Leerink Sees Another Push to Record Levels From HCA Stock

HCA shares have been riding atop their 20-day moving average for over a month now

Josh Selway
Mar 19, 2018 at 10:21 AM
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Brokerage firm Leerink mentioned HCA Healthcare Inc (NYSE:HCA) as a stock to buy in a note on hospital operators. The covering analyst said fundamental tailwinds such as a bad flu season and rising healthcare costs continue to help HCA and sector peers. The equity is trading down 0.4% at $102.36 this morning, but is holding support at the 20-day moving average, and continues to consolidate below the Jan. 30 record high of $106.84.

In fact, it's been a huge few months for the healthcare issue, thanks to tax reform tailwinds and a big post-earnings rally in late January. All told, HCA Healthcare is up 32% over the past six months. A sharp decrease in short interest may have contributed to these gains, with short interest falling 16.2% in the last two reporting periods alone.

Call buying has picked up in a big way amid this technical outperformance, though volume admittedly has been muted on an absolute level. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 6.54, meaning more than six long calls have been bought for every put. This reading ranks just 8 percentage points from a 12-month peak, indicating speculators have been more bullish than normal lately.

This demand has resulted in call buyers paying higher premiums than those picking up puts. For instance, HCA has a 30-day implied volatility (IV) skew of 7.5% at the moment, which is just 1 percentage point from a 12-month low.

Finally, most covering brokerage firms shared Leerink's bullish stance -- but plenty of skepticism continues to surround HCA Healthcare stock. To be more specific, six analysts still say it's just a "hold" or a "sell." A renewed push to record highs from the shares could theoretically bring in another round of bull notes.


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