Government Shutdown Victim Vocera Communications Offers an Attractive Trade

Although the government shutdown is now behind us, one stock continues to suffer.

Vocera Communications (VCRA) was an actual victim of the government shutdown unlike so many of the other names bantered about.

In its most recent earnings report, Vocera offered guidance for the current quarter that was nothing short of a disaster. Rather than showing a profit, Vocera announced it would lose between $0.22 and $0.29 per share.

The cause: Vocera was in the midst of federal contract negotiations when the shutdown occurred. That meant deals with the Department of Defense as well as Veterans Affairs were either delayed or killed altogether.

Management anticipates being able to recover some of this lost business later in the year, but, unfortunately, some of it will just never come to be.

Vocera works in clinical communication and workflow solutions primarily for the healthcare industry. There Smartbadge combines calling, messaging, clinical alert, and alarms in a small, lightweight wearable.

The company has added a layer of AI/machine learning, so that its product can use real-time data combined with historical data to predict patient flow and safety risks. It takes these results and nudges doctors, nurses, healthcare workers, etc. with recommendations and actions to reduce the possible risks.

The applications extend beyond healthcare into long-term care facilities, nuclear facilities, hotels, and even retail. It's more than simply addressing risks, but also about increasing efficiency and satisfaction.

For the past several weeks, VCRA shares have been consolidating the recent drop. It appears as though the $30 level has held as a short-term bottom and bulls are trying to rally.

We've broken above the recent flag pattern and now VCRA is challenging the post-earnings gap down. A move above $32.50 clears a path into the $34-35 area.

While pushing above $37 will be challenging until we get the next earnings release, some momentum and bargain shoppers provide enough opportunity here. Combine the upside opportunity with a clear stop ($30), and we have ourselves an attractive trade.

The Trade:

-- Buy to open VCRA April 18, 2019, $30 calls at $2.95

Net Cost: $295

Max Risk: $295

Max Reward: Unlimited

Breakeven: $32.95

Intrinsic Value: $200

Days Until Expiration: 50

Again, I'd exit on a close or consecutive closes under $30 and consider taking partial profits into the $34-35 range.

At the time of publication, Collins had no positions in any securities mentioned.