HSY has been in a downtrend since December
Shares of Hershey Co (NYSE:HSY) are lower in early trading, after the chocolate maker received a downgrade to "underperform" from "neutral" and a price-target slash to $80 from $90 at Credit Suisse. The brokerage firm cited a lack of consumer impulse sales due increased e-commerce traffic for the negative note. Hershey stock is down 3.4% at $90.22, at last check.
The downgrade doesn't come as too much of a surprise, however, as HSY has been on a downtrend since peaking in December, with the falling 50-day moving average acting as a ceiling of resistance. The stock touched a fresh two-year low of $89.10 on May 3, and is now down more than 20% year-to-date.
What's more, analyst sentiment already carries a pessimistic tone, with 13 out of the 15 firms following the stock sporting "hold" or worse recommendations. Further, HSY sports an average 12-month price target of $95.63, which comes in at just a 5.8% premium to current levels.
This bearish outlook is also evident in the options pits, where puts have been in favor over calls of late. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows HSY with a 10-day put/call volume ratio of 2.54, ranking in the 94th percentile of its annual range. This means puts have been purchased over calls at a faster-than-usual clip during the past two weeks.
Echoing this, Hershey stock's Schaeffer's put/call open interest ratio (SOIR) of 1.14 ranks in the lofty 86th percentile of its annual range. In other words, options traders are more put-heavy than usual, among contracts set to expire in three months or less.
Regardless, now may be a good time to target near-term HSY options. The cholocate maker's Schaeffer's Volatility Index (SVI) is just 17%, ranking in the bottom 21st percentile of its annual range. This low ranking suggests there are lower-than-normal volatility expectations priced in at the moment.