At Extreme Investor Network, we are always on the lookout for exciting investment opportunities, and recently, energy stocks have caught our attention. As oil prices begin to climb due to lower inventories and escalating tensions in the Middle East, stocks like SLB (SLB) are back in the spotlight.
Despite SLB’s recent underperformance, we see a unique opportunity to gain long exposure with substantial upside potential. The stock has declined nearly 25% since September of last year but recently formed a double bottom around $43, indicating a potential trend reversal. Just yesterday, SLB broke above its bearish trendline that has been in place since April, and with a breakout above its $46 resistance level, upside targets of $49 and $55 are in sight.
From a fundamental perspective, SLB looks attractive, trading at only 13 times forward earnings, while analysts expect EPS to grow by a strong 21% with decent net margins of 12%. This presents a discount of nearly 35% compared to the average S&P 500 stock, suggesting that the technical upside target is well within its historical valuation range.
In terms of options trading, SLB offers low volatility and inexpensive options prices, making it an ideal candidate for a simple call option strategy. We recommend going out to August and buying the $45 in-the-money call option for a $3.65 debit. With a breakeven price of only $48.65, a modest 2.5% rally in the stock over the next 50 days could lead to unlimited profit potential. Additionally, this strategy only risks 7.7% of the stock’s price to gain unlimited upside exposure.
At Extreme Investor Network, we are excited about the potential for SLB and believe that this investment opportunity aligns with our strategy of seeking out high-quality stocks with significant upside potential. Before making any financial decisions, we always recommend consulting with your own financial or investment advisor to determine the best course of action for your individual circumstances. Stay tuned for more investment insights and opportunities on Extreme Investor Network.