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One way to play UBER Technologies (UBER) stock, to set a lower buy-in target and still get paid a 2% yield over the next month, is to sell short 5% out-of-the-money (OTM) puts. This article will show how to do this.
UBER is at $83.92 in midday trading on Friday, June 20, which is off its recent highs. I previewed this in my May 16 Barchart article, “UBER Stock Soars After Strong Earnings and Cash Flow—But is it a Buy?”
Target Price for UBER
In the article, I showed that UBER generated strong free cash flow (FCF), including a 17.2% FCF margin in its trailing 12-month (TTM) and 19% in its latest quarter.
That led to a forecast of $10 billion in the next 12 months (NTM) FCF, using an 18.5% FCF margin. After dividing this by an FCF yield of 5.0%, its NTM market cap could rise to $200 billion (i.e., $10b / 0.05 = $200b).
Since today's market cap is $175.6 billion, that implies a 13.9% higher valuation (i.e., $200b/$176.6 = 1.139). In other words, UBER is worth at least $95.59 per share.
Analysts agree. For example, Yahoo! Finance shows that 54 analysts now have an average price target of $96.54. That is up from $94.83, as I pointed out in my May 16 Barchart article a month ago. Similarly, Barchart's mean survey price target has risen from $95.81 a month ago to $97.43 today.
In addition, AnaChart.com shows that 37 analysts have a price target of $98.78. The bottom line is that UBER stock looks very undervalued here and is off its highs.
One way to play this is to enter an order to “Sell to Open” put options in nearby expiry periods. That way, you can set a lower potential buy-in point, as well as get paid while waiting.
Shorting OTM Puts
For example, look at the July 18, 2025, expiration period, 28 days from now. The $80 put option strike price has an attractive premium of $1.66. This put contract is about 5% below today's price (i.e., out-of-the-money or OTM).
As a result, if an investor secures $8,000 with their brokerage firm, they can make $166 in immediate income by entering an order to “Sell to Open” this put contract.
That works out to a short-put yield of 2.075% (i.e., $166/$8,000 = 0.02075).
In other words, this is a good way to set a lower buy-in point and still get paid while waiting. Moreover, even if UBER falls below $80 over the next month, the investor has a lower breakeven:
$80 - $1.66 = $78.34 breakeven
That is 6.60% below today's trading price. So, there is good downside protection against a potential unrealized capital loss.
And keep in mind, given our next 12-month (NTM) price target of $95.59, there is good upside potential:
$95.59/$78.34 -1 = 1.22 = +22% upside potential
Moreover, if an investor can repeat this short-put play each month for 4 months, the expected return (ER) is 8.30%:
$166 x 4 = $664 and $664/$8,000 invested = 0.083 = +8.3% ER
That allows the investor to get paid while waiting to see if their brokerage account is assigned to buy 100 shares at the strike price. In fact, more enterprising investors can use this income to buy in-the-money (ITM) call options much further out in terms of expiration.
For example, the $80 call options that expire on Dec. 19, 2025 (i.e., in-the-money calls 6 months out), have a midpoint price of $12.32 per call.
So, if an investor can make $1.66 per month for 6 months shorting 1-month puts, they can accumulate $9.96 (theoretically). That would pay for 81% of the 6-month out ITM call option price.
The bottom line is that this looks like a good time to buy EBAY stock. One way to play it is to short nearby out-of-the-money (OTM) puts, and also buy in-the-money (ITM) calls further out.
On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
