Call Options Or Put Options On Group (WWWW)?

| January 23, 2013 | 0 Comments

WWWW Group (WWWW) is a provider of internet services and online marketing solutions to small- and medium-sized businesses.  Since the IPO in 2005, they have grown from 50,000 customers to over 3 million customers today. 

WWWW currently trades for $16.00 per share.  The shares are up 30% from the 52-week low of $12.22 but are currently 18% below the 52-week high of $19.72. 

Is this an opportunity to buy call options on WWWW as they step up their marketing?  Or should you buy put options on WWWW as it becomes more expensive to find new customers? 

The bulls make a convincing argument… has been a remarkable growth story.  Since their IPO in 2005, they have grown from 50,000 to over 3 million customers today and revenues have increased from $30 million to $500 million.

What’s even more remarkable is they achieved this growth with little fan fare.  They simply focused on creating a product and service their customers found valuable.

It’s no secret that it’s more important than ever for small businesses to have a strong presence on the internet.  And’s services are a perfect solution for many small business owners that need help creating a website or online advertising.

Now they’re taking their business to a whole new level…

You might have noticed, is now advertising on television.  And they recently committed to a 10-year sponsorship of the PGA Tour’s developmental tour formerly known as the Nationwide Tour.

Think of it this way…

WWWW customers find their products so valuable that their churn rate is only 1%.  Clearly, the majority of customers that try’s services find them so valuable they simply can’t get rid of them.  And now they’re ramping up advertising to get as many new customers in the door as possible. 

As WWWW adds new customers and revenue growth increases, it should drive the stock price higher in the weeks ahead.

But the bears have a compelling case as well… WAS a remarkable growth story.  But those days are coming to an end.

WWWW has already found all of the low hanging fruit.  And now they’re forced to search out new ways to fuel growth.

It’s why they recently acquired Network Solutions.  And it’s why they’re turning to new advertising channels like television advertising and sponsoring the PGA Tour developmental league. 

One thing’s for sure, the new plan is a huge financial commitment.  But there’s no guarantee these new marketing practices will generate enough new customers and revenue to justify the cost. 

Right now, the company’s future depends on these huge gambles on new advertising working out.  If they don’t, revenue and earnings growth could become much more volatile.

The bottom line is WWWW’s new marketing plan is a huge risk.  And if they come up short of investors’ expectations, the stock is going to take a big hit.

If you think the bulls are right, take a look at buying the WWWW February 2013 $15.00 calls for around $1.50.

If you think the bears are right, take a look at buying the WWWW February 2013 $15.00 puts for around $0.45.

Good Investing,

Corey Williams

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Category: Call Or Put Options?

About the Author ()

A former banking executive, Corey Williams is the Chief Options Strategist and co-editor of our well-known daily newsletter, Options Trading Research. Corey’s extensive experience with options goes all the way back to his days in corporate finance. It was this decade in banking where Corey discovered the most important skill an options trader can have– the ability to analyze a company or sector to determine its likely future direction. And now he’s brought this background, experience and love of options to Options Trading Research, the unique daily e-letter devoted exclusively to helping individual investors profit from the very lucrative options market.