Analysts Keep Crushing eBay Stock

EBAY's November 30 call has been popular in recent sessions

Oct 23, 2018 at 10:22 AM
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eBay Inc (NASDAQ:EBAY) keeps sinking to new lows and analysts continue to cut their outlooks on the stock. Since yesterday's close, EBAY has been hit with no fewer than eight bear notes, including a downgrade to "sector perform" from "outperform" at RBC, which lowered its price target by $13 to $34. Meanwhile, Susquehanna, Raymond James, SunTrust Robinson, and Jefferies all lowered their price targets, as well, with the latter two setting the bar the lowest at $32.

As such, the security is trading down 2.3% this morning at $27.83, already hitting a more than 52-week low of $27.71. The shares have shed more than one-fourth of their value year-to-date, including a 17% decline in the past month alone.

Some options traders have been betting on a rebound, however. Looking at options activity from the past five days, the front-month November 30 call has seen the largest increase in open interest during the time frame, and data from the major options exchanges hints at mostly buy-to-open activity. This would mean traders are expecting EBAY stock to reclaim the $30 level by the close on Friday, Nov. 16, when the contracts expire.

More broadly speaking, however, options traders have preferred eBay puts. The e-commerce name's Schaeffer's put/call open interest ratio (SOIR) of 1.26 shows that put open interest outweighs call open interest among contracts expiring within three months. More importantly, the ratio ranks in the 100th annual percentile, showing just how uncommon such a put-skew is.

Anyone looking to speculate on the equity with options will need to deal with elevated volatility expectations, not too surprising given the recent volatility and upcoming earnings release, scheduled for next Tuesday, Oct. 30. At the moment, EBAY's 30-day at-the-money implied volatility stands at 44% -- in the 99th annual percentile -- indicating premiums are unusually high for short-term options.

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