Mixed news from sector peers has Palo Alto Networks Inc (PANW) options traders on edge
Palo Alto Networks Inc (NYSE:PANW) is slipping on the charts this morning -- last seen down 3.9% at $149.44 -- as traders digest a mixed round of news in the cybersecurity sector. On the upside, Barracuda Networks Inc (NYSE:CUDA) reported better-than-expected quarterly earnings. But the downside comes from Fortinet Inc (NASDAQ:FTNT), which lowered its earnings and revenue guidance for the quarter, leading to a round of bearish brokerage attention. Though PANW's fiscal first-quarter earnings aren't due until late November, it looks like some traders may be tempering their expectations today.
Specifically, PANW's options pits are busy this morning, with puts crossing the tape at roughly four times the typical rate for this point in the day. The most popular put option so far is the weekly 10/14 148 strike, where all signs suggest buy-to-open activity and expectations for additional downside through the end of the week.
Taking a step back, though, call buying has long been the strategy of choice among PANW options traders. In fact, the stock's 50-day call/put volume ratio of 1.56 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits just 4 percentage point from an annual high. Near-term options traders have been similarly call-skewed. PANW's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.42 shows calls more than doubling puts among near-the-money options set to expire in three months or less.
Of course, it's possible some recent call buyers have an ulterior motive. Short interest on the stock has been climbing -- up nearly 14% during the most recent two-week reporting period -- and now represents about 9% of PANW's available float. In other worse, short sellers could be picking up protective calls to hedge their bearish bets against an upside surprise.
Elsewhere, analysts have been taken a distinctly upbeat view of PANW, with 24 out of 27 rating the stock a "buy" or better, and not a single "sell" recommendation on the books. Plus, the consensus 12-month price target of $180.66 sits at a 21% premium to current levels, and in a region not yet seen in 2016.
The stock's technical performance suggests it may not be deserving of this optimism. Year-to-date, shares of Palo Alto Networks Inc (NYSE:PANW) have shed 15% of their value, and today's slide has the stock testing the round $150 level, which has served alternately as support and resistance numerous times over the last year and change. Still, the shares seem to have found an ally in their 40-day moving average, which also limited losses during PANW's late-August earnings pullback.
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