Schaeffer's Trading Floor Blog

Analyst Update: Netflix, Inc., NVIDIA Corporation, and Level 3 Communications, Inc.

Analysts are weighing in on NFLX, NVDA, and LVLT

by 11/25/2014 1:44 PM
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U.S. markets have been on both sides of breakeven today, as traders digest the latest batch of economic reports. Meanwhile, among equities in focus are streaming giant Netflix, Inc. (NASDAQ:NFLX), semiconductor concern NVIDIA Corporation (NASDAQ:NVDA), and networking specialist Level 3 Communications, Inc. (NYSE:LVLT).

  • NFLX has given back 2.3% today to linger near $348.38, after Stifel downgraded the stock to "hold" from "buy." Specifically, the brokerage firm said it remains upbeat on the company's "longer-term international opportunity, but think[s] third-quarter results were a sign that investors are still focused on domestic subscriber growth in the near term." Netflix, Inc. has made some volatile moves since reporting earnings in mid-October, with the shares off more than 22% from their Oct. 15 close at $448.59. A continued slide could prompt another round of bearish brokerage notes, considering more than half of analysts covering the shares maintain a "buy" or better rating, and the consensus 12-month price target of $417.81 stands at a roughly 20% premium to current trading levels.

  • NVDA, meanwhile, hit a three-year peak of $20.72 earlier -- and was last seen lingering near breakeven at $20.58 -- following a price-target hike to $25 from $23 at Nomura, with the brokerage firm underscoring its "buy" opinion. The equity has been a technical standout in 2014, boasting a 28.5% year-to-date advance -- and, more recently, gaining a foothold atop the round-number $20 mark. However, not everyone has climbed on board the bullish bandwagon, considering a healthy 7.2% of the stock's float is sold short. What's more, it would take more than six sessions to cover these shorted shares, at average daily trading volumes, leaving the door wide open for a short-covering rally, should NVIDIA Corporation extend its longer-term advance.

  • Macquarie cut its rating on LVLT to "neutral" from "outperform," saying it believes the stock is "overvalued." Since bottoming out at its most recent low of $37.61 in mid-October, the security has rallied more than 29% to its current perch at $48.61, yet option traders have taken a glass-half-empty approach. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 10-day put/call volume ratio of 1.04 ranks in the 70th percentile of its annual range. Echoing this put-skewed trend is LVLT's Schaeffer's put/call open interest ratio (SOIR) of 0.72, which sits higher than 83% of similar readings taken in the past year. Simply stated, short-term speculators are more put-heavy than usual toward Level 3 Communications, Inc.

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U.S. markets have retreated from the record highs tagged earlier, as a drop in consumer confidence overshadows an unexpected rise in third-quarter gross domestic product (GDP). Among equities making significant moves are China-based mobile gaming platform iDreamSky Technology Ltd (ADR) (NASDAQ:DSKY), Internet radio concern Pandora Media Inc (NYSE:P), and environmental solutions specialist Nuverra Environmental Solutions Inc (NYSE:NES). Here's a quick look at how DSKY, P, and NES are performing on the charts today.

  • Similar to sector peer Qihoo 360 Technology Co Ltd (NYSE:QIHU), DSKY is in rally mode after the company unveiled its third-quarter earnings results. Since going public in early August, shares of DSKY have tacked on 4% to trade at $18.21 -- including today's 8% pop -- and sentiment among the brokerage bunch remains decidedly optimistic. In fact, both of the analysts covering the shares maintain a "strong buy" recommendation. Plus, the consensus 12-month price target of $28.50 stands at a 56.5% premium to current trading levels -- and resides in territory yet to be charted by iDreamSky Technology Ltd (ADR).

  • P, meanwhile, has plunged nearly 6% -- and surrendered a short-term foothold atop its 20-day moving average along the way -- to churn near $18.59. Sparking today's sell-off is a downgrade to "underperform" from "market perform" at FBR Securities, and given the equity's more than 30% year-to-date deficit, another round of bearish brokerage notes could be on the horizon. At present, 72% of analysts covering the shares deem them worthy of a "buy" or better rating, while the average 12-month price target of $30.25 represents expected upside of 63% to the stock's present price. Meanwhile, in the options pits, P's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 3.26 ranks higher than 89% of similar readings taken in the past year. An unwinding of these bullish bets in the face of Pandora Media Inc's downward trajectory could pressure the shares lower.

  • A freshly inked contract with XTO Energy -- a division of Exxon Mobil Corporation (NYSE:XOM) -- has taken front seat to a pair of mixed brokerage notes, with shares of NES up 10.7% at last check to linger near $11.12. Specifically, Stifel cut its price target on the stock to $16 from $20 -- and reiterated its "buy" rating -- while Cowen waxed optimistic on the new partnership, saying, "We believe [the contract] is indicative of the transformation happening both in the region and at Nuverra's operations." It's been a tough year for Nuverra Environmental Solutions Inc, which has shed roughly one-third of its value in 2014. Nevertheless, call buying has reached fever pitch in recent weeks, as evidenced by the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 26.00, which ranks in the highest percentile of its annual range. Considering 39% of the stock's float is sold short, though, a portion of this activity may have been at the hands of shorts hedging against any unexpected upside.

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Buzz Stocks: Digital Ally, Inc., Tiffany & Co., and Wal-Mart Stores, Inc.

Today's stocks to watch in the news are DGLY, TIF, and WMT

by 11/25/2014 9:34 AM
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Markets are poised to continue their record-setting run today, as traders digest the preliminary update on third-quarter gross domestic product (GDP). Among specific equities in focus are security and surveillance specialist Digital Ally, Inc. (NASDAQ:DGLY), high-end retailer Tiffany & Co. (NYSE:TIF), and blue chip Wal-Mart Stores, Inc. (NYSE:WMT).

  • DGLY jumped more than 12% yesterday to close at $14.05, ahead of last night's grand jury decision to not indict a police officer in the shooting death of an unarmed teenager. Following the announcement -- and despite the subsequent eruption of riots in Ferguson, Missouri -- shares of the wearable camera maker are roughly 0.9% lower right out of the gate. Year-to-date, Digital Ally, Inc. has tacked on around 50%, yet short sellers have been betting on the stock's momentum to run out of steam. Short interest jumped 5.4% in the last two reporting periods, and now accounts for more than one-quarter of the stock's available float.

  • TIF is opened nearly 5% higher, after closing last night at $105.01 -- and tagged a new record peak of $110.51 -- as traders digest the company's third-quarter earnings results. While both top- and bottom-line numbers missed consensus estimates due to sluggish growth in the Asia-Pacific region, a robust reading on same-store sales in the Americas has sparked some optimism around the Street. Heading into today's session, the stock was enjoying a respectable 13.2% year-to-date lead, and option traders have been gambling on more upside for Tiffany & Co. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, TIF's 10-day call/put volume ratio of 2.22 ranks in the bullishly skewed 76th percentile of its annual range. Echoing this call-skewed bias is the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.80, which ranks lower than 77% of similar readings taken in the past year.

  • WMT has edged 0.2% lower at the open, as traders react to reports the company's chief merchandising officer is ready to announce his departure just a few days before the all-important Black Friday shopping event. On the sentiment front, analysts are skeptical toward a stock that's tacked on more than 8% in 2014. In fact, more than half of those covering the shares maintain a "hold" or "strong sell" suggestion, while the consensus 12-month price target of $82.04 stands at a discount to the equity's current perch at $85.40. Should Wal-Mart Stores, Inc. resume its uptrend, a round of upgrades and/or price-target hikes could help propel the shares higher.

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Analyst Downgrades: Cyberark Software Ltd, Nu Skin Enterprises, Inc., and Workday Inc

Analysts downwardly revised their ratings on CYBR, NUS, and WDAY

by 11/25/2014 9:33 AM
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Analysts are weighing in today on cyber-security firm Cyberark Software Ltd (NASDAQ:CYBR), nutritional supplements marketer Nu Skin Enterprises, Inc. (NYSE:NUS), and HR specialist Workday Inc (NYSE:WDAY). Here's a quick roundup of today's bearish brokerage notes on CYBR, NUS, and WDAY.

  • CYBR got hit with a pair of bearish brokerage notes earlier. William Blair downgraded the stock to "market perform" from "outperform" -- which cited long-term growth concerns -- while Nomura reduced its rating to "neutral" from "buy." This, despite the shares advancing 88% since their late-September public debut to close last night at $47.01. Out of the gate, though, Cyberark Software Ltd has given back 4.8%. On the sentiment front, options traders have bought to open 5.91 calls for every put during the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). However, short interest on CYBR spiked 66.5% in the latest reporting period, suggesting some of these bullish options bets may have been at the hands of short sellers seeking an upside hedge.

  • NUS was initiated with a "neutral" rating at Citigroup, which is about par for the course. Of the six analysts covering the shares, two-thirds rate them the equivalent of a "hold" or "sell." Short sellers are also skeptical of Nu Skin Enterprises, Inc., as 11.3% of the stock's float is sold short -- which would take a week to buy back, at average daily trading volumes. On the charts, NUS has shed about 70% of its value in 2014 to rest at $41.43, and has underperformed the broader S&P 500 Index (SPX) by roughly 19 percentage points during the last month.

  • Finally, WDAY has plunged 6% out of the gate, following a poorly received third-quarter earnings report, and a round of bearish brokerage notes. Specifically, no fewer than seven brokerage firms reduced their price targets on Workday Inc, including Deutsche Bank, which lowered its target by 10% to $90, and reiterated its "hold" opinion. On the charts, the equity was up 11.2% year-to-date as of Monday's close at $92.49, but this morning has broken south of its month-long sideways pattern in the $90-$97 range, at $86.97. Should WDAY continue to plummet in the wake of today's negative analyst attention, there will be plenty of short sellers cheering. More than 9% of the stock's float is sold short, which would take almost seven sessions to cover, at WDAY's average daily trading rate.

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Analyst Upgrades: General Electric Company, Medtronic, Inc., and Palo Alto Networks Inc

Analysts upwardly revised their ratings on GE, MDT, and PANW

by 11/25/2014 9:02 AM
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Analysts are weighing in today on Dow component General Electric Company (NYSE:GE), medical technology firm Medtronic, Inc. (NYSE:MDT), and network security platform Palo Alto Networks Inc (NYSE:PANW). Here's a quick roundup of today's bullish brokerage notes on GE, MDT, and PANW.

  • RBC initiated coverage on GE with an "outperform" rating this morning. While the shares are sitting nearly 4% below year-to-date breakeven, they've rallied 11.2% since hitting a mid-October closing low of $24.28 to their current perch at $27.00. Meanwhile, options traders have been bearishly arrayed toward General Electric Company for some time. The equity's 50-day put/call volume ratio of 0.40 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 96th percentile of its annual range. Elsewhere, short interest ramped up 33.6% during the last two reporting periods -- though, more broadly speaking, less than 1% of GE's float is dedicated to short interest.

  • RBC was also busy upping MDT's price target to $81 from $73, while underscoring its "outperform" recommendation. The positive analyst note appears to be well-deserved, considering the shares have rallied 27% since the start of 2014 to land at $72.93, and have outperformed the broader S&P 500 Index (SPX) by 12.2 percentage points over the past two months. Additional upside could be sparked by short-covering activity, as 6.9% of Medtronic, Inc.'s float is sold short -- which would take seven sessions to buy back, at the equity's typical daily trading volume.

  • Finally, PANW is pointed 1.2% higher ahead of the bell, after the company's fiscal first-quarter earnings beat was met with no fewer than a dozen price-target hikes. Leading the way were Morgan Stanley and Raymond James, which handed out the loftiest targets of $136 and $131, respectively. On the charts, Palo Alto Networks Inc has nearly doubled in value this year, closing yesterday at $113.26, after hitting an intraday record high of $113.38. Not surprisingly, 84% of the brokerage firms covering the stock rate it a "buy" or better, with not a single "sell" recommendation to be found.

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