Blue-Chip Media Name Drops on Barclays Downgrade

The equity sports affordably priced options at the moment

Digital Content Manager
Oct 18, 2021 at 11:13 AM
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The shares of Walt Disney Co (NYSE:DIS) are down 2.8% at $171.43 at last check, after Barclays downgraded the company to "equal weight" from "overweight," and cut its price target to $175 from $210. The analyst in coverage noted growth in core streaming service Disney+ has slowed down this year, despite new franchise titles such as "Loki" and "Cruella." The firm added Disney is now behind on its goal of reaching 150 million subscribers by 2024, and that the rising risk of tightening content measures in China could impact U.S. releases.

This bear note represents a break from the bullish sentiment surrounding Disney stock. Coming into today, 15 of the 17 analysts in question called the security a "buy" or better, while the 12-month consensus target price of $209.03 is roughly a 22% premium to DIS' current levels. Should some of this optimism continue to unwind, shares could drop even lower.

The last time we checked in with the equity, it was eyeing a rebound following a selloff. Over the last few weeks, Disney stock has repeatedly tested a floor at the $170 level, while the 200-day moving average and the $180 mark have kept a tight lid on the shares. Year-to-date, DIS is off 5.3%.

The options pits already lean bearish. The equity's Schaeffer's put/call open interest ratio (SOIR) sits higher than 80% of readings from the past year, indicating short-term options traders have rarely been more put-biased. 

Drilling down to today's options activity, 40,000 calls and 25,000 puts have crossed the tape, which is double the intraday average. Most popular is the weekly 10/22 175-strike call, followed by the 180-strike call in the same series, with positions being opened at the former.

Now seems like a good opportunity to bet on Disney stock's next move with options. This is per the equity's Schaeffer's Volatility Index (SVI) of 25%, which stands higher than just 16% of readings from the last 12 months. This means the options market is pricing in low volatility expectations for DIS at the moment.


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