Schaeffer's Trading Floor Blog

Analyst Upgrades: Ford Motor Company, Baidu Inc (ADR), and Starbucks Corporation

Analysts upwardly revised their ratings on F, BIDU, and SBUX

by 7/25/2014 8:55 AM
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Analysts are weighing in today on automaker Ford Motor Company (NYSE:F), Chinese search engine Baidu Inc (ADR) (NASDAQ:BIDU), and coffee giant Starbucks Corporation (NASDAQ:SBUX). Here's a quick roundup of today's bullish brokerage notes.

  • F touched a three-year high of $18.12 yesterday, and settled at $17.84, after the firm reported stronger-than-expected earnings. The shares are looking to extend their upward momentum this morning, thanks to a trio of upbeat analyst notes. J.P. Morgan Securities hiked its price target to $21 from $20, RBC lifted its price target to $19 from $18, and Buckingham boosted its price target by $2 to $14. Most analysts are already in the bullish camp when it comes to Ford Motor Company, as the stock boasts eight "buy" or better endorsements, compared to six "holds" and not a single "sell."

  • BIDU -- which notched a record high of $205.50 before settling at $204.27 on Thursday -- is headed nearly 8% higher out of the gate. The company last night reported much stronger-than-anticipated quarterly figures, and is set to continue its string of solid earnings reactions. Analysts this morning are upwardly revising their opinions on Baidu Inc (ADR) shares, including Jefferies and Pacific Crest, which each upped their price targets to $260.

  • Finally, SBUX also unveiled stronger-than-expected quarterly earnings and revenue, and projected fiscal fourth-quarter earnings in line with estimates. As a result, Jefferies, J.P. Morgan Securities, and Buckingham lifted their price targets on SBUX to $88, $85, and $96, respectively. The shares settled at $80.45 -- a year-to-date closing high -- on Thursday, but despite the earnings beat are poised to open more than 3% lower. Perhaps the bulls' club was already crowded; Starbucks Corporation boasts 18 "buy" or better ratings, compared to four "holds" and not one "sell."

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The Great Herbalife (HLF) Debate, Continued

Tuesday's HLF rally was more notable than most of what we've seen this earnings season

by 7/25/2014 7:41 AM
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Perhaps in searching for big earnings reactions in high-profile names, I looked under the wrong rock. The biggest high-profile mover on expected news this week didn't even report numbers. Actually, the company didn't even report news. I'm referring, of course, to Herbalife Ltd. (NYSE:HLF).

They sell nutritional supplements. Or something like that. I'm not sure anyone follows the actual company anymore. It's become more just the venue for the Carl Icahn-Bill Ackman Battle Royale that allows everyone to pick and bet on a side.

This week was Ackman's turn to make news. He was all set to reveal his smoking gun about HLF's pyramid scheme. Except it went about as well as Geraldo opening up Al Capone's secret vault on live TV.

Here's a look at the stock over the last two weeks. It lifted 25% on Tuesday, way beyond any sort of options bid-up.

Herbalife Ltd. (HLF) Daily Chart Since Early July 2014

Actually, as you can see on the lower lines of the graph, there wasn't all that much options bid-up. HLF has averaged about a high 50s implied volatility in 2014. It traded a bit under that over the last few months, then ticked up modestly in July, but really just back to long-term averages.

And then on Monday, the stock dipped 10% and volatility started to perk up. Hindsight tells us if you went long HLF gamma last Friday, you made a mint. Should we have seen it coming?

Well, that's really hard to say. I'm sure everyone thought Ackman had more "evidence" supporting his case. No one forced him to make a high-profile presentation, so logic says why do it without major goods.

An objective observer a week ago saw a stock that hadn't moved all that much since February. Ten-day realized volatility in HLF had hovered in the 20s and below since April. So options volatility in the 40s and 50s represented a bit of a premium already. The lift into expected news seemed priced about right.

Small biotech probably offers us the best parallel to the options action here. Think of a one-product stock awaiting FDA approval on something. The stock itself may not move much into the announcement, but the options will price in a future gap somewhere. HLF just got de facto "approved."

What about now? Well, the "news" is out. I ignore this story at times when financial TV isn't going 24/7 Herbalife, so I can't tell you when the next presentation may arise. Earnings are due next week, but I'm not sure that's going to mean much to all the hot money in here. It's more about whether you believe the numbers are real or not. So my guess is, now's not the time to pay up for anything.

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


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Analyst Update: Amazon.com, Inc., Akamai Technologies, Inc., and Freeport-McMoRan Inc

Analysts offered their opinions on AMZN, AKAM, and FCX

by 7/24/2014 2:15 PM
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U.S. stocks are flirting with breakeven at midday, as investors weigh lackluster housing data against an eight-year low in jobless claims. Meanwhile, among the equities in focus are online marketplace Amazon.com, Inc. (NASDAQ:AMZN), cloud concern Akamai Technologies, Inc. (NASDAQ:AKAM), and mining issue Freeport-McMoRan Inc (NYSE:FCX), which have all attracted attention on Wall Street.

  • AMZN -- which will report second-quarter earnings in just a few hours -- was last seen 0.5% higher at $359.75. In the meantime, it seems everyone has an opinion on Amazon's new (and first) smartphone, the Fire. While USA Today's Edward Baig called the phone a "strong first effort," and said he expects Fire to "fire up the smartphone market," Brier Dudley at The Seattle Times admits that the Fire debut is "impressive," but "the price [of $650 without a contract] is a bit high for a device designed to help you buy more stuff from Amazon." Ahead of earnings, the options board is pricing in a roughly 6% move for the stock, according to Schaeffer's contributor Adam Warner. Following its last two turns in the earnings confessional, Amazon.com, Inc. shares dropped 10.9% and 13.7%, respectively, in the subsequent three days.

  • AKAM has added 1.8% to $59.55, after Macquarie upgraded the stock to "outperform" this morning. The company is slated to report second-quarter earnings after the close next Wednesday, July 30, and most analysts are already in the bullish corner. In fact, Akamai Technologies, Inc. boasts 14 "strong buys," compared to four "holds" and not a single "sell." The stock has performed well in 2014, up 26.2%, and has averaged a one-week post-earnings gain of 7.1% over the past eight quarters.

  • Finally, FCX is down 2.3% at $37.66. The firm reported stronger-than-expected second-quarter revenue yesterday morning, and is reportedly on the verge of ending a months-long standoff in Indonesia and resuming copper exports. Accordingly, Jefferies and Credit Suisse lifted their price targets on the stock to $50 and $45, respectively. BofA-Merrill Lynch, on the other hand, downgraded FCX to "neutral" from "buy." Freeport-McMoRan Inc shares are now struggling to stay in the green for the year, and are in danger of ending beneath their 20-day moving average for the first time since mid-June.

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Stocks on the Move: SodaStream International Ltd, Facebook Inc (FB), and D.R. Horton, Inc.

SODA, FB, and DHI are moving sharply in Thursday's trading

by 7/24/2014 1:18 PM
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Markets are little changed this afternoon -- although the S&P 500 Index (SPX) managed to notch a fresh record intraday peak earlier -- as traders digest the latest round of earnings reports and economic data. Among specific names making notable moves are at-home beverage issue SodaStream International Ltd (NASDAQ:SODA), social networking site Facebook Inc (NASDAQ:FB), and homebuilder D.R. Horton, Inc. (NYSE:DHI). Here's a quick roundup of how this trio of names is performing on the charts so far.

  • SODA has soared roughly 15% today to trade at $33.21, as buyout buzz builds on the Israel-based company. Today's rally marks a change of pace for the stock, which has shed 33% year-to-date. Given the equity's longer-term technical troubles, it's no surprise to see sentiment tilted toward the bearish side. Specifically, 90% of covering analysts maintain a "hold" or "strong sell" suggestion toward SodaStream International Ltd, and short interest accounts for 29.8% of the stock's available float.

  • FB did not disappoint in the earnings confessional last night, with the company handily topping both top- and bottom-line estimates in its second quarter. The news was met with a swarm of bullish brokerage notes, sending the shares soaring to a new record peak of $76.74 right out of the gate. More recently, the equity was enjoying a 6.3% lead to linger near $75.80. More upbeat analyst notes may be in the future for Facebook Inc -- which could create a fresh wave of buying power -- as the consensus 12-month price target of $78.09 represents a slim 3% premium to present trading levels.

  • DHI, on the other hand, was hit with a double-whammy of dismal fiscal third-quarter earnings results and a lower-than-expected reading on new home sales in June. Against this backdrop, shares of D.R. Horton, Inc. are off 10% at $22.32 -- testing support at their year-to-date breakeven mark. Today's sell-off has apparently prompted one option player to roll her bullish bet down and out, by selling to close her front-month August 25 calls and using the proceeds to buy to open DHI's September 24 calls.

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Earnings on Deck: Baidu Inc (ADR), Pandora Media Inc, and Visa Inc

Taking a closer look at BIDU, P, and V ahead of their earnings results

by 7/24/2014 12:12 PM
Stocks quoted in this article:

It's been quite a week on the earnings front, with big names such as Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) reporting. Tonight, Wall Street will get the latest quarterly updates from Chinese Internet issue Baidu Inc (ADR) (NASDAQ:BIDU), streaming radio concern Pandora Media Inc (NYSE:P), and credit card company Visa Inc (NYSE:V). Here's a quick look at this trio of names as earnings approach.

  • BIDU is in rally mode ahead of its second-quarter earnings report, thanks to a price-target hike to $245 from $215 at Citigroup this morning. At last check, the stock was up 2.6% at $205.22, and earlier hit a record peak of $205.50. If past is prologue, the stock could be poised to extend these gains through week's end. Specifically, over the past six quarters, Baidu Inc (ADR) has gone on to average a single-session post-earnings gain of 3.5%. Option traders are active ahead of tonight's scheduled event, with overall volume trading at roughly two times the average intraday amount. What's more, nine of the 10 most active BIDU options expire at tomorrow's close.

  • Although P has matched or exceeded analysts' bottom-line projections in each of the past eight quarters, the stock has shed an average of 3.9% in the subsequent session. Another poorly received earnings report could prompt the brokerage bunch to re-evaluate their bullish ratings for P, which could create additional headwinds down the road. At present, 73% of covering analysts maintain a "buy" or better rating toward the equity, and the consensus 12-month price target of $34.11 stands at a steep 22% premium to Pandora Media Inc's current perch at $27.95.

  • For V's fiscal third quarter, Wall Street is calling for a per-share profit of $2.10 -- a 22-cent improvement over the company's year-ago results. Over the past eight quarters, the blue chip has turned in a strong showing on the earnings stage, matching or besting consensus profit estimates each time. As such, the stock has averaged a single-session post-earnings advance of 1%. Although V is trading at $223.15 -- just above its year-to-date breakeven mark -- sentiment among the brokerage bunch has tended toward the bullish side. Roughly 83% of analysts weighing in on Visa Inc have levied "buy" or "strong buy" recommendations toward the stock, and the consensus 12-month price target sits in uncharted territory. Elsewhere on the fundamental front, V earlier announced its Visa Digital Solutions suite to help facilitate secure payments across a wide field of web-connected devices.

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