Schaeffer's Trading Floor Blog

Analyst Update: American Express Company, Citigroup Inc., and Finisar Corporation

Analysts adjusted their ratings on American Express Company (AXP), Citigroup Inc (C), and Finisar Corporation (FNSR)

by 3/6/2015 12:11 PM
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Analysts are weighing in today on blue chip American Express Company (NYSE:AXP), financial firm Citigroup Inc (NYSE:C), and optical components specialist Finisar Corporation (NASDAQ:FNSR). Here's a quick look at today's brokerage notes on AXP, C, and FNSR.

  • This morning, Susquehanna slashed its price target on AXP to $99 from $107 while underscoring a "positive" rating, sending the shares down 0.6% to $80.69. Year-to-date, American Express Company is down 13.3%. Surprisingly, calls are a popular choice in the stock's options pits. Drilling down, AXP's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.85 stands just 3 percentage points away from the highest such reading taken over the past year.

  • Last night, it was announced that C passed the Fed's latest round of stress tests, joining 30 other major U.S. banks in exceeding all of the capital requirements. In response, KBW upgraded C to "outperform" from "market perform," and raised its price target on the security by $7 to $61. Today, amid weakness in U.S. stocks, the shares are down 0.6% to $53.25, widening their year-to-date loss to 1.6%. Despite the stock's technical woes, call activity is prominent in the options pits, as Citigroup Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.71 sits in the 13th percentile of its annual range. Simply stated, call open interest outweighs put open interest among options that expire in three months or less, and the current skew toward calls is stronger than usual.

  • FNSR reported its fiscal third-quarter earnings last night, revealing profit and revenue figures that were in line with expectations while upwardly revising its forecast for the current quarter. Reacting were no fewer than six brokerage firms, which all increased their price targets on the equity. The most ambitious hikes came from Raymond James and B. Riley, which raised their price targets to $25 and $25.50, respectively. Today, the shares are up 8.5% to $22.06, contributing to a 13.7% year-to-date gain. Today's pop could be the result of a short-squeeze situation, as nearly 13% of Finisar Corporation's available float is sold short, which would take over 10 sessions to cover, at average daily trading volumes.

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Analyst Downgrades: Pacific Ethanol, Inc., Cyberonics, Inc., and Yandex N.V.

Analysts downwardly revised their ratings on Pacific Ethanol Inc (PEIX), Cyberonics, Inc. (CYBX), and Yandex NV (YNDX)

by 3/6/2015 9:27 AM
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Analysts are weighing in today on commodity concern Pacific Ethanol Inc (NASDAQ:PEIX), medical device maker Cyberonics, Inc. (NASDAQ:CYBX), and European Internet issue Yandex NV (NASDAQ:YNDX). Here's a quick roundup of today's bearish brokerage notes on PEIX, CYBX, and YNDX.

  • PEIX gapped nearly 26% higher yesterday, landing at a year-to-date closing high of $11.75, thanks to a solid earnings showing. The shares are poised to ride the broad-market jobs train higher, up 1.9% ahead of the bell, despite an early price-target cut to $15 from $19 at Craig-Hallum (which reiterated a "buy" rating). On the sentiment side, an exodus of option bears could help Pacific Ethanol Inc extend its upward momentum. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.81 ranks in the 88th percentile of its annual range, suggesting short-term speculators are more put-heavy than usual.

  • CYBX, on the other hand, is bracing for a 1.9% dip out of the gate, after Jefferies downgraded the stock to "hold" from "buy," and sliced its price target to $75 from $83. The new target implies expected upside of just 4.1% from Cyberonics, Inc.'s current perch at $72.03. On the charts, CYBX has added 29.4% in 2015, thanks to an M&A-inspired bull gap on Feb. 26, which sent the equity to a record high of $76.48. As such, the security's 14-day Relative Strength Index (RSI) stands at a lofty 89 -- deep into overbought territory, suggesting a short-term respite may have been due. Should CYBX resume its uptrend, an unwinding of short interest could translate into tailwinds, as it would take nearly 12 sessions to repurchase these bearish bets, at the equity's average pace of trading.

  • Finally, YNDX is flat at $15.48 ahead of the bell, even as Barclays shaved its price target to $19.39 from $20. The brokerage firm also underscored an "overweight" rating, echoing the bullish bias among the analyst community. More specifically, Yandex NV boasts five "strong buys," compared to two "holds" and no "sells." Technically speaking, YNDX's latest earnings report ultimately did nothing for the shares, which have spent most of the past two months dawdling between $15 and $17. From a longer-term standpoint, the stock has surrendered more than half its value over the past year. Should YNDX continue to linger near new lows, more negative analyst notes could hit the wires.

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Buzz Stocks: Apple Inc., Orexigen Therapeutics, Inc., and Calithera Biosciences, Inc.

Today's stocks to watch in the news include Apple Inc. (AAPL), Orexigen Therapeutics, Inc. (OREX), and Calithera Biosciences Inc (CALA)

by 3/6/2015 9:21 AM
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Despite nonfarm payrolls surging more than expected in February -- and the unemployment rate dropping to 5.5% -- U.S. equities appear headed for a choppy end to the week. In company news, today's stocks to watch include iPad parent Apple Inc. (NASDAQ:AAPL), as well as biopharmaceutical firms Orexigen Therapeutics, Inc. (NASDAQ:OREX) and Calithera Biosciences Inc (NASDAQ:CALA).

  • Ahead of the bell, S&P Dow Jones Indices has announced AAPL will be added to the Dow Jones Industrial Average this month, replacing AT&T Inc. (NYSE:T). Meanwhile, in advance of next Monday's Apple Watch event, AAPL's mobile payment system is reportedly being used by scammers to purchase expensive items -- especially at Apple Store locations. Criminals are supposedly setting up Apple Pay accounts with stolen credit card data, helped by a relatively lax cardholder verification process. Technically speaking, the company's stock is a long-term outperformer, advancing nearly 67% year-over-year to perch at $126.41, after hitting a record high of $133.60 on Feb. 24. As such, the brokerage bunch is firmly behind Apple Inc., with 24 of 30 analysts doling out "buy" or better recommendations. Ahead of the bell, the shares are up 1.5%.

  • OREX shot higher earlier this week -- and hit a four-year high -- on positive results for its obesity drug Contrave. However, in an interview with Forbes, one top Food and Drug Administration (FDA) official called the study into question, describing the data as "highly unreliable" and "likely false." As such, Orexigen Therapeutics, Inc. -- which closed at $8.01 yesterday -- is pointed 12.2% lower ahead of the bell. This is good news for short sellers. One-third of OREX's float is dedicated to short interest, roughly equivalent to 30.5 times the stock's average daily trading volume.

  • Finally, CALA is ready to surge 34.5% of the gate, after the company inked a global licensing deal with TransTech Pharma. The agreement gives Calithera Biosciences Inc the rights to develop and commercialize a pair of hexokinase II inhibitors, which can be used to slow tumor growth. A gap higher would represent a change of pace for the shares, which have tumbled 34.1% year-to-date to trade at $13.31. This could put pressure on shorts, too. Short interest on CALA jumped 13% during the latest reporting period, and now accounts for 6% of the stock's total float. At average daily trading volumes, it would take about two weeks to cover these bearish bets.

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Analyst Upgrades: Google Inc., Foot Locker, Inc., and The Fresh Market, Inc.

Analysts upwardly revised their ratings on Google Inc (GOOGL), Foot Locker, Inc. (FL), and The Fresh Market Inc (TFM)

by 3/6/2015 9:20 AM
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Analysts are weighing in today on tech titan Google Inc (NASDAQ:GOOGL), athletic apparel retailer Foot Locker, Inc. (NYSE:FL), and high-end grocer The Fresh Market Inc (NASDAQ:TFM). Here's a quick roundup of today's bullish brokerage notes on GOOGL, FL, and TFM.

  • Citigroup raised its price target on GOOGL to $682 from $629 -- and underscored its "buy" rating -- representing expected upside of 17.3% to last night's close at $581.43, as well as a move into territory yet to be charted. Technically speaking, the stock has been gaining ground since hitting an annual low of $490.91 in mid-January -- up 18.4% -- after announcing several big-time partnerships, most recently with Microsoft Corporation (NASDAQ:MSFT). Meanwhile, short-term speculators have shown a preference for calls over puts, as evidenced by Google Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.81, which indicates call open interest outweighs put open interest among options slated to expire in three months or less.

  • To the dismay of options traders, FL is up 5% in electronic trading -- and poised for a new record high -- after the company's stronger-than-forecast fourth-quarter earnings report was met with a price-target hike to $65 from $63 at Deutsche Bank. On the charts, the stock has been a long-term outperformer, boasting a 33.5% year-over-year lead. Against this backdrop, most analysts maintain a "strong buy" rating on the shares -- 11 to be specific, versus four "holds" or worse. However, the average 12-month price target of $60.60 stands at a slim 6.3% premium to Thursday's settlement at $57.03, meaning more upwardly revised price targets could be on the horizon.

  • TFM received a bevy of bullish brokerage attention, after the grocery chain unveiled a fourth-quarter profit beat and encouraging guidance, and said it would shutter its remaining stores in California. Included in the bunch were BMO, which boosted its price target by $5 to $49, and J.P. Morgan Securities, which upped its target price to $46 from $44. Both brokerage firms underscored their equivalent of an "outperform" rating. After a slow start to the year, TFM has been making technical amends since bottoming out a year-to-date low of $35.51 on Feb. 10 -- up 11.6% at $39.63, thanks to a bounce off its 120-day moving average. Not everyone is convinced The Fresh Market Inc can sustain this momentum, though. Short interest jumped 7.7% in the most recent reporting period, and now accounts for roughly one-quarter of TFM's available float. What's more, it would take almost a month to cover these shorted shares, at the stock's average daily pace of trading. In electronic trading, TFM is pointed 5% higher.

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Spot VIX and the Batch of ETFs in the Pipeline

What the next round of ETFs could mean for spot VIX trading

by 3/6/2015 8:22 AM
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We all (hopefully) know the myriad problems associated with buying and holding volatility exchange-traded funds (ETFs). But perhaps that's about to change. What if I told you there was a way to buy spot CBOE Volatility Index (VIX)?

You would probably say "that's ridiculous." Just go long Friday's close and close out every Monday. VIX averages about a 2% lift on Mondays, and you'll double your money in under one-and-a-half years.

I doubt we'll have that opportunity available. But it's not stopping some interesting new listings in the pipeline via AccuShares. This, from Tom Lydon at ETF Trends:

"AccuShares Investment Management is entering the exchange traded fund arena with a suite of alternative strategies that could help investor track the spot price movements of a group of commodities and the CBOE Volatility Index, or VIX.

According to a Securities and Exchange Commission exemptive relief filing, AccuShares is working seven paired-class share ETFs that move in opposite directions, or so-called Up Shares and Down Shares.

...Each ETF is designed for investors seeking cost-effective, targeted and transparent exposure to various spot and spot proxy prices represented by the ETF's Underlying Index. AccuShares intends to offer two class shares in each ETF, one designed for investors with a positive view of future index performance and one designed for investors with a negative view of future index performance.

…The ETF provider is expected to come out with the CBOE VIX options first sometime in the second quarter. AccuShares has also partnered with Robert Whaley, who developed the CBOE Market Volatility Index "VIX" for the Chicago Board Options Exchange, to launch the new volatility ETFs as an more efficient alternative to other VIX futures-based options on the market."

According to the piece, AccuShares has some sort of patented design that lets them track futures without the pesky math of contango. Or something like that.

It's tough to assess whether these will actually work as designed without knowing exactly what they do. It's also confusing. They claim this ability to track futures above, but the idea is to track spot?

In a basic commodity, there may or may not be a huge distinction in that they move in high correlation. In VIX, though, not so much -- they're two separate animals. Yes, it would be nice to have an ETF that didn't lose money every day in contango. But it's still not tracking VIX.

Does the Up Shares/Down Shares structure make Spot VIX tracking possible? I suppose. It's a zero-sum game. As per the post, the fund itself doesn't actually hold any futures or swaps. It sounds like it's simply taking cash from "Peter" (say, the "VIX Up" crowd) to pay "Paul" (the VIX Downers). Or vice versa.

But again, is someone selling me VIX Ups on the close just ahead of weekends and holidays? Is there some sort of parity, and can I buy it there? Can I buy VIX Downs ahead of pre-holiday weeks? These are all positive-expectancy trades that you can't actually do now, and I strongly doubt we can do after the listing either. We'll know more, though, when we see the actual structure.

Hey, it's interesting if nothing else. I doubt anyone's giving free money out, so kudos if they've actually figured out an easily accessible way to "trade" spot.

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

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