Schaeffer's Trading Floor Blog

Analyst Update: Anheuser Busch Inbev SA (ADR), VeriFone Systems Inc, and Wal-Mart Stores, Inc.

Analysts adjusted their ratings on BUD, PAY, and WMT

by 9/15/2014 1:32 PM
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Analysts are weighing in today on brewing company Anheuser Busch Inbev SA (ADR) (NYSE:BUD), electronic payment provider VeriFone Systems Inc (NYSE:PAY), and big box retailer Wal-Mart Stores, Inc. (NYSE:WMT). Here's a quick look at today's brokerage notes on BUD, PAY, and WMT.

  • Similar to fellow beer stock Molson Coors Brewing Company (NYSE:TAP), BUD started strong today, after Stifel raised its price target to $130 from $121. The stock is up nearly 3% today to trade at $114.15, and has gained over 7% year-to-date. Moreover, five out of six analysts have Anheuser Busch Inbev SA (ADR) rated as a "strong buy." The equity's Schaeffer's Volatility Index (SVI) of 17% is in the 19th percentile of its annual range, implying BUD's short-term options are on the inexpensive side, from a volatility standpoint.


  • Despite a new "buy" recommendation from Monness Crespi Hardt, PAY is off 0.5% today, sputtering at $36.60. Still, the stock has been strong on the charts in 2014, up 36% year-to-date. Elsewhere, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.68 is 12 percentage points from an annual peak, meaning short-term speculators are more put-skewed toward VeriFone Systems Inc than usual. However, additional upgrades may be in store for PAY, considering seven of 13 covering analysts maintain a tepid "hold" recommendation.


  • WMT shares are stagnant today after Citigroup initiated coverage of the stock with a "neutral" rating -- the shares were last seen trading fractionally lower at $75.76. The tepid brokerage note shouldn't be surprising, as Wal-Mart Stores, Inc. has dropped 3.7% year-to-date. However, options traders are looking for the stock to rebound, as its International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day call/put volume ratio of 2.37 is in the 88th percentile of its annual range, meaning calls are being picked up at a faster-than-normal rate.

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Stocks On the Move: Tesla Motors Inc (TSLA), ReWalk Robotics Ltd, and Avanir Pharmaceuticals Inc

TSLA, RWLK, and AVNR are moving sharply in Monday's trading

by 9/15/2014 12:04 PM
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As we head into the latter half of today's trading, three of the top market movers are electric car concern Tesla Motors Inc (NASDAQ:TSLA), Wall Street newcomer ReWalk Robotics Ltd (NASDAQ:RWLK), and biotechnology issue Avanir Pharmaceuticals Inc (NASDAQ:AVNR). Here's a quick roundup of how TSLA, RWLK, and AVNR are performing on the charts so far.

  • TSLA has shed 7.3% today to trade at $258.79, after an analyst at Morgan Stanley said the stock is worth $320, but, "perhaps not so quickly and not for some of the reasons we believe are driving the market." However, Morgan Stanley maintained its "overweight" recommendation. Longer term, shares of TSLA have rallied 72% year-to-date, and just last week, tagged their loftiest perch on record. In spite of this, nearly a quarter of the equity's float is sold short, representing more than a week's worth of pent-up buying demand, at the average daily pace of trading. Should Tesla Motors Inc resume its upward trajectory, an unwinding of these bearish bets could help fuel the stock's momentum.

  • Today marks the second day of trading for Israel-based RWLK, which went public on Friday. At last check, the stock was up 48.8% to linger near $38.24 -- after earlier hitting a record peak of $37.70 -- bringing its total return over its short lifespan to a jaw-dropping 219%. In response to the successful IPO, ReWalk Robotics Ltd's CEO Larry Jasinski said, "This achievement has provided the funding required to ensure our long term growth. It will allow expansion of our research and achieve our mission of improving the health and life experiences of individuals with spinal cord injury."

  • After hitting an eight-year peak of $11.38 earlier, AVNR was last seen 61% higher at $10.84, after the company reported positive results from its Phase II trial for AVP-923 -- a treatment for Alzheimer's patients who experience agitation. Stoking the bullish flames is a price-target hike to $12.20 from $9.90 at Cowen and Company, as well as an "outperform" rating from the brokerage firm. With the consensus 12-month price target of $8.73 standing at a discount to current trading levels, additional price-target hikes could be on the horizon. This is especially true considering today's bullish gap just highlights the equity's upward momentum in 2014, with shares of Avanir Pharmaceuticals Inc more than tripling in value year-to-date.

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Analyst Downgrades: Cree, Inc., Marathon Petroleum Corp, and Target Corporation

Analysts downwardly revised their ratings on CREE, MPC, and TGT

by 9/15/2014 9:20 AM
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Analysts are weighing in today on lighting expert Cree, Inc. (NASDAQ:CREE), fuel transporter Marathon Petroleum Corp (NYSE:MPC), and retailer Target Corporation (NYSE:TGT). Here's a quick roundup of today's bearish brokerage notes on CREE, MPC, and TGT.

  • CREE was downgraded to "neutral" from "buy" at Goldman Sachs, which also slashed its price target by $12 to $48, and removed the stock from its "America's Buy" list. This isn't shocking, given the shares' nearly 32% year-to-date deficit to trade at $42.67. Going forward, Cree, Inc. could be vulnerable to additional bearish brokerage notes, as seven out of 15 covering analysts have given the security a "buy" or better rating (including six "strong buys"). Plus, CREE's average 12-month price target of $52 stands at a roughly 22% premium to the current price. In pre-market trading, the shares are off 3%.

  • Howard Weil downgraded MPC to "sector perform" from "sector outperform," and lowered its price target to $99 from $109, as well -- although that's still a 14% premium to the stock's current price of $86.86. Technically speaking, the shares have struggled in 2014, losing 5.3%, and are now testing support at their 40-day moving average -- a trendline not breached since late July. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options players are gambling on additional downside for Marathon Petroleum Corp. The equity's 10-day put/call volume ratio across those exchanges registers at 1.63, or just 5 percentage points from an annual bearish extreme.

  • Finally, TGT was initiated with a "neutral" rating at Citigroup. This skeptical note isn't unusual for the equity, which has received 11 "hold" recommendations and four "sell" opinions from the brokerage bunch, compared to just five "buy" ratings. Plus, the security's consensus 12-month price target of $59.78 sits at a discount to the current price. On the charts, shares of Target Corporation are sitting 1.2% below breakeven on a year-to-date basis, closing Friday at $62.53.

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Buzz Stocks: Cognizant Technology Solutions Corp, RadioShack Corporation, and Molson Coors Brewing Company

Today's stocks to watch in the news include CTSH, RSH, and TAP

by 9/15/2014 9:04 AM
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U.S. stocks are hovering around the flat line this morning, as traders take a wait-and-see approach ahead of this week's Federal Open Market Committee (FOMC) policy-setting meeting. In company news, today's stocks to watch include outsourcing issue Cognizant Technology Solutions Corp (NASDAQ:CTSH), electronics retailer RadioShack Corporation (NYSE:RSH), and beer maker Molson Coors Brewing Company (NYSE:TAP).

  • CTSH has agreed to purchase health care IT firm TriZetto Corporation for $2.7 billion in cash. The deal -- which is still awaiting regulatory approval -- is projected to boost revenue for Cognizant Technology Solutions Corp's health care arm by north of $3 billion, and is slated to wrap up in the fourth quarter. On the charts, CTSH is down 11.3% year-to-date to trade at $44.76, but is poised to pare a portion of these losses today, with the equity up 2.8% ahead of the bell. In the options pits, speculators have been waving the bullish flag of late, as evidenced by the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 7.11, which ranks 6 percentage points from a 52-week peak.

  • RSH is up nearly 19% ahead of the bell, following news the company has appointed Holly Etlin as interim chief financial officer, after John Feray resigned from the position on Friday. Additionally, RadioShack Corporation is reportedly considering a $585 million financing package from UBS AG (NYSE:UBS) and Standard General LP, as it explores strategic alternatives. With RSH down 65% in 2014 to churn near $0.91, it's no surprise to see sentiment tilted toward the skeptical side. Short interest, for example, accounts for more than 34% of the stock's available float. Elsewhere, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.14 is docked at an annual peak, meaning short-term speculators are more put-skewed now toward RSH than they've been at any other point during the past year.

  • TAP is also ready to rally right out of the gate -- which could please Friday's option bulls -- with the stock pointed 6.5% higher on reports Heineken may sell its Czech operations to the Denver-based brewer. Additionally, Stifel weighed in on TAP this morning, raising its price target to $94 from $90 -- representing expected upside of 31% from the equity's current perch at $71.80 -- and maintaining a "buy" rating. More bullish brokerage notes could be on the horizon for a stock that's up nearly 45% year-over-year. Of the seven analysts covering the stock, four maintain a tepid "hold" recommendation, versus three that rate Molson Coors Brewing Company a "strong sell." Plus, the consensus 12-month price target of $79.11 stands at a lukewarm 10% premium to present trading levels.

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Why You Probably Don't Need to Buy VIX Calls Right Now

Expectations just keep rising for that next big spike in the CBOE Volatility Index (VIX)

by 9/15/2014 8:46 AM
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The market feels a little more volatile in the sense that it's weak pretty much every morning these days. And 10-day realized volatility (RV) has in fact nearly doubled in the past week, so there's that.

But the reality is, we're still mired in a whole lot of nothing. That "big" lift in RV is off 16-year lows, and very misleading when expressed in percentage terms. Ten-day RV is all the way up to 6.2, which translates to roughly a 0.4% range on a typical day. That's still incredibly low. And it's not like the directional move over time looks any less pathetic.

Since Aug. 21, the SPDR S&P 500 ETF (SPY) has ticked as low as 198.56 (on Friday, actually), and as high as 201.58. If you're scoring at home, that's a range of about 1.5% over the course of 15 trading days.

That's just unreal.

As always, that next volatility spike is right around the corner. The CBOE Volatility Index (VIX - 13.31) closed at 11.78 on Aug. 20, so it's up around 13% amidst as non-volatile a three-week stretch as you'll ever see. In all fairness, that Aug. 20 reading was a little understated, thanks to the approach of Labor Day.

On the other hand, holidays don't have much impact on the VIX term structure. And here's how it looks now vs. Aug. 14, when the VIX was right where it is now.

VIX Futures

It crept up modestly.

And VIX order flow? Same as it ever was. This, from Options Action on Friday:

Big VIX trade went out-- someone bought 50K October 22-calls for $0.425, and then paid $0.45 for another 70K.

To which I responded:

It's amazing how often that sort of trade goes up...and how infrequently it ever looks good in hindsight.

What I meant was that any time you hear about a big trade in VIX, it's the exact same general concept -- some unknown entity buys a ton of cheap dollar calls. And it works well about as often as a broken clock tells you the correct time.

Now, I assume it's almost always a general hedge against large equity or bond exposure, and it doesn't particularly matter that it rarely works. Because otherwise, all these cheap VIX calls add up to some serious money down the drain over the years, which would strongly argue against the fact that someone keeps buying them.

Want more evidence that fear of future declines persists, this time with the CBOE Nasdaq-100 Volatility Index (VXN)? Steven Place has you covered.

I know I'm a complete broken record on this topic, but I'll say it one more time: So long as every pause and slight dip in the market is met with a spike in demand for protection, that protection is likely to prove unneeded.

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


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