Digital Realty Trust Stock Shows No Signs of Slowing

DLR is seeing attractively priced premiums as well

Jul 1, 2020 at 12:25 PM
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Real estate investment trust (REIT) Digital Realty Trust Inc (NYSE:DLR) has shown some strength on the charts, despite several obstacles, namely a coronavirus-related bear gap back in March, and an earnings miss that sent the stock lower in May. In fact, the equity boasts a 19% year-to-date lead and shows no signs of slowing down.

WKALT DLR Chart Jun 26

The door is wide open for analyst upgrades and/or price-target hikes too. While nine call the equity a “strong buy,” eight still say “hold.” Meanwhile, the consensus 12-month price target of $147.89 is just a slim 4% premium to current levels.

An unwinding of shorts could put some wind at the equity’s back as well, seeing as the 12.77 million shares currently sold short make up 6.1% of the stock’s available float. Plus, it would take almost a week to buy back these bearish bets, at DLR’s average pace of trading.

For those wanting to speculate on DLR’s next move, options look like a prudent play. The stock’s Schaeffer’s Volatility Index (SVI) stands higher than just 19% of readings from the past year, suggesting options traders are pricing in relatively low volatility expectations for the time being. Lastly, our recommended call option has a leverage ratio of 6.6 and will double in a 15.4% rise in the underlying security.

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