Call Volume Spikes Amid Alibaba Group Holding Limited (BABA) News

Analysts have been extremely bullish toward Alibaba Group Holding Ltd (BABA)


Published on Apr 9, 2015 at 12:03 PM
Updated on Apr 20, 2015 at 5:32 PM

Alibaba Group Holding Ltd (NYSE:BABA) is making headlines today, announcing the debut of a Chinese e-commerce tracking stock index and plans to start an Internet bank in June, and also making a joint statement with partner Costco Wholesale Corporation (NASDAQ:COST) regarding proper business channels. All of this has BABA's options pits hopping once again, with calls changing hands at three times the expected rate for this point in the session.

Diving right in, one strike seeing what appears to be a mix of buy- and sell-to-open activity is the April 88 call. Those purchasing the out-of-the-money contracts believe BABA will topple $88 by next Friday's close, when the front-month options expire. On the other hand, the call writers anticipate the shares will stall south of $88 through their lifetime, and expire worthless at the close next Friday, April 17.

Most active, though, is the April 90 call, which has seen some apparent buyer-initiated action. By purchasing the calls to open, speculators expect BABA to muscle atop the round-number strike -- a feat not accomplished in two months -- by options expiration.

Turning elsewhere, the brokerage bunch is extremely bullish toward BABA. Each of the 23 analysts covering the shares rate them a "buy" or better. What's more, the stock's consensus 12-month price target of $109.83 stands at a 27.6% premium to current trading levels -- and in territory not explored since late December.

This is somewhat surprising, given Alibaba Group Holding Ltd's (NYSE:BABA) technical struggles. The equity has dropped more than 17% year-to-date to trade at $86.08, and has underperformed the broader S&P 500 Index (SPX) by roughly 18 percentage points over the last three months. This could leave BABA vulnerable to a round of downgrades and/or price-target cuts.

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