Schaeffer's Trading Floor Blog

Analyst Downgrades: Crocs, Inc., General Motors Company, and JPMorgan Chase & Co.

Analysts downwardly revised their ratings on CROX, GM, and JPM

by 10/2/2014 9:54 AM
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Analysts are weighing in today on rubber footwear seller Crocs, Inc. (NASDAQ:CROX), automaker General Motors Company (NYSE:GM), and Wall Street heavyweight JPMorgan Chase & Co. (NYSEJPM). Here's a quick roundup of today's bearish brokerage notes on CROX, GM, and JPM.

  • Goldman Sachs cut its price target on CROX to $14 from $16, while reaffirming its "neutral" rating. Technically speaking, 2014 hasn't been kind to the stock, which is down about 22% to trade at $12.41. Short sellers have taken notice, as evidenced by the fact that 7.7% of Crocs, Inc.'s float is sold short. At the security's average daily trading volume, it would take approximately six sessions to buy back all of these bearish bets.

  • Despite reporting encouraging September sales data yesterday, GM saw its price target slashed to $41 from $45 at RBC. This bearish brokerage attention is relatively rare, despite the stock's 19% year-to-date loss to trade at $33.11. In fact, nine out of 14 covering analysts have assigned General Motors Company a "buy" or better rating, and the stock's consensus 12-month price target is $42.56 -- in territory never before reached. That said, additional price-target reductions and/or downgrades could be on the horizon.

  • Finally, UBS slashed its opinion on JPM to "neutral" from "buy" (although Jefferies upped its price target by $2 to $67). On the charts, it's been a struggle for the stock, which has added less than 2% in 2014 to trade at $59.46. Option traders have responded accordingly, buying to open puts over calls at a near-annual-high rate. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), JPMorgan Chase & Co has racked up a 10-day put/call volume ratio of 1.33 -- just 4 percentage points from a 12-month bearish peak.

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Analyst Upgrades: Microsoft Corporation, Twitter Inc, and Under Armour Inc

Analysts upwardly revised their ratings on MSFT, TWTR, and UA

by 10/2/2014 9:20 AM
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Analysts are weighing in today on software giant Microsoft Corporation (NASDAQ:MSFT), social networking site Twitter Inc (NYSE:TWTR), and athletic apparel maker Under Armour Inc (NYSE:UA). Here's a quick roundup of today's bullish brokerage notes on MSFT, TWTR, and UA.

  • FBN Securities started coverage on MSFT with an "outperform" rating and a price target of $55. This bullish brokerage note is well-deserved, considering the shares have rallied nearly 23% in 2014 to trade at $45.90, and as recently as Sept. 19 hit a 14-year high of $47.57. Should Microsoft Corporation continue to advance on the charts, additional positive initiations and/or upwardly revised assessments could come down the pike. After all, 11 out of 20 covering analysts have given the equity a tepid "hold" rating, and MSFT's consensus 12-month price target of $48 is just a chip-shot away from current trading levels.

  • The prevailing "shift toward mobile advertising" prompted a J.P. Morgan Securities analyst to lift his opinion of TWTR to "overweight" from "neutral," and boost its price target to $64 from $54. Technically, the shares have been outperforming the broader market lately, besting the S&P 500 Index (SPX) by 37.3 percentage points during the past three months. However, on a longer-term basis, TWTR has shed 21.4% year-to-date to settle at $50.06 last night. Not surprisingly, the Street is evenly split on Twitter Inc, assigning 14 "buy" or better ratings, compared to 14 "holds" and "strong sells."

  • Finally, UA saw its price target raised to $63 from $60 at J.P. Morgan Securities, which also reiterated its "neutral" opinion on the shares. In the options pits, traders have been buying to open puts over calls at a faster-than-usual rate in recent weeks. Specifically, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.31 ranks just 15 percentage points from an annual bearish acme. This, despite Under Armour Inc's 52% year-to-date gain to trade at $66.37. If UA keeps running higher, an unwinding among the option bears could result in tailwinds.

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Buzz Stocks: Tesla Motors Inc (TSLA), RealD, and Netflix, Inc.

Today's stocks to watch in the news include TSLA, RLD, and NFLX

by 10/2/2014 9:07 AM
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The major market indexes are on pace to open cautiously higher this morning, following the previous session's drastic sell-off. In company news, today's stocks to watch include electric automaker Tesla Motors Inc (NASDAQ:TSLA), 3-D technology firm RealD (NYSE:RLD), and streaming entertainment issue Netflix, Inc. (NASDAQ:NFLX).

  • A cryptic tweet from TSLA CEO Elon Musk has sparked some pre-market buzz, with rumors now swirling about the possible unveiling of a new model. Shares of Tesla Motors Inc are up more than 5% ahead of the bell, and they've already rallied 59.7% year-to-date to trade at $240.24. Nevertheless, there's still plenty of skepticism surrounding the niche automaker. Short interest rose by 2.5% during the most recent reporting period, and now accounts for 24.4% of TSLA's float.

  • RLD ended at $9.27 on Wednesday -- but the stock has spiked 24.5% ahead of the open to linger north of $11.50, thanks to a $12-per-share buyout bid from Starboard Value LP. On the sentiment front, Schaeffer's put/call open interest ratio (SOIR) for RealD stands at 0.07, in the 15th annual percentile. In other words, short-term options players have been more call-heavy just 15% of the time during the past year. In the front-month series, peak call open interest of 2,385 contracts can be found at the October 10 strike. However, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals that quite a few of these calls were sold to open -- which means premium sellers may be scrambling to cover amid RLD's acquisition-related surge.

  • NFLX garnered some attention earlier this week, after announcing plans to release its first original movie. Now, Netflix, Inc. has inked a deal to produce four movies starring Adam Sandler, in collaboration with the Saturday Night Live alum's Happy Madison Productions. NFLX is set to open 0.5% higher, after ending yesterday at $438.80 -- up 19.2% for 2014. Despite the stock's impressive gains, quite a few analysts remain in the skeptics' camp. Among the 30 brokerage firms tracking NFLX, only 53% have deemed the shares worthy of a "buy" or better rating.

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Small-Cap Weakness: Impending Doom, or Buying Opportunity?

Does weakness in the small-cap IWM signal an impending SPY crash?

by 10/2/2014 8:02 AM
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As I'm sure you're well aware, 2014 has seen a bit of a cratering in small caps, particularly on a relative basis. Here's the iShares Russell 2000 ETF (IWM) versus the SPDR S&P 500 ETF Trust (SPY) so far in 2014:

IWM vs SPY since January 2014

The question is, of course, what this means going forward.

Well, here's a scary thought. We saw a similar pattern back in 2007. Here's how the 2007 IWM vs. SPY chart looked into early October of that year.

IWM vs SPY, January-October 2007

Not identical -- but pretty close. Thirteen and a half months later, SPY bottomed at about half the levels of October 2007.

So, sell everything! This proves that small caps are leading us to oblivion.

... but wait, don't load up on those CBOE Volatility Index (VIX) derivatives just yet. Here's how the same ratio looked in the first nine months of 2011:

IWM vs SPY, January-October 2011

That pattern looks familiar, too. But guess what? If you went long SPY at the end of September 2011 and held for a year, you earned about 30%. And we're up about another 40% in the two years since then. So, maybe small-cap underperformance isn't such a bad sign after all.

Truth is, there's just no way to know. The only point I'd like to re-emphasize is not to draw any conclusions from sample sizes of one or two.

The market looks really awful lately, no matter where you look. And volatility keeps on keeping on, though not really getting to extremes. That's not a great sign, either ... I'd rather see a panic over-reaction to what -- so far -- isn't a big stock sell-off, in percentage terms.

But we can't always get what we want.

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


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U.S. stocks are significantly lower this afternoon, as Wall Street weighs relatively lackluster economic data and a U.S. Ebola scare. Meanwhile, among the equities in focus are airline issue United Continental Holdings Inc (NYSE:UAL), number cruncher Automatic Data Processing (NASDAQ:ADP), and shoe concern Deckers Outdoor Corp (NYSE:DECK), which have all attracted analyst attention.

  • Growing fears of airborne illness are plaguing the airline sector today, and UAL is no exception, down 2.8% at $45.45. The Ebola concerns have overshadowed a price-target hike to $53 from $49, as well as a "buy" reiteration, from UBS -- though UAL's downward momentum has been contained by its 200-day moving average. From a wider technical perspective, this trendline has helped United Continental Holdings Inc more than double in value since December 2012. Against this backdrop, short-term speculators have shown a distinct preference for calls over puts, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.38, which ranks just 3 percentage points from a 52-week low.

  • Following the successful spinoff of its dealer-services platform CDK Global, Inc. (NASDAQ:CDK), ADP was hit with a price-target cut to $72 from $85 at RBC, with the brokerage firm underscoring its "sector perform" rating. Skepticism toward ADP has been prevalent among the brokerage bunch. In fact, 11 analysts covering the shares have offered up a "hold" or "sell" suggestion, versus five "buys" or better. On the charts, Automatic Data Processing has tacked on 13.6% year-over-year; however, today's uninspiring brokerage note has the stock down 1.5% at $71.79.

  • DECK is failing to capitalize on a "buy" initiation at Wunderlich Securities, with the stock off 3.8% at last check to trade at $93.47. What's more, the shares are on pace to close south of their 50-day moving average for the first time since June 13. Longer term, DECK has tacked on nearly 11% in 2014, and hit a two-year high of $99.80 on Sept. 22. Option traders are unconvinced of Deckers Outdoor Corp's sustainability, though. 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 2.77 ranks higher than 96% of similar readings taken in the past year, meaning puts have been bought to open over calls at a near-annual-high clip in recent weeks.

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