Schaeffer's Trading Floor Blog

Buzz Stocks: Zillow Inc, Apple Inc. (AAPL), Twenty-First Century Fox Inc, and Google Inc

Today's stocks to watch in the news are Z, AAPL, FOXA, and GOOGL

by 7/25/2014 9:26 AM
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Rising geopolitical concerns have futures pointed lower this morning. In company news, here are some stocks to watch.

  • Zillow Inc (NASDAQ:Z) is reportedly looking to buy rival Trulia Inc (NYSE:TRLA) for roughly $2 billion in cash and stock. Both companies refused to comment on what would be the biggest acquisition yet for Z CEO Spencer Rascoff. (Bloomberg)

  • A U.S. district judge in New York conveyed worry over Apple Inc.'s (NASDAQ:AAPL) proposed $450 million e-book price-fix settlement, suggesting it could negatively impact the payout to consumers. Specifically, she expressed concern over a clause that would substantially reduce the settlement, should an appeals court reverse her ruling. (Reuters)

  • Twenty-First Century Fox Inc's (NASDAQ:FOXA) Rupert Murdoch is raising the stakes in his bid for Time Warner Inc (NYSE:TWX). Specifically, FOXA is merging a number of European satellite TV operators, which will result in a roughly $8.3 billion influx of cash for the company. Reports are circling that Murdoch will use the windfall to up his buyout offer for TWX. (CNNMoney)

  • Google Inc (NASDAQ:GOOGL) is once again in the hot seat with European regulators, who are questioning how the company is dealing with customers' "right to be forgotten" claims. Since the European Union's top court ruled that GOOGL must remove information that is no longer relevant from its database, the company has only approved more than half of the 90,000 requests it's received. (Reuters)

  • On the earnings front, Amazon.com, Inc. (NASDAQ:AMZN), Pandora Media Inc (NYSE:P), Starbucks Corporation (NASDAQ:SBUX), Baidu Inc (ADR) (NASDAQ:BIDU), and Visa Inc (NYSE:V) all reported. (CNBC; Bloomberg; MarketWatch)

  • Finally, Corinthian Colleges Inc (NASDAQ:COCO) is ridding itself of a number of locations, as it confronts numerous state and federal lawsuits. The for-profit educational institution -- whose shares are down 90% year-over-year -- is reportedly "the biggest scam company in the world," according to one staffer. (Consumerist)

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Analyst Downgrades: Amazon.com, Inc., Pandora Media Inc, and Visa Inc

Analysts downwardly revised their ratings on AMZN, P, and V

by 7/25/2014 9:22 AM
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Analysts are weighing in today on e-commerce concern Amazon.com, Inc. (NASDAQ:AMZN), streaming music provider Pandora Media Inc (NYSE:P), and blue chip Visa Inc (NYSE:V). Here's a quick roundup of today's bearish brokerage notes.

  • AMZN is bracing for an 11% drop -- bigger than what the options market had priced in -- after the firm confessed to a wider-than-expected quarterly loss. Subsequently, a slew of analysts are downwardly revising their opinions on Amazon.com, Inc. Just to name a few, B. Riley downgraded the stock to "neutral" from "buy," CRT Capital downgraded it to "fair value" from "buy," and UBS trimmed its price target to $360 from $365. AMZN closed at $358.61 on Thursday.

  • P -- which closed at $28.72 yesterday -- is poised to surrender 10.2% out of the gate, extending its string of dismal earnings reactions. After issuing weaker-than-expected earnings guidance last night, Pandora Media Inc is feeling the wrath of analysts exiting the bulls' camp. Among them, J.P. Morgan Securities and Cowen, which cut their respective price targets to $42 and $38. More negative notes could be on the way, too, as P has earned 16 "buy" or better ratings, compared to five "holds" and just one "strong sell."

  • Finally, V is pointed 3% lower in pre-market trading, after the credit card concern cut its full-year revenue guidance. As such, the shares -- which finished at $222.74 on Thursday -- are in danger of surrendering their year-to-date gains, and could be targeted for bearish brokerage notes. Already today, Goldman Sachs cut its price target on Visa Inc to $245 from $250, while Stifel reduced its target to $281 from $289. V currently maintains 20 "buy" or better recommendations, compared to four lukewarm "holds."

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Analyst Upgrades: Ford Motor Company, Baidu Inc (ADR), and Starbucks Corporation

Analysts upwardly revised their ratings on F, BIDU, and SBUX

by 7/25/2014 8:55 AM
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Analysts are weighing in today on automaker Ford Motor Company (NYSE:F), Chinese search engine Baidu Inc (ADR) (NASDAQ:BIDU), and coffee giant Starbucks Corporation (NASDAQ:SBUX). Here's a quick roundup of today's bullish brokerage notes.

  • F touched a three-year high of $18.12 yesterday, and settled at $17.84, after the firm reported stronger-than-expected earnings. The shares are looking to extend their upward momentum this morning, thanks to a trio of upbeat analyst notes. J.P. Morgan Securities hiked its price target to $21 from $20, RBC lifted its price target to $19 from $18, and Buckingham boosted its price target by $2 to $14. Most analysts are already in the bullish camp when it comes to Ford Motor Company, as the stock boasts eight "buy" or better endorsements, compared to six "holds" and not a single "sell."

  • BIDU -- which notched a record high of $205.50 before settling at $204.27 on Thursday -- is headed nearly 8% higher out of the gate. The company last night reported much stronger-than-anticipated quarterly figures, and is set to continue its string of solid earnings reactions. Analysts this morning are upwardly revising their opinions on Baidu Inc (ADR) shares, including Jefferies and Pacific Crest, which each upped their price targets to $260.

  • Finally, SBUX also unveiled stronger-than-expected quarterly earnings and revenue, and projected fiscal fourth-quarter earnings in line with estimates. As a result, Jefferies, J.P. Morgan Securities, and Buckingham lifted their price targets on SBUX to $88, $85, and $96, respectively. The shares settled at $80.45 -- a year-to-date closing high -- on Thursday, but despite the earnings beat are poised to open more than 3% lower. Perhaps the bulls' club was already crowded; Starbucks Corporation boasts 18 "buy" or better ratings, compared to four "holds" and not one "sell."

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The Great Herbalife (HLF) Debate, Continued

Tuesday's HLF rally was more notable than most of what we've seen this earnings season

by 7/25/2014 7:41 AM
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Perhaps in searching for big earnings reactions in high-profile names, I looked under the wrong rock. The biggest high-profile mover on expected news this week didn't even report numbers. Actually, the company didn't even report news. I'm referring, of course, to Herbalife Ltd. (NYSE:HLF).

They sell nutritional supplements. Or something like that. I'm not sure anyone follows the actual company anymore. It's become more just the venue for the Carl Icahn-Bill Ackman Battle Royale that allows everyone to pick and bet on a side.

This week was Ackman's turn to make news. He was all set to reveal his smoking gun about HLF's pyramid scheme. Except it went about as well as Geraldo opening up Al Capone's secret vault on live TV.

Here's a look at the stock over the last two weeks. It lifted 25% on Tuesday, way beyond any sort of options bid-up.

Herbalife Ltd. (HLF) Daily Chart Since Early July 2014

Actually, as you can see on the lower lines of the graph, there wasn't all that much options bid-up. HLF has averaged about a high 50s implied volatility in 2014. It traded a bit under that over the last few months, then ticked up modestly in July, but really just back to long-term averages.

And then on Monday, the stock dipped 10% and volatility started to perk up. Hindsight tells us if you went long HLF gamma last Friday, you made a mint. Should we have seen it coming?

Well, that's really hard to say. I'm sure everyone thought Ackman had more "evidence" supporting his case. No one forced him to make a high-profile presentation, so logic says why do it without major goods.

An objective observer a week ago saw a stock that hadn't moved all that much since February. Ten-day realized volatility in HLF had hovered in the 20s and below since April. So options volatility in the 40s and 50s represented a bit of a premium already. The lift into expected news seemed priced about right.

Small biotech probably offers us the best parallel to the options action here. Think of a one-product stock awaiting FDA approval on something. The stock itself may not move much into the announcement, but the options will price in a future gap somewhere. HLF just got de facto "approved."

What about now? Well, the "news" is out. I ignore this story at times when financial TV isn't going 24/7 Herbalife, so I can't tell you when the next presentation may arise. Earnings are due next week, but I'm not sure that's going to mean much to all the hot money in here. It's more about whether you believe the numbers are real or not. So my guess is, now's not the time to pay up for anything.

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


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Analyst Update: Amazon.com, Inc., Akamai Technologies, Inc., and Freeport-McMoRan Inc

Analysts offered their opinions on AMZN, AKAM, and FCX

by 7/24/2014 2:15 PM
Stocks quoted in this article:

U.S. stocks are flirting with breakeven at midday, as investors weigh lackluster housing data against an eight-year low in jobless claims. Meanwhile, among the equities in focus are online marketplace Amazon.com, Inc. (NASDAQ:AMZN), cloud concern Akamai Technologies, Inc. (NASDAQ:AKAM), and mining issue Freeport-McMoRan Inc (NYSE:FCX), which have all attracted attention on Wall Street.

  • AMZN -- which will report second-quarter earnings in just a few hours -- was last seen 0.5% higher at $359.75. In the meantime, it seems everyone has an opinion on Amazon's new (and first) smartphone, the Fire. While USA Today's Edward Baig called the phone a "strong first effort," and said he expects Fire to "fire up the smartphone market," Brier Dudley at The Seattle Times admits that the Fire debut is "impressive," but "the price [of $650 without a contract] is a bit high for a device designed to help you buy more stuff from Amazon." Ahead of earnings, the options board is pricing in a roughly 6% move for the stock, according to Schaeffer's contributor Adam Warner. Following its last two turns in the earnings confessional, Amazon.com, Inc. shares dropped 10.9% and 13.7%, respectively, in the subsequent three days.

  • AKAM has added 1.8% to $59.55, after Macquarie upgraded the stock to "outperform" this morning. The company is slated to report second-quarter earnings after the close next Wednesday, July 30, and most analysts are already in the bullish corner. In fact, Akamai Technologies, Inc. boasts 14 "strong buys," compared to four "holds" and not a single "sell." The stock has performed well in 2014, up 26.2%, and has averaged a one-week post-earnings gain of 7.1% over the past eight quarters.

  • Finally, FCX is down 2.3% at $37.66. The firm reported stronger-than-expected second-quarter revenue yesterday morning, and is reportedly on the verge of ending a months-long standoff in Indonesia and resuming copper exports. Accordingly, Jefferies and Credit Suisse lifted their price targets on the stock to $50 and $45, respectively. BofA-Merrill Lynch, on the other hand, downgraded FCX to "neutral" from "buy." Freeport-McMoRan Inc shares are now struggling to stay in the green for the year, and are in danger of ending beneath their 20-day moving average for the first time since mid-June.

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