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Senseonics: First Part Of 2021 Crucial

Mar. 09, 2021 9:13 AM ETSenseonics Holdings, Inc. (SENS)7 Comments
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  • The company just announced its Q4 numbers. Forward looking 2021 guidance is encouraging.
  • The balance sheet has been strengthened considerably in recent times from multiple financings.
  • Shares are oversold and should bottom quickly. The first few quarters of 2021 are vital to keep the momentum going.
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In discussion with a colleague recently on trading and investing, we were comparing low priced stocks (which trade with high implied volatility) with low-price value plays. What we mean by value plays is companies which have sound financials and a very attractive valuation but for some reason are out of favour with the market. The discussion revolved around which “type of company” is better for trading purposes. On one hand maybe you have a $3 company trading with very high levels of implied volatility. This company though may have no income (or very little to speak of) which obviously increases risk for the investor or trader. Furthermore, when a company is not generating either positive earnings or positive cash/flow, it puts a “time element” on proceedings. These speculative type companies many times trade with very high levels of implied volatility because the fear associated with respect to future price-movement is very high.

This fear though enables traders reduce risk more than in the value play due to being able to collect far more option premium from associated options. One stock which we wrote about recently is Senseonics (NYSE:SENS). This stock came to our attention due to its spike in implied volatility which took place in mid-January. This company fits the bill perfectly with respect to being a firm which still sports high levels of high implied volatility but does not have a proven cash-generating business which supports the company´s ultra-high valuation. Let´s go through the recent fourth quarter earnings report to see if the company has significant downside risk or not at this juncture. Remember, when selling option premium to reduce cost basis, our main focus is the downside as we are essentially capping our potential gains to the upside.

First off, SENS beat bottom-line consensus by $0.01 (EPF of -$0.05 reported) and


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Analyst’s Disclosure: I am/we are long SENS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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