NEW DIRECTIONAL PUT PLAYS
Endo International plc - ENDP - close: 83.89 change: -0.71
Stop Loss: 86.05
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 2.7 million
Entry on May -- at $---.--
Listed on May 13, 2015
Time Frame: 6 to 9 weeks
New Positions: Yes, see below
Why We Like It:
"I want a new drug, one that does what it should" - Huey Lewis and The News.
A bullish earnings report with better than expected profits and sales should help send a stock higher. That prescription doesn't seem to be working for shares of ENDP. The stock looks broken in spite of bullish earnings news. ENDP is in the healthcare sector. They have a suite of branded and generic pharmaceutical companies under the ENDP umbrella.
According to the company, "Endo International plc is a global specialty pharmaceutical company focused on improving patients' lives while creating shareholder value. Endo develops, manufactures, markets and distributes quality branded pharmaceutical and generic pharmaceutical products as well as over-the-counter medications though its operating companies. Endo has global headquarters in Dublin, Ireland, and U.S. headquarters in Malvern, PA."
ENDP made a lot of headlines earlier this year when it tried to buy Salix Pharmaceuticals (SLXP). ENDP offered a cash and stock offer of $175 a share or SLXP. Yet the company lost the bid to rival Valeant (VRX) who offered an all-cash deal of $173 per share for SLXP. Most believe that ENDP will continue its trend of making acquisitions and losing SLXP to VRX failed to stop the rally in ENDP's stock.
So what did spark the sell-off in ENDP? In late April the entire biotech space was crushed with big declines. There was a flurry of negative headlines among some of the biotech companies and the whole group was sold off sharply. ENDP fell from around $93 to $85 pretty fast. Shares then churned sideways near $85.00 as investors waited for the company's earnings report.
ENDP reported its Q1 earnings on May 11th. The results look pretty good. Analysts were expecting a profit of $1.06 per share on revenues of $711.7 million. ENDP delivered a profit of $1.17 per share compared to a loss a year ago. Revenues soared +52% to $714 million. Management even raised their earnings guidance for 2015. In spite of what appears to be a great earnings report traders sold the news. ENDP reversed and has underperformed the market these last few days.
The stock has broken multiple layers of support in the last few weeks and now it's about to breakdown from its recent sideways consolidation.
If shares move below $83.00 it will produce a new triple-bottom breakdown sell-signal on the point & figure chart. Tonight we are suggesting a trigger to open bearish positions at $83.40.
Trigger @ $83.40
- Suggested Positions -
Buy the JUL $80 PUT (ENDP150717P80) current ask $2.40
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike