Red-Hot Twitter, Square Stocks Sport Bargain-Bin Options

Analysts think the World Cup will increase Twitter's revenue

Managing Editor
Jun 1, 2018 at 10:30 AM
facebook twitter linkedin


Two Jack Dorsey stocks are higher this morning, after receiving some bullish brokerage attention. In fact, both Twitter Inc (NYSE:TWTR) and Square Inc (NYSE:SQ) are on red-hot winning streaks, and have attractively priced options to boot.

Twitter Stock Expecting a World Cup Kick

Twitter stock is up 2.8% to trade at $35.62 this morning, after MKM Partners issued a price-target hike to $43 from $40, citing boosted revenue from the upcoming World Cup in Russia. The analyst in coverage sees greater opportunity for revenue than in 2014, with the Twitter platform improving since then.

The news has Twitter stock on track for a seven-day winning streak, and a chip-shot from its March 14 three-year high of $36.80. The shares have more than doubled in the past year, with their 100-day moving average offering support on pullbacks during the last two months. 

More bullish analyst attention could drive the stock higher. Of the 30 brokerages covering TWTR, 22 rate the shares a "hold" or worse. Furthermore, the security's average 12-month price target of $31.09 now sits below its current perch.

Traders looking to speculate on TWTR's near-term price action may want to do so with options. The stock's Schaeffer's Volatility Index (SVI) of 34% ranks in just the 5th annual percentile, suggesting short-term options are cheaper than usual, from a volatility standpoint. Furthermore, TWTR has a Schaeffer's Volatility Scorecard (SVS) of 93 out of 100, meaning it's shown a strong tendency to make moves bigger than the options market was expecting over the past year. 

Square's Updated Guidance Impresses Analyst

Meanwhile, Square stock is up 1.3% to trade at $59.09, and earlier scored a fresh record high of $59.40, after the software name last night upped its current-quarter and full-year revenue forecast.  As such, Needham upped its price target on SQ stock to $65, citing "higher estimates and increased confidence in the upside case."

Square stock has also more than doubled in the past year, and has relied on its 80-day moving average to cushion any pullbacks. The equity is also set for a seventh straight gain -- its longest since November -- and is currently riding a five-week winning streak. 

Surprisingly, there's plenty of skepticism surrounding the payment processor. For starters, the stock's 10-day put/call volume ratio of 0.47 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 79th annual percentile. So, while calls have outnumbered puts on an absolute basis, the ratio indicates puts have been bought to open relative to calls at a quicker-than-usual clip.

Whether traders want to bet on continued upside for SQ stock, or brace for a pullback, it's an opportune time to do so with options. The equity's SVI of 36% ranks in the 12th percentile of its annual range, indicating premium on short-term strikes is relatively cheap at the moment. In addition to a low SVI, the equity's SVS stands at a lofty 96. This means Square stock has tended to make outsized moves relative to what the options market has priced in -- a boon to potential premium buyers.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners