Options Pits Buzzing Ahead of Adobe's Q3 Report

Morgan Stanley lifted its price target to $560

Digital Content Manager
Sep 14, 2020 at 12:13 PM
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Software name Adobe Inc (NASDAQ:ADBE) is getting a pre-earnings boost from Morgan Stanley this afternoon, after the analyst lifted its price target to $560 from $450. The company is expected to post its fiscal third-quarter results after the close, tomorrow, Sept. 15. At last check, ADBE is up 2.7% at $484.18. 

A technical look at ADBE shows the stock up 47.8% for the year, with a recent pullback from its early September highs saved by the 50-day moving average. This trendline also helped support a pullback in mid-August before launching it toward its Sept. 2 record peak of $536.88.

Options players are also gobbling up the security today, with 22,000 calls and 15,000 puts across the tape so far -- double the intraday average. The weekly 9/25 480-strike call is getting the most attention, followed by the 455-strike put in the same weekly series. 

This preference for calls seems to be the norm. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ADBE sports a 10-day call/put volume ratio of 1.60, which stands higher than 87% of reading from the past year. This suggests a much healthier-than-usual appetite for long calls of late. 

The majority of analysts covering ADBE have taken a similar stance. Fifteen of the 19 in coverage call the equity a "buy" or better. The 12-month consensus price target of $478.73, on the other hand, is a slight discount to current levels. 

Finally, a quick glance at Adobe last eight post-earnings moves shows the stock prone to go in either direction, though a 17.7% post-earnings pop back in March should be noted. The stock averaged a next-day move of 5.9% during the past two years, slightly smaller than the 9.4% swing the options pits are pricing in this time around. 

 

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