Pandora stock is still heavily shorted
Pandora Media Inc (NYSE:P) stock is soaring today, up 6.3% at $5.21, after Raymond James upgraded the music streaming concern to a "strong buy" from "market perform," while also setting an $8 price target. This comes after the company announced the purchase of ad tech startup AdsWizz yesterday. The Raymond James analyst in coverage likes how Pandora is following Google's DoubleClick Search (DS) strategy.
Although currently on track for its best day in over a month, it's been tough sledding for Pandora stock in the past year. The equity has given back 57% in the past 52 weeks, and fell to a record low of $4.09 on Jan. 23. The shares have struggled to break out from there, held in check by the $5.60 level.
This longer term technical weakness has led to a bearish bias across Wall Street. For instance, just one-third of covering analysts recommend buying the security, and short interest increased by 18% during the last two reporting periods to 67.90 million shares. This is the highest level since Dec. 1, and represents more than 35% of P's total available float. Based on average daily volumes, it would now take short sellers almost four days to cover their positions.
Options traders have shown a stronger-than-usual proclivity for puts. This is according to Pandora's Schaeffer's put/call open interest ratio (SOIR) of 0.66 that ranks in the 85th percentile of its annual range, showing a heavier-than-normal amount of put open interest for contracts expiring within three months, relative to calls.
Now appears to be a more attractive time to buy premium on puts, rather than calls. The fund's 30-day implied volatility (IV) skew of -5.9% ranks in the 10th annual percentile, meaning short-term puts have rarely been cheaper compared to their call counterparts.