Procter & Gamble Stock Extends Skid After Flurry Of Downgrades

Additional downgrades could be on the way for PG

Managing Editor
Apr 20, 2018 at 9:57 AM
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Procter & Gamble Co (NYSE:PG) stock is down 1% to trade at $74.21, and just touched a two-year low of $74.16, as analysts continue to react to the company's subpar earnings report yesterday. Deutsche Bank and BofA-Merrill Lynch both downgraded the blue-chip stock to "hold" from "buy," while issuing price-target cuts to $80 and $82, respectively. The analyst in coverage at BofA noted they "do not see a near-term catalyst to drive multiple expansion." Three other brokerage firms chimed in with cuts of their own, including Berenberg to $72. 

Procter & Gamble Stock stock is now on track for a four-day losing streak, and yesterday suffered its steepest one-day percentage drop in nearly five years. The equity has now shed 18% in 2018, and additional downgrades could be in store. Of the 14 brokerages covering the stock, 50% still rate it a "buy" or "strong buy."

Despite the security's struggles, short sellers have been hesitant to jump aboard. Short interest fell by 3% during the last reporting period, and the 34.43 million shares sold short only represents 1.4% of PG's total available float.

In the options pits, though, put buyers are coming out of the woodwork. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows PG with a 10-day put/call volume ratio of 1.28, a reading that ranks in the elevated 70th percentile of its annual range. This indicates puts have been bought to open over calls at a faster-than-usual clip during the past two weeks.

Now appears to be a more attractive time to buy premium on puts, rather than calls. The fund's 30-day implied volatility (IV) skew of 2.9% ranks in the 1st annual percentile, meaning short-term puts have rarely been cheaper compared to their call counterparts.

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