Schaeffer's Trading Floor Blog
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U.S. stock futures are comfortably higher this morning, with the major equity indexes looking to extend their run to new highs. In company news, today's stocks to watch include online retailer, Inc. (NASDAQ:AMZN), cable and Internet provider Time Warner Cable Inc (NYSE:TWC), financial services firm Charles Schwab Corp (NYSE:SCHW), and firearm manufacturer Smith & Wesson Holding Corp (NASDAQ:SWHC).

  • A close look at the data suggests, Inc. (NASDAQ:AMZN) has likely sold no more than 35,000 of its Fire Phones since the device's July launch. Adding insult to injury, another report includes a slew of unfavorable comparisons for AMZN's apparently unpopular phone -- including the fact that former Smiths frontman Morrissey sold 35,000 copies of his autobiography within the first week of its release last year. (The Guardian; MarketWatch)

  • Time Warner Cable Inc (NYSE:TWC) customers experienced major outages to their cable and Internet services this morning, with reports popping up across North America and Europe. The service interruptions come just a day after TWC paid $1.1 million to settle a Federal Communications Commission (FCC) investigation into the company's improper reporting procedures for network outages. (The Wire; Reuters)

  • Charles Schwab Corp (NYSE:SCHW) suffered a significant defeat, after a Financial Industry Regulatory Authority (FINRA) panel struck down the company's $15 million arbitration case against Morgan Stanley (NYSE:MS). However, the regulators ordered MS -- which SCHW accused of "raiding" brokers from its San Francisco outpost -- to pay $72,000 in sanctions. (CNBC)

  • Sources indicate that Snapchat is close to securing a round of funding that would value the company at $10 billion. Last year, CEO Evan Spiegel turned down a bid from Facebook Inc (NASDAQ:FB) to acquire Snapchat for $3 billion. (Bloomberg)

  • Smith & Wesson Holding Corp (NASDAQ:SWHC) is down 11% in pre-market trading this morning, after the gun company drastically lowered its full-year sales guidance. SWHC also reported weaker-than-forecast revenue for its fiscal first quarter, driven by weak demand for long guns. (Business Insider)

  • In other earnings news, TiVo Inc. (NASDAQ:TIVO), Tiffany & Co. (NYSE:TIF), and Express, Inc. (NYSE:EXPR) will be in focus today after reporting their latest quarterly results. (MarketWatch)

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Analyst Upgrades: Aruba Networks, Inc., Best Buy Co Inc, and MannKind Corporation

Analysts upwardly revised their ratings on ARUN, BBY, and MNKD

by 8/27/2014 8:51 AM
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Analysts are weighing in today on network access firm Aruba Networks, Inc. (NASDAQ:ARUN), electronics retailer Best Buy Co Inc (NYSE:BBY), and biopharmaceutical issue MannKind Corporation (NASDAQ:MNKD). Here's a quick roundup of today's bullish brokerage notes on ARUN, BBY, and MNKD.

  • Last night, ARUN posted a fiscal fourth-quarter earnings beat, raised its profit outlook, and announced workforce reduction plans to optimize the company's administrative costs. Subsequently, the shares were met with price-target hikes at no fewer than seven brokerage firms, and upgrades to "buy" from "neutral" at UBS and to "neutral" from "underweight" at J.P. Morgan Securities. In the wake of this positive attention, Aruba Networks, Inc. -- which closed yesterday at $20.24 -- is sitting about 8% higher ahead of the bell. This is bad news for short sellers. Currently, 11.9% of ARUN's float is sold short, which would take nearly eight sessions to buy back, at the stock's average daily trading pace.

  • BBY saw its price target upwardly revised to $37 from $35 at J.P. Morgan Securities and to $36 from $34 at RBC, despite the retailer's mixed turn in the earnings confessional Tuesday morning. On the charts, the stock has been in rally mode since hitting an annual low of $22.15 in late January, up 34.5% to trade at $29.80. Nevertheless, short interest on Best Buy Co Inc represents 8.5% of its float, which would take more than a week to cover, at the stock's typical trading levels. In other words, should the shares rise in the wake of the aforementioned brokerage notes, there's plenty of sideline cash available to fuel additional gains.

  • Finally, MNKD was initiated with a "buy" rating and $10 price target at Jefferies. This seems appropriate, given the stock's more than 41% year-to-date gain to rest at $7.34. More recently, the shares could be found bouncing from their 200-day moving average, following a pullback from a nearly five-year high of $11.48 in late June. As with ARUN and BBY, MannKind Corporation has been a popular target among short sellers. Specifically, 30% of the equity's float is sold short, which represents close to two weeks' worth of pent-up buying demand, at the stock's average daily trading volume.

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Options Check-Up: Tesla Motors Inc (TSLA), Groupon Inc, and DryShips Inc.

Analyzing recent option activity on TSLA, GRPN, and DRYS

by 8/27/2014 7:42 AM
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Among the stocks attracting attention from options traders lately are electric car maker Tesla Motors Inc (NASDAQ:TSLA), online coupon concern Groupon Inc (NASDAQ:GRPN), and ocean transportation issue DryShips Inc. (NASDAQ:DRYS). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on TSLA, GRPN, and DRYS.

  • TSLA has rallied 74% this year -- and based on Tuesday's close at $261.74, the stock is sitting just 2% away from its Aug. 18 record peak of $267.26. Against this backdrop, option players have been initiating long calls in a flurry, and at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TSLA's 50-day call/put volume ratio of 1.46 ranks in the bullishly skewed 80th percentile of its annual range. With nearly 27% of the stock's float sold short, it's possible some of this recent call buying is a result of short sellers hedging against any additional upside. Regardless, now is a prime time to scoop up front-month Tesla Motors Inc options at a relative bargain, as the equity's Schaeffer's Volatility Index (SVI) of 33% ranks lower than 98% of similar readings taken in the past year.

  • GRPN tacked on 2% to close the session at $6.4, with the stock breaking north of its 50-day moving average for the first time in three weeks. Year-to-date, though, the shares are still staring at a roughly 45% deficit. In spite of this dismal technical showing, the stock has racked up a 10-day call/put volume ratio of 5.77 on the ISE, CBOE, and PHLX -- which ranks in the 78th annual percentile. As with TSLA, short sellers could be using these long calls to guard against an unexpected rally. At present, 20.7% of Groupon Inc's float is sold short. Meanwhile, front-month GRPN options are pricing in extremely low volatility expectations at the moment -- the equity's SVI of 38% ranks below all comparable readings taken in the last 12 months.

  • At the ISE, CBOE, and PHLX, option traders have bought to open nearly 23 DRYS calls for each put over the past two weeks. What's more, the resultant call/put volume ratio of 22.75 ranks just 10 percentage points from an annual bullish peak. In the front-month series, specifically, call players have targeted the overhead September 3.50 and 4 strikes, where a collective 25,718 contracts are currently in residence. Those purchasing these short-term options are doing so on the cheap, relatively speaking, as DryShips Inc.'s SVI of 45% ranks lower than 93% of similar readings taken over the past 52 weeks. On Tuesday, DRYS closed the session at $3.32 -- 29.4% below its year-to-date breakeven line.

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Analyst Update: The Gap Inc., Las Vegas Sands Corp., and Qihoo 360 Technology Co Ltd

Analysts adjusted their ratings on GPS, LVS, and QIHU

by 8/26/2014 2:05 PM
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Analysts are weighing in today on retail chain The Gap Inc. (NYSE:GPS), casino operator Las Vegas Sands Corp. (NYSE:LVS), and Chinese anti-virus expert Qihoo 360 Technology Co Ltd (NYSE:QIHU). Here's a quick look at today's brokerage notes on GPS, LVS, and QIHU.

  • GPS reached a new annual high of $46.61 earlier after receiving a price-target hike to $48 from $41 at Cowen. At last check, the shares were just off that mark, up 1.7% at $46.47. All in all, it's been a strong year for The Gap Inc., which has advanced nearly 19% in 2014. Nevertheless, the brokerage bunch is slanted in a bearish direction, with 14 tepid "hold" recommendations outweighing 10 "strong buy" endorsements; also, the security's consensus 12-month price target is just $45.80. If GPS continues to perform on the charts, however, the equity could be met with additional bullish brokerage notes.

  • By contrast, LVS is a long-term technical laggard, down nearly 14% this year to rest at $67.96. What's more, the shares are currently being pressured lower by their descending 20-day moving average, and are facing resistance at the overhead $70 level. Morgan Stanley may have taken note of these factors, as the firm slashed Las Vegas Sands Corp.'s price target to $76 from $83 this morning. What's more, the brokerage firm reduced its 2014 and 2015 Macau gaming revenue growth targets. Additional bearish notes could be on the way, too. Twelve out of 14 covering analysts have given LVS a "strong buy" rating (compared to just two "holds" and not a single "sell"), and the equity's average 12-month price target sits at a lofty $84.90 -- territory not explored since mid-March.

  • QIHU is struggling again this afternoon -- off 2.4% to trade at $91.59 -- following a reduction to "neutral" from "outperform" at Credit Suisse. Longer term, however, the shares remain up about 12% year-to-date. Today's bearish brokerage note is relatively rare for Qihoo 360 Technology Co Ltd, as 90% of the analysts following the equity have doled out a "strong buy" opinion.

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Stocks On the Move: Mobileye NV, Kandi Technologies Group Inc, and Trina Solar Limited (ADR)

MBLY, KNDI, and TSL are moving sharply in Tuesday's trading

by 8/26/2014 11:01 AM
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U.S. stocks are solidly higher this morning, thanks to another dose of big merger news -- though a mixed batch of economic data is keeping the bulls in check. Among the names making notable moves are Wall Street newcomer Mobileye NV (NYSE:MBLY), electrical vehicle issue Kandi Technologies Group Inc (NASDAQ:KNDI), and alternative energy name Trina Solar Limited (ADR) (NYSE:TSL). Here's a quick look at how MBLY, KNDI, and TSL are faring on the charts today.

  • With the stock's post-IPO quiet period over, MBLY was absolutely bombarded today by a wave of bullish brokerage notes. No fewer than six brokerage firms started the equity at "buy," "outperform," or "overweight," with Morgan Stanley going so far as to call MBLY its new top pick. (Baird, meanwhile, issued a lukewarm "neutral" rating.) Following this flood of endorsements, shares of Mobileye NV have surged 4.8% to trade at $40.03. The stock is now within striking distance of its all-time peak of $41.50, which was set Aug. 4 -- just one session after its public trading debut.

  • KNDI is up 6.9% to $19.52, bouncing back from yesterday's 5.2% slump. Despite the day-to-day volatility, shares of Kandi Technologies Group Inc now boast a bullish year-to-date return of 65.6%. Short sellers aren't buying into KNDI's price action, though, with short interest rising 6.4% over the past two reporting periods -- and now accounting for 23.6% of the equity's float. Elsewhere, KNDI remains a prime target for options traders, as the stock's Schaeffer's Volatility Scorecard (SVS) stands at a towering 91. This high reading indicates the shares have tended to make more significant moves over the past year than what the options market has priced in, creating some attractive opportunities for premium buyers.

  • TSL has tumbled 7.3% to trade at $12.39, pressured by a softer-than-forecast second-quarter revenue number. Today's bearish gap has left TSL back on the south side of the $13 level, which could now resume its previous role as resistance. In the wake of the company's disappointing quarterly report, Trina Solar Limited (ADR) could be vulnerable to downgrades. Among the eight brokerage firms following TSL, no fewer than five maintain a "strong buy" rating.

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