Why Shares Of Discovery Are Up By 10% Today?

Discovery Video 30.03.21.

Discovery Shares Move Higher As Traders Bet That Forced Selling Is Over

Discovery stock is moving higher after the huge sell-off as traders bet that the selling pressure from the default of hedge fund Archegos Capital has come to an end.

Discovery shares declined from the recent highs at the $78 level to the lows at $34.60 after Archegos Capital miscalculated its leveraged bets and faced margin calls which led to forced liquidation of its positions.

Nomura and Credit Suisse, which were late to liquidate Archegos’ positions compared to other banks, faced significant losses. According to recent reports, Credit Suisse is facing losses of up to $4 billion while Nomura will take a hit of about $2 billion.

What’s Next For Discovery?

The key intrigue right now is whether everyone has managed to get out of Archegos-related positions. Traders will closely monitor all selling activity in the Discovery stock in the next few days to evaluate whether forced selling is over.

If the market decides that banks have managed to get out of the stock, shares of Discovery will have a solid opportunity to gain significant upside momentum.

The company lost more than half of its market capitalization in just several trading sessions without any material fundamental changes, so this situation has surely attracted opportunistic traders who are willing to bet on a rebound.

Analysts expect that the company will report earnings of $2.84 per share in 2021 and $3.25 per share in 2022, so the stock is trading at about 14 forward P/E for 2022 at current levels. This is cheap for the current market environment, and the stock may attract value-oriented investors.

It remains to be seen whether Discovery shares will be able to get close to recent highs anytime soon, but the rebound of the stock may be strong in the near term in absence of forced selling activity.

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