Beer Stock Ripe for a Bearish Options Trade

Underperforming STZ stock is at risk for downgrades and price-target cuts

Dec 4, 2018 at 10:23 AM
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Back in October amid the broad-market sell-off, beer maker Constellation Brands, Inc. (NYSE:STZ) broke below a trendline that had supported its rise since 2012. The stock was swiftly rejected after rallying back to this trendline earlier this month, and the $200 area -- site of the August lows -- has also emerged as resistance. Now down more than 14% in 2018, it's time to make a bearish play on STZ.

181130 WKALT STZ

 

Analysts remain in the bullish camp, for now. Of the 15 brokerages covering the stock, 11 rate it a "buy" or "strong buy," while its consensus 12-month price target sits at a frothy $247.68. This indicates downgrades and/or price-target reductions are a real possibility and could push the stock lower.

You also can't count on any short-covering potential from STZ. Short interest fell by 25% in the most recent reporting period, and the 3.55 million shares sold short represents a meager 2.25% of the stock's total available float, and only 1.71 times the average daily trading volume.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this STZ 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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