Chinese Delivery Stock Gets a Big Alibaba Boost

BABA and a consortium of traders have made a significant investment in ZTO

by Karee Venema

Published on May 29, 2018 at 10:05 AM
Updated on May 29, 2018 at 10:11 AM

Shares of ZTO Express (Cayman) Inc (NYSE:ZTO) have jumped 8.3% to trade at $0.90, fresh off a record high of $21.70. Boosting shares of the Shanghai-based express delivery company is news of a $1.38 billion joint investment from Alibaba Group Holding (BABA) and a group of traders, which includes BABA's logistics data platform Cainiao Network. Included in the terms of the deal is a seat on ZTO's board for Alibaba.

ZTO stock is now on track for its best day since Feb. 15, 2017, and headed toward its first close north of its October 2016 $19.50 initial public offering (IPO) to date. And while the shares are up 34% year-to-date, they just recently broke out above the $18 region, home to their highs from Oct. 27, 2016 -- their inaugural day of trading on the Big Board -- which contained a mid-November rally attempt, as well.

A continued surge could have more short sellers jumping ship. Short interest declined 13.3% in the last two reporting periods, but 13.69 million ZTO shares remain dedicated to these bearish bets. It would take shorts more than a week to cover these shares, at the average pace of trading, which could help keep the wind at the stock's back.

Options traders today may be betting on more upside, too. Already, 2,644 calls and 661 puts have changed hands on ZTO stock -- almost four times the average daily volume of 887 contracts. The Jun 19 call is most active, with anyone buying to open the options eyeing a bigger move north of $19 over the next three weeks.

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