Schaeffer's Trading Floor Blog

Analyst Downgrades: Yahoo! Inc., Splunk Inc, and FireEye Inc

Analysts downwardly revised their ratings on YHOO, SPLK, and FEYE

by 5/23/2014 9:12 AM
Stocks quoted in this article:

Analysts are weighing in today on Internet bigwig Yahoo! Inc. (NASDAQ:YHOO), software concern Splunk Inc (NASDAQ:SPLK), and virtual security platform FireEye Inc (NASDAQ:FEYE). Here's a quick roundup of today's bearish brokerage notes.

  • YHOO saw its price target cut to $45 from $47 at Bernstein this morning, though the brokerage firm maintained its "outperform" rating on the shares. On the other hand, CNBC's Jim Cramer waxed optimistic on YHOO ahead of the Alibaba IPO, opining that the stock is underloved on the Street. To wit, options players have been purchasing YHOO puts over calls at an accelerated clip during the past two weeks, as the stock's 10-day put/call volume ratio of 0.42 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands just 14 percentage points from an annual peak. On the charts, Yahoo! Inc. shares have advanced more than 33% over the past year, but have recently consolidated atop their 50-week moving average, and were last seen at $34.70. Should the stock resume its longer-term uptrend, a mass exodus of option bears could add fuel to YHOO's fire.

  • SPLK has given up one-third of its value in 2014, and tagged a new annual low of $41.07 just last week. Against this backdrop, the stock was slapped with a double dose of price-target cuts this morning, with Barclays slashing its target to $51 from $78, and Wedbush hacking its target to $67 from $110. More bearish notes could be on the horizon for Splunk Inc, too. Fourteen out of 20 analysts offer up "strong buy" opinions, and the consensus 12-month price target of $96.04 represents more than double the stock's current price of $45.75. Short-term options players are also on the bullish bandwagon -- and are paying up for their contracts ahead of the company's turn in the earnings confessional next Thursday night. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.52 ranks in the 29th percentile of its annual range, suggesting short-term option players are more call-biased than usual right now. Meanwhile, the equity's Schaeffer's Volatility Index (SVI) of 71% stands just 5 percentage points from a 12-month peak, implying that SPLK's front-month options are expensive, from a historical standpoint.

  • Finally, FEYE has surrendered nearly 26% in 2014, and is now attempting to fill its post-earnings bear gap from earlier this month. The stock -- which settled at $32.29 yesterday -- is pointed nearly 3% higher in pre-market action, though, as traders adopt a glass-half-full approach to the latest analyst action. Specifically, although Barclays cut its price target on the equity to $40 from $50, the brokerage firm lifted its rating to "overweight" from "equal weight." So far this week, FEYE has advanced 15.8% amid escalating cyber-security tensions between the U.S. and China, and an extended rebound could spook the shorts -- of which there is no shortage. In fact, short interest skyrocketed 82% during the past two reporting periods, and now accounts for 10.3% of FireEye Inc's total available float.
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