Schaeffer's Trading Floor Blog

Analyst Downgrades: BlackBerry Ltd, Michael Kors Holdings Ltd (KORS), and DreamWorks Animation SKG Inc.

Analysts downwardly revised their ratings on BBRY, KORS, and DWA

by 9/23/2013 9:43 AM
Stocks quoted in this article:

Analysts are weighing in today on smartphone maker BlackBerry Ltd (NASDAQ:BBRY), upscale apparel issue Michael Kors Holdings Ltd (NYSE:KORS), and animated film producer DreamWorks Animation SKG Inc. (NASDAQ:DWA). Here's a quick roundup of today's bearish brokerage notes.

  • BBRY is again making headlines, after last week announcing its plan to lay off as much as 40% of its workforce by the end of 2013, which many believe will make the smartphone maker more attractive for potential buyers. Now, BBRY co-founder Mike Lazaridis is reportedly talking with private equity firms about a possible bid for the troubled company. As such, CIBC, Nomura, Goldman Sachs, MKM Partners, Citigroup, Paradigm Capital, Wells Fargo, TD Securities, and Macquarie slashed their price targets for the stock. Plus, Jefferies and RBC lowered their ratings to "hold" from "buy," and to "underperform" from "sector perform," respectively. (Meanwhile, Baird and Credit Suisse raised their ratings.) On the charts, BBRY sports a year-over-year gain of 35.2%. However, in the past three months, the stock has plummeted 36.6%, mostly due to a weaker-than-expected earnings report in late June. Elsewhere, from the brokerage bunch, BBRY has received nine "holds" and 12 "sell" or worse suggestions, compared to just four "buy" or better endorsements. On the other hand, BlackBerry Ltd's 12-month price target of $11.17 represents expected upside to the stock's current price of $8.73 -- meaning there is plenty of wiggle room for more price-target cuts, which could push the shares further south. Of note, BBRY will step up to the earnings plate ahead of the opening bell on Friday.

  • KORS -- which sports a year-to-date advance of nearly 50% to trade at $75.98 -- saw its price target sliced to $80 from $85, and its rating downgraded to "hold" from "buy" at Jefferies this morning. While sentiment among the brokerage bunch remains bullish -- 13 out of 16 analysts maintain "buy" or better endorsements toward Michael Kors Holdings Ltd -- speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open almost three KORS puts for every call during the last two weeks. The resulting 10-day put/call volume ratio of 2.78 ranks just 1 percentage point from an annual high, indicating speculators have picked up puts over calls with more rapidity just 1% of the time throughout the past year.

  • DWA has tacked on a whopping 78.5% year-to-date to trade at $29.58, outperforming the broader S&P 500 Index (SPX) by 58.62 percentage points during the same time frame. Still, B. Riley reduced its rating for the stock to "neutral" from "buy" this morning. Meanwhile, short interest -- although down 11.4% since the last reporting period -- accounts for a lofty 23.8% of DWA's available float, which would take more than three weeks to cover, in the event of an extended rally, at the stock's average pace of trading. DreamWorks Animation SKG Inc.'s ability to rise on the charts, in light of such heavy selling pressure, highlights the strength of the underlying stock.

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