Change Healthcare Stock Surges After Judge Overrules Antitrust Challenge

The security is trading at record highs

Digital Content Manager
Sep 20, 2022 at 10:03 AM
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Reports just came out that a federal judge has ruled against the Department of Justice (DOJ) bid stopping UnitedHealth Group (UNH) from taking over Change Healthcare Inc (NASDAQ:CHNG). In February, the DOJ filed a lawsuit to stop the $8 billion deal, citing concerns it would allow UnitedHealth access to data from its competitors, ultimately driving up the cost of healthcare. UnitedHealth said it would move forward with the merger quickly, and in response CHNG is up 7.3% at an all-time high of $27.32. 

Following the news Piper Sandler and Citigroup chime in with notes. The former cut the stock's rating to "neutral" from "overweight," but lifted its price target to $27.75 from $26. Meanwhile, the latter slashed its rating to "neutral" from "buy." This puts the analysts covering CHNG in an even more bearish position, with five now calling the stock a "hold," compared to three "buy" or better ratings. What's more, the 12-month consensus price target of $27.31 sits right in line with current levels. 

Options traders have taken an incredibly bearish stance as well. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CHNG sports a 50-day put/call volume ratio of 7.67, which sits higher than 86% of readings from the past year. In other words, options players are picking up puts at a much quicker-than-usual clip. 

Echoing this, the stock's Schaeffer's put/call open interest ratio (SOIR) of 26.03 stands above 93% of annual readings. In other words, short-term options traders have rarely been more put-biased during the past year. 

All this bearish sentiment is unusual considering the security's recent price action. The stock gapped higher in April and has been able to maintain above its pre-bull gap levels with support at the $22.30 region. The security's 30-day moving average has provided more recent support, sending CHNG to a record high of $27.71 on Sept 12. Today's pop is helping the healthcare name add to its 19.1% year-to-date lead. 

 

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