Potential Short Squeeze After The Close

Pandora (P) will report earnings after the close. Estimates are $.01 versus $.02. There is considerable upside to our price target, $11.28, which is based on Cash Flow Return on Investments (CFROI) as well as profitability and growth of assets. Trillions of dollars are managed on a CFROI basis.

We  note the short ratio is 9.79 which means if the company beats then the shorts will be running for  cover. Our upper bound target is $14.89. This name bottomed at $7.50 and has a gap down at $12.50 that needs to be filled.

So how to play it? Aggressive traders buy shares before the close. Less aggressive traders could be a 1/2 position and add or not add on Wednesday morning. Another stategy would be to buy the stock and buy a December $9 put for $1. If the stock rips, then you give up $1 of upside and are protected on the downside.  We like this strategy the best and will report on the results on Wednesday.

Options for December show a bias to the call side BUT there are lots of December 8 Puts with open interest at 16,959.