Analyst Pegs P&G for Double-Digit Return Potential

PG stock hit a record high earlier this week

Jun 28, 2019 at 9:47 AM
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Goldman Sachs upgraded Procter & Gamble Co (NYSE:PG) stock to "buy" from "neutral," and lifted its price target to $125 from $114 -- a nearly 14% premium to last night's close. The brokerage firm said this next year will "mark a turn in [PG's] margin profile and profit growth as relative organic strength sustains," and that it "offers investors a potential double-digit total shareholder return."

In reaction, PG shares are up 1.1% to trade at $111.02, within chip-shot of their all-time peak of $112.63 from this past Tuesday, June 25. The Dow stock has been making a beeline higher over the past 12 months, with its 40-day moving average serving as a springboard. Following its most recent bounce off here in early June, the equity is up almost 9%, eyeing its best monthly return since January 2013.

Options traders have been positioning for a pullback in PG stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.88 ranks in the 92nd annual percentile, meaning puts have been bought to open over calls at an accelerated clip. Given the equity's uptrend, it's possible some of these puts are being used by shareholders as an options hedge.

Whatever the reason, it's an attractive time to purchase premium on Procter & Gamble stock. Its Schaeffer's Volatility Index (SVI) of 16% ranks in the 18th annual percentile, indicating short-term options are pricing in relatively low volatility expectations at the moment.


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