Low Expectations Could Fuel More Upside for Medtronic Stock

Medtronic shares are outperforming on the charts, even with analysts saying 'hold'

May 31, 2017 at 10:32 AM
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Shares of Medtronic PLC (NYSE: MDT) hit a 2017 high after the medical device maker reported better-than-expected earnings and raised its full-year forecast last week. MDT stock is now boasting a more than 19% year-to-date lead. Despite these sound technical and fundamental backdrops, expectations remain low -- which could translate into buying power once the skepticism begins to unwind.


For starters, almost half of the 20 covering analysts maintain a tepid "hold" recommendation. This leaves the door wide open for a round of upgrades, which could help draw more buyers to MDT's table.

Elsewhere, the stock's top-heavy 50-day put/call volume ratio of 1.09 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks 2 percentage points from a 52-week peak -- meaning puts have been bought to open relative to calls at a near-annual-high clip. A capitulation from some of the weaker bearish hands could help boost the stock.

Plus, MDT's Schaeffer's Volatility Index (SVI) of 13% ranks below 92% of all comparable readings taken in the past year, meaning low volatility expectations are being priced into short-term options -- a potential boon to premium buyers.

Subscribers to Schaeffer's Weekend Trader Series options recommendation service received this MDT commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

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