Schaeffer's Trading Floor Blog

Analyst Upgrades: Tesla Motors Inc (TSLA), Nokia Corporation (ADR), and Monster Beverage Corp

Analysts upwardly revised their ratings on TSLA, NOK, and MNST

by 9/22/2014 9:24 AM
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Analysts are weighing in today on electric car concern Tesla Motors Inc (NASDAQ:TSLA), telecom issue Nokia Corporation (ADR) (NYSE:NOK), and drink maker Monster Beverage Corp (NASDAQ:MNST). Here's a quick roundup of today's bullish brokerage notes on TSLA, BBY, and MNST.

  • J.P. Morgan Securities chimed in on TSLA, raising its price target to $190 from $170. However, this new target price still sits nearly 27% below the stock's current price of $259.32, meaning additional bullish brokerage notes could be in store -- especially if TSLA extends its 72.4% year-to-date gain. Tesla Motors Inc could also get a boost in the form of a short-covering rally. At present, 23.8% of the equity's float is sold short, representing more than a week's worth of pent-up buying demand.

  • NOK is pointed higher ahead of the bell, after receiving yet another price target hike. Specifically, Canaccord Genuity raised its price target to $12 from $11, and maintained a "buy" recommendation. The stock has been on the mend since hitting its most recent low of $7.30 in early July, with the shares up 18.4% to trade at $8.64, and on Friday, NOK tagged a fresh three-year peak of $8.73. Option traders think there's more room to run, and over the past 10 sessions, have bought to open 11.07 Nokia Corporation (ADR) calls for every put at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). What's more, this ratio ranks in the 82nd percentile of its annual range, meaning calls have been bought to open over puts at an accelerated clip in recent weeks.

  • In mid-August, MNST tagged a record peak of $94.93, and although the equity was last seen lingering near $89.78 -- 32.5% above its year-to-date breakeven mark -- Stifel thinks the stock is ready to resume its run toward all-time highs. Specifically, the firm raised its price target for Monster Beverage Corp to $110 from $94, and maintained a "buy" rating, echoing ISI Group, which started the security with a similar recommendation. Option players have not been as optimistic, though, and at the ISE, CBOE, and PHLX, the stock's 10-day put/call volume ratio of 1.37 ranks in the bearishly skewed 87th percentile of its annual range.

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Alibaba Group Holding Ltd (NYSE:BABA) has traded for half a day, and we don't even have options listed. What is this, early 2014?

I'm told we have to wait until a week from today. Seriously? We might actually have an idea of volatility. Not a great idea, mind you, but at least something to go on. Where's the fun in that?

I semi-kidded that we should get options before they list the stock, but really, I don't think it's a terrible idea. You can't really hedge, so I wouldn't recommend playing all that large, but it's a way to take a stab at where the stock might open. It's also a way to pick where you think the IPO should trade. That's especially valuable on an oversubscribed name like this one.

I'm not going to hold my breath on it, but I honestly feel that listing options ahead of the IPO at least provides a price discovery function.

"Time" was when you had to wait three months to trade options on a new listing. That time is long ago. Now it's a week. You can get some sense of implied volatility in a week, but not an awful lot. There's no way to know how violently the name might react to any sort of company specific news.

Alibaba is a bit unique in that it comes to market as a gigantic company that earns real money. It probably doesn't earn enough to justify its current stock price of $93.89, but that's not at all my field. It's also not likely to influence the stock price at all in the near future; you'll generally go broke trying to short hot names on value.

Twitter Inc (NYSE:TWTR) and Facebook Inc (NASDAQ:FB) are generally the go-to names as far as recent high-profile IPOs go, and the behavior of the two is fairly similar. Facebook options started trading a little over two years ago at about a 55 implied volatility. It has gone as high as the mid-70s and as low as the mid-20s, where it now resides.

Twitter volatility also started at about 55 but spiked up to 100. It's now in the low 40s. Even though it feels like TWTR listed forever ago, it didn't; it was only last November. So in another year it will likely see low 30s/high 20s vol.

Alibaba might start life with lower vol than 55, thanks to both its size and the fact that vol in the market itself is very low now. It will very likely see a vol spike or three, but over time will drift lower just like pretty much every maturing stock ever.

So, if you're of a mind to take an options position early on, my only suggestion is not to pay up for longer-term options.

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


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Analyst Update: Nokia Corporation (ADR), FireEye Inc, and Rite Aid Corporation

Analysts adjusted their ratings on NOK, FEYE, and RAD

by 9/19/2014 2:03 PM
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Analysts are weighing in today on mobile firm Nokia Corporation (ADR) (NYSE:NOK), cyber security firm FireEye Inc (NASDAQ:FEYE), and drugstore chain Rite Aid Corporation (NYSE:RAD). Here's a quick look at today's brokerage notes on NOK, FEYE, and RAD.

  • Shares of NOK were last seen trading flat at $8.63, after RBC raised its price target to $12 from $11 while maintaining its "outperform" rating. Nokia Corporation (ADR) has been solid on the charts in the past three months, outperforming the broader S&P 500 Index (SPX) by nearly 10 percentage points. Bullish traders have taken an interest in the equity lately, as NOK's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 19.61 sits only 8 percentage points from a bullishly skewed annual high, implying calls have been bought to open over puts at a quicker-than-usual pace.

  • FEYE has gained 0.18% today, last seen trading at $33.74 after Piper Jaffray raised its price target to $40 from $36. Still, FireEye Inc has struggled mightily in 2014, off 22% year-to-date. The equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 10.23 is only 8 percentage points from a 52-week high, meaning calls are being bought to open over puts at a faster-than-normal rate. However, the recent call buying could be bearish traders looking for a hedge, as close to 12% of FEYE's available float is sold short.

  • Lastly, RAD is off 1.4% today to trade at $5.34, after Guggenheim and J. P. Morgan Securities cut their price targets to $7.50 and $6.50, respectively. On the year, Rite Aid Corporation has gained a modest 5.5%. Considering three out of five covering brokerage firms are issuing "buy" or better ratings for RAD, future downgrades could send the shares lower. Lately, options traders have been betting on RAD to continue to struggle, as the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.09 ranks in the 99th annual percentile.

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Stocks On the Move: AOL, Inc., ChinaNet Online Holdings Inc, and Amazon.com, Inc.

AOL, CNET, and AMZN are moving sharply in Friday's trading

by 9/19/2014 1:08 PM
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The major market indexes are mixed at midday, after earlier notching fresh record highs. Among the equities in focus are Internet issues AOL, Inc. (NYSE:AOL), ChinaNet Online Holdings Inc (NASDAQ:CNET), and Amazon.com, Inc. (NASDAQ:AMZN), which all have (alleged) ties to either rookie standout Alibaba Group Holding Ltd (NYSE:BABA) or parent Yahoo! Inc. (NASDAQ:YHOO). Here's a quick roundup of how AOL, CNET, and AMZN are performing on the charts so far.

  • AOL soared 3.3% yesterday, after a BCG Partners analyst opined the company could make an attractive acquisition target for YHOO. Today, however, the shares of AOL, Inc. have pared most of those gains, and were last seen 2.9% lower at $42.40. The security has given up more than 9% in 2014, and has spent roughly the past six weeks battling resistance in the $44-$45 neighborhood, which acted as a speed bump in March and April. Short sellers are gambling on the stock to backpedal, as short interest ramped up 19.2% during the most recent reporting period, and now represents two weeks' worth of pent-up buying demand, at AOL's average daily trading volume.

  • CNET has skyrocketed 135% to $2.40 -- and was briefly halted -- making it the top percentage gainer on the Nasdaq. Furthermore, the stock is within striking distance of its annual high of $2.75, tagged in late February. The Chinese firm said it's in talks to provide targeted marketing services to Taobao, an online shopping site owned by BABA, and is "very excited about our new focus on digital advertising and our cooperation with" Baidu Inc (ADR) (NASDAQ:BIDU). Even before today's massive rally, the shares of ChinaNet Online Holdings Inc had outperformed the broader S&P 500 Index (SPX) by 55 percentage points during the past two months, yet short interest spiked 50% during the most recent reporting period.

  • AMZN is 1.2% higher at $329.06, enjoying a halo lift from BABA, which has been called the Amazon of China. Furthermore, the e-commerce concern scored an early price-target hike after unveiling six new devices. The equity's short-term options are in demand today, as its 30-day at-the-money implied volatility has popped 7.9% to 25.9%. Intraday options volume is running at twice the average pace, with eleventh-hour bulls buying to open September 330 and 332.50 calls, amid hopes for AMZN to surmount the strikes by tonight's close. Amazon.com, Inc. shares peaked at $332.76 in intraday action.

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Buzz Stocks: Apple Inc. (AAPL), JetBlue Airways Corporation, and The Home Depot, Inc.

Today's stocks to watch include AAPL, JBLU, and HD

by 9/19/2014 9:29 AM
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Stocks are set to continue their run higher, with futures sitting comfortably higher ahead of the bell. In company news, tech titan Apple Inc. (NASDAQ:AAPL), airline issue JetBlue Airways Corporation (NASDAQ:JBLU), and home improvement bigwig The Home Depot, Inc. (NYSE:HD) are three stocks to watch in today's trading.

  • AAPL is pointed higher this morning, with fanboys across the globe lining up to get the company's newest iPhones, for sale in 10 countries today. In fact, thousands of people lined up outside stores in Australia. On the charts, Apple Inc. shares have added roughly 27% in 2014, settling at $101.79 on Thursday. In the options arena, traders have shown a healthier-than-usual appetite for AAPL calls over puts of late, as the stock's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 2.50 -- higher than 78% of all other readings from the past year. Analysts are also optimistic, as 27 out of 33 deem AAPL worthy of a "buy" or better rating, and Cowen and Company this morning hiked its price target to $110 from $106 and offered up an "outperform" recommendation.

  • JBLU is headed for a 4.5% gain out of the gate, after the company said former British Airways exec and current JBLU president Robin Hayes will replace CEO David Barger when he retires in February. The shares of JBLU finished at $11.33 on Thursday, and boast a year-to-date gain of nearly 33%. Nevertheless, short interest accounts for 21.6% of JetBlue Airways Corporation's total available float, representing nearly seven sessions' worth of pent-up buying demand, at JBLU's average pace of trading. Should the shorts hit the exits, a short-squeeze situation could help JBLU extend its longer-term ascent.

  • HD said its recent data breach put more than 55 million cards at risk -- trumping the cyber-attack that plagued Target Corporation (NYSE:TGT) late last year. Short-term options players are pessimistically aligned toward HD, relatively speaking. The stock's Schaeffer's put/call open interest ratio (SOIR) sits at an annual peak of 2.03, indicating that near-term traders haven't been more put-heavy during the past year. The Home Depot, Inc. closed at $92.09 on Thursday.

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