Tumbling to a price of $79.16 during today's morning trading session, shares of Cytokinetics are now -17.49% below their average target price of $95.94. Does this mean the stock will reverse course? Analysts are giving CYTK an average rating of buy and target prices ranging from 60.0 to 122.0 dollars per share.
The market is more pessimistic on Cytokinetics, because its short interest -- meaning the percentage of its shares that are being shorted on an expectation of a price decline -- is quite high at 23.7%. The float includes only shares that are available for public trading, and excludes preferred shares held by insiders.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Cytokinetics, institutional investors own 116.4% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in CYTK, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
To sum up, Cytokinetics is probably the subject of mixed market sentiment because of an analyst consensus of some upside potential, a buy rating, an unusually large proportion of its shares sold short, and a significant number of institutional investors. At Market Inference, we believe that any investment decision should be preceded by an in-depth analysis of the company's fundamental values and a comparison with similar stocks.
Here's a snapshot of some important facts to keep in mind about CYTK:
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The stock has trailing 12 month earnings per share (EPS) of $-5.55
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Cytokinetics has a trailing 12 month Price to Earnings (P/E) ratio of -14.3 compared to the S&P 500 average of 15.97
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Cytokinetics is a Health Care company, and the sector average P/E and P/B ratios are 30.21 and 4.08 respectively
