Schaeffer's Trading Floor Blog

Earnings on Deck: Sohu.com Inc, Herbalife Ltd., and Sirius XM Holdings Inc.

Taking a closer look at SOHU, HLF, and SIRI ahead of their earnings results

by 7/25/2014 2:27 PM
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Wall Street has digested a slew of corporate earnings reports this week, and looking ahead to next week, quarterly results from Chinese Internet issue Sohu.com Inc (NASDAQ:SOHU), nutritional supplements specialist Herbalife Ltd. (NYSE:HLF), and satellite radio issue Sirius XM Holdings Inc. (NASDAQ:SIRI) will be in focus. Here's a quick look at this trio of names as earnings approach.

  • Barclays weighed in on SOHU ahead of Monday's early morning earnings report, expressing caution toward the company's margins with a $1 price-target cut to $78, but maintaining its "buy" recommendation on the equity. This "buy" rating defies the relatively skeptical tone the brokerage bunch has taken toward SOHU, with five "hold" or "sell" suggestions levied toward the security, versus two "strong buys." In today's session, the equity is 1% higher to trade at $56.71 -- thanks to an earnings-induced halo lift from sector peer Baidu Inc (ADR) (NASDAQ:BIDU) -- but could be poised to erase these gains in the wake of its own results. In fact, over the past eight quarters, Sohu.com Inc has averaged a single-session post-earnings loss of 2.5%, which widens to 2.9% when going out one week.

  • HLF is poised to finish the week up nearly 9%, after traders brushed off dire words of warning from activist investor Bill Ackman. Longer term, though, the equity is still off roughly 16% year-to-date -- yet the brokerage bunch remains decidedly optimistic. Specifically, four out of five covering analysts maintain a "strong buy" rating toward Herbalife Ltd., and the consensus 12-month price target of $85.50 stands at a 29% premium to the security's current perch at $66.12. Looking ahead to Monday evening's earnings report, Wall Street is calling for a profit of $1.57 per share for HLF's second quarter. Historically, the company has exceeded analysts' bottom-line estimates in each of the past eight quarters, resulting in an average single-session post-earnings advance of 0.3% for the stock.

  • Over the past eight quarters, SIRI has matched or exceeded consensus profit estimates five times, translating into an average gain of 1.4% in the subsequent session. When Sirius XM Holdings Inc. steps up to the earnings plate bright and early Tuesday morning, analysts are expecting the company to post a second-quarter profit of 2 cents per share. On the charts, the stock is sitting at $3.43 -- about 2% below its year-to-date breakeven level -- yet the consensus 12-month price target of $4.31 sits in territory not charted by SIRI since November 2006. Plus, seven out of nine covering analysts have rated the equity a "strong buy," with not a single "sell" to be found. Should SIRI buck its historical trend and turn in a poorly received report, a re-evaluation of ratings from this optimistic bunch could pressure the shares lower.

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Stocks on the Move: WellCare Health Plans, Inc., Amazon.com, Inc., and Trulia Inc

WCG, AMZN, and TRLA are moving sharply in Friday's trading

by 7/25/2014 1:28 PM
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U.S. markets are trading decidedly lower today, as a handful of poorly received earnings reports and new developments in Ukraine and Gaza spark a risk-off session. Among names making notable moves are healthcare concern WellCare Health Plans, Inc. (NYSE:WCG), online retailer Amazon.com, Inc. (NASDAQ:AMZN), and real estate stock Trulia Inc (NYSE:TRLA). Here's a quick roundup of how this trio of names is performing on the charts so far.

  • WCG has gapped 20% lower today to trade at $61.40, after the company last night reported an unexpected loss in its second quarter due to high Medicaid costs in Florida, and cut its full-year profit forecast in half. Adding to the bearish bias was a price-target cut to $70 at Wedbush, and downgrades to "market perform" from "outperform" at both Raymond James and Wells Fargo. Today's plunge -- the most of any name on the Big Board -- sent the stock straight to the short-sale restricted (SSR) list and into the red on a year-to-date basis. Plus, WellCare Health Plans, Inc. is now trading more than 25% below the consensus 12-month price target of $76.93, meaning another round of bearish brokerage notes could be on the horizon.

  • AMZN's steeper-than-expected second-quarter loss -- and subsequent 10% drop on the charts -- is being widely cited as a catalyst for today's broad-market sell-off. The news was met with a round of downwardly revised brokerage notes on the Street, and with 22 "buy" or better ratings levied toward the stock out of 27 covering analysts, additional downgrades may be in AMZN's future. Meanwhile, in the options pits, puts are trading at nearly eight times the intraday average this afternoon. However, with Amazon.com, Inc. also being on the SSR list, it's no surprise to find traders looking for alternate ways to bet bearishly on the stock. At last check, AMZN was trading at $323.25, after earlier tagging an intraday low of $314.76.

  • Bucking today's bearish bias is TRLA, which is up 2.8% to linger near $55.26 -- extending yesterday's 32% pop amid buyout buzz from sector peer Zillow Inc (NASDAQ:Z). The stock is now trading comfortably above the $50 mark -- which coincides with peak put open interest in the front-month August series of options -- suggesting a new layer of short-term support may be forming. Trulia Inc's two-day rally could have short sellers on edge. At present, more than 38% of the stock's float is sold short, and it would take more than seven sessions to cover, at TRLA's average daily trading volume.

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Analysts are weighing in today on Finnish phone firm Nokia Corporation (ADR) (NYSE:NOK), sports apparel issue Under Armour Inc (NYSE:UA), and fertilizer firm Potash Corp./Saskatchewan (USA) (NYSE:POT). Here's a quick look at today's brokerage notes on NOK, UA, and POT.

  • NOK has received a mixed bag of analyst notes in the wake of Thursday's earnings report. While a number of brokerage firms increased their price targets -- including Evercore Partners, which upped its forecast to $9 from $8 -- S&P Capital IQ diverged from the pack by downgrading Nokia Corporation (ADR) (NYSE:NOK) to "hold" from "buy," citing valuation concerns. NOK is off 1.3% at $8.22 this afternoon, just barely north of its year-to-date breakeven level of $8.11. Based on the security's average 12-month price target of $8.45, most analysts aren't banking on the shares to rise much higher.

  • UA is paring a portion of Thursday's post-earnings rally, with the shares fractionally lower at $69.48 -- after earlier touching an all-time high of $70.94. Overnight, Canaccord Genuity raised its price target on Under Armour Inc to $80 from $60, with the analysts predicting a continued string of record highs for the stock. There's still room for more brokers to upwardly revise their outlook for UA, as the equity's average 12-month price target is a rather lowball figure of $65.17.

  • Canaccord Genuity and Paradigm Capital raised their respective price targets on POT to $34 and $42, bracketing the stock's current price of $36.47. The shares of Potash Corp./Saskatchewan (USA) are up 0.7% at last check, adding to the prior session's post-earnings advance. Though the stock is up nearly 11% year-to-date, most analysts side with Canaccord Genuity when it comes to POT. The security's average 12-month price target stands at $34.66, implying a general expectation for POT to pull back.

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Buzz Stocks: Zillow Inc, Apple Inc. (AAPL), Twenty-First Century Fox Inc, and Google Inc

Today's stocks to watch in the news are Z, AAPL, FOXA, and GOOGL

by 7/25/2014 9:26 AM
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Rising geopolitical concerns have futures pointed lower this morning. In company news, here are some stocks to watch.

  • Zillow Inc (NASDAQ:Z) is reportedly looking to buy rival Trulia Inc (NYSE:TRLA) for roughly $2 billion in cash and stock. Both companies refused to comment on what would be the biggest acquisition yet for Z CEO Spencer Rascoff. (Bloomberg)

  • A U.S. district judge in New York conveyed worry over Apple Inc.'s (NASDAQ:AAPL) proposed $450 million e-book price-fix settlement, suggesting it could negatively impact the payout to consumers. Specifically, she expressed concern over a clause that would substantially reduce the settlement, should an appeals court reverse her ruling. (Reuters)

  • Twenty-First Century Fox Inc's (NASDAQ:FOXA) Rupert Murdoch is raising the stakes in his bid for Time Warner Inc (NYSE:TWX). Specifically, FOXA is merging a number of European satellite TV operators, which will result in a roughly $8.3 billion influx of cash for the company. Reports are circling that Murdoch will use the windfall to up his buyout offer for TWX. (CNNMoney)

  • Google Inc (NASDAQ:GOOGL) is once again in the hot seat with European regulators, who are questioning how the company is dealing with customers' "right to be forgotten" claims. Since the European Union's top court ruled that GOOGL must remove information that is no longer relevant from its database, the company has only approved more than half of the 90,000 requests it's received. (Reuters)

  • On the earnings front, Amazon.com, Inc. (NASDAQ:AMZN), Pandora Media Inc (NYSE:P), Starbucks Corporation (NASDAQ:SBUX), Baidu Inc (ADR) (NASDAQ:BIDU), and Visa Inc (NYSE:V) all reported. (CNBC; Bloomberg; MarketWatch)

  • Finally, Corinthian Colleges Inc (NASDAQ:COCO) is ridding itself of a number of locations, as it confronts numerous state and federal lawsuits. The for-profit educational institution -- whose shares are down 90% year-over-year -- is reportedly "the biggest scam company in the world," according to one staffer. (Consumerist)

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Analyst Downgrades: Amazon.com, Inc., Pandora Media Inc, and Visa Inc

Analysts downwardly revised their ratings on AMZN, P, and V

by 7/25/2014 9:22 AM
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Analysts are weighing in today on e-commerce concern Amazon.com, Inc. (NASDAQ:AMZN), streaming music provider Pandora Media Inc (NYSE:P), and blue chip Visa Inc (NYSE:V). Here's a quick roundup of today's bearish brokerage notes.

  • AMZN is bracing for an 11% drop -- bigger than what the options market had priced in -- after the firm confessed to a wider-than-expected quarterly loss. Subsequently, a slew of analysts are downwardly revising their opinions on Amazon.com, Inc. Just to name a few, B. Riley downgraded the stock to "neutral" from "buy," CRT Capital downgraded it to "fair value" from "buy," and UBS trimmed its price target to $360 from $365. AMZN closed at $358.61 on Thursday.

  • P -- which closed at $28.72 yesterday -- is poised to surrender 10.2% out of the gate, extending its string of dismal earnings reactions. After issuing weaker-than-expected earnings guidance last night, Pandora Media Inc is feeling the wrath of analysts exiting the bulls' camp. Among them, J.P. Morgan Securities and Cowen, which cut their respective price targets to $42 and $38. More negative notes could be on the way, too, as P has earned 16 "buy" or better ratings, compared to five "holds" and just one "strong sell."

  • Finally, V is pointed 3% lower in pre-market trading, after the credit card concern cut its full-year revenue guidance. As such, the shares -- which finished at $222.74 on Thursday -- are in danger of surrendering their year-to-date gains, and could be targeted for bearish brokerage notes. Already today, Goldman Sachs cut its price target on Visa Inc to $245 from $250, while Stifel reduced its target to $281 from $289. V currently maintains 20 "buy" or better recommendations, compared to four lukewarm "holds."

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