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 Jun 24, 2020 at 10:16 AM

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.


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