The shares of TAL are sitting under their market cap
The shares of China-based TAL Education Group (NYSE:TAL) are underperforming the broader market, down over 14% year-to-date, and are sitting just below their $25 billion market cap. And while the security just had a positive post-earnings reaction, that peak coincides with its 320-day moving average, as well as a breakout level above a trendline connecting lower highs from October to December. With that in mind, now seems like a good time to speculate on TAL’s next move lower.
Analysts are still firmly in the bullish camp when it comes to the equity, with five of the seven in coverage sporting a “strong buy” rating, and not a single “sell” to be found. Should some of the more optimistic analysts step to the sidelines, the downgrades could weigh on the equity.
Meanwhile, short sellers have been building their positions since August. However, short interest is still at half its January 2019 high, meaning there is plenty of room left. In fact, short interest rose 15.8% in the last two reporting periods, and the 14.17 million shares sold short account for only 3.9% of the stock’s available float, or just under three days’ worth of pent-up buying power.
Finally, our put recommendation has a leverage ratio of -6.2, and will double in value on an 13.6% drop in the underlying equity.
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