Snap Stock Options Hot After Analyst Screams “Sell” – Schaeffers Research (blog)

Snap Inc (NYSE:SNAP) stock is down 9.1% to trade at $9.00 — earlier hitting a record low of $8.90 — after BTIG downgraded the Snapchat parent to “sell” from “neutral,” and set a $5 price target, the lowest on Wall Street. The analyst in coverage cited declining user growth and a cash burn as just two of the reasons for the bear note, and said he’s “tired of Snapchat’s excuses for missing numbers.”

Pouring salt on the proverbial wound is a price-target cut to $11 from $14 at Jefferies, which said falling user engagement would likely lead to a drop in ad sales. Plus, Citi lowered its SNAP price target to $8 from $10, saying the chance of a takeover is lessened as a result of operational headwinds.

The skepticism has ramped up in the options pits, too, with nearly 82,000 puts traded — six times what’s typically seen at this point in the day — compared to about 55,000 calls. Most active is the January 2019 9-strike put, though it’s unclear if these options are being opened or closed.

More clear-cut activity is occurring at the weekly 9/14 9-strike put, where it seems likely speculators are purchasing new positions for a volume-weighted average price of $0.21. If this is the case, breakeven for the put buyers at this Friday’s close is $8.79 (strike less premium paid).

Looking at the charts, today’s bear gap just extends the stock’s slide down the charts in 2018. Since topping out at an annual high of $21.22 on Feb. 7, Snap shares have plunged 58%. And while the equity rallied yesterday on the back of a rare upgrade, this morning’s price action suggests that was more of a “dead-cat bounce.”