Schaeffer's Trading Floor Blog

Analyst Upgrades: Celladon Corporation, American Eagle Outfitters, and Dunkin' Brands Group, Inc.

Analysts upwardly revised their ratings on Celladon Corp (CLDN), American Eagle Outfitters (AEO), and Dunkin Brands Group Inc (DNKN)

by 3/5/2015 9:28 AM
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Analysts are weighing in today on biotechnology firm Celladon Corp (NASDAQ:CLDN), retailer American Eagle Outfitters (NYSE:AEO), and quick-service restaurateur Dunkin Brands Group Inc (NASDAQ:DNKN). Here's a quick roundup of today's bullish brokerage notes on CLDN, AEO, and DNKN.

  • CLDN is poised to pop more than 11% out of the gate -- and to a new record peak -- after Roth Capital started coverage on the shares with a "buy" rating and a $70 price target, representing expected upside of 256% to last night's close at $19.64. On the charts, the equity has performed well, tacking on 73.8% over the past 52 weeks. Meanwhile, in the options pits, traders have shown a preference for calls over puts. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 1.56 calls for each put over the past month. Echoing this call-skewed bias is Celladon Corp's Schaeffer's put/call open interest ratio (SOIR) of 0.54, which suggests call open interest nearly doubles put open interest among options set to expire in three months or less.

  • It was a big day for AEO yesterday, which hit a fresh annual high of $16.36, before settling up 7.7% at $15.96 -- thanks to a well-received earnings report. Against this backdrop, no fewer than 10 brokerage firms weighed in on the stock overnight. Stifel, for example, raised its rating to "buy" from "hold," saying "AEO was able to drive sales while successfully reducing promotions. Evidence to us that the customer is responding favorably to the company's improved merchandise." Elsewhere, SunTrust Robinson boosted its price target by $2 from $17, explaining the firm's quarterly earnings report is proof "American Eagle's turnaround is tangible." Should the shares extend this momentum, another round of bullish brokerage notes could come down the pike. Currently, 61% of analysts maintain a "hold" or worse suggestion toward American Eagle Outfitters, while the average 12-month price target of $16.21 is within a chip-shot of the equity's present perch.

  • DNKN is 2% higher in electronic trading, after Goldman Sachs upped its rating on the shares to "buy" from "neutral," and raised its price target by $7 to $54 -- representing a 19.6% premium to last night's close at $45.14, as well as territory yet to be charted. Year-to-date, the shares have added 5.8%, but not everyone is convinced they can sustain this uptrend. Short interest surged over the latest reporting period, and now accounts for a healthy 10.3% of the equity's available float. What's more, at Dunkin Brands Group Inc's average daily pace of trading, it would take more than seven sessions to cover these shorted shares. Meanwhile, the company will make an appearance today at the UBS Global Consumer Conference.

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Buzz Stocks: AbbVie Inc., The Macerich Company, and Canadian Solar Inc.

Today's stocks to watch in the news include AbbVie Inc (ABBV), Macerich Co (MAC), and Canadian Solar Inc. (CSIQ)

by 3/5/2015 9:22 AM
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U.S. stocks are primed to run higher out of the gate, following some encouraging interest rate developments from across the pond. In company news, today's stocks to watch include pharmaceutical firm AbbVie Inc (NYSE:ABBV), real estate investment trust (REIT) Macerich Co (NYSE:MAC), and alternative energy concern Canadian Solar Inc. (NASDAQ:CSIQ).

  • ABBV has agreed to acquire Pharmacyclics, Inc. (NASDAQ:PCYC), maker of blood-cancer drug Imbruvica, for $21 billion, or $261.25 per share -- a 13.4% premium to PCYC's closing price on Wednesday. AbbVie Inc CEO Richard Gonzalez called the purchase a "strategically compelling opportunity" that will "add enormous value to AbbVie." PCYC was also reportedly being pursued by Johnson & Johnson (NYSE:JNJ) and others. On the charts, ABBV has struggled, losing 7.9% in 2015 to trade at $60.27, and is poised to drop nearly 5% out of the gate. Accordingly, option bears have honed in on the stock, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). ABBV's 50-day put/call volume ratio across this trio of exchanges is 0.62, which rests just 14 percentage points from a 12-month peak.

  • MAC is being courted by Simon Property Group Inc (NYSE:SPG), according to The Wall Street Journal. While sources say a formal offer has yet to be tendered, Macerich Co has already discussed potential takeover defense strategies, the Journal said. Technically speaking, MAC's momentum has slowed in 2015, with the shares up just 0.5% at $83.80 -- though that could change today, with the stock pointed 2% higher in premarket trading. Meanwhile, short sellers have been piling on. During the latest reporting period, short interest on MAC soared almost 141% to roughly 6.4 million shares -- which would take seven sessions to cover, at typical daily trading levels.

  • Finally, CSIQ posted better-than-expected fourth-quarter earnings this morning, as the company's net profit more than tripled year-over-year. CEO Shawn Qu also announced potential plans to list the firm's power plant-building unit in a yield co. As such, the shares are up 5% ahead of the open, poised to add to the equity's year-to-date advance of 24.8%. Meanwhile, the brokerage bunch has jumped on Canadian Solar Inc.'s bullish bandwagon, with 100% of covering analysts issuing a "buy" or better recommendation. What's more, CSIQ's average 12-month price target of $43.33 stands in territory not charted in nearly a year, and represents a 43.6% premium to Wednesday's close at $30.18. However, such optimism isn't reflected in the stock's options pits.

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Analyst Downgrades: McDonald's Corporation, Exxon Mobil Corporation, and Century Aluminum Company

Analysts downwardly revised their ratings on McDonald's Corporation (MCD), Exxon Mobil Corporation (XOM), and Century Aluminum Co (CENX)

by 3/5/2015 9:20 AM
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Analysts are weighing in today on fast food giant McDonald's Corporation (NYSE:MCD), as well as commodity concerns Exxon Mobil Corporation (NYSE:XOM) and Century Aluminum Co (NASDAQ:CENX). Here's a quick roundup of today's bearish brokerage notes on MCD, XOM, and CENX.

  • MCD is pointed modestly lower ahead of the bell, after Piper Jaffray downgraded the stock to "neutral" from "overweight." While McDonald's Corporation has made strides on the charts recently, the stock continues to struggle around the century mark, closing at $100.25 on Wednesday. Plus, the security's 14-day Relative Strength Index (RSI) is now docked at 71 -- in overbought territory, suggesting a short-term pullback could be in the cards. Meanwhile, short-term option premiums are historically inflated ahead of MCD's February sales report, due on Monday. The equity's Schaeffer's Volatility Index (SVI) of 22% stands higher than 72% of all other readings from the past year.

  • Ahead of the bell, fellow blue chip XOM is flirting with breakeven at $87.18, as speculators digest a mixed round of analyst attention. While Evercore ISI downgraded Exxon Mobil Corporation to "hold" and Credit Suisse reiterated an "underperform" opinion, the latter brokerage firm hiked its price target by $3 to $85. On the charts, XOM has surrendered 5.7% in 2015, and explored annual lows as recently as late January. Off the charts, the company yesterday said it's in talks to restructure its oil agreements with Iraq, and outlined its long-term spending and production plans. On the sentiment side, most analysts are skeptical, with 11 out of 14 doling out "hold" or worse ratings.

  • Finally, CENX gapped 16.6% lower yesterday, settling at an eight-month low of $16.51, due to a BofA-Merrill Lynch downgrade of the stock and sector peer Alcoa Inc (NYSE:AA). Century Aluminum Co is poised to extend its slump today -- the equity is pointed 2.2% lower in electronic trading -- after Morgan Stanley downgraded the shares to "equal weight" from "overweight," and cut its price target to $18. Likewise, Deutsche Bank chimed in, slicing its price target to $27 from $32, but maintaining a "buy" endorsement. CENX has already shed close to one-third of its value in 2015, and has underperformed the broader S&P 500 Index (SPX) by roughly 38 percentage points during the past three months. As such, short sellers are piling on, with short interest soaring 17.9% during the past two reporting periods. These bearish bets now account for more than 10% of CENX's total float, representing six sessions' worth of pent-up buying demand, at the stock's average pace of trading.

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VXX Still Defying Gravity -- But For How Long?

The iPath S&P 500 VIX Short-Term Futures ETN (VXX) has gone a full calendar quarter without a new low

by 3/5/2015 8:09 AM
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Speaking of iPath S&P 500 VIX Short-Term Futures ETN (VXX) … it continues its 2014 pattern of behaving unhorribly (for lack of a better word). We got fairly close to taking out the all-time lows of 25.64 set all the way back on Dec. 5, but alas, the Nazz hit 5,000 and that apparently became a psychological symbol and time to start selling stocks. Or, at least, time to take a break chasing them higher.

So we never made it, and have now gone an entire quarter since the last VXX record low. That's 60 calendar days, and it's time we update the VXX Lows Table … a.k.a. "Days without an Accident" at The VXX Factory.

VXX Record Lows Since 2009

It's now the fifth-longest VXX competence streak ever! And we're two-and-a-half weeks of holding water until we get all the way up to the third-best ever.

Why does VXX continue to behave less badly? Mind you, all we're talking about is, indeed, "less bad." VXX is down about 13.6% in 2015.

One factor is the demand for VXX, as we noted yesterday. It's debatable whether that demand is bullish or bearish for the market itself, but it's not debatable that it helps support VXX itself, so long as the laws of supply and demand exist.

Another factor is simply lucky timing. VXX was probably a few days away from taking out the lows, but the market simply stopped lifting.

But neither can hold up forever. Volatility itself is modestly high versus realized volatility, and CBOE Volatility Index (VIX) futures are at a premium to VIX. So if/when the market pullback ends, VXX will resume its descent. In fact, the near-month contango is as steep as it has been in a while (click chart to enlarge).

VIX Futures Term Structure March 2015 - October 2015

Remember, the steeper the slope, the greater the headwind on VXX. I'm sticking with my position from The Great Options Tweeter VXX Debate of last month: VXX dips not from rolling a VIX future itself, but rather from the implied cost of time decay of holding a VIX future. The steeper the contango, the steeper the cost of holding a future over any unit of time.

And this slope is quite steep in the nearest two cycles, which will not resolve well for VXX. So this streak of VXX competence could end soon, after all.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

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Monster Beverage Corporation, Netflix, Inc. Execs Crack Forbes List

A look at Monster Beverage Corp (MNST) and Netflix, Inc. (NFLX) -- two underloved outperformers

by 3/4/2015 2:36 PM
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Forbes came out with its annual billionaires list this week. Of course, the list was full of the usual suspects, including Microsoft Corporation's (NASDAQ:MSFT) Bill Gates -- the world's richest man -- and Facebook Inc's (NASDAQ:FB) Mark Zuckerberg, the wealthiest person under 40. However, there were a couple newcomers worth noting, including the CEOs of Monster Beverage Corp (NASDAQ:MNST) and Netflix, Inc. (NASDAQ:NFLX).

Rodney Sacks of MNST appeared on the list with a net worth of $1.5 billion. Shares of his company have been locked in an uptrend, adding 90% year-over-year to trade at $139.90. The stock is off to a fast start in 2015, too, outperforming the broader S&P 500 Index (SPX) by more than 23 percentage points over the last 40 sessions.

However, not everyone is in MNST's bullish corner, yet. Seven out of 13 covering analysts have doled out tepid "hold" ratings, and the equity's average 12-month price target of $144.93 represents a less than 4% premium to current trading levels. In other words, a round of bullish brokerage attention could intensify buying power on the shares.

What's more, put buying has been running fast and furious in Monster Beverage Corp's (NASDAQ:MNST) options pits. The security's 50-day put/call volume ratio of 1.44 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands in the 90th annual percentile. While a portion of these wagers may be the work of shareholders hedging, a capitulation among "vanilla" bears could lead to tailwinds.

Moving along, NFLX's Reed Hastings squeaked onto the Forbes list with a net worth of $1 billion. Shares of his company have been on the up-and-up, too, tacking on more than 37% year-to-date to trade at $469.69. Sparking the rally was an earnings beat in late January. Notably, the security is once again approaching its Sept. 9 record high of $489.29.

Netflix, Inc. (NASDAQ:NFLX) still has plenty of detractors, though. Half of the analysts tracking the shares rate them a "hold" or worse, and the stock's consensus 12-month price target of $445.51 is at a discount to the current price. In other words, NFLX could benefit from a series of upgrades and/or price-target hikes.

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