Schaeffer's Trading Floor Blog

Analyst Update: Alibaba Group Holding Ltd, Panera Bread Co, and SolarWinds Inc

Analysts offered their two cents on BABA, PNRA, and SWI

by 10/29/2014 2:55 PM
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U.S. stocks have taken a decisive turn lower this afternoon, as Wall Street weighs the Federal Open Market Committee's (FOMC) vote to end "QE3." Among equities attracting the attention of analysts are Chinese e-commerce concern Alibaba Group Holding Ltd (NYSE:BABA), fast-casual restaurateur Panera Bread Co (NASDAQ:PNRA), and tech issue SolarWinds Inc (NYSE:SWI).

  • After touching a record high in triple-digit territory on Tuesday, BABA is down 1% at $98.67. Following the end of the Wall Street freshman's "quiet period," a slew of analysts offered their two cents on Alibaba Group Holding Ltd. While most BABA underwriters initiated coverage with a "buy" or equivalent rating, Goldman Sachs took the road less traveled, offering up a "hold" suggestion and $102 price target. Meanwhile, BABA's short-term options remain popular ahead of the firm's inaugural public earnings report, slated for Tuesday morning, as the equity's 30-day at-the-money implied volatility continues to assail new heights.

  • PNRA is down 4.8% at $162.85, as traders pan the company's downwardly revised earnings guidance (subscription required). As a result, Piper Jaffray cut its price target on the stock to $125 from $135, and reiterated an "underweight" rating. The negative note is relatively rare for Panera Bread Co, which sports 11 "strong buys," compared to five lukewarm "holds" and three "strong sell" suggestions. In the options pits, meanwhile, short-term speculators have rarely been more put-biased during the past year, as PNRA's Schaeffer's put/call open interest ratio (SOIR) of 1.75 sits just 6 percentage points from an annual high.

  • Finally, SWI is up 11.7% to $47.56, and earlier notched a new annual high of $49.11, thanks to a stronger-than-expected third-quarter earnings report. Plus, Cowen and Co upped its price target on the security to $53 from $49, and said the firm is well-positioned for growth. SolarWinds Inc could benefit from a short squeeze, too, as short interest represents more than a week's worth of pent-up buying demand, at SWI's average pace of trading. Likewise, a mass exodus of option bears could add fuel to the equity's fire; the stock's SOIR of 2.04 stands higher than 97% of all other readings from the past year.

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Stocks On the Move: Cliffs Natural Resources Inc, USANA Health Sciences, Inc., and Aerohive Networks Inc

CLF, USNA, and HIVE are moving sharply in Wednesday's trading

by 10/29/2014 1:34 PM
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The major market indexes are modestly lower ahead of this afternoon's policy announcement from the Federal Open Market Committee (FOMC). Among specific names making notable moves, though, are mining magnate Cliffs Natural Resources Inc (NYSE:CLF), nutritional supplement specialist USANA Health Sciences, Inc. (NYSE:USNA), and cloud component concern Aerohive Networks Inc (NYSE:HIVE). Here's a quick look at how CLF, USNA, and HIVE are performing on the charts so far.

  • CLF has been making some volatile moves on the charts recently, and today, the shares are 9.6% lower to trade at $10.21, and earlier, were placed on the short-sale restricted (SSR) list. Today's sell-off comes amid a mixed batch of brokerage notes, with Brean Capital downgrading the stock to "sell" from "hold," while J.P. Morgan Securities, Cowen and Company, and Clarkson Capital all upped their price targets. Year-to-date, the shares are down 61%, so it's no surprise to see sentiment tilted toward the bearish side. In the options pits, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.75 ranks in the 78th percentile of its annual range, meaning short-term speculators are more put-skewed than usual. Elsewhere, short interest soared nearly 26% during the past two reporting periods, and now accounts for a brow-raising 53.3% of Cliffs Natural Resources Inc's available float.

  • USNA, meanwhile, is soaring -- up 30.3% at $114.47, after earlier tagging a record peak of $116.20. This burst of buying power follows the company's strong third-quarter earnings showing and upwardly revised full-year profit forecast. One group that's likely smarting from today's bullish gap -- short sellers. At present, 39.4% of the stock's float is sold short, representing almost 16 sessions' worth of pent-up buying demand, given typical daily trading levels. Should the equity extend its 51.5% year-to-date lead -- and trek into uncharted territory -- a short-covering rally could help propel USANA Health Sciences, Inc. higher.

  • One day after surging nearly 19% on reports of a partnership with Apple Inc. (NASDAQ:AAPL), HIVE has plunged 14.2% to $4.94 after the company said it is donating its Wi-Fi gear to AAPL's ConnectED initiative, not providing it. The Big Board freshman has shed almost 45% since going public in late March, yet traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 89.75 calls for every put over the past 10 sessions. With 12.4% of the stock's float sold short, though, a portion of this activity could be a result of shorts hedging their bearish bets against any unexpected upside. Looking ahead, Aerohive Networks Inc will take its turn in the earnings confessional after the market closes next Wednesday, Nov. 5.

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Analyst Downgrades: Facebook Inc (FB), InvenSense Inc, and Michael Kors Holdings Ltd

Analysts downwardly revised their ratings on FB, INVN, and KORS

by 10/29/2014 9:28 AM
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Analysts are weighing in today on Mark Zuckerberg's Facebook Inc (NASDAQ:FB), integrated circuit maker InvenSense Inc (NYSE:INVN), and apparel designer Michael Kors Holdings Ltd (NYSE:KORS). Here's a quick roundup of today's bearish brokerage notes on FB, INVN, and KORS.

  • FB was greeted this morning by a round of bearish brokerage notes, after warning of increased spending and slower revenue growth in 2015 -- and despite a third-quarter earnings beat. In fact, no fewer than a dozen analysts cut their price targets on the stock -- although Raymond James and Canaccord Genuity raised their respective targets to $84 and $88, while maintaining their "outperform" and "buy" opinions. Taking a step back, 29 out of 32 analysts following Facebook Inc have doled out a "buy" or "strong buy" endorsement, compared to three "holds" and not a single "sell" rating. At last check, the shares -- which are up nearly 48% in 2014 to trade at $80.77 -- are sitting roughly 6.5% lower in pre-market trading.

  • INVN is getting pummeled on and off the Street, following a fiscal second-quarter earnings miss. Specifically, six brokerage firms slashed their price targets on the shares, while Piper Jaffray and Pacific Crest also downgraded the stock to "neutral" and "sector perform," respectively. In fact, Piper Jaffray cut its price target by a steep $12 -- more than any of its peers -- to $17. As such, InvenSense Inc -- which closed yesterday 3.4% higher year-to-date at $21.48 -- looks poised to drop approximately 21% out of the gate. Elsewhere, options traders had been betting bearishly on the equity ahead of last night's earnings report. INVN's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.68 ranks in the 92nd percentile of its annual range.

  • Finally, KORS saw its fair value docked by $18 to $87 at Janney, which also lowered its rating to "neutral" from "buy." This comes as little surprise, considering the stock is down 3.7% year-to-date to trade at $78.17. Nevertheless, traders at the ISE, CBOE, and PHLX have been buying to open calls over puts at a rapid-fire rate in recent weeks. Specifically, Michael Kors Holdings Ltd's 10-day call/put volume ratio across those exchanges checks in at 2.92 -- or just 2 percentage points from an annual high.

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Futures are little changed this morning, as investors await this afternoon's policy statement from the Federal Open Market Committee (FOMC). Among specific equities on the radar are rocket manufacturer Orbital Sciences Corp (NYSE:ORB), healthcare company Sanofi SA (ADR) (NYSE:SNY), and real estate investment trust American Realty Capital Properties Inc (NASDAQ:ARCP).

  • ORB is bracing for a 15% drop out of the gate, after an unmanned rocket ship that it built and launched exploded shortly after lift off. Orbital Sciences Corp -- which is currently in the process of merging with Alliant Techsystems Inc. (NYSE:ATK) -- has tacked on 30.3% year-to-date to trade at $30.37, and option traders have responded in kind. Over the past 20 sessions, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 5.80 calls for every put. With 9.2% of the stock's float sold short, though, a portion of this call buying may have been at the hands of short sellers hedging their bearish bets against any additional upside.

  • After plunging 9% yesterday to close at $48.07 on a revenue warning, SNY is poised to drop an additional 6% at the open following reports its board has unanimously voted to oust CEO Christopher A. Viehbacher. "There was a lack of trust, the relationship wasn't close enough," said Chairman Serge Weinberg, who will step into the role on an interim basis. The news was met with a handful of bearish brokerage notes, including one from Morgan Stanley, which cut its outlook to "equal weight" from "overweight" and reduced its price target to 82 euros from 95 euros. Should Sanofi SA (ADR) continue to struggle, an additional round of downgrades and/or price-target cuts could be on the horizon. At present, 60% of covering analysts maintain a "strong buy" rating on the shares, and the consensus 12-month price target of $61.77 stands at a 28.5% premium to current trading levels.

  • After uncovering incorrect financial statements, ARCP announced it is replacing both its chief financial officer and chief accounting officer, sending shares 21% lower ahead of the bell. "The audit committee believes that this error was identified but intentionally not corrected, and other AFFO and financial statement errors were intentionally made." Heading into today's session, the stock was wallowing 3.7% below its year-to-date breakeven line, and closed last night at $12.38. Option traders were keeping the faith, though, as evidenced by the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 54.17. Echoing this is American Realty Capital Properties Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.16, which ranks lower than 98% of similar readings taken in the past year. In other words, short-term speculators have rarely been as call-heavy on the stock as they are now.

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Analyst Upgrades: Amazon.com, Inc., Electronic Arts Inc., and Gilead Sciences, Inc.

Analysts upwardly revised their ratings on AMZN, EA, and GILD

by 10/29/2014 9:00 AM
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Analysts are weighing in today on online merchant Amazon.com, Inc. (NASDAQ:AMZN), video game producer Electronic Arts Inc. (NASDAQ:EA), and biopharmaceutical firm Gilead Sciences, Inc. (NASDAQ:GILD). Here's a quick roundup of today's bullish brokerage notes on AMZN, EA, and GILD.

  • Despite its year-to-date loss of roughly 26%, AMZN was started with an "overweight" rating and $420 price target at Morgan Stanley -- representing 42% upside to the stock's current perch at $295.59. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open puts and calls at a roughly even pace over the past 10 weeks. However, Amazon.com, Inc.'s resultant 50-day put/call volume ratio of 1.01 ranks in the 73rd percentile of its annual range, meaning speculators have scooped up long puts over calls at an accelerated rate, relative to the previous year's worth of data.

  • EA topped the Street's quarterly profit and sales estimates last night -- and raised its 2015 outlook -- prompting no fewer than seven brokerage firms to raise their price targets. For instance, Wedbush upped its outlook to $55 from $49, and reiterated its "outperform" opinion. Technically speaking, 2014 has been kind to Electronic Arts Inc., which has soared 63.4% year-to-date to trade at $37.48. Not surprisingly, most of Wall Street is already in the bulls' corner, as 11 analysts rate the shares a "strong buy," versus six "holds" and not a single "sell" recommendation. EA's consensus 12-month price target of $41.98 also represents a healthy 12% premium to current trading levels.

  • Finally, GILD reported mixed quarterly results last night, and as a result, the shares are sitting about 3% lower ahead of the bell. Nevertheless, half a dozen brokerage firms increased their price targets on the pharmaceutical name -- including BMO, which bumped its target up $5 to $170, to go along with its "outperform" conviction. On the charts, shares of Gilead Sciences, Inc. are up a market-beating 51% in 2014 to rest at $113.45, and just yesterday hit a record high of $114.13. Not surprisingly, the majority of Wall Street is already bullish toward the equity, with 14 "buy" or better opinions outweighing a pair of "holds" and not a single "sell" rating.

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