Schaeffer's Trading Floor Blog

Analyst Downgrades: First Solar, VIVUS, and Verisign

Analysts downwardly revised their ratings on FSLR, VVUS, and VRSN

by 2/27/2013 9:41 AM
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Analysts are checking in on solar panel maker First Solar, Inc. (NASDAQ:FSLR - 31.36), biopharmaceutical company VIVUS, Inc. (NASDAQ:VVUS - 10.89), and Internet infrastructure provider Verisign, Inc. (NASDAQ:VRSN - 44.78). Here's a quick roundup on the day's downgrades from analysts on these three names.

  • FSLR was hit with two downgrades this morning, as Bank of America-Merrill Lunch cut the stock to "underperform" from "buy," while Baird lowered its rating to "neutral" from "outperform," and cut the target price to $25 from $30. (One firm, Piper Jaffray, did raise its price target to $28 from $19 and reiterated its "neutral" rating this morning.) Despite the recent fall, FSLR is up 1.6% so far this year, and did come close to overcoming its annual high of $37.18 earlier this month. Today's downgrades come after FSLR turned in fourth-quarter results that were mixed compared to analysts' expectations (adjusted earnings topped expectations, while revenue fell short). Option traders remain extremely bullish on FSLR. The 50-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 1.89, meaning that calls are going at nearly double the rate as puts. In addition, that ranks above all but 1% of other readings in the last year, meaning call buying activity is near a 12-month high.

  • VVUS was another firm to turn in earnings this week, and today Roth Capital cut its target price to $14 from $18, but kept its rating at "neutral." VVUS lost 56 cents a share in the fourth quarter, well below analysts' expectations of a loss of 44 cents -- with disappointing sales for the company's new weight loss drug Qsymia held partially responsible for the loss. The stock has dropped 18.9% so far this year, and more than 50% since the beginning of October. Analysts still are bullish on the stock, however, with five out of the 11 covering VVUS giving the equity a "strong buy" rating. And VVUS remains a popular play for bullish option traders; the stock's Schaeffer's put/call open interest ratio (SOIR) stands at 0.28, a low number by itself, but it ranks in the lowest 5% of all readings taken in the last 12 months. In other words, traders have rarely been as call-oriented as they are right now on options that expire in the next three months.

  • Despite a strong comeback from its annual low of $32.81 in late November that has seen the stock climb more than 36%, VRSN was cut to "neutral" from "outperform" by Credit Suisse this morning. The stock is now consolidating around its 20-day moving average as it digests its year-to-date gains of more than 15%. While the brokerage bunch has been rather gloomy (just two of 11 covering analysts rate the stock a "buy"), short sellers are beginning to hit the exits. During the last two weeks, the number of shorted VRSN shares dropped by almost 12%. With more than 8% of the stock's float still sold short, however, the potential for more short-covering activity remains.

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