Spotify Stock Hit with Multiple Bear Notes

Most of the brokerage crowd still has "buy" ratings on SPOT

by Josh Selway

Published on Jan 7, 2019 at 9:46 AM

Spotify Technology SA (NYSE:SPOT) shares are under pressure following at least four bearish brokerage notes. The stock this morning was hit with price-target cuts at Guggenheim, Deutsche Bank, Stifel and Nomura, which set their respective marks at $120, $135, $170, and $188. Most analysts are still bullish on SPOT, though, with 16 of 22 handing out "buy" or "strong buy" ratings.

And all of these new price targets are above the equity's current perch of $116.04, down 2.1% today. It's been a steady slide for Spotify since the end of August, falling from the $190-$200 range to a Dec. 24 low of $103.29. Looking closer, the 20-day moving average acted as resistance on Friday.

Sentiment has remained upbeat in the options pits. During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than 7,200 calls were bought to open, compared to 740 puts. This heavy call skew may be attributed to recent action at the April 120 call, which saw a large increase in open interest over the past 10 days. However, it's not clear if buy-to-open activity in fact occurred here.

Either way, it's not cheap to speculate on SPOT with short-term options right now. This is based on the security's 30-day at-the-money implied volatility of 55.3%, which ranks in the 89th annual percentile, pointing to higher-than-normal volatility expectations around Spotify.

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