3 Stocks Dropping on Analyst Notes

GRUB and MNST are seeing heavy options trading today

by Karee Venema

Published on Apr 12, 2019 at 2:41 PM

The U.S. stock market is solidly higher today, boosted by an impressive start to earnings season and optimism over Disney's new streaming service. Among other names making notable moves are food delivery name GrubHub Inc (NYSE:GRUB), energy drink manufacturer Monster Beverage Corp (NASDAQ:MNST), and oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK). Here's a quick roundup of what's moving the shares of GRUB, MNST, and CHK.

GrubHub PT Slashed After Uber IPO Filing

Wedbush slashed its GrubHub price target by $30 to $100 "to better reflect the continued changes in competitive dynamics. This follows Uber Technologies' initial public offering (IPO) filing, which failed to give investors "clarity on U.S. diners, gross food sales, and profitability, which were not separately broken out in the filing." However, the analyst in coverage maintained an "outperform" rating on GRUB, expecting the company to remain a leader in the third-party delivery.

In reaction, GRUB stock is down 5.4% at $65.68, earlier hitting a 17-month low of $64.57. A previous test of the $66 region back in early 2018 preceded GrubHub's seven-month rally up to its Sept. 14 record peak of $149.35, but one options trader today appears to be bracing for more downside.

Amid accelerated activity -- more than 52,000 contracts have changed hands today, 10 times what's typically seen -- the May 75 and 80 puts are most active. Data from Trade-Alert suggests the higher-strike puts are being rolled down to the lower-strike puts, with the speculator looking to capitalize on another move lower by the shares.

Competition Concerns Spark Another MNST Bear Note

Wells Fargo became the latest brokerage firm to cut its Monster Beverage stock price target cut, lowering its target by $1 to $53 on competition concerns. At least seven other analysts have reduced their MNST price target in the past month. At last check, the drink stock was down 3.5% at $52.82, but finding support in the $52.50-$53.00 region that has served as a floor since late March.

Options bears are turning up the heat, too, with more than 6,000 puts traded so far -- almost two times what's typically seen at this point in the day and nearly five times the number of puts traded. The April 54 put is most active, and it looks like new positions are being purchased here for a volume-weighted average price of $0.96, which would make breakeven for the put buyers $53.04 (strike less premium paid).

Chesapeake Energy Sinks After "Sell" Rating

Goldman Sachs downgraded Chesapeake Energy to "sell" from "neutral," citing unfavorable supply cost and corporate returns, relative to its sector peers. CHK stock is dropped 3.6% in response to trade at $3.20. Nevertheless, the selling has stalled near a trendline connecting higher lows since late December, with Chesapeake still holding on to a 52.9% year-to-date lead.

In CHK's options pits, the April 4 call is home to peak front-month open interest of 40,065 contracts. Data from the major options exchanges confirms notable buy-to-open activity here, meaning speculative players expect CHK to break out above $4 by expiration at the close next Thursday, April 18.


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