Sinking Short Interest Levels Lift SeaWorld Stock

SEAS could be benefiting from a short squeeze

Apr 13, 2018 at 2:26 PM
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After a multi-year downtrend that saw the stock fall from around $40 to as low as $10.43 back in December, shares of SeaWorld Entertainment Inc (NYSE:SEAS) have actually shown signs of life. They're on pace for a third straight positive quarter, and are trading notably higher today amid news the company received a Wells notice from the Securities and Exchange Commission (SEC) in connection to claims the company misled investors in recent years. SEAS stock was last seen trading up 4.2% at $16.04, on pace for its highest settlement since July.

Fueling the equity's rise in recent months has been a corresponding drop in short interest. In fact, short interest on SeaWorld peaked just before the stock bottomed. Still, 39% of the total float is dedicated to short interest, which would take more than 12 sessions to buy back, going by average daily volumes. Clearly there's room for this short-covering trend to continue.

seas stock price

Despite the stocks' recent rise, the bearish sentiment seen from analysts is understandable; in fact, it could surprise some people that SEAS still has four "strong buy" recommendations from covering brokerage firms. As it stands today, the average 12-month price target comes in below current levels, at $15.14.

The same negative sentiment can be seen from options traders, too. For example, put open interest stands at 278,729 contracts, compared to just 96,440 calls. Big open interest can be found at LEAPS like the January 2019 and January 2020 20-strike puts, and there's also heavy open interest at the June 17 put.

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