Schaeffer's Trading Floor Blog

Stocks on the Move: Puma Biotechnology Inc, Intuitive Surgical, Inc., and Biogen Idec Inc

PBYI, ISRG, and BIIB are moving sharply in Wednesday's trading

by 7/23/2014 1:20 PM
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U.S. markets are mixed at midday -- with the S&P 500 Index (SPX) notching a new intraday record earlier -- as traders weigh another round of upbeat earnings against geopolitical concerns and a downwardly revised domestic growth outlook from the International Monetary Fund (IMF). Among specific equities in focus, development stage biopharmaceutical firm Puma Biotechnology Inc (NYSE:PBYI), surgical robot manufacturer Intuitive Surgical, Inc. (NASDAQ:ISRG), and biotechnology concern Biogen Idec Inc (NASDAQ:BIIB) are all seeing big moves on the charts today. Here's a quick roundup of how this trio of names is performing on the charts so far.

  • PBYI is 289% higher today to trade at $229.72, after announcing upbeat late-stage trial results for its experimental breast cancer drug. Earlier the stock tagged a new record peak of $236.91 -- nearly 65% above its previous all-time high of $143.65, tagged on Jan. 22. From a contrarian perspective, additional upside could by on the horizon for Puma Biotechnology Inc, considering the consensus 12-month price target of $122.67 stands at a steep discount to present trading levels.

  • Also seeing a notable move to the upside today is ISRG, thanks to last night's strong showing in the earnings confessional and subsequent round of bullish brokerage notes. At last check, the stock was up 14.7% at $449.74 -- easily filling in the earnings-induced bearish gap from late April. Diving deeper, some of today's rally could be attributable to short sellers. Although short interest declined 13.9% over the last two reporting periods, nearly 8% of the stock's float is still sold short, representing more than a week's worth of pent-up buying demand, at ISRG's average pace of trading. A continued capitulation by these bearish bettors could help propel Intuitive Surgical, Inc. even further up the charts.

  • BIIB has charged 10.7% higher this afternoon to linger near $336.19, after reporting second-quarter earnings that beat analysts' estimates by the largest margin in 10 years. What's more, the equity is now trading comfortably above previous congestion in the $330 area, suggesting a new layer of support may be forming. Heading into today's session, the security was already up an impressive 36.4% year-over-year, so it's not surprising to find sentiment tilted toward the bullish side. For starters, short interest accounts for a low 1.3% of the stock's float, and would take fewer than three sessions to cover, at BIIB's average daily pace of trading. Plus, 72% of covering analysts maintain a "buy" or better rating toward Biogen Idec Inc, with not a single "sell" to be found.

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Buzz Stocks: Starbucks Corporation, Puma Biotechnology Inc, Safeway Inc., and, Inc.

Today's stocks to watch in the news are SBUX, PBYI, SWY, and AMZN

by 7/23/2014 9:28 AM
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Futures on the major U.S. markets are little changed ahead of the bell, as traders digest a slew of corporate earnings reports and geopolitical developments. In company news, here are some stocks to watch.

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Analyst Downgrades: Twenty-First Century Fox Inc, Time Warner Inc, and DuPont

Analysts downwardly revised their ratings on FOXA, TWX, and DD

by 7/23/2014 9:22 AM
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Analysts are weighing in today on TV titans Twenty-First Century Fox Inc (NASDAQ:FOXA) and Time Warner Inc (NYSE:TWX), as well as big-cap chemical company E I Du Pont De Nemours And Co (NYSE:DD). Here's a quick roundup of today's bearish brokerage notes.

  • FOXA -- which is in hot pursuit of TWX -- was downgraded to "underperform" from "outperform" at Cowen and Company this morning. In addition, the brokerage firm slashed its price target to $29 from $38, the former of which would represent a new annual low for the shares. On the charts, Twenty-First Century Fox Inc is down 5.2% year-to-date, closing at $33.34 yesterday, yet most analysts remain optimistic. In fact, the security boasts 13 "strong buys" and one "buy" endorsement, compared to one lukewarm "hold" and not a single "sell" recommendation.

  • Cowen and Company also offered its two cents on TWX -- which is attempting to dodge a hostile takeover by FOXA -- downgrading the equity to "market perform" from "outperform." The shares are up nearly 30% in 2014, and touched a decade-plus peak on Monday, as the aforementioned bid sent the security soaring on July 16. Most analysts are already in the bullish camp, though. Time Warner Inc has earned 16 "strong buy" opinions and one "buy," compared to five "holds" and no "sells." On Tuesday, TWX finished at $86.78.

  • Finally, DD -- which closed at $64.95 yesterday -- is still feeling the heat from Monday's weaker-than-expected earnings and guidance. This morning, J.P. Morgan Securities downgraded the stock to "neutral" from "overweight," and Susquehanna last night trimmed its price target on E I Du Pont De Nemours And Co to $75 from $80. From a longer-term perspective, the equity is now clinging to its year-to-date breakeven level, and is testing support in the $64.50 neighborhood.

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Analyst Upgrades: Microsoft Corporation, Broadcom Corporation, and Intuitive Surgical, Inc.

Analysts upwardly revised their ratings on MSFT, BRCM, and ISRG

by 7/23/2014 9:13 AM
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Analysts are weighing in today on blue chip Microsoft Corporation (NASDAQ:MSFT), semiconductor concern Broadcom Corporation (NASDAQ:BRCM), and medical device maker Intuitive Surgical, Inc. (NASDAQ:ISRG), which all stepped into the earnings confessional last night. Here's a quick roundup of today's bullish brokerage notes.

  • MSFT is lifting the Dow ahead of the open, with the shares pointed 1.5% higher in pre-market trade. In fact, the stock -- which settled at $44.83 on Tuesday -- could be aiming for a new 14-year high, thanks to a well-received second-quarter earnings report. As a result, no fewer than five brokerage firms have hiked their price targets on Microsoft Corporation, and Pacific Crest upgraded the security to "outperform" from "sector perform." There's still plenty of room on the bullish bandwagon, too, as just 10 out of 23 analysts consider MSFT a "buy" or better.

  • BRCM is poised to pop 3.9% this morning, after settling at $38.75 yesterday. Speculators are celebrating the company's second-quarter earnings report, along with news that Broadcom Corporation will wind down -- not sell -- its cellular baseband chip unit, and cut 2,500 jobs, or about 20% of its workforce. Monday's crop of option sellers are likely cheering the news, and the brokerage bunch is also taking an optimistic tone. Ahead of the bell, BRCM has scored no fewer than 11 price-target hikes, including revisions from Brean and Bernstein, which both upwardly adjusted their targets to $46.

  • Finally, ISRG is more than 13% higher in pre-market trading, as second-quarter earnings and revenue handily topped expectations, and the firm increased the low end of its full-year procedure growth forecast. As such, three brokerage firms have lifted their price targets on ISRG, and Raymond James and Stifel upgraded the shares (to "outperform" and "buy," respectively). Today's earnings-inspired rally could have the shorts sweating, as short interest represents more than a week's worth of pent-up buying demand, at Intuitive Surgical, Inc.'s average pace of trading. At Tuesday's close, ISRG was docked at $392.16.

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VIX Futures are Rising -- But Are We All That Afraid?

Investor fears were higher as recently as two months ago

by 7/23/2014 7:34 AM
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Well, we've now officially retraced our non-cataclysmic declines off the highs. And all we got were some lousy t-shirts, and some worthless CBOE Volatility Index (VIX) calls.

OK, not really.

We did get an overbought VIX signal that may look kind of odd in hindsight. And we got a spike in 10-day realized volatility (RV) in the S&P 500 Index (SPX) -- all the way to double digits!

Yes, 10-day RV "closed" above 10 for two straight trading sessions. July 18 marked the first time 10-day RV went out that high since April 25, so we're talking virtually an entire quarter of single-digit volatility. That's a tough backdrop if you're rooting for a VIX pop. Implied volatility can move separately from RV if expectations going forward change. But over time, it's tough to get anyone to pay up for options when they keep losing money on the trade.

And as Eli Mintz of VIX Central notes, not all RV pops are created equal. In regards to the recent "surge," he tweets:

That's a fair point. Volatility, in theory, is independent of direction. A big range on an up day looks the same as a big range on a down day to a dispassionate calculation such as RV. But, clearly, we react entirely differently. No one's afraid of a string of large up days. We don't react to a 1% pop by purchasing every cheap VIX call in site. But if we go down 1% watch out!

What's more, that RV "pop" looks even less ominous when you consider that it's entirely thanks to Friday's virtual retracement of Thursday's big dip. A trader watching every tick felt a 1.25% dip, then a 1.1% pop on consecutive days. An investor not paying all that much attention felt a 0.1% yawner over two days. Extend your horizon to four days and we haven't moved at all.

So who has a major need for protection after all that? Really, no one, unless you're worried about future volatility. But that's always the case.

And we are collectively less worried now than we've been in quite a while. Here's the VIX futures term structure now vs. two months ago, when VIX itself was at a similar level.

VIX Futures Historical Prices

The market still expects a rising VIX over time, just not nearly to the extent it did as recently as two months ago.

Throughout the bull move, the term structure was a sign of fear and disbelief in the rally. That's still the case -- there's really no particular reason for much of an upslope -- but it's a case that's gotten much weaker over time.

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

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