Pure Storage Stock Eyes Fourth-Straight Win Before Earnings

Sentiment surrounding the stock has been extremely optimistic

Deputy Editor
Aug 25, 2021 at 12:11 PM
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Data storage platform Pure Storage Inc (NYSE:PSTG) is well on its way to notching a fourth-consecutive daily close, as well as its first close north of its 140-day moving average since April. The stock was last seen up 1% at $20.91, as investors gear up for its second-quarter earnings report, due out after the close this evening. 

pstg aug 25

While absolute volume is still relatively light, options traders are paying attention to the tech stock before the event as well. So far, 1,35 calls and 920 puts have exchanged hands, which is double the amount typically seen at this point. The September 22.50 call is the most popular, followed by the 20 put in the same front-month series. 

This penchant for calls is nothing new. In fact, over the past 10 weeks, 34.96 calls have been picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than all but 4% of readings from the past year, too, suggesting there's been a larger-than-usual appetite for these bullish bets of late. 

Analysts are echoing this sentiment. Of the 13 in coverage, 10 call Pure Storage stock a "strong buy," compared to just three "hold" ratings. Plus, the 12-month consensus price target of $28.05 is a 33.9%  premium to current levels. 

The stock does have a history of post-earnings plummets, looking back at its last eight reports. This includes a 10% drop in August 2020, and a 15.1% dip in November 2019. During this time period, PSTG suffered negative returns following five of these reports, and averaged an 8% swing, regardless of direction. This time around, options traders are pricing in a 10.5% next-day move for the equity. 

 

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