Schaeffer's Trading Floor Blog

Analyst Downgrades: VIVUS, Inc., Verizon Communications Inc., and Southwest Airlines Co.

Analysts downwardly revised their ratings on VVUS, VZ, and LUV

by 2/25/2014 9:19 AM
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Analysts are weighing in today on biopharmaceutical concern VIVUS, Inc. (NASDAQ:VVUS), telecommunications specialist Verizon Communications Inc. (NYSE:VZ), and airline operator Southwest Airlines Co. (NYSE:LUV). Here's a quick roundup of today's bearish brokerage notes.

  • The brokers on Wall Street have responded bearishly to VVUS' fourth-quarter earnings report. This morning, Credit Suisse and Jefferies -- among others -- cut their price targets by $3 apiece, to $7 and $2, respectively. Heading into last night's announcement, VIVUS, Inc. was already facing a six-month deficit of 45.7% to trade at $6.75, and is now poised for a significant earnings-induced plunge in today's session. As such, it comes as no surprise that the equity has racked up a heavy amount of short interest. Currently, 33.6% of the stock's available float is sold short, which is equivalent to nearly 12 sessions' worth of pent-up buying demand, at VVUS' average pace of trading.

  • Despite VZ CEO Lowell McAdam's positive comments about the upcoming fiscal year, Credit Suisse lowered its price target on the stock to $52 from $53 this morning. (J.P. Morgan Securities, meanwhile, resumed coverage on the equity with an "overweight" rating and a price target of $57.) Year-to-date, Verizon Communications Inc. has shed about 6% to trade at $46.23, yet the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.46 ranks the lowest of all comparable readings from the past year. In other words, short-term speculators are extremely call-heavy toward the equity right now -- as evidenced in yesterday's session.

  • Stifel initiated a tepid "hold" rating on LUV this morning, despite the stock's impressive 12-month gain of 95.8% to perch at $22.16 -- its highest close in 13 years. Elsewhere, the majority of brokerage firms are bullish on Southwest Airlines Co., as nine of the 13 covering analysts have deemed the equity worthy of a "strong buy" endorsement. However, the average 12-month price target of $23.54 represents a slim premium to the shares' current price.

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