Stock: AMARIN (AMRN)
Price Target: 20$, 22$
Type: Put Credit Spread
Fundamental: Amarin is currently off a slow decline due several weaknesses, most prominent being its patent lawsuit against 2 other companies. This can hurt their profitability and market share, as AMRN currently dominates the heart disease medicine area with Vascepa. In addition, AMRN is looking to report a 80%+ YoY revenue growth on the back of Vascepa, while maintaining a decent EPS. There also has been rumors of M&A, though I doubt it’ll factor into this earning.
Technical: Priced below in 20, 50, 200D average, while being bullish in nature. MACD shows neutral convergence. RSI shows around 40, going towards oversold. Options sentiments are very bullish in volume and very bullish open interest. Implied move is 10.8% or about $2. Short interest is surprisingly high at 11.5%, or about 30% float. The SI ratio is about 7.
Sentimental: After its approval and label expansion for their blockbuster drug Vascepa, Amarin has faced several issues that prevented it from realizing gains. These issues include patent challenges, lawsuits, and general investor uncertainty. Last quarter, AMRN knocked it out of the park, and faced a subsequent sell off that is stabilizing just now. With huge YoY improvement in earnings performance, I believe Amarin will come up on top, even in spite of coronavirus fears. The main bear case is that of profit collecting, which may trigger if the outstanding issues I’ve listed are not properly addressed.
ROI% – 54%, 102%
Risk Level – 3 out of 5, 5 out of 5.
2 plays 2 different level of risk/reward. Both are bullish.
Amarin is fickle. It can beat really hard and still sell off. This time might be different, but I’d suggest closing for profit earlier than later if we win.
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.