Halozyme Therapeutics Stock Set to Slide On High-Profile Price-Target Cut

Today's sell-off could be much-needed good news for HALO short sellers

Jan 17, 2018 at 9:27 AM
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Shares of oncology biotech Halozyme Therapeutics, Inc. (NASDAQ:HALO) are trading 12.2% lower before the open, after Deutsche Bank analyst Andrew Peters cut his price target by $2 to $19. Peters labeled the company's experimental enzyme for hyaluronic acid (HA) as "disappointing" and said the development of the treatment brings on additional risk. On the other hand, Peters noted Halozyme's Enhanze drug delivery technology will continue to be a long-term driver for the company.

Looking back, HALO stock has been a strong performer on the charts in recent years -- though the price action has been somewhat choppy. Since the shares' early 2016 bottom below $7, they're up roughly 184%, and touched their highest point since August 2015 back on Dec. 29, peaking at $21.30. The security settled Tuesday's session at $19.74.

Most analysts are bullish for now. Of the nine covering the equity, five deem it a "strong buy," and the average 12-month price target comes in at $20.90. This upbeat outlook has been shared by options traders in recent weeks, according to the stock's 10-day call/put volume ratio of 18.01 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which shows call buying has been extremely popular compared to put buying, albeit amid relatively low absolute volume.

Some traders have been selling calls, too. In fact, the March 20 call saw the largest increase in open interest during the past two weeks, and data from the major exchanges shows almost exclusive sell-to-open here. This means many have speculated HALO will hold below $20 through the coming months.

Shifting gears, short interest has fallen dramatically in recent months, including a 12.2% decline in the most recent reporting period. Still, over 10% of Halozyme Therapeutics' float is controlled by short sellers, and going by average daily volumes, it would take them almost three weeks to buy back their positions. Of course, the stock is on pace to open on the short-sale restricted list this morning.


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