Schaeffer's Trading Floor Blog
Stocks quoted in this article:

Stocks are modestly lower on Merger Monday, despite stronger-than-expected housing and manufacturing data, with the major market indexes backing down from all-time peaks. Meanwhile, among the equities in focus are pharmacy concern Walgreen Company (NYSE:WAG), casino issue Wynn Resorts, Limited (NASDAQ:WYNN), and filmmaker DreamWorks Animation SKG, Inc. (NASDAQ:DWA), which have all attracted analyst attention.

  • WAG -- which will report fiscal third-quarter earnings ahead of the open tomorrow -- has shed 0.5% to $74.20, after UBS cut its price target on the stock to $88 from $90. (Susquehanna, on the other hand, raised its price target to $95 from $80.) While the longer-term trend points to bullish options betting, speculators more recently have been upping the bearish ante ahead of WAG's earnings report. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.10 stands higher than 87% of all other readings from the past year, pointing to a healthier-than-usual appetite for long puts over calls during the past two weeks. Short-term speculators are paying up to gamble on WAG, as the equity's Schaeffer's Volatility Index (SVI) has jumped to 32% -- in the 62nd percentile of its annual range, suggesting Walgreen Company's front-month options are pricier than usual right now, from a volatility standpoint.

  • WYNN dropped 1.8% out of the gate today, but has since trimmed its loss to 0.1% to trade at $200.72. Pressuring the equity lower was a double dose of negative analyst attention, with Susquehanna slashing its price target to $239 from $268, and Deutsche Bank lowering its target to $242 from $265. The bearish brokerage attention is relatively rare for Wynn Resorts, Limited, which boasts 11 "strong buys," compared to six lukewarm "holds" and not a single "sell" rating. Plus, the consensus 12-month price target rests at $247.35 -- a more than 23% premium to the stock's current price, and within 2 points of an all-time high.

  • Finally, DWA is 3.6% lower at $23.59, after B. Riley trimmed its price target on the equity by $5 to $32. From a sentiment perspective, DWA is no stranger to skepticism. Just two out of nine analysts offer up "strong buy" opinions, and short interest represents nearly 13 sessions' worth of pent-up buying demand, at the stock's average pace of trading. Meanwhile, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 4.15 stands higher than 96% of all other readings from the past year, and its Schaeffer's put/call open interest ratio (SOIR) rests at an annual peak of 3.62. In other words, DreamWorks Animation SKG, Inc.'s short-term options crowd hasn't been more put-biased during the past 12 months.

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