SunPower stock's latest peak comes amid historically low implied volatility, which could push it back to five-year highs
The shares of SunPower Corporation (NASDAQ: SPWR) are down 3.5% to trade at $16.68 at last check, despite earlier hitting a four-year high of $18.25. And while the renewable energy company already enjoys a jaw-dropping 231.8% lead year-to-date -- with support from the 30-day moving average over the last few weeks -- a historic bullish signal now flashing could indicate even more upside for SPWR in the near future.
Specifically, the stock's recent peak comes amid historically low implied volatility (IV), which has been a bullish combination for the equity in the past. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have only been two other times in the past five years when the stock was trading within 2% of a 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower -- as is the case with the SPWR's current SVI of 96.3%, which sits close to the 18th percentile of its 12-month range. Data shows the stock was higher a month later, averaging a return of 26.5% for that time period. From its current perch, a move of similar magnitude would put SPWR just above the $21 mark, territory that hasn't been reached since 2015.
The majority of analysts covering SPWR are still bearish, leaving plenty of room for upgrades and price-target hikes going forward, which could push the stock even higher. Of the 11 in coverage, nine call it a tepid "hold" or worse, while only two sport a "strong buy." Plus, the 12-month consensus price target of $12.58 is a massive 25.7% discount to current levels.
A short squeeze could create even more tailwinds for the security. Short interest is up 28.3% in the last two reporting periods, and the 33.32 million shares sold short make up a substantial 41.3% of SunPower stock's available float. In other words, it would take more than a week to buy back these bearish bets, at the security's average pace of trading.
In the options pits, traders are also pessimistic, with puts popular. This is per SPWR's Schaeffer's put/call open interest ratio (SOIR) of 1.06, which sits in the 91st percentile of its annual range -- meaning short-term options traders have rarely been more put-biased.
What's more, the equity's Schaeffer's Volatility Scorecard (SVS) ranks at 93 out of 100, implying that the SunPower stock has tended to exceed volatility expectations in the past year -- a boon for option buyers.