Options Bulls Blitz Snap Stock After Upgrades

Both Jefferies and Cowen issued bull notes for Snap

Jan 9, 2020 at 2:13 PM
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Snap Inc (NYSE:SNAP) stock is trading up 4.4% this afternoon at $17.40, after Jefferies upgraded the Snapchat parent to "buy" from "hold," and lifted its price target to $21 from $17 -- a nearly 26% premium to last night's close. The brokerage firm expressed optimism over user growth and advertising revenue, saying it expects the latter to double over the next three years. Additionally, Jefferies said it expects Snap to be "non-GAAP profitable by FY20."

Cowen and Company also expressed optimism toward Snap, raising its rating to "outperform" from "market perform," and boosting its target price by $4 to $20. Overall, most analysts remain on the sidelines when it comes to SNAP. Prior to today, 15 of 27 brokerages called the stock a tepid "hold," while its average 12-month price target of $18.30 is a slim 4.8% premium to current levels.

The social media stock's latest surge is catching the attention of options traders, too, with roughly 193,000 calls and 49,000 puts on the tape -- three times what's typically seen at this point, and volume pacing in the 96th annual percentile. The weekly 1/10 17.50-strike call is most active, and it looks like new positions are being bought here. If this is the case, call buyers expect SNAP to rally above the strike by expiration at tomorrow's close.

Today's call-skewed trading is just more of the same in Snap's options pits. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 5.73 ranks in the 82nd annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

While it's likely some of this activity is from traditional options bulls, it's also possible short sellers are hedging against any additional upside risk. Almost 15% of SNAP's float is controlled by shorts, and many are likely underwater following the equity's 37% rally off its mid-October lows south of $13.

snap stock daily price chart jan 9


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