Schaeffer's Trading Floor Blog

Analyst Downgrades: Caterpillar Inc. (CAT), OpenTable Inc (OPEN), and Zillow Inc (Z)

Analysts downwardly revised their ratings on CAT, OPEN, and Z

by 9/5/2013 9:34 AM
Stocks quoted in this article:

Analysts are weighing in today on construction equipment maker Caterpillar Inc. (NYSE:CAT), online reservations issue OpenTable Inc (NASDAQ:OPEN), and real estate website Zillow Inc (NASDAQ:Z). Here's a quick roundup of today's bearish brokerage notes.

  • Morgan Stanley initiated an "equal weight" rating for CAT, which has dropped 16.2% since tagging its annual high of $99.70 on Feb. 1. Stepping back, the stock stands a mere 1% higher on a year-over-year basis, and was last seen trading at $83.54. Elsewhere, the majority of the brokerage bunch remains optimistic toward CAT, which sports 10 "buy" or better endorsements, compared to eight "holds" and not a single "sell" or worse suggestion. Furthermore, the stock's consensus 12-month price target of $92.69 stands in territory last reached in late February. Given Caterpillar Inc.'s weak technical backdrop, a potential round of downgrades and/or price-target cuts may be in store, which could pressure the shares lower.

  • OPEN has been a technical standout over the past year, tacking on 75% to its current perch at $76.53. What's more, the stock has outperformed the broader S&P 500 Index (SPX) by 16.3 percentage points during the last 20 sessions, and reached a new two-year high of $78.36 early last week. Unimpressed by such performance, Morgan Stanley lowered its rating for OPEN to "underweight" from "equal weight" this morning. Meanwhile, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than eight OPEN calls for every put during the past four weeks, resulting in a 20-day call/put volume ratio of 8.29. While this activity is typically considered bullish, short interest on OpenTable Inc accounts for 18.6% of the stock's available float, which means the high volume of call activity could, in part, be due to short sellers hedging their bearish bets.

  • Finally, Morgan Stanley also lowered its rating for Z to "underweight" from "equal weight," following Australian billionaire James Packer's acquisition of a 9.4% stake in the company. On the charts, Z has climbed an impressive 262% since the beginning of 2013, and tagged a new record high of $103.00 during yesterday's session before slouching to its current price of $100.50. Not surprisingly, calls have been the options of choice in Z's options pits of late. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.69 ranks higher than 81% of all other such readings taken over the last year, indicating Zillow Inc calls have been bought to open over puts at an accelerated pace during the past two weeks. Again, though, short interest represents 21.6% of the stock's total available float, suggesting potential hedging activity among the bears.

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