Market Perception of CYTK's Decline – Analyzing Stock Performance

By Kim Brooks • Monday, March 11 15:11 • Permanent Link

Tumbling to a price of $63.24 during today's afternoon trading session, shares of Cytokinetics are now -33.88% below their average target price of $95.65. 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, on the other hand, is a bit more pessimistic. Cytokinetics's short interest -- meaning the percentage of its share float that is being shorted on an expectation of a price decline -- is quite high at 23.8%. The float includes only shares that are available for public trading, and excludes preferred shares.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

Another way to gauge the sentiment on Cytokinetics is to look at the percentage of institutions that are invested in the stock. In this case, 114.2% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.

If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.

Overall, there is mixed market sentiment towards Cytokinetics because of an analyst consensus of strong upside potential, a buy rating, an unusually large proportion of its shares sold short, and a significant number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about CYTK:

It has trailing 12 month earnings per share (EPS) of $-5.45 per share
Cytokinetics has a trailing 12 month Price to Earnings (P/E) ratio of -11.6 while the S&P 500 average is 15.97
Cytokinetics is a Health Care company, and the sector average P/E and P/B ratios are 30.21 and 4.08 respectively

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.