Barron's Strikes Divergent Tones in Whole Foods, Monsanto Write-Ups

Barron's has high hopes for Whole Foods Market, Inc. (WFM) -- but not for Monsanto Company (MON)

by Alex Eppstein

Published on Jun 6, 2016 at 10:23 AM
Updated on Jun 24, 2020 at 10:16 AM

Barron's weighed in on several stocks over the weekend. A bullish write-up on organic grocer Whole Foods Market, Inc. (NASDAQ:WFM) has sent the stock sharply higher, while a conversely skeptical piece on Monsanto Company's (NYSE:MON) potential merger with Bayer AG is weighing on the agricultural firm's shares. With the stocks going in different directions, the reactions among bullish options traders may be quite different.

First up, Barron's said WFM has "healthy upside potential" (subscription required), citing "corporate cost cuts that are fueling more competitive pricing in stores, and the launch last month of a value chain that could unlock new markets." The positive commentary has the stock 3.1% higher at $35.12, and on track for its highest close since early August. What's more, WFM has recently muscled into positive year-to-date territory, potentially setting up the shares for more gains.

Hopes are running high in the options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 3.99 WFM calls for each put during the last two weeks. The corresponding call/put volume ratio ranks just 6 percentage points from a 12-month peak.

On the other hand, bearish analysts may need to start rethinking things. Of the 19 brokerages tracking Whole Foods Market, Inc., 17 have handed out a "hold" or "strong sell" rating. Also, the stock's consensus 12-month price target of $30.19 represents a steep discount to current levels. In other words, WFM could benefit from a round of upgrades and/or price-target hikes.

Shifting our gaze, MON is off 1.1% at $109.77, after Barron's waxed pessimistic on a potential Bayer acquisition (subscription required). While the shares have surged about 11% year-to-date due to the M&A rumblings, the publication's advice is to "take gains while the sun is shining," adding "better values abound."

This likely isn't what bullish options traders want to hear. During the past two weeks, MON has racked up an ISE/CBOE/PHLX call/put volume ratio of 4.53, outstripping 84% of all readings from the past year. As a result, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.38 sits in the low 9th annual percentile. If the Bayer deal ultimately falls through and/or these option bulls begin to hit the exits, Monsanto Company stock could be negatively impacted.

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