CTSH Stock Eyes Worst Week in Years After Earnings

Cognizant Technology lowered its full-year guidance

Deputy Editor
May 3, 2019 at 10:22 AM
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The shares of tech concern Cognizant Technology Solutions Corp (NASDAQ:CTSH) are spiraling in early trading, after the firm announced first-quarter earnings below analysts' expectations. The company also nearly halved its full-year sales forecast. As a result, CTSH stock is down 10.2% at $59.82 in early trading, pacing for its worst day since 2016, with analysts and option bears already rushing in.

Jefferies predicted even more woes for Cognizant's new CEO Brian Humphries, while KeyBanc and Evercore ISI downgraded the shares to "sector weight" and "in line," respectively. In addition, Wedbush downgraded CTSH to "neutral" from "outperform," and cut its price target to $70 from $80. In fact, no fewer than eight brokerage firms slashed their price targets. 

CTSH is pacing for its worst week since October 2008, down more than 20%. The stock lost 7.7% in yesterday's trading, after quarterly results were released just before the closing bell. Today, Cognizant stock is fresh off a new two-year low of $58.51.

Recent options buyers are likely cheering, as bears appear to have been piling on CTSH ahead of earnings. The equity sports a 10-day put/call volume ratio of 1.14 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 87th percentile of its annual range, suggesting that puts were purchased at a quicker-than-usual clip over the past two weeks. 

Today, CTSH options are trading at 17 times the average intraday pace, with about 8,300 puts and 5,200 calls exchanged so far. Both call and put volume are on track for a new annual high. Digging deeper, it appears May 70 put holders are likely cashing in their chips, selling the now in-the-money contracts to close.


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