BofA-Merrill Slams U.S. Bancorp Stock With Another Bear Note

It also looks like an attractive time to invest in USB options

Managing Editor
Sep 30, 2019 at 9:26 AM
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Banking name U.S. Bancorp (NYSE:USB) is suffering this morning, already down 0.6% at $55.09, after receiving a downgrade to "underperform" from "neutral" at BofA-Merrill Lynch. In addition to the price-target cut to $53 from $55, the analyst in coverage warned of "execution risk" facing the company's premium valuation. USB is now on its way to its third straight loss, expanding on its already volatile year on the charts. 

Specifically, U.S. Bancorp stock has added 21.2% in 2019 alone, but has struggled to maintain the positive momentum day-to-day. During the month of September, the $55 mark has been a floor of support, while the $56 has emerged as a stiff ceiling, capturing any breakout attempts.

Today's downgrade comes with little surprise, as 13 of 16 covering firms carry a "hold" or "strong sell" rating coming into today. Also underwhelming is the stock's average 12-month price target of $56.43, which comes in one dollar above Friday's close of $55.43.

On the flip side, options traders have been leaning bullish toward the financial concern. This is per the stock's 10-day call/put volume ratio of 1.43 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks in the 83rd percentile of its annual range, suggesting calls have been bought over puts at a faster-than-usual clip.

Now looks to be an attractive time to jump onto U.S. Bancorp stock with options. The equity's Schaeffer's Volatility Index (SVI) of 20% registers in the low 26th percentile of its annual range, meaning near-term options premiums are pricing in unusually low volatility expectations.


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