Splunk Stock Plummets Amid Lawsuit Buzz, Downgrade

Put traders are targeting the equity as well

Digital Content Manager
Oct 6, 2022 at 10:56 AM
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Splunk Inc (NASDAQ:SPLK) is down 5.7% to trade at $78.54 at last check, after UBS downgraded the equity to "neutral" from "buy," and cut its price target to $86 from $125. The analyst in coverage noted multiple headwinds besides the current macroeconomic environment. Plus, the company yesterday filed an intellectual property lawsuit against Cribl, alleging the infringement of copyrights and patents, as well as "misappropriation" of its source code and confidential materials.

More price-target cuts and downgrades might be on the horizon, too, as the majority of analysts currently lean bullish towards SPLK. In fact, 17 of the 27 in coverage deem it a "buy" or better, while the stock's 12-month consensus target price of $129.39 is a 66.2% premium to current levels.

Options bears are chiming in as well. So far today, 2,850 puts have crossed the tape, which is double the intraday average, as opposed to the 1,164 calls traded. The most popular contract is the 10/7 73-strike put, followed by the 74-strike put in that same weekly series, with new positions being opened at the latter.

The options pits were already pessimistic prior to today's bear note, though. This is per the stock's 10-day put/call volume ratio of 1.33 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 98% of readings from the past year. This means puts have been getting picked up a much faster-than-usual clip.

Options look like an ideal way to speculate on the equity's next move. This is per the stock's Schaeffer's Volatility Scorecard (SVS) of 95 out of 100, which indicates SPLK has consistently realized bigger returns than options traders have priced in the past 12 months.

 

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