Healthcare Stock Looks Ripe for Analyst Upgrades

The equity's weekly chart boasts a promising technical setup

May 31, 2022 at 1:32 PM
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On Cardinal Health Inc (NYSE:CAH) stock's weekly chart, the equity just retested a trendline connecting higher lows since December 2021. Plus, the security already boasts a 12% year-to-date lead, and is up over 3% in the last 12 months. With this in mind, now looks like a perfect time to buy calls on Cardinal Health stock.

cah may 31

An unwinding of pessimism among options traders could provide additional tailwinds. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CAH sports a 10-day put/call volume ratio of 1.59, which sits higher than all but 4% of readings from the past year, suggesting puts have rarely been more popular.

What's more, CAH's Schaeffer's put/call open interest ratio (SOIR) of 1.16 sits higher than all but 2% of annual readings. This means short-term options traders have also been heavily put-biased.

Cardinal Health stock could be ripe for upgrades and/or price-target hikes, too. Of the eight analysts in coverage, five consider CAH a "hold" or worse, while the 12-month consensus price target of $60.54 is a slim 4.9% premium to Friday's close.

Despite the recent shakiness Wall Street is experiencing, options traders have been pricing in low volatility expectations for CAH. This is per the security's Schaeffer's Volatility Index (SVI) of 28%, which sits higher than just 18% of readings from the past year. In other words, Cardinal Health options can be had at a relative bargain right now.

Finally, our recommended call has a leverage ratio of 6.85 and will double in a 13.84% rise in the underlying stock.

 

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