IBM Stock Suffering from "Elevated Valuation," Says Analyst

Options traders have been picking up puts before today's bear note

Deputy Editor
Jan 11, 2022 at 10:32 AM
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Blue-chip tech name IBM (NYSE:IBM) is down 4% to trade at $129.67 at last check, after a bear note from UBS. The covering analyst downgraded IBM stock to "sell" from "neutral," and lowered its price target to $124 from $136, citing the vulnerability of shares over the next 12 months thanks to near-term risks to its fourth-quarter operating results and an "elevated valuation."

Just yesterday, Goldman Sachs initiated coverage on IBM with a "neutral" rating, and there's room for other covering analysts to follow UBS's lead. Coming into today, four of eight brokerages said "strong buy," while the remaining four called the security a "hold." Meanwhile, the 12-month consensus price target of $144.77 is a 10.7% premium to its current perch.

It seems options traders were at least aware of some of the concerns before today, per IBM stock's 10-day put/call volume ratio of 1.28 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands in the elevated 98th percentile of its annual range. This suggests puts have been the go-to choice in the options pits over the last two weeks.

Drilling down to today's options activity, 18,000 calls and 17,000 puts have been exchanged so far, which is triple the intraday average. Most popular is the 1/14 135-strike put, where new positions are being bought to open.

Digging deeper, today's negative price action was caught by the $128 level, while the formerly supportive 20-day moving average is now putting pressure on the shares.Year-over-year, the security is clinging to a 5.3% lead. 


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