Western Digital Guidance Has Analysts, Options Traders Abuzz

WDC options traders were bearish ahead of earnings

Lillian Currens
Jan 25, 2019 at 10:14 AM
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Despite its fiscal second-quarter earnings and revenue miss, the shares of Western Digital Corp (NASDAQ:WDC) are up 10% at $44.18, on a positive forecast from the company. Specifically, the data storage concern foresees improved revenue in the second half of the year, as it begins to cut costs. 

WDC bottomed out at a six-year low of $33.83 in late December, after a sharp decline from its March 2018 peak of $106.96. However, the equity today is set to take out its 50-day moving average for the first time since April, pacing for its biggest one-day gain since September 2016. 

Analysts are rushing to the stock after earnings, with a mixed bag of reviews. Stifel, BMO, Mizuho, J.P. Morgan Securities, and Morgan Stanley all cut their price targets on WDC. Outliers RBC and Cowen, however, raised their targets to $46 and $44, respectively. Analysts were mostly wary ahead of earnings, though, with 65% doling out a tepid "hold" rating.

Option bears were piling on, too. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.55 is in the 98th percentile of its annual range, pointing to a healthier-than-usual appetite for long puts over calls in the past two weeks. Echoing that, WDC's Schaeffer's put/call open interest ratio (SOIR) of 1.44 sits above every other reading from this past year -- suggesting short-term traders haven't been more put-heavy during the past 12 months. 

So far today, WDC has seen about 27,000 calls and 33,000 puts change hands -- 16 times the average intraday pace. It appears today's bull gap hasn't spooked too many bears, with buy-to-open action detected at the February 40 and 40.50 puts -- the most active options so far. On the other hand, it looks like one bull bought to open a big block of March 45 calls, speculating on more upside for WDC in the next couple of months.


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