Schaeffer's Trading Floor Blog

Analyst Downgrades: Citigroup Inc, Transocean LTD, and United Continental Holdings Inc

Analysts downwardly revised their ratings on C, RIG, and UAL

by 4/7/2014 9:20 AM
Stocks quoted in this article:

Analysts are weighing in today on financial firm Citigroup Inc (NYSE:C), offshore drilling concern Transocean LTD (NYSE:RIG), and airline issue United Continental Holdings Inc (NYSE:UAL). Here's a quick roundup of today's bearish brokerage notes.

  • C -- which settled at $47.11 on Friday -- attracted negative analyst attention yet again this morning, with Credit Suisse trimming its price target on the equity to $62 from $65. (HSBC, on the other hand, upgraded Citigroup Inc shares to "neutral" from "underweight.") The stock has surrendered almost 10% so far in 2014, yet analysts and options traders remain optimistic. Thirteen out of 21 brokerage firms maintain "strong buy" ratings on the underperformer, and the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.62 sits in the 21st percentile of its annual range, suggesting short-term options players are more call-heavy than usual. Should the stock extend its recent downtrend, or should the company report weaker-than-expected earnings next Monday, another round of downgrades and/or a mass exodus of option bulls could translate into contrarian headwinds for C.

  • Morgan Stanley cut its price target on RIG by $5 to $45. However, the stock, which finished last week at $41.61, is no stranger to skepticism on Wall Street. Just five analysts deem Transocean LTD shares worthy of a "buy" or better rating, compared to 14 "holds" and four "strong sells." Likewise, short interest rocketed nearly 35% higher during the past two reporting periods, and now represents nearly six sessions' worth of pent-up buying demand, at RIG's average pace of trading. In the same vein, the security's SOIR of 0.96 stands higher than 84% of all other readings from the past year, suggesting short-term options traders are more put-biased than usual. Since touching a new two-year low of $38.47 in mid-March, RIG has recovered nearly 8.2%. However, the stock is now squaring off with its 10-week moving average -- which has yet to be conquered in 2014 -- and remains 15.8% lower year-to-date.

  • Finally, Goldman Sachs shaved its price target on UAL by $1 to $59, which still represents expected upside of 31.5% to the stock's current perch at $44.88, and stands in territory not yet charted by the shares. From a sentiment standpoint, most analysts are upbeat when it comes to United Continental Holdings Inc, which boasts nine "buy" or better endorsements, compared to two "holds" and two "sell" or worse ratings. Plus, the security's SOIR of 0.43 sits just 4 percentage points from an annual low, hinting at a bigger-than-usual call bias among options expiring within three months. On the technical front, it's no surprise to find a bullish skew on the Street; UAL has spent the last few months consolidating atop support in the $43-$44 neighborhood, but has added 53.3% over the past year.

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