Schaeffer's Trading Floor Blog

Analyst Downgrades: Whole Foods Market, Inc., Barrick Gold Corporation (USA), and Deere & Company

Analysts downwardly revised their ratings on WFM, ABX, and DE

by 9/22/2014 9:50 AM
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Analysts are weighing in today on organic grocer Whole Foods Market, Inc. (NASDAQ:WFM), commodity concern Barrick Gold Corporation (USA) (NYSE:ABX), and farm equipment maker Deere & Company (NYSE:DE). Here's a quick roundup of today's bearish brokerage notes on WFM, ABX, and DE.

  • Sterne Agee cut its price target on WFM to $37 from $40 (and maintained a tepid "neutral" rating), representing expected downside of roughly 5% to the stock's current perch at $38.97. Year-to-date, shares of WFM are off more than 32%, yet option traders think the equity is ready to bounce back . At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), WFM's 10-day call/put volume ratio of 2.15 ranks in the bullishly skewed 68th percentile of its annual range. With 10.5% of the security's float sold short, though, a portion of this call buying could be a result of shorts hedging their bearish bets.

  • ABX got hit with another round of price-target cuts, this time from CIBC (to $20 from $22) and TD Securities (to $19 from $21).This isn't too surprising, considering the stock has shed more than 12% this year to churn near $15.48. This skeptical stance is witnessed elsewhere on the Street, as well. In fact, 83% of covering analysts have levied a "hold" or "strong sell" suggestion toward Barrick Gold Corporation (USA), and the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.88 ranks just 4 percentage points from an annual bearish peak.

  • DE has been charting a path lower since hitting an annual high of $94.89 in early May, with the shares off 12% to linger near $83.44. This downward trajectory may have been what spurred Deutsche Bank to cut its price target on DE to $106 from $110. From a wider perspective, no fewer than 16 out of 19 analysts covering the equity maintain a "hold" or worse suggestion. Meanwhile, in the options pits, the stock's Schaeffer's put/call open interest ratio (SOIR) of 3.08 ranks at an annual peak, indicating short-term speculators are more put-heavy now toward Deere & Company than at any other time within the past year.

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Buzz Stocks: General Motors Company, Google Inc, and Sigma-Aldrich Corporation

Today's stocks to watch in the news include GM, GOOGL, and SIAL

by 9/22/2014 9:29 AM
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U.S. equities markets look like they'll open in the red this morning, with existing home sales data and a pair of speeches from Fed officials on tap. In company news, today's stocks to watch include automaker General Motors Company (NYSE:GM), online search expert Google Inc (NASDAQ:GOOGL), and chemical concern Sigma-Aldrich Corporation (NASDAQ:SIAL).

  • GM is facing yet another round of vehicle recalls. This time, more than 220,000 cars across the U.S. and Canada are being recalled due to a defect in the parking brake, which could potentially result in a fire. On the charts, General Motors Company has swooned amid a seemingly non-stop string of negative fundamental developments, including last week's announcement of reduced production at its European Opel unit. Specifically, the shares have shed 17% year-to-date to rest at $33.94. This could set GM up for a round of bearish brokerage notes, as nine out of 14 covering analysts maintain "buy" or better opinions on the stock.

  • GOOGL's Nexus 9 will be produced by Taiwan-based HTC, according to The Wall Street Journal. The tablet -- HTC's first since 2011 -- is expected to hit the shelves this quarter. On the sentiment front, Google Inc has benefited from positive brokerage attention, with 26 "buy" or better ratings, compared to three "holds" and not a single "sell" recommendation. However, this optimism is warranted, given the equity's nearly 34% year-over-year advance to trade at $605.40.

  • Finally, Merck KGaA -- not to be confused with Merck & Co., Inc. (NYSE:MRK) -- has agreed to purchase chemical producer SIAL for $17 billion in cash, or $140 per share -- a 37% premium to the stock's closing price of $102.37 on Friday. Technically speaking, Sigma-Aldrich Corporation has added about 9% in 2014, and hit a record high of $105 earlier this month. Nevertheless, short sellers have taken an interest in the shares, as 4% of SIAL's float is sold short -- which would take more than three weeks to buy back, at average daily trading levels.

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Analyst Upgrades: Tesla Motors Inc (TSLA), Nokia Corporation (ADR), and Monster Beverage Corp

Analysts upwardly revised their ratings on TSLA, NOK, and MNST

by 9/22/2014 9:24 AM
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Analysts are weighing in today on electric car concern Tesla Motors Inc (NASDAQ:TSLA), telecom issue Nokia Corporation (ADR) (NYSE:NOK), and drink maker Monster Beverage Corp (NASDAQ:MNST). Here's a quick roundup of today's bullish brokerage notes on TSLA, BBY, and MNST.

  • J.P. Morgan Securities chimed in on TSLA, raising its price target to $190 from $170. However, this new target price still sits nearly 27% below the stock's current price of $259.32, meaning additional bullish brokerage notes could be in store -- especially if TSLA extends its 72.4% year-to-date gain. Tesla Motors Inc could also get a boost in the form of a short-covering rally. At present, 23.8% of the equity's float is sold short, representing more than a week's worth of pent-up buying demand.

  • NOK is pointed higher ahead of the bell, after receiving yet another price target hike. Specifically, Canaccord Genuity raised its price target to $12 from $11, and maintained a "buy" recommendation. The stock has been on the mend since hitting its most recent low of $7.30 in early July, with the shares up 18.4% to trade at $8.64, and on Friday, NOK tagged a fresh three-year peak of $8.73. Option traders think there's more room to run, and over the past 10 sessions, have bought to open 11.07 Nokia Corporation (ADR) calls for every put at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). What's more, this ratio ranks in the 82nd percentile of its annual range, meaning calls have been bought to open over puts at an accelerated clip in recent weeks.

  • In mid-August, MNST tagged a record peak of $94.93, and although the equity was last seen lingering near $89.78 -- 32.5% above its year-to-date breakeven mark -- Stifel thinks the stock is ready to resume its run toward all-time highs. Specifically, the firm raised its price target for Monster Beverage Corp to $110 from $94, and maintained a "buy" rating, echoing ISI Group, which started the security with a similar recommendation. Option players have not been as optimistic, though, and at the ISE, CBOE, and PHLX, the stock's 10-day put/call volume ratio of 1.37 ranks in the bearishly skewed 87th percentile of its annual range.

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Alibaba Group Holding Ltd (NYSE:BABA) has traded for half a day, and we don't even have options listed. What is this, early 2014?

I'm told we have to wait until a week from today. Seriously? We might actually have an idea of volatility. Not a great idea, mind you, but at least something to go on. Where's the fun in that?

I semi-kidded that we should get options before they list the stock, but really, I don't think it's a terrible idea. You can't really hedge, so I wouldn't recommend playing all that large, but it's a way to take a stab at where the stock might open. It's also a way to pick where you think the IPO should trade. That's especially valuable on an oversubscribed name like this one.

I'm not going to hold my breath on it, but I honestly feel that listing options ahead of the IPO at least provides a price discovery function.

"Time" was when you had to wait three months to trade options on a new listing. That time is long ago. Now it's a week. You can get some sense of implied volatility in a week, but not an awful lot. There's no way to know how violently the name might react to any sort of company specific news.

Alibaba is a bit unique in that it comes to market as a gigantic company that earns real money. It probably doesn't earn enough to justify its current stock price of $93.89, but that's not at all my field. It's also not likely to influence the stock price at all in the near future; you'll generally go broke trying to short hot names on value.

Twitter Inc (NYSE:TWTR) and Facebook Inc (NASDAQ:FB) are generally the go-to names as far as recent high-profile IPOs go, and the behavior of the two is fairly similar. Facebook options started trading a little over two years ago at about a 55 implied volatility. It has gone as high as the mid-70s and as low as the mid-20s, where it now resides.

Twitter volatility also started at about 55 but spiked up to 100. It's now in the low 40s. Even though it feels like TWTR listed forever ago, it didn't; it was only last November. So in another year it will likely see low 30s/high 20s vol.

Alibaba might start life with lower vol than 55, thanks to both its size and the fact that vol in the market itself is very low now. It will very likely see a vol spike or three, but over time will drift lower just like pretty much every maturing stock ever.

So, if you're of a mind to take an options position early on, my only suggestion is not to pay up for longer-term options.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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Analyst Update: Nokia Corporation (ADR), FireEye Inc, and Rite Aid Corporation

Analysts adjusted their ratings on NOK, FEYE, and RAD

by 9/19/2014 2:03 PM
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Analysts are weighing in today on mobile firm Nokia Corporation (ADR) (NYSE:NOK), cyber security firm FireEye Inc (NASDAQ:FEYE), and drugstore chain Rite Aid Corporation (NYSE:RAD). Here's a quick look at today's brokerage notes on NOK, FEYE, and RAD.

  • Shares of NOK were last seen trading flat at $8.63, after RBC raised its price target to $12 from $11 while maintaining its "outperform" rating. Nokia Corporation (ADR) has been solid on the charts in the past three months, outperforming the broader S&P 500 Index (SPX) by nearly 10 percentage points. Bullish traders have taken an interest in the equity lately, as NOK's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 19.61 sits only 8 percentage points from a bullishly skewed annual high, implying calls have been bought to open over puts at a quicker-than-usual pace.

  • FEYE has gained 0.18% today, last seen trading at $33.74 after Piper Jaffray raised its price target to $40 from $36. Still, FireEye Inc has struggled mightily in 2014, off 22% year-to-date. The equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 10.23 is only 8 percentage points from a 52-week high, meaning calls are being bought to open over puts at a faster-than-normal rate. However, the recent call buying could be bearish traders looking for a hedge, as close to 12% of FEYE's available float is sold short.

  • Lastly, RAD is off 1.4% today to trade at $5.34, after Guggenheim and J. P. Morgan Securities cut their price targets to $7.50 and $6.50, respectively. On the year, Rite Aid Corporation has gained a modest 5.5%. Considering three out of five covering brokerage firms are issuing "buy" or better ratings for RAD, future downgrades could send the shares lower. Lately, options traders have been betting on RAD to continue to struggle, as the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.09 ranks in the 99th annual percentile.

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