Penny Stock Gets Rare Vote of Confidence

AVP has been a target of call buyers

Sep 24, 2018 at 10:15 AM
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Avon Products, Inc. (NYSE:AVP) is on the rise again today, last seen 1.2% higher at $2.47, following an upgrade to "buy" from "neutral" at D.A. Davidson. The brokerage firm also boosted its price target to $3.50 from $1.75, citing confidence in the company's new CEO. This represents territory not seen in over a year for AVP stock.

In fact, the round $3 level acted as a stiff ceiling for the shares earlier in the year, before they suffered a sharp pullback that culminated in an all-time low of $1.38 in July. Since then, however, the equity has been pushing higher, and today it's on pace for its highest close since May.

On a longer-term time frame, AVP has been a major underperformer, which may be why only one of the six brokerage firms covering it has a "strong buy" recommendation in place, though that was before D.A. Davidson's bull note. Meanwhile, the average 12-month price target of $2.55 prices in almost no upside.

As for options activity, Avon Products has historically been lightly traded, but recently there's been some notable call activity across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Looking at the past 10 days, more than 3,100 calls were bought to open at these exchanges, compared to just 162 puts, putting the 10-day call/put volume ratio at 19.23.

In other words, options traders seem to be speculating on a move higher from the penny stock. At the same time, that's not exactly surprising given AVP's low share price, giving put traders less opportunity to bet on a move to the downside.

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