Sigma Lithium (SGML) shares are inching lower ahead of the company’s earnings on Nov. 13 and the derivatives market believes the selloff could accelerate after the quarterly event.
The bearish options market sentiment is interesting considering SGML is expected to record $0.02 per share of earnings (EPS) for its third fiscal quarter – a remarkable 120% year-over-year growth.
Heading into the earnings event, Sigma Lithium stock is down over 75% versus its May high.
Options Sentiment Remains Bearish on SGML Shares
Despite massive expected YoY growth, options traders are not convinced that SGML’s upcoming release will help put a floor underneath its stock price.
According to Barchart, the put-to-call ratio on contracts expiring Nov. 20 sits at 1.42 as of writing, indicating a strong bearish skew (a reading below 1.00 is typically characterized as in favor of the bears).
Importantly, the lower price on those options contracts is set at $4.49 currently – suggesting Sigma Lithium shares could tumble another 13% through the end of next week.
The bearish options market sentiment is reflected in the technical setup as well, as evidenced in Barchart’s “100% SELL” opinion on the Canadian miner.
Why Does Data Suggest Selling Sigma Lithium Stock?
While Sigma Lithium is expected to turn a profit in Q3, investors remain focused on lithium prices, which remain well below their 2023 highs and therefore continue to pressure sentiment across the sector.
There are also questions about whether SGML can sustain strong profitability if pricing conditions remain weak into 2027.
Moreover, SGML shares’ huge year-to-date decline suggests confidence has already been severely damaged, making traders reluctant in betting on a meaningful post-earnings recovery.
All in all, for now, the market seems to view earnings growth as backward-looking while keeping a close eye on future demand and lithium pricing trends.
How Wall Street Recommends Playing Sigma Lithium
Investors should note, however, that Wall Street firms haven’t thrown in the towel on SGML stock yet.
According to Barchart, while the consensus rating on Sigma Lithium sits at “Hold” only, the mean price target of about $13.67 signals potential upside of more than 150% from here.
On the date of publication, Wajeeh Khan did not directly have a position in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.