Schaeffer's Trading Floor Blog

Analyst Downgrades: Hewlett-Packard Company (HPQ), VMware, Inc. (VMW), and NetApp Inc. (NTAP)

Analysts downwardly revised their ratings on HPQ, VMW, and NTAP

by 9/20/2013 10:04 AM
Stocks quoted in this article:

Analysts are weighing in today on computer maker Hewlett-Packard Company (NYSE:HPQ), IT services firm VMware, Inc. (NYSE:VMW), and data storage provider NetApp Inc. (NASDAQ:NTAP). Here's a quick roundup of today's bearish brokerage notes.

  • Cantor initiated a "hold" rating for HPQ ahead of today's opening bell. On the charts, the stock stands more than 50% higher on a year-to-date basis to trade at $21.41. More recently, the computer maker announced and unveiled a variety of innovative consumer tablets, PCs and tablets, including the world's first notebook PC with Leap Motion technology. Against this backdrop, call volume zoomed to a new 90-day record on Thursday. From a broader perspective, HPQ's Schaeffer's put/call open interest ratio (SOIR) of 1.21 ranks in the 73rd percentile of its annual range, indicating that -- before yesterday's spout of call activity -- short-term traders were more put-heavy than usual. Given recent events, and Wall Street's positive response to them, Hewlett-Packard Company could enjoy a burst of buying power, as traders continue to bullishly adjust their positions on the stock.

  • Cantor initiated a "hold" rating for VMW this morning, as well. On the charts, VMW has tacked on 26% -- mostly earnings induced -- in the past three months to trade at $87.89. Stepping back, however, the IT services firm sits nearly 12% lower on a year-over-year basis. Meanwhile, VMWare, Inc. traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open almost five calls for every put during the last two weeks, resulting in a 10-day call/put volume ratio of 4.67. While this action is typically executed by bullish traders, it could actually be the work of short sellers hedging their bearish bets. In fact, short interest accounts for a lofty 11.8% of VMW's available float, which would take more than six sessions to cover (in the event of an extended rally) at the stock's average pace of trading.

  • Finally, NTAP saw its rating lowered to "underperform" from "market perform" at William Blair in pre-market action. (Cantor, meanwhile, started the stock with a "buy.") Technically speaking, NTAP has climbed 30.7% since the beginning of the year, and has outperformed the broader S&P 500 Index (SPX) by about 10 percentage points in the same time frame. Still, the brokerage bunch is skeptical toward the stock, which sports 14 tepid "holds" and one "sell" suggestion, compared to 13 "buy" or better recommendations. Furthermore, NetApp Inc.'s average 12-month price target of $44.39 is just a stone's throw away from the stock's current price of $43.88. In other words, the door is wide open for a potential round of upgrades and/or price-target hikes, which could give the shares an additional boost on the charts.

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