Early this morning, PetMed Express, Inc. (PETS - 12.84) stepped up to the earnings plate to report its third-quarter results. Due to higher operating expenses, PETS' profit fell 14% to $3.9 million, or 19 cents per share, from its year-ago profit of $4.5 million, or 20 cents per share. Revenue jumped 12% to $50.5 million, thanks in part to new subscribers and online sales. Despite the drop in profit, the outcome still beat analysts' expectations for earnings of 16 cents per share on $44.7 million in sales.
Call players were already fond of the Florida-based pet pharma ahead of earnings, as evidenced by the security's Schaeffer's put/call open interest ratio (SOIR). In fact, the stock's SOIR of 0.44 indicates that call open interest more than doubles put open interest among options slated to expire within three months. Further, this ratio ranks in the 31st percentile of its annual range -- showing a more-bullish-than-usual bias toward the stock emanating from near-term traders.
Echoing this optimism is data collected from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows that traders on these exchanges have bought to open more than three calls for every one put in the past 50 sessions.
This preference for calls is being continued post-earnings, as well, with calls trading at 26 times their average intraday volume. More than 950 call contracts have crossed the tape at midday, compared to around 125 puts.
This rise in call volume could be explained by the glut of pessimism surrounding the stock beyond the options arena. Short interest accounts for a staggering 24.8% of PETS' available float. It would take more than a month to cover these shorted shares, at the equity's average daily trading volume.
In addition, Zacks reports that five out of six analysts maintain a "hold" or worse suggestion toward the stock, including three "strong sells." Plus, the consensus 12-month price target of $9.80 -- as calculated by Thomson Reuters -- represents a steep 28% discount to PETS' intraday high of $13.67.
On the charts, PETS has been ushered higher by double-barreled support atop its ascending 10- and 20-day moving averages in recent months. This technical prowess is continuing in today's session, with Wall Street celebrating the earnings results. The stock is up roughly 13% at last check -- adding to its already-impressive 8.6% year-to-date advance. This post-earnings push places the stock solidly above the $12 mark -- a neighborhood not visited since mid-July. In fact, at its intraday peak, PETS was exploring territory not charted since May.
Should the stock maintain its upward trajectory, any upgrades and/or price-target hikes from the bearish brokerage bunch could encourage a short-squeeze rally -- giving PETS a contrarian-related boost.
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