Schaeffer's Trading Floor Blog

Analyst Downgrades: Wells Fargo & Co, Transocean LTD, and CarMax, Inc

Analysts downwardly revised their ratings on WFC, RIG, and KMX

by 6/14/2013 9:18 AM
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Analysts are weighing in today on financial services firm Wells Fargo & Co (NYSE:WFC), oil and gas concern Transocean LTD (NYSE:RIG), and used car retailer CarMax, Inc (NYSE:KMX). Here's a quick roundup of today's bearish brokerage notes.

  • WFC -- which has climbed nearly 28% during the past year to trade at $40.94 -- was downgraded to "neutral" from "buy" at Sterne Agee today. The brokerage firm noted that the company's "earnings growth is clearly moderating into '14 … exacerbated by the stubbornly low rate environment and normalizing mortgage banking revenues." (However, Jefferies upped its price target to $44 from $42.) Meanwhile, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.88 ranks higher than 76% of similar annual readings, meaning traders have been picking up Wells Fargo & Co puts relative to calls at an accelerated clip.

  • RIG saw its price target trimmed to $55 from $56 at Susquehanna ahead of the opening bell, which could potentially chip away at the stock's 2013 advance of about 9%. Elsewhere, skepticism has been growing toward Transocean LTD, which is presently perched at $48.74. In fact, short interest surged by close to 37% during the past two reporting periods. However, there is still plenty of room in the security's pessimistic camp, as these bearish bets make up just over 1% of RIG's available float. It would take less than a day to buy back these shorted shares, at the equity's average pace of trading.

  • Despite a year-over-year gain of almost 72% to explore the $46.99 area, KMX received a price-target cut to $56 from $58 at Nomura this morning. The stock has also bested the broader S&P 500 Index (SPX) by about 9 percentage points during the past three months, yet near-term traders remain bearishly biased toward CarMax, Inc. The security's Schaeffer's put/call open interest ratio (SOIR) checks in at 1.12, confirming puts outstrip calls among the front three-months' series of options. This glut of put open interest -- particularly within the June series of contracts -- could end up translating into options-related support in the short term.

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