Analyst: This Energy Stock Could Double

PE call buyers have been busy in recent weeks

Jan 16, 2019 at 10:03 AM
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Barclays initiated coverage on Parsley Energy Inc (NYSE:PE) with an "overweight" rating and $38 price target -- a 103% premium to last night's close at $18.70. The brokerage firm said the Texas-based oil and natural gas firm's "steady activity program" will create a constant cash flow.

In reaction to the bull note, PE stock is up 1.2% to trade at $18.93. The security peaked above $31 on Oct. 9, before sinking to a three-year low of $14.17 on Dec. 26. The shares quickly bounced from here, and are now trading back above a 23.6% Fibonacci retracement of this sell-off and their 40-day moving average.

Sentiment is mostly upbeat toward the energy name, with roughly 82% of covering analysts maintaining a "strong buy" rating, and not a single "sell" on the books. Plus, the average 12-month price target sits all the way up at $30.

Meanwhile, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), PE's 10-day call/put volume ratio of 22.84 ranks in the 76th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.

However, short sellers have targeted Parsley Energy stock at a furious pace. Short interest jumped 76.9% in the two most recent reporting periods to 16.07 million shares -- the most since mid-May. The bearish bandwagon is far from full, though, considering this accounts for 6.5% of PE's available float.

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