Schaeffer's Trading Floor Blog

Analyst Update: Amazon.com, Inc., Cree, Inc., and hhgregg, Inc.

Analysts are weighing in on AMZN, CREE, and HGG

by 4/16/2014 2:16 PM
Stocks quoted in this article:

The broad-market indexes are higher this afternoon, as Wall Street applauds solid tech earnings and comments from Fed Chair Janet Yellen. Meanwhile, among the equities in focus are e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN), LED issue Cree, Inc. (NASDAQ:CREE), and electronics retailer hhgregg, Inc. (NYSE:HGG), which have all attracted the attention of analysts.

  • AMZN is 0.1% higher at $316.50, after Argus upgraded the equity to "buy" from "hold." Despite its year-to-date deficit of more than 20%, Amazon.com, Inc. remains beloved on Wall Street. In fact, 21 analysts deem the stock worthy of a "strong buy," while another pair dish out "buy" ratings. For comparison, AMZN harbors six lukewarm "holds" and not a single "sell" recommendation. Likewise, short-term options players haven't been more call-heavy during the past year, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.88, which stands at an annual low. The company is slated to report first-quarter earnings after the close next Thursday, and a weaker-than-expected report could spook some of the bulls into hitting the exits. An unwinding of optimism in the options pits, or a flood of downgrades, could exacerbate selling pressure on the security.

  • CREE is 1.5% higher at $56.34, thanks to an upgrade to "buy" from "hold" at Needham & Co. Ahead of Cree, Inc.'s turn in the earnings confessional after the close next Tuesday, option buyers are picking up calls over puts at an accelerated clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 5.30 sits just 15 percentage points from a 52-week peak. However, it's worth noting that short interest accounts for nearly 10% of CREE's total available float, meaning some of the recent call buying -- especially at out-of-the-money strikes -- could be attributable to short sellers picking up pre-earnings hedges.

  • Finally, HGG is taking the red road less traveled today, down 0.3% at $7.85, after a price-target cut to $8 from $9 at Jefferies. Beleaguered hhgregg, Inc. yesterday warned of a sharp, weather-induced drop in fiscal fourth-quarter revenue, which translated into a 9.6% bear gap for HGG on the charts. From a longer-term perspective, the equity has surrendered more than 43.8% in 2014, and underperformed the broader S&P 500 Index (SPX) by nearly 30 percentage points during the past three months. As such, it's no surprise to find a bearish bias on Wall Street. Not one of the 12 analysts following HGG deems it a "buy," and short interest accounts for a whopping 60% of the stock's total available float. In the same vein, the security has racked up a 10-day ISE/CBOE/PHLX put/call volume ratio of 22.54, which rests just 2 percentage points from an annual acme.

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