Schaeffer's Trading Floor Blog

Analyst Downgrades: Juniper Networks, Inc., Electronic Arts, and Lululemon Athletica

Analysts downwardly revised their ratings on JNPR, EA, and LULU

by 3/19/2013 9:20 AM
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Analysts are weighing in today on telecom/IT equipment maker Juniper Networks, Inc. (NYSE:JNPR - 20.21), videogame giant Electronic Arts Inc. (NASDAQ:EA - 18.71), and athletic clothing retailer Lululemon Athletica Inc. (NASDAQ:LULU - 65.90). Here's a quick roundup of today's bearish brokerage notes.

  • Goldman Sachs downgraded JNPR to "sell" from "neutral," and cut its target price to $17 from $21. The analyst cited increased competition, especially in its data-center equipment and security business segment. JNPR has been on a bit of a run lately, up 2.7% on the year, although it is off from its 2013 high of $22.98 reached in the beginning of February. Option traders remain bearish on the stock, with the stock's Schaeffer's put/call open interest ratio (SOIR) standing at a respectable 1.66, and that ranks in the top 3% of all ratings in the last year. That shows that put open interest is nearly as high now (relative to call open interest) as it has been in the last year among options set to expire in the next three months.

  • Following the abrupt resignation of CEO John Riccitiello Monday, Needham cut its rating to "hold" from "buy" for EA. (On the positive side, Stifel raised its target price to $21 from $17 and kept its rating at a "buy.") Electronic Arts is actually up nearly 29% on the year, bouncing back 73.7% from a summer swoon. But sentiment in the option pits remains bearish, with EA's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) standing at 8.82, just 1 percentage point from an annual high. That means that investors are buying puts to open at a faster clip than at just about any other time in the past 12 months.

  • After news that LULU was recalling of one of its most popular offerings (black yoga pants) Monday, which could result in a shortage of that item, the stock not only took a big tumble, but also saw a bevy of analyst cuts. All told, seven analysts cut their ratings and/or their target prices, including Sterne Agee, which lowered its rating to "neutral" from "buy," and UBS, which reduced its target price to $77 from $82. Lululemon dropped 3.8% from the previous day's close on the news yesterday, and is down 13.6% on the year. Option traders agree sentiment wise, with LULU's 50-day put/call ratio on the ISE/CBOE/PHLX standing at 1.40. That is in the 89th percentile compared to all readings in the last year, meaning that puts are being bought to open at a quicker pace over the last 50 days as compared with the last 12 months.

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