A short squeeze could help IQ extend its gains
Shares of iQIYI Inc (NASDAQ:IQ) are up 0.4% to trade at $24.50 this morning, after the Chinese video streaming service inked a deal to provide in-vehicle entertainment for Ford Motor (F) in its new Sync+ system. The feature will be rolled out in Ford and Lincoln models in China later this year.
On the charts, iQiyi stock has added 70% since its Jan. 2 bottom at $14.35, thanks in part to upbeat U.S.-China trade developments. The shares were rejected by the $28 level last month, but the subsequent pullback was cushioned by their 50-day moving average.
More short covering could drive the shares higher. Short interest fell 3.6% in the most recent reporting period, yet the 48.46 million shares still sold short represents a hefty 15.9% of IQ's total available float. At the security's average daily trading volume, it would take shorts more than four days to buy back their bearish bets.
Bull notes could also keep the wind at IQ's back. While six of the 15 analysts covering IQ stock maintain a "hold" or "strong sell" recommendation on the equity, its consensus 12-month price target of $27.16 is only an 11% premium to its current perch.
Meanwhile, IQ short-term options premiums look relatively inexpensive at the moment. This is per the security's Schaeffer's Volatility Index (SVI) of 48%, which stands in the low 3rd percentile of its annual range. In other words, near-term options are pricing in relatively low volatility expectations.