Schaeffer's Trading Floor Blog
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Analysts are weighing in today on insurance issue American International Group Inc (NYSE:AIG), mining company Cliffs Natural Resources Inc (NYSE:CLF), and personal care products marketer Nu Skin Enterprises, Inc. (NYSE:NUS). Here's a quick look at today's brokerage notes on AIG, CLF, and NUS.

  • AIG has edged 0.4% higher to trade at $50.98, following an upgrade to "buy" from "hold" at Deutsche Bank. The brokerage firm likewise raised its price target on the stock by $1 to $60. This, despite shares of American International Group Inc sitting slightly in the red on a year-to-date basis. Elsewhere, options traders have expressed pessimism toward the equity in recent weeks. Specifically, AIG's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.04 sits just 8 percentage points from a 52-week peak.

  • CLF was hit with a downgrade to "sell" from "neutral" -- as well as a price-target cut to $5 -- at Citigroup earlier, but has nonetheless added 1.1% to hover near $8.84. Taking a step back, it's been a miserable year for the shares, which have shed approximately two-thirds of their value in 2014. Not surprisingly, the majority of covering analysts are pessimistic toward Cliffs Natural Resources Inc, with 11 out of 13 firms sporting a "hold" or worse rating. On the fundamental front, the company will report third-quarter earnings one week from today's close.

  • NUS has tacked on 1.1% to trade at $44.09, after receiving a "buy" initiation and $75 price target from Pivotal Research. Such optimism is rare for the stock, which is down roughly 68% on a year-to-date basis. For example, 10.3% of Nu Skin Enterprises, Inc.'s float is sold short, as short interest expanded 31.7% during the two most recent reporting periods. What's more, the security's 50-day ISE/CBOE/PHLX put/call volume ratio of 2.72 ranks in the bearishly skewed 85th percentile of its annual range.

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Stocks On the Move: NewLink Genetics Corp, Sears Holdings Corp, and Chipotle Mexican Grill, Inc.

NLNK, SHLD, and CMG are moving sharply in Monday's trading

by 10/20/2014 11:39 AM
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U.S. stocks are trading on both sides of breakeven this morning, with the Nasdaq Composite (COMP) in the black and the blue-chip barometer in the red, due to an earnings miss from Big Blue. Among the names making significant moves are Ebola vaccine maker NewLink Genetics Corp (NASDAQ:NLNK), department store operator Sears Holdings Corp (NASDAQ:SHLD), and fast-casual restaurateur Chipotle Mexican Grill, Inc. (NYSE:CMG). Here's a quick look at how NLNK, SHLD, and CMG are faring on the charts today.

  • NLNK is 19.4% higher at $35.05, after the firm announced a potentially lucrative agreement with Roche Holding AG to develop NLNK's cancer therapy. The stock has now added 59% so far in 2014, and today's rally could have quite a few bears hitting the exits. Short interest edged 9.3% higher during the past two reporting periods, and now accounts for 30.4% of NewLink Genetics Corp's total available float. In fact, it would take more than 16 sessions to repurchase these pessimistic positions, at the equity's average pace of trading -- ample fuel for a short-covering rally. Of course, considering the affinity for long calls of late, some of those shorts may be hedged.

  • SHLD is up 7.4% at $30.51, thanks to plans to boost liquidity with help from CEO Eddie Lampert. Nevertheless, SHLD remains more than 22% lower year-to-date, and has underperformed the broader S&P 500 Index (SPX) by more than 23 percentage points during the past three months. As such, it's no surprise to find optimism toward Sears Holdings Corp is relatively sparse. Short interest accounts for almost 35% of the security's total available float, and option buyers on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been upping the bearish ante. In fact, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.43 stands higher than 77% 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.

  • CMG is flirting with a 1.5% gain at $651.50, as buyers step in ahead of the firm's quarterly earnings release tonight. Intraday options volume is running at twice the normal pace, and the stock's 30-day at-the-money implied volatility is 1.1% higher at 40.6%, reflecting a growing demand for short-term options ahead of earnings. Echoing that, eight of the 10 most active options expire at Friday's closing bell, with last-minute positions being established at the deep out-of-the-money weekly 10/24 500-strike put and 700-strike call. Technically speaking, Chipotle Mexican Grill, Inc. has tacked on more than 22% in 2014, and major post-earnings reactions aren't outside the realm of possibility; the shares gapped 11.8% higher after the company's last go-round in the earnings spotlight in July.

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Analyst Downgrades: athenahealth, Inc, SanDisk Corporation, and Philip Morris International Inc.

Analysts issued bearish brokerage notes on ATHN, SNDK, and PM

by 10/20/2014 9:46 AM
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Analysts are downwardly revising their ratings on medical billing firm athenahealth, Inc (NASDAQ:ATHN), data storage solutions specialist SanDisk Corporation (NASDAQ:SNDK), and tobacco titan Philip Morris International Inc. (NYSE:PM). Here's a quick look at today's bearish brokerage notes on ATHN, SNDK, and PM.

  • ATHN's uninspiring third-quarter earnings report from last Thursday prompted a wave of price-target cuts from the brokerage bunch. Among those weighing in on the stock were Cowen, which slashed its price target by $10 to $134, and Goldman Sachs, which reduced its target price by $8 to $133, with both brokerage firms maintaining their equivalents of a "neutral" recommendation. On the charts, the security has struggled in 2014, and is currently staring at a 16% year-to-date deficit. Should the shares continue to struggle, another round of price-target reductions could be on the horizon. In fact, athenahealth, Inc's consensus 12-month price target of $147 not only stands at a steep 30% premium to the equity's current perch at $112.91, but also in territory not charted since mid-April.

  • Since hitting an all-time high of $108.77 in mid-July, SNDK has surrendered 21.4% to churn at $85.61 -- and Friday, the shares gave back 2.9% following a third-quarter earnings miss, a lower-than-expected current-quarter revenue outlook, and round of bearish brokerage notes. Nevertheless, the shares are rallying today, even in the wake of a price-target cut to $110 from $120 at Jefferies (although the brokerage firm reiterated its "buy" rating). Should the stock resume its longer-term downtrend, another round of bearish brokerage notes could pressure the shares lower. At present, 81% of covering analysts maintain a "buy" or "strong buy" recommendation toward the shares, and the consensus 12-month price target of $109.41 represents a lofty 27.8% premium to SNDK's present price.

  • Exane BNP Paribas reduced its price target for PM by 2% to $86 -- in line with the equity's current perch -- and underscored its "neutral" rating. On the charts, PM is off 1.3% year-to-date, and option traders think there is more downside ahead. At 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 2.17 ranks in the 97th percentile of its annual range. Simply stated, puts have been bought to open over calls on Philip Morris International Inc. with more rapidity just 3% of the time within the past year.

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Buzz Stocks: Microsoft Corporation, Family Dollar Stores, Inc., and Valeant Pharmaceuticals Intl Inc

Today's stocks to watch in the news include MSFT, FDO, and VRX

by 10/20/2014 9:39 AM
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U.S. stocks are lower out of the gate, with disappointing earnings from IBM Corp. (NYSE:IBM) dragging down the Dow. Among the equities in focus, today's stocks to watch are software titan Microsoft Corporation (NASDAQ:MSFT), discount retailer Family Dollar Stores, Inc. (NYSE:FDO), and drugmaker Valeant Pharmaceuticals Intl Inc (NYSE:VRX).

  • MSFT is down 1.4% at $43.05, but remains nearly 15% higher year-to-date. Ahead of the company's quarterly earnings report, slated for release after the close on Thursday, traders are digesting reports of a smart watch in the works. Specifically, the firm is allegedly planning to debut the wearable device within the next few weeks. Despite outperforming the broader S&P 500 Index (SPX) during the past three months, Microsoft Corporation's bullish bandwagon is far from crowded. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.01 stands just 4 percentage points shy of a 52-week peak, implying that short-term options players have rarely been more put-biased during the past year. Meanwhile, more than half of the analysts following MSFT maintain tepid "hold" opinions. Should Microsoft impress with its earnings report or smart watch debut, an unwinding of pessimism in the options pits or among analysts could help the shares continue their longer-term run higher.

  • Last night, FDO traders learned that activist Elliot Management Corp. nominated seven candidates to the Family Dollar Stores, Inc. board, citing a missed opportunity to "facilitate a bidding war" between Dollar General Corp. (NYSE:DG) and Dollar Tree, Inc. (NASDAQ:DLTR), the former of which had a "clearly superior" bid rejected. Speaking of, FDO on Oct. 30 will host a special meeting of shareholders to approve the DLTR transaction. On the charts, the recent M&A back-and-forth has translated into a year-to-date gain of 19% for FDO, which was last seen 0.7% higher at $77.35.

  • Finally, VRX is 1.1% higher at $121.71 in early trading. Bolstering the stock is a stronger-than-expected earnings report and forward guidance, and Valeant Pharmaceuticals Intl Inc CEO's confession that the company is just waiting on the "appropriate time" to up its bid for Allergan, Inc. (NYSE:AGN). While the brokerage bunch is already bullish toward VRX -- the stock boasts nine "buy" or better ratings, compared to two "holds" -- options traders could be caught off-guard by today's upside move. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 2.80 stands higher than 92% 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.

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Analyst Upgrades: Twitter Inc, Micron Technology, Inc., and E TRADE Financial Corporation

Analysts issued bullish brokerage notes on TWTR, MU, and ETFC

by 10/20/2014 9:24 AM
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Analysts are upwardly revising their ratings on microblogging issue Twitter Inc (NYSE:TWTR), semiconductor concern Micron Technology, Inc. (NASDAQ:MU), and online broker E TRADE Financial Corporation (NASDAQ:ETFC). Here's a quick look at today's bullish brokerage notes on TWTR, MU, and ETFC.

  • Following reports of a new partnership, TWTR saw its price target raised to $63 from $62 at Topeka -- with the brokerage firm underscoring its "buy" rating -- representing expected upside of 29.2% to Friday's closing price of $48.77. A move of such magnitude isn't out of the question for a stock that's rebounded more than 65% since hitting an all-time low of $29.51 in early May. Plus, if past is prologue, TWTR could get an additional boost after it steps into the earnings confessional next Monday evening. After reporting its second-quarter earnings results in late July, the shares rallied roughly 20% in the subsequent session. Additionally, another round of bullish brokerage notes could help buoy the shares, as 13 out of 28 covering analysts maintain a "hold" or "strong sell" suggestion toward Twitter Inc.

  • Pacific Crest upped its outlook for MU to "outperform" from "sector perform," echoing the majority of analysts covering the shares. This optimism isn't surprising, though, considering MU is up more than 32% in 2014 -- and nearly 69% year-over-year -- to trade at $28.76. However, not everyone on the Street has taken this glass-half-full approach toward Micron Technology, Inc. Short interest, for example, accounts for nearly 10% of the stock's available float. Elsewhere, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.33 ranks in the 83rd annual percentile. In other words, puts have been bought to open over calls at a faster-than-usual clip in recent months. Should MU continue to make its way up the charts, a capitulation by these bearish bettors could help fuel the stock's fire.

  • Goldman Sachs weighed in on ETFC -- which is scheduled to report third-quarter earnings after tomorrow's close -- by adding the stock to its "Conviction Buy" list. The equity has performed well over the long term, tacking on 15% over the past 52 weeks to trade at $20.12. In the options pits, short-term speculators have shown a preference for puts over calls, as evidenced by ETFC's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 11.03. Simply stated, near-the-money put open interest outweighs call open interest by a more than 11-to-1 margin in the November-dated series. Going forward, this set-up could create an options-related foothold for E TRADE Financial Corporation, as the hedges related to these bets unwind over the next five weeks.

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