Schaeffer's Trading Floor Blog

Analyst Downgrades: Dendreon Corporation (DNDN), The Gap Inc. (GPS), and Aeropostale Inc (ARO)

Analysts downwardly revised their ratings on DNDN, GPS, and ARO

by 8/23/2013 9:39 AM
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Analysts are weighing in today on biotech issue Dendreon Corporation (NASDAQ:DNDN), along with retailers The Gap Inc. (NYSE:GPS) and Aeropostale Inc (NYSE:ARO). Here's a quick roundup of today's bearish brokerage notes.

  • Deutsche Bank lowered its rating for DNDN to "sell" from "hold" ahead of today's session. Since reporting less-than-stellar earnings on Aug. 8, the shares have dropped 30.5% to their current perch at $3.19. Stepping back, the stock now sits at a year-to-date loss of 37.8%. Meanwhile, calls remain the options of choice in DNDN's options pits. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.50 ranks higher than just 22% of other such readings taken over the past year. In other words, DNDN's short-term traders are more call-heavy than usual right now, relative to the last 52 weeks. Given that short interest represents a brow-raising 34% of Dendreon Corporation's available float, however, it is possible that some of this call activity is due to short sellers hedging their bearish bets .

  • Ignoring GPS' quarterly same-store sales increase, Canaccord Genuity and Janney slashed their price targets for the stock to $44 from $45, and to $51 from $52, respectively. Though GPS sports a year-to-date gain of 35.3%, the stock has taken a 9.8% dive since tagging a new 13-year high of $46.56 on Aug. 2, and was last seen hovering at $42.01. As such, GPS' International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day put/call volume ratio of 1.07 ranks in the 86th percentile of its annual range. This means The Gap Inc. speculators have bought to open puts over calls at an accelerated clip during the past two weeks.

  • Following last night's disappointing earnings report, ARO saw its price target sliced at Janney, Brean Capital, Susquehanna, BMO, Wedbush, and KeyBanc. Meanwhile, BofA-Merrill Lynch downgraded its rating for the stock to "underperform" from "neutral." On the charts, ARO has fallen 17.4% over the past year. What's more, in the last three months, the stock has tumbled 34%, and has underperformed the broader S&P 500 Index (SPX) by 25 percentage points. With that being said, the brokerage bunch maintains a pessimistic outlook toward ARO, which sports 11 "holds" and three "sell" or worse ratings, compared to just four "strong buy" endorsements. On the other hand, the stock's 12-month price target of $14.89 represents expected upside of 35.6% to its current price of $10.98 -- leaving plenty of room for additional price-target cuts, which could pressure Aeropostale Inc lower.

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