Options Bulls Target Zoom Stock After Upgrade

Calls are flying off the shelves after the upgrade

Assistant Editor
Oct 22, 2021 at 10:51 AM
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J.P. Morgan Securities upgraded Zoom Video Communications Inc (NASDAQ: ZM) to "overweight" from "neutral," saying long-term adoption of the pandemic-era communications tool in businesses will help accelerate future growth. The firm noted that ZM will likely bottom out this quarter, and that the stock already reflects a slowdown in remote video communication as pandemic-related safety measures continue to ease.

The analyst joins a split brokerage bunch. Coming into today, nine of the 18 in coverage considered the stock a "buy" or better, while the other nine recommended a tepid "hold." Meanwhile, the 12-month consensus price target of $369.43 is a 30.5% premium to the equity's current level.

Call traders are blasting ZM following the upgrade. In the first hour of trading, 37,000 calls have exchanged hands, which is three times the intraday average and almost four times the amount of puts traded so far. The two most popular contacts are the weekly 10/22 285- and 290-calls, with new positions are being opened at each.

Last seen up 3.8% to trade at $285.26, Zoom stock has more than halved since its pandemic-era peak of $588.84, achieved on Oct. 19, 2020. The stock has been on the rise in the last couple weeks, however, since its 20-day moving average pushed it to an annual low of $250.11 on Oct. 6. The security has since toppled this trendline, though it still suffers a year-to-date deficit of 18.5%. 

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