Option Bulls Eye Fastenal Stock Ahead of Earnings

J.P. Morgan downgraded FAST to "underweight" but hiked its price target by $1

Deputy Editor
Apr 8, 2020 at 11:56 AM
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The shares of industrial and construction supply manufacturer Fastenal Company (NASDAQ:FAST) are attempting a comeback today, up 1.5% at $32.49, just ahead of the firm's first-quarter earnings report, due out next week on Tuesday, April 14. Meanwhile, J.P. Morgan Securities just downgraded FAST to "underweight" from "neutral", though the analyst also lifted its price target by $1 to $26. 

Analysts were already cautious on Fastenal. Coming into today, just two members of the brokerage bunch held out "strong buy" ratings, while the other nine in coverage called FAST a tepid "hold." Meanwhile, the consensus 12-month target price of $35.67 is an 11.8% premium to current levels. 

This caution isn't surprising considering FAST's recent behavior on the charts. While it has enjoyed a broad-market boost since its March 23 one year low, the equity's year-over-year breakeven has acted as a layer of resistance, while the 40-day moving average snuffed out yesterday's attempted rally. 

FAST Chart Apr 8

This bearish sentiment can be seen in the options pits as well, with 3.57 puts picked up for every call at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) during the past 10 days. This ratio sits higher than 84% of all other readings from the past year, suggesting a healthier appetite than usual for long puts of late. 

Drilling down to today's options activity, it looks like bulls might be making a comeback. So far 410 calls have crossed the tape -- three times the intraday average -- compared to 443 puts. Most popular by far is the May 40 call. The most popular put is the April 30 contract. 

During the past two years, post-earnings reactions on Fastenal have been split. The stock has averaged a post-earnings swing of 7%, regardless of direction. This time around, the options pits are pricing in a slightly bigger move of 9.3%. 

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