Evercore Slams Spotify Stock With Scathing Bear Note

Shorts have been targeting Spotify recently

Jun 24, 2019 at 9:55 AM
facebook twitter linkedin


Spotify Technology SA (NYSE:SPOT) is trading lower this morning after a bruising bear note from Evercore ISI. The brokerage firm downgraded SPOT stock to "underperform" from "in line," and slashed its price target by $15 to $110 -- a nearly 26% discount to last night's close -- saying it doesn't see any way the music streaming service can meet Wall Street's elevated gross profit estimates.

In reaction, SPOT shares are down 0.6% to trade at $147.40, and could be headed for their first back-to-back losses since mid-June. More broadly, the stock has been rallying since its late-May low near $120, and topped out at a roughly eight-month high of $154.30. Plus, the equity is fresh off a four-week win streak, and is eyeing its first monthly win since February.

Skepticism has been ramping up, with short interest rising 27% in the two most recent reporting periods. Spotify's bearish bandwagon is far from full, though, considering the 4.26 million shares controlled by shorts accounts for just 4% of the stock's available float.

Some of these bears may have initiated an options hedge recently to guard against any additional upside risk. The out-of-the-money July 160 call has seen one of the biggest increases in open interest over the past two weeks, and data from Trade-Alert indicates some of the out-of-the-money calls were bought to open.

Regardless of whether the calls are being used as a hedge or a traditional bullish bet, now is an attractive time to purchase premium on Spotify. The stock's Schaeffer's Volatility Index (SVI) of 34% ranks in the 11th annual percentile, meaning short-term SPOT options are pricing in relatively low volatility expectations.

 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 

 


 


 
Special Offers from Schaeffer's Trading Partners