Quest Diagnostics Stock Dips on Analyst Outlook

Contrary to its downgrade, near-term options traders have been call-biased of late

by Emma Duncan

Published on Mar 18, 2019 at 10:02 AM

Shares of Quest Diagnostics Inc (NYSE:DGX) are down 0.2% at $88.28 this morning, after Credit Suisse downgraded the stock to "neutral" from "outperform" and cut its price target to $91 from $101. Though it sees near-term headwinds, the firm said it was optimistic toward Quest Diagnostic's long-term outlook saying, "reimbursement pressures and recent payer contract shifts will likely spur industry consolidation." Overall analyst sentiment toward the security has been wary, with 10 of 17 covering firms sporting a tepid "hold" or worse rating. 

DGX has struggled in the long term. As of Friday's close, the shares had fallen 24% from their late-June record high of $116.49. However, the equity has been holding above its 50-day moving average in recent weeks, and just broke north of its 80-day moving average.

Meanwhile, Quest Diagnostics stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.64, ranking in the low 36th annual percentile. In other words, near-term options traders have rarely been more call-biased in the past year. 

Lastly, now seems to be a good time for traders to speculate on Quest Diagnostics stock's near-term trajectory with options. The lab specialist's Schaeffer's Volatility Index (SVI) of 19% ranks in the 17th annual percentile, meaning short-term options are extremely cheap at the moment, from a historical volatility perspective.

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