ADT Stock Drops on RBC Downgrade, Price-Target Cut

The options pits are still firmly bullish towards the equity, though

Digital Content Manager
Jan 6, 2022 at 10:17 AM
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ADT Inc (NYSE:ADT) is down 5.7% at $8.15 at last check, after the security received a downgrade from RBC to "sector perform" to "outperform," as well as a price-target cut to $10 from $12. The analyst noted ADT's focus on subscriber growth, while wage inflation and pandemic-related cost reductions offset by higher prices may negatively impact its free cash flow. Plus, the firm pointed to concerns over the company's acquisition of Sunpro Solar, amid potential changes to net metering rules.

RBC joins an already skeptical brokerage bunch. Coming into today, three of the four analysts in coverage called ADT a tepid "hold" or worse, while only one said "buy." The stock's 12-month consensus target price of $10.25 is a 25.9% premium to its  current perch, however.

Meanwhile, the options pits are firmly in the bullish camp. ADT's 10-day call/put volume ratio of 254.50 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than all other annual readings. This means calls have been getting picked up at a much faster-than-usual clip lately.

These options traders are in luck, as ADT has attractively priced premiums. The equity sports a Schaeffer's Volatility Index (SVI) of 46%, which stands in the 13th percentile of readings from the past 12 months, indicating options traders' volatility expectations aren't high at the moment. 

The security has had a few volatile months on the charts, with the $10.40 level capping its early November surge. The shares have most recently bounced off a familiar floor at the $7.80 level, though the 120-day moving average now seems to be keeping a tight lids on gains. Nonetheless, ADT has shed 22.1% over the last six months.


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