Skeptics Swarm Sinking ServiceNow, Inc. (NOW)

ServiceNow Inc (NOW) skeptics are buying soon-to-expire April puts after earnings

by Andrea Kramer

Published on Apr 17, 2015 at 1:40 PM
Updated on Apr 20, 2015 at 5:32 PM

Even on a broadly bad day, cloud concern ServiceNow Inc (NYSE:NOW) is among the Big Board's biggest losers, down 14.5% at $70.85 -- and on pace to end south of its 120-day moving average for the first time since mid-October. After issuing dismal guidance, the stock was slapped with a pair of price-target cuts from Brean Capital (to $90) and Barclays (to $85) -- though Canaccord Genuity upped its price target to $90 -- and has been relegated to the short-sale restricted list. Nevertheless, short-term skeptics are turning to the options pits to place eleventh-hour bets on NOW.

Put volume is running at 26 times the average afternoon clip, and has roughly doubled call volume thus far. Buy-to-open activity has been detected at the April 70 and 75 puts -- the most popular options thus far -- as speculators gamble on more downside for NOW through tonight's close, when the options expire. While the 75-strike put is in the money, buyers of the 70-strike puts are hoping NOW breaches $70 within the next few hours; the security hit an intraday low of $70.38.

Heading into earnings, NOW was no stranger to pessimism. Short interest surged 34.6% during the past two reporting periods, and now represents nearly six sessions' worth of pent-up buying demand, at the stock's average pace of trading.

However, more downbeat analyst attention could be in store, should ServiceNow Inc (NYSE:NOW) extend today's bear gap. The average 12-month price target of $86.79 sits in uncharted territory for the stock, and 17 out of 18 analysts consider the equity worthy of a "buy" or better endorsement.


A Schaeffer's exclusive

TOP STOCK PICKS 2020

Access your FREE insider report before it's too late!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


IRA/401k: The Crash-Proof Retirement Plan
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.
Stocks Eye Notable Weekly Gains on 3-Day Surge
Stocks are eyeing big weekly gains
WW Stock Brushes Off Bull Note
Morgan Stanley upgraded the Weight Watchers parent to "overweight" from "equal weight"
IRA/401k: The Crash-Proof Retirement Plan
Use gold to protect any IRA, 401(k), or retirement account from a looming financial crisis.