Here's your task -- if you decide to accept it.
We see a trading opportunity around a fast-growing name that debuted on the market less than a year ago. TaskUs, Inc. (TASK) is a digital business process outsourcing concern, operating digital call centers and providing content security for social media, e-commerce, delivery, fintech, and many other verticals.
The company is based in Texas, but the majority of its labor force is in The Philippines even as it has numerous sites across the globe, as seen by this company slide below.
As the company's moniker implies, the company handles various tasks for multitude of clients. These include content moderation for clients such as Meta Platforms (FB) as well as user support via chat, SMS, social, or in-app to ride-sharing, e-commerce, food delivery, and media streaming clients.
TaskUs also offers data tagging, annotating, and transcription services for the purpose of increasing the efficiency of AI algorithms. The company has a diverse customer base with a client roster of over 100 technology concerns, including 16 that paid it more than $10 million and 72 that generated more than $1 million in 2021.
The company was part of the massive wave of IPOs in 2021 and the shares hit their all-time high of just north of $85.00 a share last September. However, like just about every IPO from that "vintage" the shares have been shellacked over the past couple of quarters.
TaskUs did post solid fourth-quarter numbers at the end of February. At that time, management provided 2022 revenue guidance of $990 million, which would be a solid 30% rise over 2021 and was approximately $35 million over the analyst consensus at the time.
With a market capitalization of approximately $2.6 billion, TASK is currently trading at less than three times forward sales. This represents more than decent value, in our view, given the company is already profitable and has a solid balance sheet.
The stock doesn't seem to have a lot of more downside at this point. That said, until investor sentiment on growth stocks improves, the shares may muddle around.
So can we play it?
With solid option premiums and good liquidity in the option markets, TaskUs provides a good covered call opportunity that provides solid downside protection as well as more-than-acceptable potential upside.
Our Covered Call Option Strategy
Here is how one can initiate a position in TASK via a covered call strategy. Remember, covered call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.
Using the December $30 call strikes, fashion a covered call order with a net debit in the $21.60 to $21.80 a share range (net stock price - option premium). This strategy provides approximately 25% of downside protection and nearly 40% of potential upside even if the stock does very little over the option duration.
