Schaeffer's Trading Floor Blog

Earnings Preview: ReneSola Ltd, Trina Solar Limited, and Vivint Solar, Inc

Analyzing recent option activity on ReneSola Ltd. (ADR) (SOL), Trina Solar Limited (ADR) (TSL), and Vivint Solar Inc (VSLR)

by 3/3/2015 1:11 PM
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Among the stocks gearing up to report earnings tomorrow are solar energy concerns ReneSola Ltd. (ADR) (NYSE:SOL), Trina Solar Limited (ADR) (NYSE:TSL), and Vivint Solar Inc (NYSE:VSLR). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on SOL, TSL, and VSLR.

  • SOL has been sliding, with the shares down about 64.6% year-over-year to hit $1.37. Accordingly, short-term puts are more prominent than usual in the options pits, as ReneSola Ltd.'s Schaeffer's put/call open interest ratio (SOIR) of 0.47 sits just 8 percentage points from an annual high. Said another way, options traders have rarely been this put-skewed over the past year, when measuring options that expire in three months or less. Traders hoping for additional downside after the company releases earnings tomorrow have history on their side: in the session immediately following its last eight earnings reports, SOL has lost an average of 5.7%, including a 7.1% dip this past November. Near-term options on the stock are available for inflated prices, as its Schaeffer's Volatility Index (SVI) of 175% sits in the 71st percentile of its annual range.

  • On the other hand, sector peer TSL has been edging higher, with the shares up over 19% year-to-date to reach $11.02, including a 0.6% gain today. However, sentiment in the stock's options pits is pessimistic ahead of tomorrow's earnings release. Specifically, Trina Solar Limited's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.87 reads higher than 97% of all similar readings taken over the past year. What's more, short interest accounts for nearly 18% of TSL's available float, which would take nearly five sessions to cover, at average daily trading volumes. Meanwhile, in the session following its last four earnings reports, TSL has advanced an average of 7.2%, including a staggering 30.9% gain in May 2014. Option traders are paying historically cheap prices for their short-term bets on the equity, as its SVI of 59% sits in the 21st percentile of its annual range.

  • Since debuting with an IPO price of $16 in October, the shares of VSLR have fallen nearly 50% to rest at $8.12, including a 0.1% dip so far today. Accordingly, bearish activity is ramping up; short interest on Vivint Solar Inc has grown by nearly 33% over the past two reporting periods, and now accounts for over 17% of the stock's available float, representing four and a half days of pent-up buying power, at VSLR's average daily volume. In the session following its last two earnings reports, VSLR has shed an average of 11.9%, with the security failing to notch a positive post-earnings move since going public. Short-term options on VSLR are available for relatively inexpensive prices, as its SVI of 85% sits in the 32nd percentile of all similar readings taken over the past year.

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Analyst Update: Mylan Inc., Pacira Pharmaceuticals, Inc., and Facebook, Inc.

Analysts adjusted their ratings on Mylan Inc (MYL), Pacira Pharmaceuticals Inc (PCRX), and Facebook Inc (FB)

by 3/3/2015 11:22 AM
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Analysts are weighing in today on pharmaceutical firms Mylan Inc (NASDAQ:MYL) and Pacira Pharmaceuticals Inc (NASDAQ:PCRX), as well as social-media titan Facebook Inc (NASDAQ:FB). Here's a quick look at today's brokerage notes on MYL, PCRX, and FB.

  • Last night, MYL reported lackluster fourth-quarter revenue, issued full-year guidance, and revealed it could be searching for additional takeover targets, prompting J.P. Morgan Securities and RBC to raise their price targets on the equity. Specifically, J.P. Morgan Securities upped its price target to $66 from $60 while underscoring an "overweight" rating, while RBC lifted its price target to $60 from $56 while reiterating a "sector perform" opinion. At last check, the shares of Mylan Inc were down 2.9% to hit $56.19, putting the stock 0.3% in the red for 2015. Sentiment in the options pits is pessimistic, as MYL's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.30 sits in the 71st percentile of all similar readings taken over the past year.

  • Four brokerage firms slashed their price targets on PCRX, following yesterday's news that the firm's application to expand the use of one of its pain drugs was denied by the U.S. Food and Drug Administration (FDA). Drilling down, the most dramatic cut came from Canaccord Genuity, which lowered its price target to $128 from $163 while reiterating a "buy" opinion. Today, Pacira Pharmaceuticals Inc is down 2.4% to hit $90.10, adding to yesterday's 19.6% tumble. The security is still up 1.3% year-to-date, though, as it was exploring record highs just last week. Bearish sentiment is popular in the options pits, as PCRX's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.47 sits in the 88th percentile of its annual range.

  • Jyske Bank initiated coverage on FB today with a $93 price target -- in uncharted territory for the shares -- and a "buy" rating. Despite the positive brokerage attention, the shares of Facebook Inc are down about 1.2% today to hit $78.82. Looking back, FB is over 14.5% higher year-over-year. However, short-term puts are more popular than usual, as FB's Schaeffer's put/call open interest ratio (SOIR) of 0.69 sits in the 67th percentile of its annual range. Simply stated, options traders have preferred near-term puts over calls by a bigger-than-usual margin.

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Analyst Upgrades: Citigroup Inc., Palo Alto Networks, Inc., and GrubHub, Inc.

Analysts upwardly revised their ratings on Citigroup Inc (C), Palo Alto Networks Inc (PANW), and GrubHub Inc (GRUB)

by 3/3/2015 9:27 AM
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Analysts are weighing in today on financial firm Citigroup Inc (NYSE:C), cybersecurity issue Palo Alto Networks Inc (NYSE:PANW), and online restaurant concern GrubHub Inc (NYSE:GRUB). Here's a quick roundup of today's bullish brokerage notes on C, PANW, and GRUB.

  • C is making headlines this morning, after the firm said it agreed to sell its OneMain Financial Holdings consumer finance unit to Springleaf Holdings Inc (NYSE:LEAF) for a cool $4.25 billion in cash. Meanwhile, J.P. Morgan Securities upgraded Citigroup Inc to "overweight" from "neutral," and lifted its price target by $4 to $58, citing the company's deal with Visa Inc (NYSE:V) and Costco Wholesale Corporation (NASDAQ:COST). On the charts, C is staring up at former support in the $54 region -- also home to its year-to-date breakeven level -- which could reverse roles to serve as resistance. In fact, C sports a 14-day Relative Strength Index (RSI) of 68 -- on the cusp of overbought territory, suggesting a short-term pullback could be in the cards. The stock closed Monday at $53.49.

  • PANW unveiled stronger-than-expected fiscal second-quarter earnings (subscription required) and offered upbeat guidance, triggering a bounty of bullish brokerage notes. Nearly a dozen analysts have upped their price targets on PANW, including Raymond James, which lifted its target to $173 from $160. Palo Alto Networks Inc has been a broad-market standout of late, more than doubling over the past year to sit at $145.98. In fact, the security touched a record high of $146.40 just yesterday. As such, option players have been upping the bullish ante. The stock's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.14 -- just 6 percentage points from an annual peak.

  • Finally, GRUB jumped 5% yesterday to land at $44.09 -- a six-month high -- thanks to well-received guidance. Brean Capital weighed in on GrubHub Inc this morning, lifting its price target by $5 to $50 and underscoring a "buy" recommendation. Most analysts are already aboard the stock's bullish bandwagon, as GRUB boasts 13 "strong buys," compared to two lukewarm "holds" and not a single "sell." Likewise, the consensus 12-month price target of $48.63 stands in uncharted territory for the shares, which have added 21.4% in 2015.

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Analyst Downgrades: MannKind Corporation, Micron Technology, Inc., and Chesapeake Energy Corporation

Analysts downwardly revised their ratings on MannKind Corporation (MNKD), Micron Technology, Inc. (MU), and Chesapeake Energy Corporation (CHK)

by 3/3/2015 9:27 AM
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Analysts are weighing in today on biopharmaceutical company MannKind Corporation (NASDAQ:MNKD), chip producer Micron Technology, Inc. (NASDAQ:MU), and natural gas concern Chesapeake Energy Corporation (NYSE:CHK). Here's a quick roundup of today's bearish brokerage notes on MNKD, MU, and CHK.

  • MNKD is taking it on the chin in electronic trading, pointed 9.5% lower due to a downgrade at Goldman Sachs. The brokerage firm cuts its outlook on the shares to "sell" from "neutral," and slashed its price target in half to $3, citing a slower-than-anticipated launch of the company's Afrezza insulin device. The expected drop will put a major dent into what was previously a strong 2015 for MannKind Corporation, as it had added 27.2% year-to-date. Over one-third of MNKD's float is held by short sellers, though, so not everyone is disappointed. The shorted shares account for almost two weeks' worth of trading, at the equity's normal daily trading pace. What's more, short interest increased 12% just in the past two reporting periods. MNKD closed at $6.64 on Monday.

  • MU is off 2.5% in pre-market action, after being downgraded to "neutral" from "buy" at Nomura, which also reduced its price target on the equity to $30 from $40. Since hitting a decade-plus high of $36.59 on Dec. 8, the shares have given back over 17% to sit at $31.24, and option bears couldn't be happier. During the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Micron Technology, Inc. has accumulated a put/call volume ratio of 0.66, which is only 6 percentage points from an annual bearish peak. In other words, puts have been bought to open over calls at a faster-than-normal rate. Analysts, though, are almost entirely bullish on the shares. Nineteen out of 22 covering brokerage firms say MU is a "buy" or better.

  • Since yesterday's close, CHK has seen its price target cut by Susquehanna and Barclays. The former lowered it price target by $4 to $18 and kept a "neutral" rating, with the latter dropping its price target by $3 to $10 -- multi-year low territory -- and maintaining an "underweight" opinion. The negative attention comes as Chesapeake Energy Corporation continues to fall after last week's earnings-induced bear gap. Just yesterday, the shares hit an annual low of $16.23, and are hovering around breakeven at $16.60 ahead of the bell. On the Street, six analysts give CHK a "buy" or better rating, with 11 handing out "holds," and two calling it a "sell" or worse.

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Buzz Stocks: Kate Spade & Co, AutoZone, Inc., and Ocwen Financial Corporation

Today's stocks to watch in the news include Kate Spade & Co (KATE), AutoZone, Inc. (AZO), and Ocwen Financial Corp (OCN)

by 3/3/2015 9:25 AM
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U.S. benchmarks appear ready to take a breather today, following Monday's historic session. In company news, today's stocks to watch include high-end fashion designer Kate Spade & Co (NYSE:KATE), car parts seller AutoZone, Inc. (NYSE:AZO), and mortgage lender Ocwen Financial Corp (NYSE:OCN).

  • KATE's latest turn in the earnings confessional was mixed, as the company's adjusted per-share profit of 24 cents fell short of the consensus estimate, but its sales were better than expected. On the charts, the stock has added 10.3% year-to-date to trade at $35.30. This technical tenacity has led to accelerated call buying at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, Kate Spade & Co's 50-day call/put volume ratio of 4.24 rests above 90% of comparable readings from the last year.

  • AZO topped the Street's consensus earnings and sales forecasts for its fiscal second quarter, helped by higher inventory levels and new store openings. As such, the shares are nearly 4% higher in electronic trading, putting them on pace for a record peak out of the gate. AutoZone, Inc. closed Monday at $649.53, just below last Friday's all-time high of $651.95. Despite this impressive price action, AZO is facing skepticism from analysts. Fifteen out of 18 brokerage firms have designated the equity a "hold" or worse, and its average 12-month price target of $639.44 stands below current trading levels -- potentially paving the way for a round of upgrades and/or price-target hikes. On the flip side, option traders have blazed a more bullish path toward AZO.

  • Finally, OCN has agreed to sell the servicing rights on $45 billion in Fannie Mae loans to an undisclosed party, just a week after a similar $9.8 billion sale. The company is trying to raise money to offset mounting legal expenses. On the charts, Ocwen Financial Corp has had a rough go of it, surrendering nearly 77% of its value over the last 52 weeks to trade at $8.54 -- though the security is pointed 6.6% higher in electronic trading. Short sellers have turned up the heat, too, as short interest rose 29% during the most recent reporting period, and now makes up 38.8% of the stock's total float.

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