More GRUB tailwinds could surface with continued short covering
GrubHub Inc (NYSE:GRUB) is slightly lower in today's trading, but this past Friday surged to a fresh record high of $149.34, after receiving a bull note from Wedbush. The firm initiated coverage with an "outperform" rating and set a price target of $180 -- a 28% upside to the stock's current perch of $141.14. Below we will dig deeper into the security's technical performance, and learn why data from Schaeffer's Senior Quantitative Analyst Rocky White suggests that now may be an ideal time to bet on GRUB's next leg higher.
The food delivery stock has been moving higher on the charts long term, benefiting from a line of support at the rising 20-day trendline. And despite today's pullback, losses have been capped at the $140 mark and aforementioned moving average. Overall, the shares have nearly doubled year-to-date.
Moving on, GrubHub stock's short-term options are attractively priced right now. This is per the security's Schaeffer's Volatility Index (SVI) of 38%, in the 13th percentile of its annual range, suggesting near-term options are pricing in relatively low volatility expectations.
According to White, there have been eight other times since 2008 the equity was trading near new highs when its SVI was simultaneously perched in the lower 20th percentile of its 12-month range. After these signals, the shares were higher 75% of the time one month later, and up an average of 6.39%.
Looking toward analyst sentiment, the majority of those covering the food stock carry "hold" or worse recommendations. Plus, GRUB's average 12-month price target comes at a slight discount to current levels, meaning the security is well overdue for a round of analyst upgrades and/or price-target hikes.
Finally, short interest fell roughly 8.2% during the two most recent reporting periods, yet the 5.84 million shares still sold short account for a healthy 7.4% of the available float, or 6.3 times the average daily pace of trading. Continued covering could create bigger tailwinds for GrubHub stock.