Schaeffer's Trading Floor Blog

Analyst Downgrades: Western Digital, Trina Solar, and Legg Mason

Analysts downwardly revised their ratings on WDC, TSL, and LM

by 9/14/2012 9:06 AM
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Analysts are weighing in today on data storage provider Western Digital Corp. (NASDAQ:WDC - 42.58), alternative energy company Trina Solar Limited (ADR) (NYSE:TSL - 4.47), and asset management firm Legg Mason, Inc. (NYSE:LM - 26.59). Here's a quick roundup of today's bearish brokerage notes.

  • WDC was downgraded to "sector perform" from "outperform" at FBN this morning, after the company slashed its fiscal first-quarter revenue guidance while also implementing a quarterly dividend and raising its share buyback program by $1.5 billion. Although the security sits on a 52-week advance of roughly 42%, bearish speculation is still heavy among near-term traders. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.77 arrives in the pessimistically skewed 73rd annual percentile, denoting a healthier-than-usual appetite for puts compared to calls.

  • TSL -- which has lost more than 56% over the past year -- was cut to "underperform" from "market perform" at Raymond James in pre-market action, who cited ongoing sector woes as a major catalyst for the move. The stock has also trailed the broader S&P 500 Index (SPX) by about 40 percentage points during the past three months. This technical weakness has likely been luring in the skeptics, as short interest on the security accounts for nearly 20% of TSL's float -- or the equivalent to nine days' worth of pent-up buying demand, at the equity's average daily trading volume.

  • Despite a year-to-date climb of nearly 11%, LM was lowered to "neutral" from "buy" at Citigroup ahead of the open. Nevertheless, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 2.63, confirming that calls bought to open have more than doubled puts during the past few months. This ratio is docked in the 66th percentile of its annual range, meaning traders have been picking up calls over puts at an accelerated clip.

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