Schaeffer's Trading Floor Blog

Analyst Downgrades: Splunk Inc, Staples, Inc., and Pharmacyclics, Inc.

Analysts downwardly revised their ratings on SPLK, SPLS, and PCYC

by 5/27/2014 9:03 AM
Stocks quoted in this article:

Analysts are weighing in today on software concern Splunk Inc (NASDAQ:SPLK), office supplies retailer Staples, Inc. (NASDAQ:SPLS), and biopharmaceutical name Pharmacyclics, Inc. (NASDAQ:PCYC). Here's a quick roundup of today's bearish brokerage notes.

  • Analysts are expressing caution on SPLK as the company prepares to report quarterly earnings after Thursday's close. Pacific Crest lowered its price target by a healthy margin to $68 from $107, while Cantor dropped its respective target to $99 from $115. (Northland, however, upped its opinion on SPLK to "outperform" from "market perform.") The shares have dropped more than 33% in 2014 to rest at $45.99, but the company has enjoyed historical success in the earnings confessional. In fact, Splunk Inc has matched or topped analysts' bottom-line estimates in seven of the past eight quarters, and gained an average of 7.5% the session after earnings were issued. Meanwhile, short-term SPLK options have become notably expensive as earnings approach, as evidenced by the stock's Schaeffer's Volatility Index (SVI) reading of 73%, which stands at an annual high.

  • Currently perched at $11.65, SPLS shares are sitting 13% below their week-ago level as a result of a post-earnings gap lower last Tuesday. What's more, an article in yesterday's The Wall Street Journal reported that Staples, Inc. top executives earned bonuses despite failing to meet established goals. The retailer is continuing to feel the repercussions of this earnings report, as Goldman Sachs cut its rating on the equity to "sell" from "neutral" this morning, and lowered its price target to $11 from $11.50. The stock has become a favorite among short sellers, given its challenges on the charts. Nearly 14% of the equity's float is currently sold short, following a 5.3% increase in short interest during the last reporting period. At the stock's average daily volume, it would take more than two weeks to exit the shorted positions.

  • PCYC has been in downtrending mode for the last few months, shedding more than 43% from its all-time high of $154.89 (reached on Feb. 21) to trade at $87.62. The stock is beginning the holiday-shortened week with two strikes against it: Morgan Stanley lowered its price target to $95 from $100, and RBC trimmed its rating to "sector perform" from "outperform," while dropping its target to $95 from $110. Still, there is wiggle room for additional downgrades for Pharmacyclics, Inc., judging by the current analyst ratings landscape. Of the 14 brokerage firms following the shares, eight still rate the stock a "strong buy," leaving six "holds" and not one "sell" to be found.
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