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Hawk’s Nest

WageWorks (WAGE)

by | Mar 14, 2019

WageWorks (WAGE) shares jumped 30% today after the company announced that the majority of its delay Q4/FY reports were set to be filed with the SEC. The catalyst was one highlighted in a write up on 2/1. WAGE a great example how knowing not just the flow correctly but also the context and potential drivers for the action, something we strive to highlight everyday.

Wage Works (WAGE) yesterday with some sizable trades late as 4,000 April $35 calls were bought for $2.60 to $2.65 and then 2,000 Februayr $30 calls bought for $2.70 to $2.75. Earlier in the session, the March $30/$40 call spread was bought 550X. WAGE had buyers in the May $25 calls last week while the May $30 puts remain in OI from buyers in November. Shares are nearly 25% off the December lows and back above its 50-day MA this week for the first time since August. WAGE shares traded as high as $80 in early 2017 and has retraced 75% of the bullish run higher from the 2012 lows. WAGE has key support, now resistance, above at $42.50. The $1.25B company trades 16X earnings, 2.7X sales, and 2X book. WAGE manages a variety of employee accounts for businesses such as CDBs, FSAs, HSAs, and commuter benefit services. They expect double-digit EPS growth and 2-3% revenue growth over the next two years as they expand their footprint and pursue deals to consolidate a fragmented space. Shares fell in September after announcing an accounting probe to look at irregularities at the company with respect to a 2016 government contract. Their Chairman also resigned. Analysts have an average target for shares of $47 with 4 buy ratings and 2 hold ratings. JMP upgraded to Outperform on 12/10 with a $37 PT citing a relatively stable and moderately defensive recurring revenue model. The firm has greater comfort that the company has retained its key channel partners in the wake of last year’s loss. Sun Trust has a $50 PT for shares and thinks the long-term outlook remains positive given its highly scalable, predictable, and growing business model. Institutional ownership fell 17.9%. Short interest is 3.9% and down from 7% in July and over 10% in January 2018.