TAP Stock Sinks After Analyst Drubbing

Meanwhile, put trading has picked up on Molson Coors

Deputy Editor
Jul 15, 2019 at 3:00 PM
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Beverage concern Molson Coors Brewing Company (NYSE:TAP) was just taken down a few pegs by BofA-Merrill Lynch, which downgraded the stock from a "buy" rating all the way to an "underperform." The analyst slashed its price target, too, to a new street low of $50. The analyst said it didn't trust the company's current initiatives to stabilize its business in order to counteract weakening beer trends and tough competition. The analyst lowered its full-year forecasts for 2019 and 2020, as well, causing shares of the Miller parent to hit a five-year low of $52.36 earlier. 

The equity has recouped some of these earlier losses but is still on course for its lowest close since 2014, now down 1.7% at $53.45. This negative price action is nothing new, though, since TAP has lost 21.5% year-over-year and is eyeing its third straight loss today. And while the $54 region provided some support in June, the security was quickly capped by pressure at its 40-day moving average and $57 area. 

Unsurprisingly, an unusual amount of bearish activity is taking place in the options pits. So far, more than 2,000 puts have crossed the tape today, more than double the number of calls traded, and three times what's typically seen for puts at this point. The weekly 8/2 51.50-strike put is the most popular, and traders are opening new contracts.

This pessimism is nothing new for Molson Coors, which sports a 10-day put/call volume ratio of 2.36 on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 93rd percentile of its annual range, suggesting that puts have been purchased at a much quicker clip than usual during the last two weeks.

Prior to today's drubbing, analyst sentiment has been mixed, with six "strong buy" ratings, and six "hold" or worse ratings. The consensus 12-month target price of $64.44, however, is at a solid 20% premium to current levels. This means the door is wide open for downgrades to push the stock lower, should analysts begin to follow BofA-Merrill Lynch's lead. 

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