Paychex Stock Hits Record High After Quarterly Blowout

In response, options volume is running at eight times what's typically seen

Deputy Editor
Dec 23, 2020 at 12:58 PM
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The shares of Paychex Inc (NASDAQ:PAYX) are down 0.6% at $96.06 at last check, earlier hitting a record high of $99.95, after the payroll processing company reported better-than-expected fiscal second-quarter earnings and revenue ahead of the open today. After the $70 level provided a floor for pullbacks through June and July, the stock has been steadily climbing on the charts, with added support from the 40-day moving average. Year-to-date, the equity is up 12.8%. 

PAYX Dec23

Despite its consistent rally, analysts are still overwhelmingly pessimistic on PAYX stock, leaving plenty of room for a round of upgrades that could push the equity higher. Of the 15 in coverage, all but two carry a "hold" or worse rating on PAYX. Furthermore, the 12-month consensus price target of $85.33 is an 11.2% discount to current levels. 

Meanwhile, though short interest has started to fall off, down 6.2% during the most recent reporting period. The 7.72 million shares sold short would take nearly five days to cover at Paychex stock's average pace of trading, indicating that this pent-up buying power could act as a tailwind as well. 

The options pits are seeing plenty of post-earnings action, with 7,440 calls and 3,176 puts across the tape so far -- eight times what's typically seen at this point with overall volume pacing for the 99th percentile of its annual range. Most popular is the January 2021 100-strike call, followed by the 105 call in the same session, with new positions being opened at the latter. 

These premiums are well-priced at the moment too, per the stock's Schaeffer's Volatility Index (SVI) of 30%, which stands higher than 19% of all other readings in its annual range. This implies that options players are pricing in relatively low volatility expectations on PAYX at the moment.

 

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