Acacia Stock On Track For Its Worst Day Ever After Dismal 2018 Forecast

Additional downgrades could push the stock even lower

Managing Editor
Feb 23, 2018 at 10:37 AM
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Acacia Communications, Inc. (NASDAQ:ACIA) stock is down 18.5% to trade at $34.09, and just touched a new annual low of $33.68, after the software company posted fourth-quarter revenue that fell short of analyst estimates. The company also gave a weaker-than-expected full-year forecast for 2018. In response, Needham and D.A. Davidson downgraded the stock to "hold" and "neutral," respectively, while Morgan Stanley cut its price target on ACIA stock to $37 from $40.

Acacia stock is now on track for its worst day in history. The shares have been in a channel of lower highs and lows since their 2016 peak, with recent rally attempts contained by their 160- and 200-day moving averages. The equity has now given back 46% year-over-year and is currently on the short-sale restricted (SSR) list. 

Prior to today, analysts were hesitant to ditch the security. Of the 13 brokerages covering ACIA stock, 12 rate it a "strong buy" or "buy." Furthermore, ACIA's average 12-month price target of $47.42 represents a 39% premium from the stock's current perch. Continued technical underperformance could prompt more analysts to rethink their bullish positions.

Options traders also remain optimistic. Ahead of today's drop, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) showed ACIA with a 10-day call/put volume ratio of 8.20, ranking in the 96th percentile of its annual range. This suggests ACIA calls have been bought to open over puts at a faster-than-usual clip during the past two weeks of trading. Should ACIA stock continue to sink, it could lead to an unwinding of these bullish bets.

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