Schaeffer's Trading Floor Blog

Analyst Downgrades: SandRidge Energy, Quicksilver Resources, and PetSmart

Subtitle: Analysts downwardly revised their ratings on SD, KWK, PETM

by 3/7/2013 9:32 AM
Stocks quoted in this article:

Analysts are weighing in today on oil and natural gas producer SandRidge Energy, Inc. (NYSE:SD - 5.74), fellow oil and gas firm Quicksilver Resources Inc (NYSE:KWK - 1.67), and pet supply retailer PetSmart, Inc. (NASDAQ:PETM - 66.55). Here's a quick roundup of today's bearish brokerage notes.

  • SD was downgraded by two firms this morning, with BMO cutting its rating to "underperform" from "market perform," and Canaccord Genuity reducing its target price to $1 from $2, and keeping its "sell" rating in place. SD shares have struggled so far this year, losing 9.6% since the beginning of 2013 and nearly 28% since this same time last year. And option traders are increasingly bearish on the stock as well. While the 10-day put/call volume ratio of 0.77 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) might appear low, it is higher than 90% of similar rankings in the last year. That indicates that bearish sentiment is reaching an annual high.


  • Staying on the oil/energy theme, MLV Equity cut its rating on KWK to "hold" from "buy" this morning, reacting to the stock's 41.6% slide so far this year and the drop of 67.7% year over year. KWK just set its annual low of $1.65 in late February and appears solidly trapped by its 20-day moving average at about $2.10. Today's downgrade would make 10 "holds" from the 15 analysts covering the company, with four more having a "sell" rating or worse. But in the option pits, optimism prevails. KD's 10-day call/put volume ratio on the ISE/CBOE/PHLX stands at a whopping 43.95 -- and that very high number ranks higher than 79% of other readings in the last 12 months. That signifies an even greater propensity toward bullish calls lately.


  • Despite the stock's 17.5% rally over the last 12 months, Piper Jaffray cut its rating on PETM to "neutral" from "overweight," Morgan Stanley lowered its target price to $77 from $81, and Jeffries reduced its target price to $66 from $71, after the retailer projected muted sales for 2013. The stock has slid 2.6% so far this year, but has recovered 6.3% since a big drop on Jan. 28. The stock's Schaeffer's put/call open interest ratio (SOIR) reads 1.91, and that ranks in the 88th percentile over similar data in the last 12 months -- indicating option traders are definitely trending toward puts on options that expire in the next three months.

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