Metlife (MET), a $62 billion insurer and annuity provider, had a volatile start to the year, but is currently up 4.56% year to date. Following an impressive 67.47% rise in the 2013, shares of Metlife still only trade at a P/E ratio of 9.05x (2015 estimates) with 9.1% EPS growth (-0.5% this year), price to sales ratio of 0.88x, and a price to book ratio of 0.89x. Revenue growth is expected to accelerate to 3.5% from 2.3%.
Derivative performance was a big turnaround in the second quarter, going a $1.69B loss in Q2 2013 to a gain of $311 million this year. While the stock continues to trade below the book value as of June 30th at $59.96, the additional $1B share repurchase plan announced on June 10 (expected to be completed this year) will continue to support the stock on weakness. The average analyst price target is $62.23 (12.57% above the current share price). On July 17, Sterne Agee raised their price target to $66 from $65.
Unusual Options Activity
On September 17, someone rolled out 9,000 Sep $55 calls (credit) into 9,000 Dec $57.50 calls (debit). The call to put ratio was 21:1. Call activity was more than five times the average daily volume. Net call premium was +$1.1M versus net put premium of +$31,000. The breakeven is $58.89 for the big call buyer on December options expiration ($1.25M+ worth of call premium).
The Weekly Chart Signals More Upside To Come
Metlife Options Trade Idea
Buy the Dec $55/$60 call spread for a $1.80 debit or better
(Buy the Dec $55 call and sell the Dec $60 call, all in one trade)
Stop loss- None
First upside target- $3.40
Second upside target- $4.90
Disclosure: I may look to put on this options trade within the next week.
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Mitchell’s Smart Money Report for unusual options activity featuring Yahoo! (YHOO)
