Options Bears Swarm Zoom Video Stock After Dismal Results

BITG downgraded ZM to "neutral"

Deputy Editor
Aug 23, 2022 at 10:00 AM
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The shares of Zoom Video Communications Inc (NASDAQ:ZM) are tumbling this morning, last seen down 13.2% to trade at $84.57, after the video-conferencing name posting some troubling results for the second quarter. While earnings came in better than Wall Street anticipated, revenue fell short of expectations, with Zoom's CFO noting difficulty in acquiring new, paying subscribers. Also weighing on ZM this morning is the company's decision to slash its full-year outlook -- a move that analysts were quick to respond to.

Specifically, no less than eight firms issued price-target cuts, with Citigroup adjusting its price objective all the way down to $76 from $91. BITG downgraded the equity to "neutral" from "buy," while Piper Sandler called the results "one of the worst quarters Zoom has reported since going public."

While the bear notes have been pouring in lately, ZM's 12-month consensus target price of $140.66 is a hefty 62.2% premium to last night's close. This setup leaves the shares extremely vulnerable to additional downgrades and/or price-target cuts.

The options pits are firmly in the bearish camp. Zoom stock's 10-day put/call volume ratio of 1.14 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), sits higher than 96% of readings from the past year. This indicates that over the last two weeks, puts were picked up at a much faster-than-usual clip.

Today, 29,000 puts are outpacing the 27,000 calls traded in just the first hour of trading. Total volume across both bullish and bearish bets already accounts for 13 times what's typically seen at this point, and the most popular contract is the 8/26 80-strike put, while new positions are being opened at the second most popular contract, the 84-strike put from the same weekly series.

The good news for options traders is that the security's Schaeffer's Volatility Scorecard (SVS) sits up at 81 out of 100. In other words, this means the stock has greatly exceeded option traders' volatility expectations during the past year.

On the charts, Zoom stock is back near its May 22 annual low of $79.03. Recent consolidation around the $120 level has now been breached, with the shares now trading beneath all notable short- and long-term moving averages. Year-over-year, ZM sports an 83% deficit. 

 

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