ACADIA Pharmaceuticals Stock Shrugs Off Post-Earnings Bear Notes

ACAD calls are the options of choice today -- a reversal of recent trends

by Emma Duncan

Published on Aug 9, 2018 at 10:45 AM

Shares of drug name ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) touched a five-year low of $12.77 out of the gate, but have since turned higher, as traders shrug off an earnings miss. The firm reported weaker-than-expected second-quarter earnings, and lowered its full-year sales guidance for its Parkinson's drug, Nuplazid. Nevertheless -- and despite mostly negative analyst attention -- ACAD stock is up 8.5% to trade at $15.21.

Analysts have been quick to react to the earnings miss, with no fewer than three price-target cuts recorded so far. Specifically, Cowen lowered its target to $42 from $50, and Stifel cut its target to $14 from $17. Meanwhile, J.P. Morgan Securities slashed its target by nearly 50%, to $26 from $50 -- still a healthy premium to ACAD's current price.

Even with today's bounce, the pharma stock could be due for more bear notes. Currently, four of the six analysts covering Acadia stock sport a "strong buy" rating. Plus, the average 12-month price target of $31.63 is more than double the equity's current perch.

On the charts, ACADIA stock has been in a downtrend since its post-earnings bear gap in late February. The stock gapped lower again in April, after a scathing CNN report detailing the number of deaths associated with Nuplazid. As of yesterday, ACAD's 14-day Relative Strength Index (RSI) sat at 35 -- on the cusp of oversold territory, suggesting today's bounce may have been in the cards.

Options traders were speculating on more downside for ACAD after earnings. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows ACADIA Pharmaceuticals stock with a 10-day put/call volume ratio of 2.75, ranking in the 81st percentile of its annual range. This suggests that during the past two weeks, puts have been bought over calls at a faster-than-usual clip.

Today, however, Acadia calls are flying off the shelves at six times the average intraday clip, with more than 2,100 exchanged. That's compared to fewer than 700 ACAD puts.

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