Short interest on JKS has dropped after hitting a record high in September
Shares of JinkoSolar Holding Co., Ltd. (NYSE:JKS) settled up 1.5% at $23.82, likely with help from a First Solar (FSLR) halo lift. Below, we will take a look at the company's earnings history, and examine how analysts and options traders are playing JKS stock ahead of earnings, due out tomorrow morning.
Looking at the charts, JKS shares are up 59% year-over-year. However, the stock has been choppy since hitting a two-year high of $30.50 in mid-September. The equity has more recently been seen testing its footing atop the 180-day moving average, currently located at $22.68.
While JKS has managed to hold above this trendline in recent sessions, another positive earnings reaction could be the catalyst for a big bounce. The shares of JinkoSolar have a solid history of post-earnings price action, finishing the subsequent session higher in five of the past eight quarters.
Over the last two years, the security has averaged a single-session post-earnings move of 4.1%, including a 6.4% boost in November 2016. This time around, the options market is pricing in a next-day swing of 10.6%, regardless of direction, based on at-the-money implied volatility data. A move higher of similar magnitude would have JKS trading back near $26.60.
Options traders appear to be bracing for a post-earnings drop, however. The stock's December 30 put is home to peak open interest of 3,447 contracts, and data from the major options exchanges confirms buy-to-open activity here. In other words, speculators expect JKS shares to settle below $30 when the options expire at the close on Friday, Dec. 15.
This skepticism is seen elsewhere on Wall Street, too. Although short interest is down almost 21% from the Sept. 1 record high of 7.63 million shares, these bearish bets still account for more than 27% of the stock's total available float. At JKS' average daily trading volume, it would take more than 11 days for shorts to cover these positions, meaning there's plenty of sideline cash available to help fuel another post-earnings pop.
Furthermore, all three analysts following JinkoSolar stock carry a "hold" or worse rating, while the average 12-month price target of $18.48 sits well below today's closing price. Upgrades and/or price-target hikes could lift the energy concern even higher.