Macquarie Makes Big Call on Spotify Stock

Macquarie sees a sharp rally ahead for Spotify stock

Jul 23, 2019 at 10:03 AM
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Spotify Technology SA (NYSE:SPOT) just received a bullish note from brokerage firm Macquarie. Analysts there began coverage with an "outperform" rating and $200 price, well above Monday's close of $146.76. The note suggested SPOT shares are undervalued and the streaming music company has been underestimated by Wall Street.

While most analysts covering Spotify recommend buying the shares, pessimism from this group has been growing in recent months, most notably in the form of a downgrade out of Evercore ISI a month ago. The average 12-month price target right now comes in at $167.75. The stock was last seen trading up 1.9% at $149.58.

Meanwhile, short interest keeps climbing on SPOT stock. The number of shares held by short sellers increased by 26.4% in the last reporting period, and almost 5% of the total float is now sold short.

In the options pits, there's been a strong interest in call options. Call buying has been unusually popular during the past two weeks at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), with the August 160 call seeing the largest increase in open interest during that time. The weekly 7/26 155-strike call also saw a major uptick in open interest.

In fact, Spotify's Schaeffer's put/call open interest ratio (SOIR) right now is 0.18. Not only does this show that call open interest among options expiring within three months outweighs put open interest by a more than 5-to-1 ratio, but it ranks in the bottom percentile of its annual range. In other words, such a call-skew for near-term traders is very rare.

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