SunTrust initiated coverage with a "buy" rating and a $50 price target
Constellation Pharmaceuticals Inc (NASDAQ:CNST) is bucking the broad-market trend today, and surging after SunTrust Robinson initiated coverage with a "buy" rating and a $50 price target -- a roughly 43% premium to last night's close. The analyst said Constellation's myelofibrosis drug candidate CPI-1610 showed promised, calling it "likely ahead of the competition." The stock is up 7.1% to trade at $37.24, and is on track for its highest close in two weeks.
Plus, CNST is looking to overtake its 20-day moving average, which has acted as a ceiling on the charts this year, leading the equity lower. The stock is still eyeing a nearly 20% year-to-date drop, but boasts a 224.6% gain in the last 12 months of trading.
While options activity is still running at a relatively low volume, the 165 calls that have crossed the tape represent 27 times the expected intraday volume. It looks like most of this activity surrounds the September 45 call, where positions are possibly being sold to open, suggesting these traders are calling the $45 level as a ceiling for CNST ahead of the contracts expiration on Sept. 18. The 25-strike put from the same series is also getting some attention, with positions being opened here.
Circling back to analyst sentiment, it looks like those in coverage are pretty optimistic. Coming into today, the stock sported seven "buy" or better ratings, and just one "hold." Meanwhile, this penchant for bullish bets in the options pits also seems to be the norm, with 7.6 calls bought for every put at the the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).
Keeping all this in mind, options look like an attractive way to bet on Constellation Pharmaceuticals next move. The equity's Schaeffer's Volatility Index (SVI) of 76% sits lower than all other readings from the past year, suggesting options haven't priced in such low volatility expectations in the past 12 months.