SEC Investigation Sinks Syneos Health Stock

SYNH options are trading at 11 times the normal volume

Feb 28, 2019 at 2:08 PM
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The shares of Syneos Health Inc (NASDAQ:SYNH) are getting rocked today, after the company said the Securities and Exchange Commission (SEC) is looking into its revenue accounting practices and internal controls. In addition, Syneos delayed its fourth-quarter earnings release. As such, SYNH stock is down 20.5% at $41.37, pacing for its worst session since November 2017, yet options traders appear to be betting on a bounce.

From SYNH's Dec. 24 low of $36.27 to its Feb. 25 annual high of $56.34, the stock had rallied more than 50%. Today, however, the equity has given up nearly all of those gains, and earlier fell as low as $36.72 -- within pennies of the aforementioned low. The shares are now clinging to a 5% year-to-date gain.

SYNH stock chart feb 28

Analysts at Jefferies think the nosedive could be overdone. If not, though, SYNH could be vulnerable to analyst backlash. Currently the stock sports nine "strong buy" endorsements, compared to two "holds" and not a single "sell" rating. Plus, the average 12-month price target of $52.80 now represents a premium of roughly 26% to the equity's current price.

Today's options traders also appear optimistic. Although absolute volume is light on SYNH, the stock has seen nearly 600 calls change hands so far today, 11 times the average intraday volume. It appears some traders are buying to open the March 45 call on hopes that Syneos shares will rebound atop the $45 level by the close on Friday, March 15, when front-month options expire.

That appetite for long calls runs counter to the recent trend, though. In fact, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than 10 SYNH puts for every call in the past two weeks.

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