Short sellers could be running scared
Health and wellness retailer GNC Holdings Inc (NYSE:GNC) is up 41.8% this morning at $4.89, after the company said it's expecting an increase in same-store sales for the fourth quarter. It also forecast earnings-per-share for the period at 24 cents to 25 cents, compared to the 7 cents per share it posted last year in the same period. This is a much-needed boost for GNC stock, which had been floundering near oversold territory in recent weeks.
The shares settled yesterday at $3.47, giving them a year-over-year loss of 69%. They were trading in double-digit territory as recently as mid-September, but a post-earnings bear gap in October sent them on a downward spiral they've failed to recover from. In fact, GNC stock is now pacing for its first close above its 10-week moving average since that earnings gap.
Analysts certainly aren't expecting much from the stock; there's not a single "buy" rating to be found on the Street. At the same time, the average 12-month price target stands up at $5.64, which represents a 15% run higher even after today's gains.
On the surface, it would also appear options traders have been quite bearish. For instance, put buying more than tripled call buying during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Plus, GNC's Schaeffer's put/call open interest ratio (SOIR) of 1.37 confirms put open interest outweighs call open interest among contracts expiring within three months.
One factor that could play into the shares' push higher is short sellers covering their positions. Short interest on GNC touched the highest point on record back in mid-December, but has since fallen 15.4%. If this trend continues, it could result in a fresh source of buying power for the stock.