Struggling Best Buy Stock Sinks After Downgrade

BBY puts were already popular among options traders

Deputy Editor
Jun 14, 2022 at 8:55 AM
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Best Buy Co Inc (NYSE:BBY) stock is 1.8% lower in premarket trading, last seen at $68.20, following a bear note from Bank of America Securities. The brokerage firm downgraded BBY to "neutral" from "buy," noting some concern over Best Buy's earnings in 2023. 

Coming into today, the majority of covering brokerages were hesitant toward the security, with 10 of 16 rating it a "hold" or worse; however, the six "strong buy" recommendations on Best Buy stock leave ample room for additional downgrades. What's more, the 12-month consensus price target of $91.14 -- a 33.3% premium to last night's close -- could signal a round of price-target adjustments is overdue.

Short sellers are building their positions. Short interest rose 2% over the most recent reporting period, and the 13.98 million shares sold short make up 7% of the stock's available float, or nearly one week's worth of pent-up buying power.

The options pits lean bearish, too. This is per BBY's Schaeffer's put/call open interest ratio (SOIR) of 1.64, which sits higher than just 93% of readings from the last year. In other words, short-term options traders have rarely been more put-biased.

Additionally, the stock's 10-day put/call volume ratio of 1.32 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 85% of readings from the past year, showing a penchant for bearish bets in the last two weeks.

Should today's premarket losses hold, the security will open at its lowest level since May 2020. Pressure from the 20-day moving average has kept a lid on the shares in recent weeks, while, longer term, BBY has failed to close above its 200- and 320-day trendlines in all of 2022. This ample pressure on the charts, paired with a seven-month losing streak, has Best Buy stock down 31.6% year-to-date.

 

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