Analyst: This Drug Stock Could Double

Option buyers are also turning bullish on BHC stock

Dec 14, 2018 at 2:20 PM
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While most healthcare stocks are taking their cues from Johnson & Johnson (JNJ) today, the shares of Bausch Health Companies Inc (NYSE:BHC) -- formerly Valeant Pharmaceuticals -- are in the black, thanks to some upbeat analyst attention. Specifically, H.C. Wainwright upgraded BHC shares to "buy" from "neutral," and more than doubled its price target, to $58 from $25 -- representing expected upside of 145% from yesterday's closing price. The analyst said that now is "an appropriate time to become more bullish" on BHC, waxing optimistic on organic growth and recent drug launches.

Bausch Health stock was last seen 0.2% higher to trade at $23.70. The equity has been in a channel of higher lows and highs since early 2017, with recent pullbacks contained by its 200-day moving average. More recently, BHC vaulted higher in early November after a well-received earnings report, but since then has retreated to the middle of its recent range.

BHC stock chart dec 14

As with H.C. Wainwright, recent options buyers are also bullish on the stock. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders bought to open more than seven calls for every put on the equity in the past two weeks. The resulting 10-day put/call volume ratio of 7.02 is in the 98th percentile of its annual range, indicating BHC traders are showing a much healthier-than-usual appetite for bullish bets of late.

This marks a shift for the near-term options crowd, at least. The security's Schaeffer's put/call open interest ratio (SOIR) of 1.17 is higher than 90% of all other readings from the past year. In simpler terms, short-term options traders are still much more put-heavy than usual on BHC right now.

The drug stock has rewarded option buyers over the past year, too. The equity's Schaeffer's Volatility Scorecard (SVS) comes in at a lofty 95 out of a possible 100, meaning Bausch Health shares have handily exceeded options traders' volatility expectations in the past 12 months.


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