Schaeffer's Trading Floor Blog

Analyst Upgrades: F5 Networks, Inc., RF Micro Devices, Inc., and Take-Two Interactive Software, Inc.

Analysts upwardly revised their ratings on FFIV, RFMD, and TTWO

by 10/30/2014 9:35 AM
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Analysts are weighing in today on IT issue F5 Networks, Inc. (NASDAQ:FFIV), radio frequency solutions specialist RF Micro Devices, Inc. (NASDAQ:RFMD), and video game maker Take-Two Interactive Software, Inc. (NASDAQ:TTWO). Here's a quick roundup of today's bullish brokerage notes on FFIV, RFMD, and TTWO.

  • A rash of brokerage firms weighed in on FFIV this morning, after the company posted fiscal fourth-quarter earnings and revenue that exceeded estimates, and announced the retirement of CEO John McAdam. The most optimistic of outlooks came from Pacific Crest, which raised its price target to $153 from $151 -- and underscored its "outperform" rating -- representing expected upside of 30.6% to last night's closing price of $117.12. On the sentiment front, option traders displayed a slight bearish bias toward F5 Networks, Inc. in the weeks leading up to last night's results. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.83 ranks in the 66th percentile of its annual range.

  • RFMD received no fewer than four price-target hikes after unveiling its fiscal second-quarter earnings report, including one from Canaccord Genuity. Specifically, the brokerage firm upped its price target to $16 from $12.50, and raised its outlook to "buy" from "hold." The shares have more than doubled in value on a year-to-date basis, and closed last night at $12.05. In the options pits, traders have been scooping up bullish bets in a flurry, as evidenced by the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 97.09, which ranks higher than 92% of similar readings taken in the past year. With 24.2% of RFMD's float sold short, though, a portion of this call buying could be at the hands of shorts hedging their bearish bets against any post-earnings upside. In early trading, RF Micro Devices, Inc. is up about 1%.

  • TTWO popped 5% out of the gate to explore six-year highs near $24.50. Take-Two Interactive Software, Inc. last night reported a narrower-than-expected fiscal second-quarter loss, and lifted its fiscal-year outlook. No fewer than 10 brokerage firms hiked their price targets on TTWO, with the most ambitious being MKM, which lifted its target to $30 from $27 -- representing expected upside of 31.6% to the stock's Wednesday close at $22.80, and in record-high territory. In addition, Brean upgraded its opinion to "buy" from "hold." One group not celebrating TTWO's earnings victory? Short sellers. Short interest accounts for 18.7% of the stock's total available float, representing nearly eight sessions' worth of pent-up buying demand, at the stock's average pace of trading -- plenty of fuel for a short-covering rally.

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Analyst Downgrades: DreamWorks Animation SKG, Inc., SunPower Corporation, and Glu Mobile Inc.

Analysts downwardly revised their ratings on DWA, SPWR, and GLUU

by 10/30/2014 9:23 AM
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Analysts are weighing in today on movie studio DreamWorks Animation SKG, Inc. (NASDAQ:DWA), alternative energy concern SunPower Corporation (NASDAQ:SPWR), and mobile game maker Glu Mobile Inc. (NASDAQ:GLUU). Here's a quick roundup of today's bearish brokerage notes on DWA, SPWR, and GLUU.

  • DWA is pointed 1.8% higher ahead of the bell, after the firm said the blockbuster performance of "How to Train Your Dragon 2" translated into stronger-than-expected third-quarter earnings. Nevertheless, Janney downgraded DWA to "neutral" from "buy," echoing the already bearish tone among the brokerage bunch. In fact, DreamWorks Animation SKG, Inc. boasts just one "strong buy," compared to six tepid "holds" and two "sell" or worse ratings. Likewise, the consensus 12-month price target of $22.22 represents a discount to DWA's closing price of $23.29 on Wednesday. Short-term option players, on the other hand, are likely applauding the earnings beat. The stock's Schaeffer's put/call open interest ratio (SOIR) sits at an annual low of 0.42, suggesting DWA's near-term traders haven't been more call-heavy during the past year.

  • SPWR is flirting with breakeven at $30.31 in pre-market action, even as analysts continue to react to yesterday's lackluster earnings guidance. Specifically, Cowen cut its price target to $46 from $50, but maintained an "outperform" rating, while RBC trimmed its price target by $1 to $35, and reiterated a "sector perform" opinion. (Canaccord Genuity, meanwhile, upgraded SPWR to "buy" from "hold.") In the options pits, SunPower Corporation traders were picking up puts over calls at an annual-high pace ahead of earnings, 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 a 12-month high of 2.20. The stock's post-earnings reaction was relatively tame, however, as the shares dipped just 1.7% Wednesday, and remain in the black on a year-to-date basis.

  • Finally, GLUU is poised to plummet 16% out of the gate, as analysts pan the company's current-quarter forecast. Canaccord Genuity reduced its price target on the stock to $6 from $8, but upheld a "buy" rating, while Piper Jaffray cut its target to $5 from $7, while maintaining an "overweight" opinion. As of last night, the shares of Glu Mobile Inc. were up 16.8% year-to-date to trade at $4.53, but were struggling to topple their 50-week moving average. More negative analyst notes could exacerbate post-earnings selling pressure on the stock, which boasts six "strong buys" and two "holds," with not a single "sell" in sight. Plus, the consensus 12-month price target of $7.82 represents a steep premium to GLUU's current price.

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Buzz Stocks: Microsoft Corporation, Lakeland Industries, Inc., and Level 3 Communications, Inc.

Today's stocks to watch include MSFT, LAKE, and LVLT

by 10/30/2014 9:10 AM
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Futures have pared the worst of their losses this morning, as the advance reading on third-quarter gross domestic product (GDP) surpassed expectations. Among equities in focus are blue chip Microsoft Corporation (NASDAQ:MSFT), protective gear maker Lakeland Industries, Inc. (NASDAQ:LAKE), and integrated communications specialist Level 3 Communications, Inc. (NYSE:LVLT).

  • MSFT officially threw its hat in the digital health ring, announcing a wearable device that will monitor the sleep and exercise of the user, with the data stored in the company's new app called "Microsoft Health." The band will be available in limited amounts starting today at a price of $199. Technically speaking, it's been a standout year for Microsoft Corporation, with the shares up nearly 25% to trade at $46.62. Not everyone has climbed on board the equity's uptrend, which could spell additional gains for the shares down the road. In fact, the majority of analysts covering the stock maintain a tepid "hold" rating, while the consensus 12-month price target of $49.21 stands at a slim 5.6% premium to current trading levels. Simply stated, the door is wide open for a round of upgrades and/or price-target hikes, which could translate into a fresh wave of buying power.

  • LAKE is poised to pop nearly 40% out of the gate, after the company said it has received orders for roughly 1 million protective suits amid the global Ebola crisis. Additionally, Lakeland Industries, Inc. expects two of its protective suit lines to double in capacity by January. Today's projected price movement is just more of the same for a stock that's up almost 67% month-to-date to linger at $11.58. Traders seem to be bracing for a steep fall from grace, though. Short interest rose exponentially over the past two reporting periods, and now accounts for nearly 48% of the stock's available float.

  • LVLT is up 3% in pre-market trading, following news the stock has earned a spot on the S&P 500 Index (SPX), and will replace Jabil Circuit, Inc. (NYSE:JBL) after next Tuesday's close. Year-to-date, the shares have tacked on 34.4% to trade at $44.59, and should the stock continue this uptrend, a shift in sentiment could help propel it even higher. Short interest, for example, accounts for 10.6% of the stock's available float, and would take nearly seven sessions to cover, at average daily trading levels. Elsewhere, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.70 ranks in the 80th percentile of its annual range, meaning short-term traders are more put-skewed than usual toward Level 3 Communications, Inc.

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Analyst Update: Alibaba Group Holding Ltd, Panera Bread Co, and SolarWinds Inc

Analysts offered their two cents on BABA, PNRA, and SWI

by 10/29/2014 2:55 PM
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U.S. stocks have taken a decisive turn lower this afternoon, as Wall Street weighs the Federal Open Market Committee's (FOMC) vote to end "QE3." Among equities attracting the attention of analysts are Chinese e-commerce concern Alibaba Group Holding Ltd (NYSE:BABA), fast-casual restaurateur Panera Bread Co (NASDAQ:PNRA), and tech issue SolarWinds Inc (NYSE:SWI).

  • After touching a record high in triple-digit territory on Tuesday, BABA is down 1% at $98.67. Following the end of the Wall Street freshman's "quiet period," a slew of analysts offered their two cents on Alibaba Group Holding Ltd. While most BABA underwriters initiated coverage with a "buy" or equivalent rating, Goldman Sachs took the road less traveled, offering up a "hold" suggestion and $102 price target. Meanwhile, BABA's short-term options remain popular ahead of the firm's inaugural public earnings report, slated for Tuesday morning, as the equity's 30-day at-the-money implied volatility continues to assail new heights.

  • PNRA is down 4.8% at $162.85, as traders pan the company's downwardly revised earnings guidance (subscription required). As a result, Piper Jaffray cut its price target on the stock to $125 from $135, and reiterated an "underweight" rating. The negative note is relatively rare for Panera Bread Co, which sports 11 "strong buys," compared to five lukewarm "holds" and three "strong sell" suggestions. In the options pits, meanwhile, short-term speculators have rarely been more put-biased during the past year, as PNRA's Schaeffer's put/call open interest ratio (SOIR) of 1.75 sits just 6 percentage points from an annual high.

  • Finally, SWI is up 11.7% to $47.56, and earlier notched a new annual high of $49.11, thanks to a stronger-than-expected third-quarter earnings report. Plus, Cowen and Co upped its price target on the security to $53 from $49, and said the firm is well-positioned for growth. SolarWinds Inc could benefit from a short squeeze, too, as short interest represents more than a week's worth of pent-up buying demand, at SWI's average pace of trading. Likewise, a mass exodus of option bears could add fuel to the equity's fire; the stock's SOIR of 2.04 stands higher than 97% of all other readings from the past year.

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Stocks On the Move: Cliffs Natural Resources Inc, USANA Health Sciences, Inc., and Aerohive Networks Inc

CLF, USNA, and HIVE are moving sharply in Wednesday's trading

by 10/29/2014 1:34 PM
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The major market indexes are modestly lower ahead of this afternoon's policy announcement from the Federal Open Market Committee (FOMC). Among specific names making notable moves, though, are mining magnate Cliffs Natural Resources Inc (NYSE:CLF), nutritional supplement specialist USANA Health Sciences, Inc. (NYSE:USNA), and cloud component concern Aerohive Networks Inc (NYSE:HIVE). Here's a quick look at how CLF, USNA, and HIVE are performing on the charts so far.

  • CLF has been making some volatile moves on the charts recently, and today, the shares are 9.6% lower to trade at $10.21, and earlier, were placed on the short-sale restricted (SSR) list. Today's sell-off comes amid a mixed batch of brokerage notes, with Brean Capital downgrading the stock to "sell" from "hold," while J.P. Morgan Securities, Cowen and Company, and Clarkson Capital all upped their price targets. Year-to-date, the shares are down 61%, so it's no surprise to see sentiment tilted toward the bearish side. In the options pits, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.75 ranks in the 78th percentile of its annual range, meaning short-term speculators are more put-skewed than usual. Elsewhere, short interest soared nearly 26% during the past two reporting periods, and now accounts for a brow-raising 53.3% of Cliffs Natural Resources Inc's available float.

  • USNA, meanwhile, is soaring -- up 30.3% at $114.47, after earlier tagging a record peak of $116.20. This burst of buying power follows the company's strong third-quarter earnings showing and upwardly revised full-year profit forecast. One group that's likely smarting from today's bullish gap -- short sellers. At present, 39.4% of the stock's float is sold short, representing almost 16 sessions' worth of pent-up buying demand, given typical daily trading levels. Should the equity extend its 51.5% year-to-date lead -- and trek into uncharted territory -- a short-covering rally could help propel USANA Health Sciences, Inc. higher.

  • One day after surging nearly 19% on reports of a partnership with Apple Inc. (NASDAQ:AAPL), HIVE has plunged 14.2% to $4.94 after the company said it is donating its Wi-Fi gear to AAPL's ConnectED initiative, not providing it. The Big Board freshman has shed almost 45% since going public in late March, yet traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 89.75 calls for every put over the past 10 sessions. With 12.4% of the stock's float sold short, though, a portion of this activity could be a result of shorts hedging their bearish bets against any unexpected upside. Looking ahead, Aerohive Networks Inc will take its turn in the earnings confessional after the market closes next Wednesday, Nov. 5.

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