Schaeffer's Trading Floor Blog

Analyst Update: SanDisk Corporation, Esperion Therapeutics Inc, and Jazz Pharmaceuticals plc - Ordinary Shares

Analysts adjusted their ratings on SanDisk Corporation (SNDK), Esperion Therapeutics Inc (ESPR), and Jazz Pharmaceuticals plc - Ordinary Shares (JAZZ)

by 3/27/2015 11:33 AM
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Analysts are weighing in today on data solutions specialist SanDisk Corporation (NASDAQ:SNDK), as well as biopharmaceutical firms Esperion Therapeutics Inc (NASDAQ:ESPR) and Jazz Pharmaceuticals plc - Ordinary Shares (NASDAQ:JAZZ). Here's a quick look at today's brokerage notes on SNDK, ESPR, and JAZZ.

  • The fallout from yesterday's decreased revenue guidance is still affecting SNDK, as no fewer than eight brokerage firms reduced their opinion on the equity. Drilling down, the most dramatic cuts came from Wedbush and BMO -- to $56 and $61, respectively. After suffering its worst drop in five years yesterday, the shares of SanDisk Corporation are down 1.8% to hit $65.03 -- and earlier touched an annual low of $64.45 -- bringing the equity's year-to-date deficit to 33.7%. The brokerage bunch is still mostly bullish on SNDK, though, as 71% of covering analysts rate the stock a "buy" or better, with no "sell" or worse recommendations to be found. This leaves the door wide open for another round of negative analyst notes to pressure the shares even lower.

  • Citigroup started coverage on ESPR with a "buy" rating and a lofty $130 price target -- in uncharted territory -- sending the shares up 5.2% to hit $93.12. Digging deeper, the brokerage firm said ESPR's cholesterol-lowering drug is "an attractive asset for pharma to in-license or acquire." While Esperion Therapeutics Inc has dropped 21.7% from its March 19 record high of $118.95, the shares remain nearly 500% higher year-over-year. As such, the brokerage bunch is unanimously optimistic on the security, as all three covering analysts rate the stock a "buy" or better. Additionally, ESPR's average 12-month price target of $107.17 represents a 15% premium to current trading levels.

  • Citigroup also initiated JAZZ with a "buy" rating alongside a $195 price target -- in unexplored terrain. On the charts, Jazz Pharmaceuticals plc is up 2.1% at $177.09, bringing its year-to-date gain to 8.2%. In fact, JAZZ just tagged an all-time peak of $190.17 on March 19. Accordingly, sentiment in the options pits has been bullish, as JAZZ's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.70 stands in the 99th percentile of its annual range.

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Buzz Stocks: BlackBerry Limited, The Dow Chemical Company, and Orexigen Therapeutics, Inc.

Today's stocks to watch include BlackBerry Ltd (BBRY), Dow Chemical Co (DOW), and Orexigen Therapeutics, Inc. (OREX)

by 3/27/2015 9:30 AM
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U.S. futures are trading lower ahead of the open, with investors eyeing today's reading on gross domestic product (GDP) and a speech from Fed Chair Janet Yellen. Among the equities in focus are smartphone maker BlackBerry Ltd (NASDAQ:BBRY), science and technology giant Dow Chemical Co (NYSE:DOW), and biotech name Orexigen Therapeutics, Inc. (NASDAQ:OREX).

  • BBRY is making a strong push higher in electronic trading, after the company's fourth-quarter profit beat analysts' expectations. The shares are pointed 6.2% higher ahead of the open, as they try to gain back some of their 15.3% year-to-date deficit, following yesterday's close at $9.30. If BlackBerry Ltd can sustain this morning's momentum, the equity could be looking at additional upside, given the amount of pessimism surrounding it. For instance, put buying has picked up during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 10-day put/call volume ratio across these exchanges is 0.36 -- which lands in the 72nd percentile of its annual range. Elsewhere, nearly one-fifth of BBRY's float is sold short, representing over eight sessions' worth of trading, at normal daily volumes. A reversal of sentiment in and out of the options pits could give the security a spark.

  • DOW has gained 3.5% in electronic trading, after announcing it will sell most of its chlorine business to sector peer Olin Corporation (NYSE:OLN) -- in a transaction valued at roughly $5 billion. Dow Chemical Co finished yesterday at $46.44, and has now added nearly 11% since its 2015 low of $41.95 on Jan. 14. Still, analysts aren't sold on the equity just yet. Of the 18 brokerage firms covering DOW, 11 rate it a "hold" or worse.

  • OREX is poised to jump 7.6% out of the gate, after the company's obesity drug, Mysimba, was approved for marketing authorization by the European Commission. In the stock's options pits, OREX's Schaeffer's put/call open interest ratio (SOIR) of 1.01 rests at an annual high, meaning short-term speculators are more put-heavy now than at any other time during the past year. On the Street, analysts have taken a bullish stance. All six of the brokerage firms covering Orexigen Therapeutics, Inc. rate it a "buy" or better. OREX has done its best to live up to these expectations, adding 11.2% year-over-year, settling at $7.25 yesterday.

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Analyst Upgrades: Amazon.com, Inc., Yahoo! Inc., and Conn's, Inc.

Analysts upwardly revised their ratings on Amazon.com, Inc. (AMZN), Yahoo! Inc. (YHOO), and CONN'S, Inc. (CONN)

by 3/27/2015 9:30 AM
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Analysts are weighing in on e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN), Internet issue Yahoo! Inc. (NASDAQ:YHOO), and consumer products specialist CONN'S, Inc. (NASDAQ:CONN). Here's a quick roundup of today's bullish brokerage notes on AMZN, YHOO, and CONN.

  • In the wake of yesterday's raft of fundamental developments -- including reports of a possible buyout target -- AMZN saw its price target lifted to $430 from $405 at Citigroup, representing expected upside of 17% to last night's close at $367.35, and a move into uncharted territory. Separately, the firm announced a new partnership with LiveDeal Inc (NASDAQ:LIVE) this morning. Technically speaking, the shares have put in a strong performance in 2015, boasting an 18.4% lead. What's more, although the stock has succumbed to this week's broader tech sell-off, it seems to have found a foothold atop its rising 10-week moving average. In the options arena, speculators have shown a preference for long calls over puts in recent months. Specifically, Amazon.com, Inc.'s 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.25 ranks in the 70th annual percentile.

  • YHOO is up nearly 2% in electronic trading, after news of a $2 billion stock buyback -- which comes as the company prepares to spin off its stake in Alibaba Group Holding Ltd (NYSE:BABA) -- was met with an "overweight" initiation and $55 price target at Morgan Stanley. As a point of reference, YHOO hasn't seen the north side of $55 since September 2000, and settled last night at $44.47. It's been a rough year for the stock, which is down around 12%. Against this backdrop, option traders have taken a skeptical stance. At the ISE, CBOE, and PHLX, YHOO's 50-day put/call volume ratio of 0.37 rests 1 percentage point from a 52-week peak. Additionally, Yahoo! Inc.'s Schaeffer's put/call open interest ratio (SOIR) of 0.64 arrives in the 96th percentile of its annual range, meaning short-term speculators have rarely been more put-heavy.

  • Piper Jaffray weighed in on CONN -- which is slated to step up to the earnings plate next week. Specifically, the brokerage firm boosted its rating to "overweight" from "neutral," and lifted its price target to $38 from $20, saying the company's stable portfolio is likely to result in strong earnings-per-share upside. The stock has had a standout year, rallying almost 52% to its current perch at $28.39 -- and the equity appears to be poised to continue this momentum today, with CONN'S, Inc. up almost 6% ahead of the bell. Short sellers may be on the verge of capitulating, which could help fuel the security's fire. Short interest accounts for 35.8% of the stock's available float, and it would take more than two weeks to cover these shorted shares, at average daily trading levels.

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Analyst Downgrades: GameStop Corp., EMC Corporation, and American Eagle Outfitters, Inc.

Analysts downwardly revised their ratings on GameStop Corp. (GME), EMC Corporation (EMC), and American Eagle Outfitters (AEO)

by 3/27/2015 9:25 AM
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Analysts are weighing in on video game retailer GameStop Corp. (NYSE:GME), IT service provider EMC Corporation (NYSE:EMC), and clothing concern American Eagle Outfitters (NYSE:AEO). Here's a quick roundup of today's bearish brokerage notes on GME, EMC, and AEO.

  • GME is pointed 4.2% lower in electronic trading, after last night's disappointing sales and full-year guidance was met with a round of bearish brokerage notes. Drilling down, no fewer than seven firms lowered their ratings on the equity, with the most dramatic cut coming from Benchmark, which decreased its price target to $27.98. Meanwhile, B. Riley downgraded GME to "neutral" and trimmed its price target to $44. On the charts, GameStop Corp. is up 22.4% from its Jan. 12 annual low of $31.69, to close yesterday at $38.79. Accordingly, option traders were picking up long calls at a rapid-fire rate ahead of earnings, as GME's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.54 ranks higher than 85% of all equivalent readings taken over the past year. Meanwhile, nearly 45% of GME's available float is sold short, which would take roughly six weeks to cover, at average trading volumes.

  • Last night, Pacific Crest cut its rating on EMC to "sector perform" from "outperform," sending the shares about 0.6% lower ahead of the bell. The downgrade comes as no surprise, considering that the shares of EMC Corporation have fallen 13.2% year-to-date to close yesterday at $25.81. As such, put buying in the options pits is nearing a yearly peak, as EMC's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.62 stands in the 99th percentile of its annual range.

  • AEO is down nearly 4.6% in pre-market trading, after Goldman Sachs reduced its opinion of the stock to "sell" from "neutral," citing waning mall traffic, growing competition, and high earnings expectations. The downgrade is somewhat surprising, given that the shares of American Eagle Outfitters have advanced 39.6% year-over-year to close yesterday at $16.92. What's more, the stock notched a fresh annual high of $17.40 on March 16. Option buyers have also grown increasingly pessimistic, as AEO's 50-day ISE/CBOE/PHLX put/call volume ratio of 2.88 is higher than 99% of all equivalent readings taken over the past 12 months. Elsewhere, the brokerage bunch is divided on the equity, with 48% of covering analysts rating the stock a "buy" or better, and the remaining 52% doling out "hold" or worse ratings.

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Are We in the Beginning of a VIX Regime Change?

Yemen is the latest 'cause' for an uptick in volatility

by 3/27/2015 9:14 AM
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As savvy late '80s options trader David Coverdale once sang -- "Here We Go Again."

Yes, it's yet another market drop/CBOE Volatility Index (VIX) pop. It seems like only a week ago we had gotten comfortable with the fact that the Fed would manage to get the word "patience" out of its statement and not spook the markets. Wait … that was only a week ago.

We rallied for a couple days, but have gotten quite ugly since. VIX made up the entirety of its large drop last Wednesday. But we're still a bit away from getting "officially" overbought. Depending on the timing, it's going to take a close near 18.

Maybe it's a little shakier this go around since we don't have our usual cast of drivers for the turn this week. "Causes" for market moves are often specious (to say the least). TV needs to come up with a "reason" for every move, but in all fairness, we humans do like explanations, so it's tough to blame them. It's just usually in the form of "here's the news backdrop, and here's the market move, so ergo the news led to the market move."

So, for what it's worth, we're blaming Yemen and worries about a mediocre earnings season for the current bout of malaise. The irony is that if you buy the Yemen part, it's putting a bid under oil. It wasn't that long ago that we were blaming cascading oil prices for market dips.

The volatility market has acted pretty unemotionally to the recent selling. Here's the VIX futures:

VIX Futures Term Structure in 2014

That's pretty much how VIX futures always look -- it just flattens out slightly as VIX lifts. And VIX itself around 16 doesn't tell us much in a vacuum. It's still down in 2015 … about 18%, in fact. But as you may remember, VIX spiked into the close of 2014, which makes comps kind of misleading, given it just uses an arbitrary endpoint.

"Mean" VIX for 2015 is 16.67 so far, which is a considerable uptick from 14.17 in 2014. It's not a perfectly fair comp. Summer tends to weigh on volatility, as do holiday stretches. On the other hand, we haven't had our annual Fall VIX-plosion yet, either. We do figure to close the year with a higher mean than 2014, though, as we're likely transitioning from the low-volatility "regime" of the last five years or so into a high-volatility "regime." And that's just a long-winded way of saying one of these volatility pops will actually "stick."

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


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