Centene Stock Spiraling After Humana Squashes Rumors

CNC shares are eyeing their worst day since 2016

Deputy Editor
Jun 3, 2019 at 9:58 AM
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Healthcare concern Centene Corporation (NYSE:CNC) is near the bottom of the New York Stock Exchange this morning, after insurance heavyweight Humana (HUM) said it will not make a bid for the firm. While Humana typically doesn't comment on M&A buzz, the firm made an exception amid "significant investor speculation and persistent market rumors." CNC stock is down 7.4% at $53.46, pacing for its worst day since November 2016.

Prior to today, CNC had staged a hard rally off its one-year low of $45.44 in late-April, hitting its highest close in months at $57.75 on Friday. From a longer-term perspective, though, the equity has been in a channel of lower highs and lows since its December peak of $74.49, with upside momentum stalling at its 100-day trendline, which happens to coincide with its year-to-date breakeven.

Today's plummet might attract some analyst downgrades or price-target cuts. Currently, there are 13 "strong buy" ratings on the books, one "buy," and not a single "hold" or "sell." Plus, its consensus 12-month target price of $73.50 represents a nearly 38% premium to current levels. 

An unwinding of bullish bets could push the stock even lower, too. In the last two weeks, amid Humana rumors, CNC has racked up a call/put volume ratio of 7.69 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 95th percentile of its annual range, meaning calls have been bought to open over puts at a much quicker-than-usual clip.

Short sellers, on the other hand, are likely celebrating today. Short interest rose 18.1% in the last two reporting periods. The 23.4 million shares sold short make up a whopping 13.6% of the stock's available float, or nearly three days of trading, at CNC's average daily pace. 


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