Blue-Chip Stock Pops on Fresh Analyst Coverage

Call traders are blasting Caterpillar stock in the options pits

Digital Content Manager
Oct 14, 2021 at 11:21 AM
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The shares of Caterpillar Inc. (NYSE:CAT) are up 2.4% at $193.44 this morning, after Cowen and Company initiated coverage of the blue chip with an "outperform" rating and $241 price target. The brokerage firm highlighted the company's autonomous products, power technologies, and increasing service revenues, which bring a secular growth component to CAT. The analyst also said it sees revenue opportunities of $35 billion for the heavy machinery name over the next decade.

Analysts were hesitant towards Caterpillar stock coming into today, indicating there is more room for upgrades moving forward. Of the 15 in coverage, nine carried a tepid "hold" rating, while the remaining six said "buy" or better. Meanwhile, the 12-month consensus target price of $224.33 is a healthy 16.1% premium to current levels.

Caterpillar stock has been cooling off from a June 4, record high of $246.69 in the last few months. Shares seem to have found their footing at the $188-$190 level in recent weeks, though the 20-day moving average has been pressuring the security lower since early September. Year-over-year, CAT still sports an 18.1% lead.

A shift in the options pits could also give Caterpillar stock a boost. This is per the security's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 74% of annual readings. This means puts have been getting picked up at a faster-than-usual pace of late.

That shift seems to be in motion already. So far, 5,036 calls have crossed the tape, which is double the intraday average. Most popular is the October 195 call, followed by the 192.50 call in that same series, indicating options players see more upside for CAT by the time these contracts expire tomorrow.

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