Schaeffer's Trading Floor Blog

Analyst Downgrades: Hewlett-Packard, Best Buy, and Cliffs Natural Resources

Analysts downwardly revised their ratings on HPQ, BBY, and CLF

by 11/21/2012 9:12 AM
Stocks quoted in this article:

Analysts are weighing in today on computer concern Hewlett-Packard Company (NYSE:HPQ - 11.71), electronics retailer Best Buy Co., Inc. (NYSE:BBY - 11.96), and coal producer Cliffs Natural Resources (NYSE:CLF - 30.48). Here's a quick roundup of today's bearish brokerage notes.

  • HPQ was flooded with bearish attention this morning, after reporting a fiscal fourth-quarter loss yesterday amid major accounting issues relating to its Autonomy purchase. RBC lowered the stock to "sector perform" from "outperform" and downwardly adjusted its price target to $14 from $18, Mizuho downgraded HPQ to "underperform" from "neutral" and lowered its price target to $8 from $15, and analysts at Jefferies, Credit Suisse, J.P. Morgan, UBS, and BMO also issued price-target cuts. The equity has shed about 56% during the last 12 months, which may be attracting some bearish speculation. Short interest on HPQ jumped by 20% during the past month, and now accounts for 5% of the security's float. It would take nearly a week to buy back these shorted shares, at the stock's average pace of trading.

  • BBY received price-target cuts at Jefferies (to $13 from $18), Wedbush (to $9 from $14.50), Deutsche Bank (to $13 from $16), UBS (to $12.50 from $14.50), and Bernstein (to $12 from $16) today, after revealing weaker-than-expected quarterly earnings on Tuesday. The stock has surrendered more than 54% over the past year, yet calls appear to be ruling the short-term options pits. The Schaeffer's put/call open interest ratio (SOIR) for BBY sits at 0.63, with calls nearly doubling puts among the front three-months' series of options. This ratio ranks in the 26th annual percentile, meaning near-term traders have been more call-heavy toward the equity just over one-fourth of the time during the past year.

  • Down more than 52% on a year-over-year basis, CLF saw its price target reduced to $55 from $57 at CIBC ahead of the open, as the company continues to feel the heat from Monday's news that it plans to idle production at two U.S. operations due to weak iron ore prices. Meanwhile, the security's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio sits at 1.15, signaling traders have bought to open 115 puts for every 100 calls during the last two weeks. This ratio ranks higher than 82% of similar readings taken during the past year, denoting a healthier-than-usual appetite for puts over calls.

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