Schaeffer's Trading Floor Blog

Analyst Downgrades: Carnival Corporation, American Eagle Outfitters, and ARM Holdings plc (ADR)

Analysts downwardly revised their ratings on CCL, AEO, and ARMH

by 5/23/2013 10:16 AM
Stocks quoted in this article:

Analysts are weighing in today on cruise concern Carnival Corporation (NYSE:CCL), apparel retailer American Eagle Outfitters (NYSE:AEO), and tech issue ARM Holdings plc (ADR) (NASDAQ:ARMH). Here's a quick roundup of today's bearish brokerage notes.

  • Down more than 11% so far this year to linger in the $32.55 neighborhood, CCL saw its price target reduced to $33 from $37.50 at Jefferies today, amid news that the company's credit rating is under review with Moody's Investors Service. The equity has also trailed the broader S&P 500 Index (SPX) by almost 15 percentage points during the past three months, yet bearish speculation on Carnival Corporation is relatively low right now. In fact, short interest accounts for less than 2% of the security's available float, pointing to a meager amount of sideline cash. In other words, CCL is unlikely to benefit from any short-covering activity in the near term.

  • AEO -- which sits just below breakeven year-to-date to hover at $20.02 -- received a price-target cut to $22 from $23 at UBS this morning, after reporting a 30% decline in first-quarter profits on Wednesday. (However, analysts at Janney raised their price target by $2 to $23.) Elsewhere, Schaeffer's put/call open interest ratio (SOIR) for American Eagle Outfitters checks in at 1.88, with puts almost doubling calls among options scheduled to expire within the next three months. This ratio is just 1 percentage point shy of an annual high, conveying short-term traders have rarely been more bearishly aligned toward the stock during the last 12 months.

  • Despite a year-over-year gain of almost 93% to trade at $44.38, ARMH was downgraded to "neutral" from "outperform" at Exane BNP Paribas in pre-market activity. This pessimistic attitude toward the stock is prevalent in the options pits, as well. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 2.79 for ARM Holdings plc (ADR), confirming traders have bought to open nearly three puts for every call during the past two weeks. This ratio ranks higher than 76% of similar annual readings, reflecting a healthier-than-usual appetite for puts over calls lately.

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