EMC Corporation (NYSE:EMC), Advanced Micro Devices Inc. (NASDAQ:AMD) and Valence Technology Inc. (VLNC) are three technology stocks that were recently mentioned by analysts. In this article, we’ll take a look at the sentiment surrounding these stocks and take a look at the best ways to profit from those sentiments using both equity and stock options.
LEAP into EMC to capitalize on $40.00 price target
EMC, a provider of information infrastructure and virtual infrastructure technologies, should be bought on any weakness, according to Pacific Crest. The analyst doesn’t expect the firm’s second quarter results to provide a catalyst, but believes the stock’s risk/reward profile is positive this year, and suggested that shares could hit $40.00 a piece over the long-term.
Other analysts have also been very bullish on the information infrastructure provider. Credit Suisse, which rates the stock as a Buy with a $34.00 per share price target, noted earlier this month that its surveys indicate that the firm’s seasonal trends appear very bullish. Meanwhile, Merriman recently initiated the company with a Buy and a price range of $34.00-$38.00 per share.
Investors looking to follow the advice of these analysts may want to consider purchasing long-term equity anticipation securities, or LEAPS. These long-term stock options can lower the amount of capital at risk and leverage returns. Currently, investors can purchase at-the-money 25 Jan ’13 LEAPS calls for $4.65 per contract, creating a breakeven point of just $29.65.
Hedge your bets and profit from AMD’s outlook
AMD, a global semiconductor company with a popular line of x86 processors, may be suffering from a weak near-term demand outlook, but at least one analyst still recommends the stock. ThinkEquity lowered its price target to $8.00 per share, but continues to recommend the stock for its long-term potential.
Other analysts haven’t been so bullish on the semiconductor company. Ealrier this month, JMP Securities downgraded the stock to Underperform, with a $4.50 per share price target, citing the rise of ARM-based alternatives and tablets. Meanwhile, MKM Partners recently initiated the stock at a Sell with a $5.00 per share price target.
Investors looking to capitalize on a weak short-term and strong long-term may want to consider a diagonal spread. By purchasing long-term LEAPS at attractive prices, investors can write shorter term call options against the long position to offset any losses in the near-term. Currently, at-the-money 5 Jan ’13 LEAPS calls trade for just $2.30, while $7.00 Oct ’11 calls can be written for around $0.35 a piece.
Capitalize on Valence’s significant near-term potential
VLNC, a developer of energy systems using its phosphate-based lithium-ion technology, could be worth up to $4.00 per share, according to Needham. The analyst sees multiple potential catalysts for the company and views the current level as a good entry point. Meanwhile, the firm reiterated its Buy rating and $4.00 per share price target – a 264% premium to the current price.
The energy systems company also reported its preliminary Q1 2012 results early this week, where it sees first quarter revenues projected to be above May 2011 guidance of $8.5-10.5 million. The firm attributed the outperformance to significant shipments to Smith Electric Vehicles and positive trends in orders from both existing and new customers.
Investors looking to capitalize on this potential can either purchase call options or write put options against a long-term equity position. Currently, the only options available are the 2.50 Sept ’11 calls for $0.10 apiece. While 427 contracts are open, investors should note that there is very little volatility in these options at this time.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.