eBay Stock Faces Onslaught of Bear Notes After Revenue Miss

EBAY put options are flying off the shelves this morning

Managing Editor
Jul 19, 2018 at 10:17 AM
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Earnings season claims its winners and losers every morning. One notable victim today is eBay Inc (NASDAQ:EBAY) stock, down 8.9% to trade at $34.58, after the e-commerce concern reported second-quarter revenue below estimates. The company also lowered its fiscal-year revenue forecast, citing weaker sports ticket sales from its ticket marketplace StubHub. A barrage of bear notes have ensued, including a downgrade to "outperform" from "strong buy" at Raymond James, and no fewer than 15 price-target cuts.

eBay stock, fresh off its own version of Prime Day, is on track for its worst day since October 2016, and is flirting with its Nov. 29 annual low of $33.94. The shares have now handily breached their year-to-date breakeven point and are set to end below their 20-month moving average for the first time in over two years. 

Should this downtrend continue, there is ample room aboard the bearish bandwagon. Short interest fell in the most recent reporting period, and the 26.18 million shares sold short only represents a meager 2.7% of EBAY's total available float. In addition, prior to today's collapse, more than half of the brokerages covering the security rated it a "buy" or "strong buy," indicating that additional downgrades could be in store.

However, skepticism had been picking up in the options pits recently. The stock's 10-day put/call volume ratio of 1.18 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 83rd annual percentile -- meaning EBAY puts were bought to open relative to calls at a quicker-than-usual clip ahead of earnings. 

Shifting gears to today, put volume has understandably exploded. More than 35,000 puts have been exchanged in the first hour of trading -- 13 times the intraday average. Most active is the now in-the-money July 35 put,where some traders are likely taking profits before options expiration tomorrow

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