Schaeffer's Trading Floor Blog

Analyst Update: AMC Networks Inc, Netflix, Inc., and Take-Two Interactive Software, Inc.

Analysts adjusted their ratings on AMCX, NFLX, and TTWO

by 12/22/2014 12:55 PM
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Analysts are weighing in today on media companies AMC Networks Inc (NASDAQ:AMCX) and Netflix, Inc. (NASDAQ:NFLX), as well as video game maker Take-Two Interactive Software, Inc. (NASDAQ:TTWO). Here's a quick look at today's brokerage notes on AMCX, NFLX, and TTWO.

  • Pacific Crest initiated coverage on several entertainment stocks last evening, one of which was AMCX. The brokerage firm started the equity with a favorable "outperform" rating, stating that, out of the companies it began coverage on, AMC Networks Inc has "the most potential upside." The positive note prompted a modest increase for the shares today. AMCX's current price of $62.60 is still 8% below its year-to-date breakeven mark, and analysts are split in their opinions. Specifically, half of the covering firms issue "strong buy" recommendations, and the other half maintain "hold" ratings. There's no ambiguity in AMCX's options pits, however, as its 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.05 sits in its 97th annual percentile. This reading suggests that calls have been bought to open over puts at a faster rate only 3% of the time in the past year.

  • Meanwhile, NFLX saw its price target lowered to $494 from $511 at Topeka Capital Markets, which also softened its fourth-quarter and 2015 earnings estimates. However, the firm maintained its "buy" endorsement on the shares, which have dropped 1.4% today to trade at $335.54. The move puts Netflix, Inc. 8.9% below its year-to-date breakeven level. Elsewhere, sentiment in the analyst community is mixed, with the stock receiving 14 "buy" or better ratings, 14 "holds," and two "sell" or worse recommendations. Speculators are looking to the upside, though, as NFLX's 50-day ISE/CBOE/PHLX call/put volume ratio of 1.05 ranks in the 94th percentile of its annual range.

  • TTWO today hit a nine-year high of $28.83, after Wedbush raised its price target by $5 to $24, but reaffirmed its tepid "neutral" note. The stock was last seen 1.7% higher at $28.60, which is nothing new, considering its 64.7% increase in 2014. Regardless, five of the 12 brokerage firms covering Take-Two Interactive Software, Inc. deem it just a "hold," with the seven remaining analysts issuing "strong buy" ratings. There's still plenty of buying power on the sidelines, too, with over 18% of TTWO's float sold short. It would take short sellers over two weeks to buy back their bets, at the security's average daily trading pace.

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Analyst Upgrades: BlackBerry Ltd, TASER International, Inc., and Groupon Inc

Analysts upwardly revised their ratings on BBRY, TASR, and GRPN

by 12/22/2014 9:22 AM
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Analysts are weighing in today on mobile phone maker BlackBerry Ltd (NASDAQ:BBRY), stun-gun producer TASER International, Inc. (NASDAQ:TASR), and mass coupon concern Groupon Inc (NASDAQ:GRPN). Here's a quick roundup of today's bullish brokerage notes on BBRY, TASR, and GRPN.

  • BBRY is modestly higher ahead of the bell, as early traders adopt a glass-half-full approach to the latest round of analyst notes. On one hand, TD Securities upgraded BlackBerry Ltd to "buy" from "hold," and Raymond James hiked its price target to $11 from $10.50 (and maintained a "market perform" opinion). On the other hand, J.P. Morgan Securities and RBC trimmed their respective price targets to $10 and $11. On Friday, BBRY slipped just 0.8% to land at $9.99, as traders panned the company's latest earnings report. However, the stock found a foothold atop its 50-week moving average, which has supported pullbacks since mid-June.

  • TASR is set to jump 4.5%, after Oppenheimer initiated coverage with an "outperform" endorsement and $28 price target -- in territory not charted since early 2005. TASER International, Inc. has advanced more than 51% in 2014, settling at $23.98 on Friday, as a year of civil unrest has sparked demand for the company's products. Nevertheless, just two out of five analysts consider TASR worthy of a "buy" or better rating, and the consensus 12-month price target of $19.25 sits at a discount to the security's current perch. More bullish brokerage attention could help TASR extend its journey higher.

  • Finally, GRPN is set to open 1% higher, after Brean Capital upped its price target by $1 to $11, and reiterated a "buy" rating. Groupon Inc has outperformed the broader S&P 500 Index (SPX) by more than 24 percentage points during the past two months, ending at $7.92 on Friday -- its second-highest close since early April. However, short-term option traders remain unconvinced, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.88 sits just 9 percentage points from an annual bearish peak. In the same vein, short interest accounts for 22.1% of GRPN's total available float, and would take nearly seven sessions to buy back, at the stock's average daily trading volume -- plenty of fuel for a potential short-covering boost.

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Analyst Downgrades: Barrick Gold Corporation (USA), Stratasys, Ltd., and Nike Inc

Analysts downwardly revised their ratings on ABX, SSYS, and NKE

by 12/22/2014 9:21 AM
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Analysts are weighing in today on commodity concern Barrick Gold Corporation (USA) (NYSE:ABX), 3-D printing specialist Stratasys, Ltd. (NASDAQ:SSYS), and athletic apparel issue Nike Inc (NYSE:NKE). Here's a quick roundup of today's bearish brokerage notes on ABX, SSYS, and NKE.

  • TD Securities shaved its price target on ABX to $15 from $16 -- and underscored its tepid "hold" rating, echoing the general consensus among the brokerage bunch. This lackluster positioning isn't surprising, considering Barrick Gold Corporation (USA) has shed 38.6% of its value this year, and, more recently, has underperformed the broader S&P 500 Index (SPX) by roughly 32 percentage points over the past 60 sessions. Should ABX extend this downward trajectory, another round of price-target reductions could be on the horizon. Specifically, ABX's consensus 12-month price target of $18.13 stands at a 67.4% premium to Friday's close at $10.83, and in territory not charted since early September.

  • SSYS got hit with price-target cuts from J.P. Morgan Securities (by $12 to $120) and Piper Jaffray (by $10 to $120), although both brokerage firms reiterated their "overweight" ratings. Technically speaking, SSYS has struggled since taking a post-earnings dive in early November, with the shares off 33% from their Nov. 4 close at $121.25 to trade at $81.15. Traders, meanwhile, have shown a distinct preference for puts over calls among options set to expire in three months or less. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.20 ranks in the 86th percentile of its annual range, meaning short-term speculators are more put-heavy than usual toward Stratasys, Ltd.

  • Following NKE's 2.3% post-earnings drop last Friday, Goldman Sachs trimmed its six-month price target on the shares by $3 to $109. The brokerage firm did maintain its "buy" rating, however, mirroring the majority of analysts currently covering the shares. In spite of NKE's price action in the wake of its disappointing demand outlook, the security is still up roughly 21% year-to-date, and closed Friday at $94.84 -- just 4.9% below its Nov. 28 record peak of $99.76. In the options pits, though, short-term speculators are more put-skewed than usual, as evidenced by Nike Inc's SOIR of 1.24, which sits just 10 percentage points from a 52-week peak.

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Buzz Stocks: AbbVie Inc, Achillion Pharmaceuticals, Inc., and Caesars Entertainment Corp

Today's stocks to watch in the news include ABBV, ACHN, and CZR

by 12/22/2014 9:01 AM
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After concluding their best week in years, U.S. stocks are set to kick off a holiday-shortened week on a merry note. Among the equities in focus are drugmakers AbbVie Inc (NYSE:ABBV) and Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN), as well as casino concern Caesars Entertainment Corp (NASDAQ:CZR).

  • ABBV is pointed 3% higher ahead of the bell, after inking an exclusive deal with Express Scripts Holding Company (NASDAQ:ESRX). Specifically, ESRX said its biggest plan will cover only ABBV's newly approved Viekira Pak hepatitis C treatment, and will exclude similar treatments from Gilead Sciences, Inc. (NASDAQ:GILD), among others. As such, AbbVie Inc shares could explore record-high territory north of $71, extending their year-to-date surplus of more than 28%. What's more, an unwinding of pessimism in the options pits could add fuel to the equity's fire. 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 0.78 stands just 6 percentage points from an annual bearish peak. On Friday, ABBV settled at $67.71.

  • Meanwhile, fellow biotech concern ACHN is set to soar 11% out of the gate, thanks to encouraging data on its own hepatitis C treatment. Achillion Pharmaceuticals, Inc. has outperformed the S&P 500 Index (SPX) by nearly 22 percentage points during the past three months, landing at $14.21 on Friday. The stock has more than quadrupled in value in 2014, so it's no surprise to find nine out of 10 analysts offer up "strong buy" opinions. However, the consensus 12-month price target of $13.22 stands at a discount to ACHN's current perch, suggesting price-target hikes could be on the horizon.

  • Finally, CZR was temporarily halted in pre-market trading, upon announcing an all-stock deal to buy Caesars Acquisition Company (NASDAQ:CACQ). The shares of CZR have since resumed electronic trading, and are headed for a 24% jump at the opening bell. Caesars Entertainment Corp has struggled in 2014, surrendering 37.4% to finish at $13.49 on Friday. In light of today's merger news, a mass exodus of bears could propel CZR even higher. Short interest accounts for 42% of the stock's total available float, representing 13 sessions' worth of pent-up buying demand, at CZR's average pace of trading. Plus, not one of the four analysts following the shares deems them worthy of a "buy" endorsement.

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Why You Never Buy and Hold VXX

You might be better off with index puts than with the iPath S&P 500 VIX Short-Term Futures ETN (VXX)

by 12/22/2014 8:53 AM
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Remember the iPath S&P 500 VIX Short-Term Futures ETN (VXX)? We haven't checked on our favorite exchange-traded note (ETN) in quite some time now.

VXX, of course, did quite well recently, albeit for a relatively brief time. It hit all-time intraday and closing lows on Dec. 5, then proceeded to rally 32.5% close-to-close over the next week and a half, before peaking on Dec. 16 at 34.63. And then the market explosion happened, and with it the inevitable VXX implosion: it dropped 16% in three sessions.

On the year, VXX is down 29.7%, which actually isn't a terrible year for VXX on its own. Contango in CBOE Volatility Index (VIX) futures always knocks down VXX over time. Thing is, VIX itself is up 20% in 2014, so using VXX as a general volatility or portfolio hedge worked about as well as always. That is to say, it didn't work well at all.

I can put a positive spin on it, though! VXX has hit 316 new all-time lows in its illustrious 1,484 trading-day history; a 21.3% "success" rate. The pace of ineptitude has slowed, though, in 2014, with only 36 new lows in 246 tries (11.39%)! And buying VXX into an overbought VIX has actually worked OK, at least in the very short term. The following table is a VXX-centric version of the overbought VIX table we often run. What happens if you buy VXX on the first close when VIX closed 10% above its 10-day simple moving average and hold for five, 15, or 25 trading days? Here's each play since the invention of VXX in 2009.

VIX 10% above 10-day simple moving average

Keep in mind that VXX almost always declines over time, so negative returns in and of themselves aren't surprising. Buying VXX on overbought VIX and holding for five trading days actually worked well in 2014: four wins in five tries!

Going back for all of VXX history, though, it still hasn't paid off. It incurred a median loss of 4.53% vs. a median loss of 2.24% on any random five-day hold. The average loss is 1.95%, vs. a 1.43% randomly timed purchase and hold. Buying and holding for 15 trading days is worse off of overbought VIX (-10.46% median vs. -7% random median). If you use averages, you get a different story, but that's wholly because of a huge win if you bought VXX on the Aug. 29, 2011 overbought VIX. Out 25 trading days, there's little difference.

As always, the best advice is to never buy and hold VXX. It's fine to play in the very short term. But if you do that, the numbers suggest you are better off anticipating a VIX pop than trying to ride one in progress. Unfortunately, that's almost by definition a crapshoot. So, just stick with good old-fashioned index puts!

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

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