Schaeffer's Trading Floor Blog

Earnings Preview: Ambarella, Inc., AutoZone, Inc., and Best Buy Co., Inc.

Analyzing recent option activity on Ambarella Inc (AMBA), AutoZone, Inc. (AZO), and Best Buy Co Inc (BBY)

by 3/2/2015 2:11 PM
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Among the stocks gearing up to report earnings tomorrow are semiconductor issue Ambarella Inc (NASDAQ:AMBA), car parts retailer AutoZone, Inc. (NYSE:AZO), and home electronics retailer Best Buy Co Inc (NYSE:BBY). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on AMBA, AZO, and BBY.

  • AMBA, which will release its fourth-quarter earnings report Tuesday night, has been a technical outperformer, with the shares up a staggering 184.5% -- including a 7.1% gain to $61.46 today-- since hitting an annual low of $21.60 on May 9. Accordingly, call activity is popular in Ambarella Inc's options pits, as its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.52 sits higher than four-fifths of all similar readings taken over the past year. Meanwhile, in the session following its last seven earnings reports, the shares of AMBA have gained an average of 1.4%. Traders are paying historically fair prices for their near-term bets on the stock, as its Schaeffer's Volatility Index (SVI) of 60% sits in the 46th percentile of all similar readings taken over the past year.

  • AZO has also been on a hot streak, with the shares advancing 31% from their Oct. 15 yearly low of $491.93 to hit $644.48. In fact, the equity notched an all-time best of $651.95 on Friday. In AutoZone, Inc.'s options pits, bullish sentiment is prevalent ahead of tomorrow morning's fiscal second-quarter earnings release. Specifically, the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.28 sits in the 80th percentile of its annual range. Traders hoping for a positive post-earnings move from AZO have history on their side:- in the session following its last six earnings reports, the stock has added an average of 1.7%, including a 4.3% gain this past December. Historically speaking, short-term speculators are paying expensive prices for their bets on AZO, as its SVI of 22% sits in the 80th percentile of all similar readings from the past year.

  • The shares of BBY have fallen recently, with the stock down about 1% year-to-date to hit $38.58, despite a 1.3% gain today. However, calls are fairly prominent in the options pits, as Best Buy Co Inc's 50-day ISE/CBOE/PHLX call/put volume ratio of 1.91 sits in the 61st percentile of all similar readings taken annually. The company, which will report fourth-quarter earnings tomorrow morning, has not performed well, on average, in the session following its last five earnings reports. Drilling down, the shares have only enjoyed a positive post-earnings trading session twice out of the last five times, shedding an average of about 1.7%. Near-term options for the security are available for below-average prices, as its SVI of 42% sits in the 30th percentile of its annual range.

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Analyst Update: Apple Inc., Navient Corporation, and OHR Pharmaceutical Inc

Analysts adjusted their ratings on Apple Inc. (AAPL), Navient Corp (NAVI), and OHR Pharmaceutical Inc (OHRP)

by 3/2/2015 11:38 AM
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Analysts are weighing in today on electronics maker Apple Inc. (NASDAQ:AAPL), educational loan concern Navient Corp (NASDAQ:NAVI), and pharmaceutical firm OHR Pharmaceutical Inc (NASDAQ:OHRP). Here's a quick look at today's brokerage notes on AAPL, NAVI, and OHRP.

  • The first week of March is already filled with news for AAPL, which is grappling with the unveiling of main competitor Samsung Electronics' latest smartphone, while heading to court over a $415 million settlement related to employee poaching. What's more, rumors that the company could be unveiling its new smartwatch as early as next week are picking up. Reacting to the news was Morgan Stanley, which raised its price target to $160 from $133 while underscoring an "overweight" rating, prompting the shares to add about 0.9% to reach $129.62. On the charts, Apple Inc. has added over 17% year-to-date, and call buying is popular in the options pits. Specifically, AAPL's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.42 sits in the 63rd percentile of its annual range.

  • This morning, NAVI was placed on the short-sale restricted list, after Barclays and Compass Point lowered their ratings on the security to "equal weight" and "neutral," respectively, from "overweight" and "buy." In response, the shares are down about 10.5% today to hit $19.17, adding up to an 11.3% year-to-date loss. Despite Navient Corp's technical woes, the brokerage bunch is firmly optimistic on the stock. All five covering analysts rate the security a "buy" or better, with four of them doling out lofty "strong buy" opinions.

  • Cowen and Company initiated coverage on OHRP with a price target of $25 and an "outperform" rating, following an encouraging mid-stage study of the company's squalamine eye drops. The price target represents a lofty 150.8% premium to the shares' current perch of $9.97. Today, the shares are up nearly 28.9%, adding up to a 18.7% year-to-date gain. Accordingly, call activity has been prominent in the stock's options pits, as OHR Pharmaceutical Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.23 sits in the 15th percentile of all similar readings taken over the past year.


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Buzz Stocks: Aruba Networks, Inc., NXP Semiconductors N.V., and Visa Inc.

Today's stocks to watch in the news include Aruba Networks, Inc. (ARUN), NXP Semiconductors NV (NXPI), and Visa Inc (V)

by 3/2/2015 9:42 AM
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U.S. stocks are higher in early trading following China's weekend rate cut -- and ahead of a number of domestic economic reports. In company news, today's stocks to watch include network access specialist Aruba Networks, Inc. (NASDAQ:ARUN), chipmaker NXP Semiconductors NV (NASDAQ:NXPI), and credit card titan Visa Inc (NYSE:V).

  • ARUN will be purchased by Hewlett-Packard Company (NYSE:HPQ) for approximately $2.7 billion in cash. "By combining Aruba's world-class wireless mobility solutions with HP's leading switching portfolio, HP will offer the simplest, most secure networking solutions to help enterprises easily deploy next-generation mobile networks," said HPQ CEO Meg Whitman in a statement. Out of the gate, shares of Aruba Networks, Inc. are down 1.6% at $24.41, as Friday's close at $24.81 stands at a modest premium to HPQ's offer price of $24.67 per share. The stock reached an annual high of $24.97 on Friday, thanks to the since-confirmed rumors of a potential deal with HPQ. Elsewhere, short sellers have zeroed in on ARUN in recent weeks, with short interest jumping 9.4% during the most recent reporting period. Roughly one-tenth of the equity's float is now sold short, which would take close to a week to buy back, at its average daily trading volume.

  • NXPI has agreed to an $11.8 billion cash-and-stock deal to acquire Freescale Semiconductor Ltd (NYSE:FSL). NXP Semiconductors NV will also take on FSL's debt, bringing the total purchase price to roughly $16.7 billion. The news has NXPI shares up 14.3% this morning at $97, and fresh off a record high of $97.24. On the sentiment front, the brokerage crowd has taken a shine to NXPI, with 11 out of 13 covering analysts handing out "buy" recommendations -- compared to two "holds" and not a single "sell."

  • Finally, V has agreed to become Costco Wholesale Corporation's (NASDAQ:COST) next credit card provider, replacing American Express Company (NYSE:AXP). The exclusive deal will take effect April 1, 2016. Visa Inc shares have tacked on 1.3% this morning to trade at $274.86, bringing their year-over-year lead to 24.1%. In fact, the stock earlier hit a record high of $277.49. As V's muscled higher, the brokerage bunch has come to tilt in a decisively bullish direction. Specifically, 80% of covering analysts rate the shares a "buy" or better.

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Analyst Upgrades: Cardinal Health, Inc., Whole Foods Market, Inc., and Cirrus Logic, Inc.

Analysts upwardly revised their ratings on Cardinal Health Inc (CAH), Whole Foods Market, Inc. (WFM), and Cirrus Logic, Inc. (CRUS)

by 3/2/2015 9:38 AM
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Analysts are weighing in today on healthcare services provider Cardinal Health Inc (NYSE:CAH), healthy grocer Whole Foods Market, Inc. (NASDAQ:WFM), and Apple Inc. (NASDAQ:AAPL) supplier Cirrus Logic, Inc. (NASDAQ:CRUS). Here's a quick roundup of today's bullish brokerage notes on CAH, WFM, and CRUS.

  • CAH is in the spotlight this morning, after the firm agreed to buy Johnson & Johnson's (NYSE:JNJ) heart-product unit (subscription required) for $1.94 billion in cash. In addition, Mizuho Securities lifted its price target on Cardinal Health Inc to $103 from $93 -- in uncharted territory for CAH -- and reiterated its "buy" endorsement. On the charts, CAH touched a record high of $89.43 just last week, and has added 1.4% to flirt with $89.20 today. Most analysts are already on the bullish bandwagon, as the security boasts 11 "buy" or better ratings, compared to three lukewarm "holds" and not a single "sell." Still, more price-target hikes could ensue, as the consensus 12-month price target of $92.62 is just a stone's throw from CAH's current perch.

  • WFM earned a trio of upbeat analyst notes this morning, sending the shares 0.3% higher to $56.63. J.P. Morgan Securities, BMO, and SunTrust Robinson all lifted their price targets, to $56, $58, and $67, respectively. While the latter offered up a "buy" rating, the former underscored the equivalent of "neutral" ratings. The shares of Whole Foods Market, Inc. have added 12% so far in 2015, and touched a fresh annual high of $57.57 on Feb. 19. However, analysts are split on WFM, with 12 doling out "hold" or worse ratings, compared to 11 "buy" or better endorsements.

  • Finally, Barclays hiked its price target on CRUS to $35, and reiterated an "overweight" rating. The equity has been on fire in 2015, gaining 31.1%, and touched a two-year peak of $30.92 out of the gate today. More price-target boosts could be in store, should CRUS extend its upward momentum. The average 12-month price target of $33.75 sits just 12.1% north of the stock's current perch at $30.11.

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Analyst Downgrades: Isis Pharmaceuticals, Inc., Lumber Liquidators Holdings, Inc., and Seadrill Limited

Analysts downwardly revised their ratings on ISIS Pharmaceuticals, Inc. (ISIS), Lumber Liquidators Holdings Inc (LL), and Seadrill Ltd (SDRL)

by 3/2/2015 9:38 AM
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Analysts are weighing in today on drug developer ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS), hardwood flooring retailer Lumber Liquidators Holdings Inc (NYSE:LL), and drilling firm Seadrill Ltd (NYSE:SDRL). Here's a quick roundup of today's bearish brokerage notes on ISIS, LL, and SDRL.

  • While ISIS announced it has received a $15 million milestone payment from GlaxoSmithKline plc (ADR) (NYSE:GSK) after making progress on a study of its familial amyloid polyneuropathy drug, the equity is still lower out of the gate, after a downgrade at Stifel. Specifically, the shares are down 2% at $67.01, after the brokerage firm cut its rating to "hold" from "buy." Before today, ISIS Pharmaceuticals, Inc. had been strong in 2015, adding 11%. Option traders probably don't mind today's decline, though, as put buying has been in fashion in the equity's options pits. For example, the security's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44 sits higher than 81% of all such readings from the past year. Said differently, puts have been bought to open over calls at a faster-than-normal rate in the past two weeks.

  • LL is having a rough morning, to say the least, losing 26% to hit $51.86, after "60 Minutes" released a report saying the company sold flooding with formaldehyde levels above California's health and safety standards. The shares were also hit with a downgrade at Morgan Stanley, which cut them to "equal weight" from "overweight." Today's downward move at Lumber Liquidators Holdings Inc is just more of the same, as the stock has dropped nearly 52% year-over-year. These struggles have opened the door to short sellers. Currently, roughly 30% of LL's float is sold short, representing almost three weeks' worth of trading, at typical daily volumes.

  • Since Friday, SDRL has seen two brokerage firms cut their price targets. Yesterday, Evercore ISI reduced its price target on the shares to $10 from $12, and this morning Global Hunter dropped its price target to $13 from $14. The former firm reiterated a "sell" rating, and the latter underscored an "accumulate" recommendation. As such, Seadrill Ltd is off 2.3% this morning at $11.27, bringing its 52-week loss to nearly 70%. It's not a surprise, then, to see short-term speculators have taken a put-skewed approach. According to SDRL's Schaeffer's put/call open interest ratio (SOIR) of 1.24 -- ranking in the 75th annual percentile -- near-term option traders have only been more put-focused 25% of the time in the past year.

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