Schaeffer's Trading Floor Blog

Stocks On the Move: Harley-Davidson Inc, GoPro Inc, and ARM Holdings plc (ADR)

HOG, GPRO, and ARMH are moving sharply in Tuesday's trading

by 10/21/2014 11:57 AM
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U.S. stocks are higher in early action, as Wall Street cheers encouraging data out of China, an uptick in U.S. home sales, and a well-received batch of big-cap earnings reports. Among the names making significant moves are motorcycle maker Harley-Davidson Inc (NYSE:HOG), mobile camera concern GoPro Inc (NASDAQ:GPRO), and tech issue ARM Holdings plc (ADR) (NASDAQ:ARMH). Here's a quick look at how HOG, GPRO, and ARMH are faring on the charts today.

  • HOG is 7.3% higher at $62.62, thanks to a stronger-than-expected earnings report. After wallowing near annual lows yesterday, the stock is on pace to finish north of its 60-day moving average for the first time since late June. Today's earnings win was likely a disappointment to recent Harley-Davidson Inc option buyers, as the stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.45 -- in the 82nd percentile of its annual range. In other words, in the two weeks leading up to HOG's report, speculators were buying to open puts over calls at a much faster-than-usual clip.

  • GPRO is 4.1% higher on no apparent news, though traders may be digesting leaked info regarding the company's newest camera. The stock has nearly tripled in value since going public in late June, and was last seen flirting with $79.04 and its formerly supportive 10-day moving average, which hasn't been conquered on a daily closing basis since Oct. 8, when GPRO was lingering near $90. Should the equity resume its uptrend, bearish analysts and short sellers could hit the bricks. Just two out of nine analysts offer up "strong buy" opinions, and short interest accounts for almost 41% of GoPro Inc's total available float.

  • ARMH is bucking the broad-market trend higher, down 5.5% at $39.26. In fact, the equity touched a new annual low of $37.75 earlier, as Wall Street pans the company's third-quarter earnings report. An analyst at Bernstein said it's "more and more likely" that last year was an exceptional one for ARM Holdings plc (ADR) and smartphone growth, and reiterated his "underweight" rating. Likewise, Canaccord Genuity, Benchmark, and S&P Capital IQ all downwardly revised their price targets, with the latter echoing a "sell" recommendation. There could be more negative notes on the horizon, too, as seven out of 11 analysts offer up "buy" or better endorsements, and the average 12-month price target of $52.31 represents expected upside of 33% to ARMH's current price.

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Analyst Downgrades: Chipotle Mexican Grill, Inc., Zynga Inc, and IBM Corp.

Analysts issued bearish notes on CMG, ZNGA, and IBM

by 10/21/2014 9:29 AM
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Analysts are downwardly revising their ratings today on burrito chain Chipotle Mexican Grill, Inc. (NYSE:CMG), social gaming specialist Zynga Inc (NASDAQ:ZNGA), and blue-chip tech giant International Business Machines Corp. (NYSE:IBM). Here's a quick look at today's bearish brokerage notes on CMG, ZNGA, and IBM.

  • CMG is poised to open 4.6% lower today, paring its 2014 gain of 22.6%, after the fast-casual restaurant operator predicted slowing sales trends for 2015. Analysts are weighing in on Chipotle Mexican Grill, Inc. this morning, with price-target cuts rolling in from four different firms -- including a decrease to $660 from $680 at Wunderlich. On the other hand, CMG has also racked up three price-target hikes, though Jefferies' upwardly revised target of $630 represents a considerable discount to the stock's Monday close at $653.03. Ahead of CMG's quarterly results, options traders were loading up on puts; the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 1.31, with puts outnumbering calls among options set to expire within three months. This ratio arrives in the 62nd percentile of its annual range, indicating a stronger-than-usual skew toward near-term puts.

  • Benchmark cut its price target on ZNGA to $2.54 from $2.83, and backed a middling "hold" rating on the Tech 2.0 name. Zynga Inc is down nearly 40% year-to-date, and there's room for additional negative notes from analysts. Currently, the average 12-month price target for ZNGA stands at $3.54, representing a 54.6% premium to yesterday's close at $2.29. For the past couple of weeks, the stock has spent most of its time bouncing between $2.20 and $2.40, but ZNGA's upcoming earnings report on the evening of Thursday, Nov. 6, could provide a catalyst for its next big move.

  • On the heels of its major earnings disappointment, IBM was downgraded to "hold" from "buy" at Evercore, with the firm simultaneously dropping its price target to $180 from $210. Meanwhile, at least eight other brokers lowered their price targets for International Business Machines Corp., with a Credit Suisse cut to $125 representing the lowest forecast. IBM finished Monday's session down more than 7% at $169.10, bringing its year-to-date loss to 9.8%. The silver lining for Big Blue is that there's already a healthy amount of skepticism on display from analysts, which means a wave of additional downgrades is relatively unlikely. Already, only 25% of brokerage firms following IBM recommend buying it.

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Buzz Stocks: AbbVie Inc, Staples, Inc., and Facebook Inc (FB)

Today's stocks to watch in the news include ABBV, SPLS, and FB

by 10/21/2014 9:16 AM
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U.S. stocks are headed higher ahead of the bell, as traders digest big-cap earnings and data out of China. Among the equities in focus, today's stocks to watch are pharmaceutical firm AbbVie Inc (NYSE:ABBV), office supplies issue Staples, Inc. (NASDAQ:SPLS), and social networking titan Facebook Inc (NASDAQ:FB).

  • Shire PLC (ADR) (NASDAQ:SHPG) is "officially dead" to ABBV -- as a buyout prospect, anyway. AbbVie Inc last night said it pulled the plug on what would have been an epic merger, in the wake of efforts by the U.S. government to curb so-called tax inversion. ABBV -- which is now on the hook to pay SHPG a $1.64 billion breakup fee, and last night announced a stock-buyback program and dividend increase -- is pointed 1.8% higher in pre-market action. The shares have tacked on 3% in 2014, and touched a record high of $60.02 in mid-September, but have since pulled back to flirt with $54.41. Short sellers have been upping the ante on ABBV, with short interest increasing 19.1% during the past two reporting periods. These bearish bets now represent nearly nine sessions' worth of pent-up buying demand, at the security's average daily trading volume.

  • SPLS is the latest U.S. firm targeted for a possible cyber attack. Last night, the company said it's investigating a possible breach of credit card data and that law enforcement has been contacted. Technically speaking, SPLS has surrendered 22.6% in 2014, finishing at $12.30 on Monday. While analysts are firmly in the bearish camp -- not one of the 14 brokerage firms following SPLS deems it worthy of a "buy" -- option players have been picking up calls over puts at an annual-high clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 61.04 sits at a 12-month peak. However, it's worth noting that short interest accounts for 11.7% of Staples, Inc.'s total available float, so some of the recent call buying could be the work of short sellers looking for a hedge.

  • Finally, FB is poised to edge 0.8% higher out of the gate, as traders learn of a legal battle between CEO Mark Zuckerberg and several lawyers who represented New York entrepreneur Paul Ceglia. Specifically, the company is suing the attorneys, claiming they knowingly helped Ceglia pursue a fraudulent lawsuit. If today's upside move pans out, it'll be to the dismay of the recent crop of Facebook Inc option bears, who bet on the equity to retreat by the end of the week. In fact, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.74 sits at an annual peak, as does the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.86, underscoring the bigger-than-usual put bias among near-term speculators. On the charts, FB has soared 40.8% in 2014, landing at $76.95 on Monday. Off the charts, the company will confess its third-quarter earnings after the close next Tuesday.

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Analyst Upgrades: Illumina, Inc., Synaptics, Incorporated, and GrubHub Inc

Analysts issued bullish notes on ILMN, SYNA, and GRUB

by 10/21/2014 9:04 AM
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Analysts are upwardly revising their ratings today on molecular diagnostics firm Illumina, Inc. (NASDAQ:ILMN), tech issue Synaptics, Incorporated (NASDAQ:SYNA), and mobile carryout platform GrubHub Inc (NYSE:GRUB). Here's a quick look at today's bullish brokerage notes on ILMN, SYNA, and GRUB.

  • After the company's strong earnings report last night, ILMN scored an upgrade to "buy" from "neutral" at Janney, along with a price-target hike to $192 from $165. Six other firms also upped their price targets on Illumina, Inc., with JMP Securities lifting its forecast all the way to $245 -- roughly 49% above the stock's close at $164.47 on Monday. Most analysts are already upbeat on ILMN, in light of the equity's year-to-date rally of 48.7%. Among the 18 brokerage firms tracking the shares, 11 have handed out "strong buy" ratings, and there's not a single "sell" to be found. As traders respond to the firm's positive earnings news, ILMN has bounced 10% ahead of the bell.

  • Sterne Agee started coverage of SYNA with a "buy" rating ahead of Thursday night's fiscal first-quarter earnings release. Synaptics, Incorporated has now garnered an almost unanimous vote of confidence from Wall Street, with 89% of analysts deeming the stock a "buy" or better. SYNA has advanced 36.9% year-over-year, with a recent pullback contained by support in the $65 area. However, the stock remains heavily targeted by short sellers, as evidenced by its short-to-float ratio of 12.9%. After closing Monday at $74.94, SYNA has edged fractionally higher in pre-market trading.

  • BMO boosted its price target on GRUB to $44 from $40, implying expected upside of more than 19% from Monday's close at $36.86. GrubHub Inc made its public trading debut back in April, and the stock's current all-time high of $45.80 was reached in mid-August. In recent sessions, the stock's progress has been capped by resistance at its overhead 40-day moving average, now located at $37.37. Despite the recently sluggish price action, BMO's freshly reiterated "outperform" rating is hardly unique for GRUB. Among the eight analysts following the stock, seven call it a "buy" or better.

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Options Check-Up: Canadian Solar Inc., Nokia Corporation (ADR), and Sirius XM Holdings Inc.

Analyzing recent option activity for CSIQ, NOK, and SIRI

by 10/21/2014 8:07 AM
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Among the stocks attracting attention from options traders lately are alternative energy issue Canadian Solar Inc. (NASDAQ:CSIQ), tech concern Nokia Corporation (ADR) (NYSE:NOK), and satellite radio provider Sirius XM Holdings Inc. (NASDAQ:SIRI). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on CSIQ, NOK, and SIRI.

  • CSIQ ended Monday's session 3.3% higher at $28.62, despite another price-target cut at J.P. Morgan Securities, to $37 from $41. However, the brokerage firm also underscored its "overweight" rating on the shares. Year-to-date, Canadian Solar Inc. is down 4%, but options traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been buying to open calls over puts at a rapid-fire rate in recent weeks. Specifically, the stock's 10-day call/put volume ratio across those three exchanges is 3.93, with long calls nearly quadrupling long puts. What's more, this ratio ranks higher than 80% of all other readings from the past year. Those hoping to place short-term bets on CSIQ can currently do so at a relative bargain. The equity's Schaeffer's Volatility Scorecard (SVS) of 96 indicates the shares tend to make outsized moves, relative to what the options market is pricing in.

  • NOK lost 0.6% yesterday to close at $7.89, bringing the shares deeper into the red in 2014. Not surprisingly, speculators have been relatively bearish over the past two weeks, per the stock's put/call volume ratio of 0.42, which registers in the 87th percentile of its annual range. Meanwhile, the cost of short-term Nokia Corporation (ADR) options is fairly typical at present, per the stock's Schaeffer's Volatility Index (SVI) of 41%, which ranks in the 54th annual percentile.

  • Finally, SIRI tacked on 1.8% to close at $3.33, but remains 4.6% lower year-to-date. During the previous two weeks, options traders have bought to open 0.65 put for every call at the ISE, CBOE, and PHLX -- quite a change from one month ago. The resultant put/call volume ratio checks in higher than all but 8% of similar readings taken in the last 12 months, suggesting a stronger-than-usual preference for bearish bets over bullish. Meanwhile, short-term Sirius XM Holdings Inc. options are priced at pretty typical levels. The stock's SVI of 33% is docked in the 46th percentile, looking back 52 weeks.

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