🗞 An App for Karens

WHILE YOU POUR THE JOE… ☕️
Take It or Leave It

Boeing has finally struck a wage deal with its workers, and now it’s clear that the deal is ‘best and final.’

The deadline for workers to accept or deny this deal is this morning, the 27th, which means we might see good news and a certain path forward for Boeing stock.

When markets feel more confident about a stock’s future, volatility tends to leave. If it stays, then it’ll likely be on the upside.

Look, we already pitched the Boeing trade a few posts ago, so we think it’s a matter of time or workers accept this deal before the stock bounces back. 📈 

Speaking of bouncing back, let’s get on with today’s email 📧…

MOMENTUM IS BACK
Manic Depressive on China

Remember when everyone talked about how Chinese stocks were the most dangerous names in the market? Or how the numbers were basically fake or fabricated without oversight?

Yeah those stories aren’t that popular anymore, especially as some of the US’s largest investors have come out in public to praise the value that is hidden in Chinese stocks today.

Not Christian Bale, but the investor he played in the movie The Big Short. Michael Burry has now made Alibaba his largest position in the fund he manages, with JD.com and Baidu also in the top five largest holdings.

And he’s not alone. George Soros initiated a $73.8 million 💵 position as well, and David Tepper from Appaloosa appeared on CNBC yesterday morning to say he’s buying everything China-related.

A few weeks ago, we pitched a bull calendar spread on Alibaba for the $85 November long calls and the $85 September short calls. Here’s what happens now that the stock is up over 15% this week alone 🔥:

We have to start rolling out this position into the $120 calls, probably to give us enough room and not get squeezed out of this play. Keep in mind that we also hold the stock itself and have a current valuation of up to $220 a share 🎯 as a base case.

There are, however, some assumptions (which aren’t that far from reality) that could make the stock worth as much as $400, but we’ll leave that for destiny to decide.

We’ll probably post about this trade live on our Twitter account, which you should follow if you are not already to keep up with live ideas and plays rather than get them only three times a week here.

TRADE OF THE WEEK
Tailor Made for Karens & Latinas

This is not a trade nor an investment just yet. I heard about this app from my cousin and how he uses it with his girlfriend, and I also have heard lots of moms use it when their kids are off to college.

Not necessarily a pointer for popularity, but I see a growing trend for people adopting this app today. So, we decided to break down a few of the company’s financials to get a feel for what’s happening.

With double-digit monthly active user (MAU) growth over the past couple of years, the stock will likely hit operating profits and net income soon, especially as gross margins are over 74% today (typical of a software company).

The service seems attractive enough for families to pay a subscription for the premium version.

Life 360 reported up to 23% annual growth 📈 in annualized monthly revenue, which speaks to the subscription-based income it generates.

In only four years, the company has achieved significant market penetration in pretty much every state, which means economies of scale and other perks like positive free cash flow:

And that is already being reflected in the company’s financials, as the cash flow statement shows a net operating outflow of $5.5 million last year. This metric jumped to $13.9 million for the same quarter this year.

Adjusting for capital expenditures of $2.2 million, Life 360 reported up to $11.7 million in free cash flow, getting investors one step closer to seeing positive net earnings per share (EPS) and other perks like stock buybacks.

While all this sounds nice, the stock hasn’t even been in the public markets for a full year, meaning we don’t have enough data yet to get a feeling for the price. Still, we can definitely attempt to value this business 👀 with the current and historical financials.

Of course, we will post about this live on our Twitter account if we decide this is a deal worth pursuing.

NOW GO AND MAKE IT HAPPEN
Take it From a Trader

Here’s a pretty cool guy who killed in his former role at Citigroup. Gary Stevenson is now a retired trader with a pretty cool YouTube channel that talks about his previous experience as a professional trader.

Today’s book recommendation 📖, his book, is a bit of a story-teller but is entertaining enough to get you familiarized with the Wall Street pace and culture of his day and today’s.

To your success,

G. 🥃