Pandora Media Inc (P) Uber Partnership, Analyst Nod Fail to Excite Investors

A new partnership and an analyst upgrade are doing nothing to help Pandora Media Inc (P)

Jun 27, 2016 at 12:42 PM
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Pandora Media Inc (NYSE:P) is 2% lower at $11.50, despite news that the company is partnering with ride-sharing specialist Uber to allow drivers to stream music directly through the Uber app. While some recent call buyers may be sweating as the stock succumbs to broad-market headwinds, there's reason to believe not all these traders are truly P bulls.

Over the past 10 week at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have purchased more than five P calls for each put -- a ratio just 2 percentage points shy of an annual peak. Likewise, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.38 sits lower than 92% of the past year's readings, indicating near-term traders have rarely been more call-skewed toward P.

The reason for all this call-heavy action may reside outside of the options pits, however. Short interest on P has risen more than 11% during the last two reporting periods, and currently accounts for 29.3% of the equity's total float. With short interest near record-high levels, it's likely that some short sellers have been picking up P calls to hedge against an upside move -- a theory strengthened by the fact that heavy call open interest resides at P's way out-of-the-money (OOTM) January 15 and 20 strikes.

Meanwhile, an upgrade to "overweight" at Morgan Stanley suggests that analysts may be coming around. At last check, well over half of the brokerage firms following P gave it a lukewarm "hold" recommendation.

On the technical front, Pandora Media Inc (NYSE:P) has given up more than 14% year-to-date, and the shares' most recent rallies have run into trouble at their declining 200-day moving average. Still, they may be saved from steeper losses, as it appears the $11 level -- which served as resistance back in March -- is taking on a supportive role for the stock.

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