Dropbox Stock On Cloud Nine After Earnings Beat

A short squeeze could keep the wind at DBX's back

Managing Editor
Nov 9, 2018 at 10:10 AM
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The shares of Dropbox Inc (NASDAQ:DBX) are up 8.6% to trade at $26.90 this morning, after the cloud storage company reported third-quarter earnings and revenue that exceeded analyst expectations. Dropbox also upped its fiscal year guidance. RBC has responded with a price-target bump to $37 from $36, while Canaccord Genuity spoiled the fun with a price-target cut to $35 from $38.

The earnings beat, which has DBX on track for its best day since Aug. 9, could not have come at a better time. Dropbox stock fell to a record low of $21.36 back on Oct. 25, territory that coincides with its initial public offering (IPO) price of $21 back in March. Thanks to today, though, the shares are on track to test their 80-day moving average for the first time since mid-August.

A short squeeze could keep the wind at DBX's back. Short interest fell by 8.7% in the most recent reporting period, yet the 14.53 million shares sold short represents a healthy 16% of the stock's total available float. At DBX's average daily trading volume, it would take almost four days for shorts to buy back their bearish bets.

In the options pits, traders are rushing to grab calls today. At last check, nearly 16,000 calls have changed hands, 18 times the average intraday volume and pacing for the 100th percentile of its annual range. Leading the charge today are the weekly 11/9 26- and 27-strike calls, both set to expire at the close today, along with heavy attention at the December 27 calls.


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