Seres Therapeutics Inc (MCRB) Sizzles on 'Overdone' Selloff Talk

FBR Capital believes the recent Seres Therapeutics Inc (MCRB) selloff is "overdone"

by Alex Eppstein

Published on Aug 12, 2016 at 11:55 AM
Updated on Jun 24, 2020 at 10:16 AM

Seres Therapeutics Inc (NASDAQ:MCRB) is blowing up around midday, after FBR Capital offered the embattled biotech stock a vote of confidence. While the brokerage firm did cut its price target to $23 from $43, it reiterated its "outperform" rating, saying "the stock sell-off since July 29 is overdone."

FBR is referring to an enormous bear gap that was triggered by MCRB's disappointing study results for intestinal infection drug SER-109. At last night's close, the stock was down nearly 73% since its pre-bear gap settlement. Today, however, MCRB is 12% higher at $10.90, benefiting from the bullish analyst note. Also potentially contributing to the gains, the stock's 14-day Relative Strength Index (RSI) finished yesterday at 21 -- well into oversold territory -- suggesting a near-term pop may have been in the cards.

One group that's holding out high hopes for MCRB is options traders. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open over 1,500 calls versus fewer than 50 puts. And while volume is light in today's session on an absolute basis, call options are still crossing at triple their typical intraday pace -- with potential buy-to-open activity at the August 10 strike.

Looking elsewhere, short sellers have been fleeing from MCRB of late. During the most recent reporting period, short interest plummeted 17.4%, and it would take less than one session for short sellers to cover their bets, at the stock's average trading levels. Separately, like FBR, the analyst crowd is planted firmly in Seres Therapeutics Inc's (NASDAQ:MCRB) bullish camp. Five analysts rate the biotech stock a "strong buy," compared to one "hold" and not a single "sell."

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