Schaeffer's Trading Floor Blog

Buzz Stocks: General Motors Company, BreitBurn Energy Partners L.P., Wal-Mart Stores, Inc., and UBS AG

Today's stocks to watch in the news are GM, BBEP, WMT, and UBS

by 7/24/2014 9:13 AM
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U.S. markets are poised for a solid start thanks to a round of strong manufacturing data from around the globe. In company news, here are some stocks to watch.

  • General Motors Company (NYSE:GM) announced a fresh round of recalls yesterday, bringing its year-to-date total to roughly 26 million vehicles. The latest recall involves newer year models, with the company citing a number of safety concerns, including faulty laser welding. The news preceded the automakers' second-quarter earnings report, which was released this morning. (Los Angeles Times; Bloomberg)

  • In M&A news, BreitBurn Energy Partners L.P. (NASDAQ:BBEP) has agreed to purchase QR Energy LP (NYSE:QRE) in a deal worth about $1.5 billion. Elsewhere, Google Inc (NASDAQ:GOOG) will acquire 3-D graphics firm drawElements for a reported $10 million. (FOX Business; The New York Times)

  • The Delaware Supreme Court on Wednesday upheld a ruling requiring Wal-Mart Stores, Inc. (NYSE:WMT) to release to a shareholder internal documents relating to the company's Mexico bribery investigation. In response, the attorney representing the shareholder said, "We are very pleased with the result. After almost two years we eagerly await these documents and the truth they will reveal." Separately, WMT this morning announced the retirement of its U.S. CEO William Simon, effective Aug. 8. Simon will be replaced by Gregory Foran, former CEO of retail operations in Asia. (Reuters; MarketWatch)

  • French officials have ordered UBS AG (NYSE:UBS) to pay roughly $1.5 billion in bail, after the Swiss bank was put under formal investigation for money laundering. UBS called the bail "unprecedented and unwarranted," and said it plans to appeal. (Reuters)

  • The Food and Drug Administration approved Gilead Sciences, Inc.'s (NASDAQ:GILD) new cancer drug, Zydelig, aimed at treating three types of the disease: chronic lymphocytic leukemia, follicular lymphoma, and small lymphocytic lymphoma. According to the FDA, combining Zydelig with Rituxan -- another cancer treatment -- slowed the progression of the disease. (FOX Business)

  • Among companies that reported earnings were Facebook Inc (NASDAQ:FB), AT&T Inc. (NYSE:T), Ford Motor Company (NYSE:F), TripAdvisor Inc (NASDAQ:TRIP), and QUALCOMM, Inc. (NASDAQ:QCOM). (MarketWatch; USA Today; CNBC; FOX Business)

  • Finally, a family from Minnesota was temporarily removed from a Southwest Airlines Co's (NYSE:LUV) flight in Denver, after the father sent out a tweet complaining about one of the employees. The family was eventually allowed to re-board the plane after the man deleted the tweet, and LUV said the incident will go "under review." (Consumerist)

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Analyst Downgrades: Angie's List Inc, Boeing, and TripAdvisor Inc

Analysts downwardly revised their ratings on ANGI, BA, and TRIP

by 7/24/2014 9:12 AM
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Analysts are weighing in today on online review issue Angie's List Inc (NASDAQ:ANGI), blue-chip aircraft titan The Boeing Company (NYSE:BA), and travel concern TripAdvisor Inc (NASDAQ:TRIP). Here's a quick roundup of today's bearish brokerage notes.

  • ANGI last night confessed to a wider-than-expected second-quarter loss, and projected current-quarter revenue below analysts' estimates. The shares -- which closed at $10.17 on Wednesday -- are bracing for a 22% drop out of the gate, which would put ANGI in all-time-low territory. Analysts are downwardly revising their opinions in droves, with no fewer than eight brokerage firms weighing in. Among them, BofA-Merrill Lynch downgraded Angie's List Inc to "neutral" from "buy," and Deutsche Bank nearly halved its price target, to $7 from $13.

  • BA is set to extend its post-earnings downtrend today. The stock gave up 2.3% to end at $126.71 on Wednesday, making it the worst-performing blue chip on the day. Analysts continue to lace into The Boeing Company, with BofA-Merrill Lynch downgrading the shares to "neutral" from "buy." (J.P. Morgan Securities, on the other hand, upped its price target on the equity by $1 to $168.)

  • Finally, TRIP is headed for a 10% plunge out of the gate, as Wall Street pans the company's second-quarter earnings report. Among the handful of analysts weighing in on TripAdvisor Inc, Susquehanna cut its price target on the stock to $98 from $100, while Cantor downgraded the equity to "hold." One group likely celebrating the firm's earnings miss: short sellers. Short interest accounts for 12.2% of TRIP's total available float, representing more than eight sessions' worth of pent-up buying demand, at the stock's average pace of trading. On Wednesday, TRIP settled at $107.36.

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Analyst Upgrades: Facebook Inc (FB), Delta Air Lines, Inc., and Gilead Sciences, Inc.

Analysts upwardly revised their ratings on FB, DAL, and GILD

by 7/24/2014 9:05 AM
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Analysts are weighing in today on social networking guru Facebook Inc (NASDAQ:FB), airliner Delta Air Lines, Inc. (NYSE:DAL), and drug maker Gilead Sciences, Inc. (NASDAQ:GILD). Here's a quick roundup of today's bullish brokerage notes.

  • FB is headed for all-time highs, with the shares up 9.2% in pre-market trade. The company last night blew second-quarter earnings estimates out of the water, earning a bevy of subsequent upgrades and price-target hikes. Among the doting analysts were Topeka Capital and Jefferies, which both upped their price targets to $100, and J.P. Morgan Securities, which hiked its target by $10 to $90. On Wednesday, Facebook Inc settled at $71.29.

  • DAL saw its price target increased to $52 from $50 at UBS this morning. The shares of DAL are up 42.5% in 2014, and surged to $39.15 yesterday in the wake of a stronger-than-expected quarterly earnings report. The security is pointed modestly higher ahead of the bell, and the Federal Aviation Administration (FAA) this morning lifted its ban on U.S. airlines flying into Tel Aviv. DAL, which has indicated it may suspend flights to the region even longer than the FAA recommends, has yet to comment on the news. Most analysts were already in the bullish camp for Delta Air Lines, Inc., which boasts 11 "buy" or better endorsements, compared to one "hold" and not a single "sell" rating.

  • Finally, GILD -- like FB -- is on the verge of record-high territory. The shares are pointed 1.3% higher ahead of the bell, thanks to a regulatory win and a solid earnings showing. Specifically, the Food and Drug Administration (FDA) approved Gilead Sciences, Inc.'s Zydelig to treat a trio of blood cancers, and the drug maker last night said second-quarter earnings more than quadrupled from a year earlier, as Sovaldi sales surpassed estimates. GILD closed at $90.34 on Wednesday, and Cowen and Company, Guggenheim, and J.P. Morgan Securities expect the stock to journey into triple-digit territory; the brokerage firms hiked their respective price targets to $100, $120, and $110.

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Is Amazon.com (AMZN) Primed for a Big Post-Earnings Move?

It's been a calm earnings season, but perhaps AMZN can break that trend

by 7/24/2014 7:39 AM
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Quite the calm earnings season so far. Well, unless you trade aggressively in the first two minutes after the numbers come out. Here's Microsoft Corporation (NASDAQ:MSFT), for example:

Microsoft Corporation (MSFT) Post-Earnings Reaction

There's a lightning quick drop and pop, but by the next open, the shares had gapped up all of 1%.

Similar story in Apple Inc. (NASDAQ:AAPL).

Apple Inc. (AAPL) Post-Earnings Reaction

By the next morning, it had moved less than McDonald's Corporation (NYSE:MCD), at least on the open.

Netflix, Inc. (NASDAQ:NFLX) did drop $20, and Google Inc (NASDAQ:GOOGL) lifted $20, but in percentage terms, those are just in the 4-5% range.

Which brings us to Amazon.com, Inc. (NASDAQ:AMZN), set to report after the close today.

The options board is pricing in a roughly 6% move. That basically means that if AMZN moves exactly 6%, the decline in implied volatility after the news will offset the absolute move in the stock, such that delta-neutral volatility plays will break even for both the shorts and longs. Think straddles and strangles as basic examples of such strategies.

That's a little high in relation to the moves seen in AMZN's high-profile brethren so far this cycle. But AMZN has more of a history of earnings gaps than the Apples and Googles of the world. Shares of the Internet marketplace opened up 7.5% in October 2013, gapped down about 7.5% in January 2014, then gapped down 9% in April. So, given the recent history in and of itself, maybe the options pricing is a little light?

As to direction, well, I tend to look for a stock to react in the same direction it's already moving. But you can kind of argue that both ways for AMZN. The stock's intermediate-term trend is definitely higher, as it's grinded up like pretty much everything else over the last quarter. But longer term, it's still down a bit off its early 2014 highs.

Interest in puts has picked up recently -- though this, too, is well off its relative (vs. calls) highs.

Amazon.com, Inc. (AMZN) Put/Call Open Interest Ratio

I guess what's most noteworthy is that the Schaeffer's put/call open interest ratio (SOIR) has trended up along with the stock this quarter. That's usually a bullish sign, in that traders aren't believing the stock strength.

So here's my bold call: small upside surprise! Oh, and ignore the two-minute initial reaction that's my permanent call in everything, by the way.

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


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U.S. stocks are mixed this afternoon, after a downwardly revised U.S. economic forecast from the International Monetary Fund (IMF) dampened a round of well-received earnings reports. Meanwhile, among the equities in focus are tech issue EMC Corporation (NYSE:EMC), as well as drug makers Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) and Cubist Pharmaceuticals Inc (NASDAQ:CBST), which have all attracted analyst attention.

  • EMC is 1.1% higher at $28.83, and earlier notched a new two-year high of $29.59, after the company reported in-line second-quarter earnings and revenue, and upped its full-year profit guidance. In addition, EMC Corporation accelerated its stock repurchase program, and is fending off pressure from Elliott Management to spin off VMware, Inc. (NYSE:VMW). "I don't know another tech company that has [spun off one of its most strategic assets] and been successful," opined EMC CEO Joe Tucci in a conference call. On the analyst front, Piper Jaffray and FBN Securities are counting on higher highs for EMC, lifting their respective price targets on the stock to $33 and $29. In addition, the brokerage firms reiterated their "overweight" and "outperform" recommendations.

  • Biotech stocks are on the Street's collective radar today, and TEVA is no exception. The shares were last seen 0.5% higher at $55.19, after Deutsche Bank launched coverage with a "buy" endorsement and $63 price target -- which would represent a new four-year high for the stock. Despite fighting in Gaza, Israel-based Teva Pharmaceuticals Industries Ltd (ADR) has moved steadily up the charts, and touched a three-year peak of $55.33 just yesterday. The company is slated to report second-quarter earnings before the open on Thursday, July 31, and has matched or exceeded analysts' bottom-line estimates in seven of the past eight quarters.

  • Finally, fellow drug maker CBST is bucking the sector trend higher today, down 3.9% at $63.15. The firm last night confessed to weaker-than-expected second-quarter revenue, and received subsequent price-target cuts from Cantor (to $64 from $73) and Oppenheimer (to $83 from $86). In addition, JMP Securities downgraded Cubist Pharmaceuticals Inc to "market perform" from "market outperform." From a broader technical perspective, the equity has shed 8.5% in 2014, but has found a foothold atop its 20-month moving average.

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