Options Bears Target Airline Stock After Acquisition

Deutsche Bank downgraded ALK to "neutral" after the buyout news

Deputy Editor
Dec 4, 2023 at 2:40 PM
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Alaska Air Group Inc (NYSE:ALK) is in a tailspin today, after the company announced the acquisition of Hawaiian Airlines parent Hawaiian Holdings (HA) for $1.9 billion, including $900 million in debt. The shares of ALK are suffering in response, down 14.7% at $33.89 at last glance, while HA soars 185%. 

Following the news, Deutsche Bank downgraded Alaska Air Group stock to "hold" from "buy," with a price-target cut to $44 from $55. This marks the stock's second downgrade in the last month, with potential for more, as nine of the 13 analysts in coverage still carry a "buy" or better rating. 

This negative price action is poised to be the shares' worst single-session drop since March 2020. ALK has now breached all daily moving averages between the 20- and 320-day trendlines, including the 40-day moving average. Now down 21.4% in 2023, the equity is drifting near its Nov. 1 three-year low of $32.

Options traders are flooding ALK's options pits in response, with 18,000 calls and 22,000 puts exchanged so far, which is already 17.9 times the average daily options volume. The January 2024 27.50-strike put is the most popular contract by far, with new positions being sold to open there. 

ALK Dec4

 

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