Prospect Capital (NASDAQ:PSEC) Stock Sees Heavy Call Option Buying

Prospect Capital Corporation (NASDAQ:PSEC) was the recipient of some unusual options trading activity on Thursday. Stock traders bought 2,565 call options on the company. This represents an increase of 353% compared to the average volume of 566 call options.

Prospect Capital Price Performance

Shares of PSEC traded up $0.03 during mid-day trading on Thursday, hitting $1.47. 2,928,394 shares of the company traded hands, compared to its average volume of 5,098,063. Prospect Capital has a one year low of $1.40 and a one year high of $3.12. The company has a current ratio of 0.87, a quick ratio of 0.87 and a debt-to-equity ratio of 0.64. The business has a 50-day moving average of $1.93 and a 200 day moving average of $2.35. The stock has a market capitalization of $782.05 million, a price-to-earnings ratio of 29.10 and a beta of 0.84.

Prospect Capital (NASDAQ:PSEC) last issued its quarterly earnings results on Wednesday, November 4th. The financial services provider reported $0.15 earnings per share for the quarter, beating analysts’ consensus estimates of $0.10 by $0.05. Prospect Capital had a net margin of 19.33% and a return on equity of 12.15%. The business had revenue of $151.74 million during the quarter, compared to analyst estimates of $163.14 million. As a group, equities analysts expect that Prospect Capital will post 0.38 earnings per share for the current fiscal year.

Prospect Capital Dividend Announcement

The company also recently announced a monthly dividend, which will be paid on Wednesday, November 18th. Stockholders of record on Wednesday, October 28th will be given a dividend of $0.0350 per share. The ex-dividend date is Wednesday, October 28th. This represents a $0.42 dividend on an annualized basis and a dividend yield of 28.7%. Prospect Capital’s payout ratio is presently 840.00%.

Insiders Place Their Bets

In other news, CEO John Barry. III acquired 1,217,105 shares of the company’s stock in a transaction dated Friday, September 4th. The stock was bought at an average price of $2.24 per share, with a total value of $2,726,315.20. Following the completion of the acquisition, the chief executive officer owned 90,479,988 shares in the company, valued at approximately $202,675,173.12. This represents a 1.36% increase in their position. The acquisition was disclosed in a document filed with the SEC, which is available through this hyperlink. Corporate insiders own 25.94% of the company’s stock.

Hedge Funds Weigh In On Prospect Capital

Hedge funds have recently added to or reduced their stakes in the company. Independent Financial Group LLC bought a new stake in Prospect Capital in the first quarter valued at about $8,644,000. Legal & General Group Plc bought a new position in Prospect Capital during the second quarter worth about $9,336,000. Private Management Group Inc. grew its position in shares of Prospect Capital by 51.7% during the 2nd quarter. Private Management Group Inc. now owns 20,534,804 shares of the financial services provider’s stock worth $47,435,000 after buying an additional 6,999,513 shares during the period. Van ECK Associates Corp grew its position in shares of Prospect Capital by 32.7% during the 2nd quarter. Van ECK Associates Corp now owns 9,685,724 shares of the financial services provider’s stock worth $22,374,000 after buying an additional 2,388,990 shares during the period. Finally, Concorde Asset Management LLC bought a new stake in shares of Prospect Capital in the 2nd quarter valued at about $838,000. Institutional investors own 9.06% of the company’s stock.

Key Headlines Impacting Prospect Capital

Here are the key news stories impacting Prospect Capital this week:

• Positive Sentiment: PSEC reported $0.15 per share, above the $0.10 analyst consensus, and announced a $200 million common-share repurchase program. Repurchases could support per-share value, though the announcement does not establish how much the company will buy back. Prospect Capital results and repurchase program
• Neutral Sentiment: Call-option trading rose to 2,565 contracts, 353% above its average volume. This suggests increased speculative interest, but options activity alone does not reliably predict the stock’s direction.
• Negative Sentiment: Quarterly revenue of $151.7 million fell short of the $163.1 million consensus. Net investment income was $76.4 million, down from $79.4 million a year earlier, while NII per share declined to $0.15 from $0.17. The earnings beat therefore came alongside weaker underlying income. Prospect Capital earnings report
• Negative Sentiment: An Associated Press earnings snapshot reported a $21 million net loss, highlighting that the per-share earnings beat does not mean the company was profitable on a net basis. Fiscal Q1 earnings snapshot
• Negative Sentiment: A Seeking Alpha article raised concerns about PSEC’s high stated yield being supported by a shrinking portfolio, adding to questions about the sustainability of income and distributions. Analysis of Prospect Capital’s yield and portfolio

Analysts Set New Price Targets

A number of research firms recently commented on PSEC. Wall Street Zen lowered Prospect Capital from a “buy” rating to a “hold” rating in a research report on Saturday, August 22nd. Weiss Ratings lowered Prospect Capital from a “sell (d+)” rating to a “sell (d)” rating in a research note on Wednesday, August 26th. Finally, Zacks Research upgraded Prospect Capital to a “hold” rating in a report on Monday, October 5th. One analyst has rated the stock with a Hold rating and two have issued a Sell rating to the stock. According to data from MarketBeat, the stock presently has a consensus rating of “Sell” and an average target price of $2.00.

About Prospect Capital

Prospect Capital Corporation (NASDAQ:PSEC) is a business development company that provides financing and investment capital to middle-market companies. The company primarily invests in privately held businesses through first-lien and second-lien loans, mezzanine debt, and other debt securities, while also making equity and equity-related investments in selected companies.

Prospect Capital invests across a range of industries and has additional exposure to areas such as real estate, structured credit, and financial services.