Schaeffer's Trading Floor Blog

Analyst Downgrades: Applied Materials, Inc., McDonald's Corporation, and Yahoo! Inc.

Analysts downwardly revised their ratings on AMAT, MCD, and YHOO

by 7/23/2013 9:24 AM
Stocks quoted in this article:

Analysts are weighing in today on semiconductor name Applied Materials, Inc. (NASDAQ:AMAT), fast food giant McDonald's Corporation (NYSE:MCD), and search engine guru Yahoo! Inc. (NASDAQ:YHOO). Here's a quick roundup of today's bearish brokerage notes.

  • Berenberg introduced a "hold" rating and a price target of $14.40 for AMAT this morning, which is a bit surprising, considering AMAT has gained almost 55.6% year-over-year to trade at $16.35, and has outperformed the broader S&P 500 Index (SPX) by almost 10 percentage points during the last two months. Meanwhile, in the options pits, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open roughly 10 AMAT puts for every 7 calls within the past two weeks. The resultant 10-day put/call volume ratio of 1.41 ranks higher than 80% of other such readings taken throughout the year, meaning AMAT puts are being snatched up over calls at a faster-than-usual clip as of late.

  • BMO and J.P. Morgan Securities slashed their price targets for MCD, after yesterday's report of lower-than-expected second-quarter earnings of $1.38 per share. Specifically, the firms lowered their prices to $107 from $110, and to $105 from $109, respectively. On the charts, MCD has tacked on a modest 10.6% year-to-date to hover at $97.58, and speculators in the stock's options pits have responded rather bullishly. In fact, MCD sports a Schaeffer's put/call open interest ratio (SOIR) of 0.81, with calls outnumbering puts by a margin of 5-to-4 among options with a shelf-life of three months or less. This ratio ranks in the 23rd percentile of its annual range, conveying short-term speculators are more call-heavy than usual right now.

  • Overall, YHOO has had an impressive run on the charts throughout the past year, soaring roughly 76%. What's more, the stock hit a new five-year high of $29.83 last Thursday, before slumping to its present perch at $27.86. Despite this strong technical backdrop, Needham sliced its rating for YHOO to "hold" from "buy" ahead of today's opening bell, joining the majority of the brokerage bunch who remain skeptical toward the stock. Specifically, of the 27 analysts weighing in, YHOO has received 16 tepid "hold" ratings and one "sell" suggestion, compared to just 10 "buy" or better endorsements. Likewise, YHOO's consensus price target of $29.38 represents a discount to the stock's aforementioned high. Should the stock continue to travel to new heights, the brokerage bunch may reconsider their bearishly skewed positions, which could provide further tailwinds for the stock.

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