Frontier Communications Corp (NASDAQ: FTRCQ) is a small telecoms company that has a big competitive advantage. This is because it is active in a field that is on the rise (Telecoms), and the likelihood for this trend, is to the upside and continue to rise. More importantly, the company is small enough to be ignored by the competition.
The world’s population reached an impressive 40% Internet connectivity, and this says much about the global trend in the telecom industry and the future implications for telecoms companies. So what makes Frontier Communications special I hear you ask? A few things…
The first item to consider is that the company is active in the United States, which is a very promising marketplace. The second item to note is that FTR actually works within a niche; they are the supplier of telecoms services to rural areas and small and medium-sized towns and cities in the United States. During the past few years, FTR have managed to cover almost all states with an impressive rural network. Their recent Verizon deal saw Frontier purchase all of Verizon’s landline services.
The second item to consider is the Verizon deal. With that, Frontier not only acquired new customers but a way to offer better deals across the board and the potential to upsell high-speed Internet solutions to current customers. This demand should in turn lower the customer average costs, which in turn should translate into higher stock prices for FTR.
Last but not least, the company announced a new secured 1.5 billion dollar loan to finance its activities, expansion and according to company’s officials, it is expecting to finish the Verizon deal as early as March 2016.
The bullish statements above are obvious and this means I would favor a call option on the FTR stock price with an end of the month expiration date and, starting with September, another call option with a one-month expiration as well.
The reason for this aggressive trading plan comes from the fact that the technical picture is really bullish. A look at their five-year chart reveals a bullish pattern, a so-called flat pattern, but this one is flat with a double failure. Such a pattern appears before important moves higher, as with the second or fourth waves in impulsive moves or b waves in zigzags. Regardless if a zigzag or an impulsive move, a leg higher should start and this puts the $10/share level back in focus.
The current $5.25/share seems to be the perfect striking price for the call option mentioned above, as the move lower from the 8$/share level looks like a five wave structure of a lower degree, basically forming the c wave of the above mentioned flat pattern.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
