, Zacks states that it cannot recommend WGO stock as a bullish opportunity. This runs counter to analysts’ expectations, who rate Winnebago as a Moderate Buy.
Nevertheless, skepticism runs high against WGO stock and for good reason. Since the start of the year, shares tumbled 21%. Financially, Winnebago has delivered generally mixed earnings results, with sales often coming in lower than anticipated in recent quarters. That’s not shocking to Zacks, which pointed to broader challenges in the RV industry. The firm stated the following:
While RVs emerged as a rare travel winner in 2020 and 2021, the craze for the same has long been over. A rising interest rate environment and economic uncertainty have played spoilsports. The RV space relies heavily on consumers' affordability. Along with higher interest rates and inflationary pressures, consumer appetites for large purchases have dwindled considerably. Customers haven’t been keen on taking a high-interest rate debt to finance their RV purchases.
As we head further into the post-pandemic paradigm, consumers have simply lost interest in discretionary big-ticket items. Still, it’s not impossible for the bulls to extract profits from WGO stock.
Unusual Options Activity Imposes Wrinkle on WGO Stock Thesis
From a financial and fundamental viewpoint, the safe wager may be to stay away from WGO stock. Despite analysts’ generally liking the security, Barchart’s Technical Opinion indicator pegs the enterprise as a “Strong Sell.” Still, the hard numbers don’t always have the last say on a publicly traded business. Like it or not, the market is the ultimate arbiter.
As it turns out, the smart money (from the perspective of unusual options activity) doesn’t necessarily view WGO stock in negative terms. At the end of yesterday’s session, total options volume for WGO reached 9,321 contracts against an open interest reading of 46,625 contracts. This figure represented a 335.15% lift against the trailing-month volume. Moreover, call volume pipped put volume, 4,860 contracts to 4,461 contracts.
Granted, the put/call volume ratio of 0.92 barely offers a positive read. However, for every option bought, that same contract is sold; that is, someone is always taking the other side of the wager. That’s where Barchart’s options flow screener — which filters exclusively for big block transactions — can be an incredibly powerful tool.
On Monday, net trade sentiment — calculated as the aggregation of premiums associated with bullish and bearish sentiment transactions — hit $407,000, favoring the bulls. In total, premiums for bullish options hit $645,500, shadowing premiums for bearish options at $-238,500.
To be sure, it’s only a measurement of a single day so traders should avoid reading into the matter aggressively. Still, the data — in combination with unusual options activity — suggests that investors may be willing to give WGO stock a second look.
That’s also not surprising. Yes, Winnebago has suffered a big decline this year. However, since roughly the middle of July, WGO stock has traded inside a neatly defined horizontal consolidation pattern. So long as WGO doesn’t break below the framework’s lower threshold, contrarians may be able to extract risk-controlled profits.
Enter the Bull Put Spread
One mechanism to skim some income off WGO stock is to consider a vertical options strategy called the bull put spread. Here, we deploy two put options: selling a higher-strike put for income and buying a lower-strike put to cap the liability of the sold derivative.
Barchart’s Premier subscribers enjoy the full spectrum of viable options trading ideas at their fingertips. One conservative idea is to consider the following options expiring on Oct. 18, 2024:
- Sell the $55 put (at a time-of-writing bid of $1.15).
- Buy the $52.50 put at an ask of 65 cents.
- Maximum profit for this trade is the net premium received of 50 cents ($1.15 – 65 cents) per contract.
- Maximum loss comes out to the difference between the strike prices minus the net premium received or $2 per contract.
- The breakeven price for this trade is $54.50.
At first glance, putting at risk $200 ($2 multiplied by 100 shares) for receiving $50 in income might seem like a foolish bet. However, please note that Barchart’s algorithm calculates the probability of this trade being at least somewhat profitable at 72.1%. That seems very reasonable considering that WGO stock closed at $57.76 on Monday.
Could Winnebago lose 5.6% (against the breakeven price) from now till the Oct. 18 expiration date? Sure, anything’s possible. However, it’s also worth pointing out that WGO stock already lost 5% in the trailing month. Given the ebb and flow of the market, it wouldn’t be out of the ordinary for shares to trade sideways, if not march a bit higher.
Granted, it’s not the most exciting idea out there. But with the smart money betting on WGO stock — and the Barchart algorithm favoring the aforementioned bull put spread — Winnebago could be a winner for the astute investor.
On the date of publication, Josh Enomoto 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.
