Bull Notes For E-Trade Stock Despite Earnings Miss

Shorts could be using calls to hedge

Deputy Editor
Apr 24, 2020 at 2:00 PM
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E*TRADE Financial Corp (NASDAQ:ETFC) is down 0.2% to trade at $38.14 today, after the firm reported adjusted first-quarter earnings of 74 cents per share, well below the 91 cents per share anticipated by analysts. E*TRADE's $707 million in revenue also came in lower than expected. Analysts chimed in optimistically, however, as no less than three analysts raised their price targets -- KBW with the highest to $43.50 -- and only one price-target cut, by UBS, to $41. 

ETFC has been consolidating on the charts the last month below pressure at its 80-day moving average. While the shares have added 48% since its three-year low of $25.76 on March 18, they're still down 24% in the last 12 months.

There's not a lot optimism coming from analysts, perhaps explaining today's bull notes. Coming into today, nine out of 12 analysts sport a tepid "hold" or worse rating. Meanwhile, the 12-month consensus price target of $41.79 is an uninspiring 9.5% premium to current levels. 

Despite limited absolute volume, calls are winning out in the options pits. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 9.56 calls have been bought for every put in the past 10 days. This ratio sits in the 100th percentile of its annual range, suggesting the appetite for calls is higher than usual. However, given that short interest is up 87% in the two most recent reporting periods, its possible some of this call buying could be shorts hedging against any unexpected upside risk.

 

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