Schaeffer's Trading Floor Blog

Analyst Update: BlackBerry Limited, Cliffs Natural Resources Inc., and Verizon Communications Inc.

Analysts adjusted their ratings on BlackBerry Ltd (BBRY), Cliffs Natural Resources Inc (CLF), and Verizon Communications Inc. (VZ)

by 1/21/2015 12:11 PM
Stocks quoted in this article:

Analysts are weighing in today on smartphone maker BlackBerry Ltd (NASDAQ:BBRY), commodities concern Cliffs Natural Resources Inc (NYSE:CLF), and telecommunications giant Verizon Communications Inc. (NYSE:VZ). Here's a quick look at today's brokerage notes on BBRY, CLF, and VZ.

  • Despite offering a bearish view on BBRY's fourth-quarter revenue outlook, RBC spoke positively about the stock's future, saying it "may recognize better device units" and "higher software bookings" beyond this quarter. Today, the equity is 1.4% higher at $10.18, but remains 5.6% lower year-over-year. In recent months, BlackBerry Ltd has been trending higher atop support at its 200-day moving average. If BBRY does gain additional ground on the charts, there's plenty of cash on the sideline to provide a boost. Nearly one-quarter of the security's float is sold short, and would take over eight sessions to buy back, at BBRY's average daily pace of trading.

  • CLF is up 1.3% at $8.57, after Brean Capital raised its price target to $6 from $5, but kept its "sell" rating. The security has struggled on the charts, dropping close to 60% in the last 52 weeks. Still, speculators have been staying upbeat. Cliffs Natural Resources Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.36 ranks in the 72nd percentile of its annual range, showing a healthier-than-normal appetite for calls over a puts. Yet, with over half of CLF's float sold short, the recent surge in call buying could be the work of short sellers hedging their bets.

  • After being cut to "equal weight" from "overweight" at Barclays, VZ is down 0.4% at $47.98. In the past three months, Verizon Communications Inc. has underperformed the S&P 500 Index (SPX), and option bears have stepped up in response. At the ISE, CBOE, and PHLX, the equity's 10-day put/call volume ratio of 0.80 ranks in its 80th annual percentile. Conversely, the brokerage bunch remains mostly bullish, with 75% of analysts rating the security a "buy" or better. VZ will present fourth-quarter earnings before the bell tomorrow.

permanent link

Analyst Upgrades: Netflix, Inc., Cree, Inc., and Salix Pharmaceuticals, Ltd.

Analysts upwardly revised their ratings on Netflix, Inc. (NFLX), Cree, Inc. (CREE), and Salix Pharmaceuticals, Ltd. (SLXP)

by 1/21/2015 9:30 AM
Stocks quoted in this article:

Analysts are weighing in today on streaming content provider Netflix, Inc. (NASDAQ:NFLX), LED specialist Cree, Inc. (NASDAQ:CREE), and drugmaker Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP). Here's a quick roundup of today's bullish brokerage notes on NFLX, CREE, and SLXP.

  • NFLX is up almost 19% ahead of the bell, after last night's earnings beat prompted a rush of bullish brokerage attention. Specifically, no fewer than 13 analysts upped their price targets -- the most ambitious of which came from J.P. Morgan Securities, which raised its target to $511 from $450, and reiterated an "overweight" rating. This is good news for recent options traders, who have displayed optimism over the last couple of weeks. On the technical front, a sharp move higher would represent a break from Netflix, Inc.'s prevailing technical pattern, as the shares have advanced just 2.1% year-to-date to trade at $348.80.

  • CREE also topped the Street's expectations during its trip to the earnings confessional last night, and is pointed 4.4% higher this morning. Adding fuel to the equity's fire is a pair of price-target hikes from Susquehanna (to $31) and J.P. Morgan Securities (to $39). Technically speaking, Cree, Inc. has been a long-term laggard, shedding 48.5% of its value year-over-year to rest at $32.34. Not surprisingly, bearish betting has been popular on the stock. Nearly 18% of CREE's float is sold short -- which would take more than two weeks to cover, at typical daily trading levels -- and the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.10 ranks in the 82nd percentile of its annual range.

  • Mizuho boosted its price target on SLXP to $124 from $103 -- and reiterated its "neutral" rating -- after news that the pharmaceutical firm is allegedly exploring strategic options, including a possible sale. On the charts, the shares have performed admirably, tacking on 25.8% over the last year to trade at $125.83 -- including a 4.7% surge yesterday following the aforementioned report. Despite this technical tenacity, 18% of Salix Pharmaceuticals, Ltd.'s float is sold short, which represents nearly seven days' worth of pent-up buying power, at typical daily trading volumes. If the stock can muscle higher, a short-covering rally could result.

permanent link

Buzz Stocks: Microsoft Corporation, Insperity, Inc., and Qualcomm

Today's stocks to watch in the news include Microsoft Corporation (MSFT), Insperity Inc (NSP), and QUALCOMM, Inc. (QCOM)

by 1/21/2015 9:25 AM
Stocks quoted in this article:

U.S. stocks are pointed lower in electronic trading, hurt by discouraging comments from one European Central Bank official. In company news, today's stocks to watch include blue chip Microsoft Corporation (NASDAQ:MSFT), HR solutions provider Insperity Inc (NYSE:NSP), and digital communications expert QUALCOMM, Inc. (NASDAQ:QCOM).

  • MSFT will unveil its Windows 10 operating system today at an event held at its home office. One of the biggest changes anticipated is a shift away from the company's Internet Explorer browser to a new one named Spartan -- expected to resemble Google Inc's (NASDAQ:GOOGL) Chrome. Moving to the charts, Microsoft Corporation is a long-term outperformer, advancing more than 28% year-over-year to trade at $46.39. However, options traders have been relatively bearish of late, based on the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.75 -- which ranks in the 79th annual percentile. Looking ahead, MSFT will report earnings after the close next Monday.

  • NSP is facing pressure from activist investor Starboard Value LP -- which disclosed a 13.2% stake in the company -- to consider the possibility of a sale. Additionally, Starboard offered suggestions for Insperity Inc -- which it considers "deeply undervalued" -- to streamline operations and reduce expenses. Technically speaking, the stock has performed well since gapping down to $31.25 in mid-December, rallying more than 16% to land at $36.34. In fact, NSP tagged an annual high of $36.45 yesterday. Nevertheless, the brokerage crowd is decidedly skeptical toward NSP, with 80% of covering analysts levying tepid "hold" recommendations on the shares. Also, the equity's consensus 12-month price target of $34.75 is below current trading levels. As such, a round of upgrades and/or price-target hikes could usher in a fresh wave of buying power. Ahead of the open, the shares are sitting more than 8% higher.

  • Finally, QCOM is down roughly 3% ahead of the bell, following news that Samsung Electronics Co. will drop the firm's Snapdragon microprocessor from the upcoming Galaxy S smartphone. The chip reportedly overheated during testing, prompting Samsung's decision to use its own microprocessors in the handheld. Moving along, QUALCOMM, Inc. -- which will report fiscal first-quarter earnings next Wednesday night -- is staring at a year-over-year loss of nearly 4% to trade at $72.48. If the shares continue to struggle, another round of downgrades could ensue. After all, 17 out of 23 analysts covering QCOM have doled out "buy" or better recommendations, compared to six "holds" and not a single "sell."

permanent link

Analyst Downgrades: Tesla Motors, Inc., Freeport-McMoRan Inc., and Colgate-Palmolive Company

Analysts downwardly revised their ratings on Tesla Motors Inc (TSLA), Freeport-McMoRan Inc (FCX), and Colgate-Palmolive Company (CL)

by 1/21/2015 9:22 AM
Stocks quoted in this article:

Analysts are weighing in today on electric car concern Tesla Motors Inc (NASDAQ:TSLA), mining magnate Freeport-McMoRan Inc (NYSE:FCX), and consumer products specialist Colgate-Palmolive Company (NYSE:CL). Here's a quick roundup of today's bearish brokerage notes on TSLA, FCX, and CL.

  • It's been a rough ride for TSLA in recent months, with the shares off 34% since hitting a record peak of $291.42 in early September. The stock is poised to extend these losses today, after Morgan Stanley cut its price target to $280 from $290 amid concerns that plunging oil prices and a strengthening dollar could impact TSLA's long-term earnings outlook. The brokerage firm did reiterate its "overweight" rating, echoing the majority of analysts covering the shares. In fact, the equity has eight "buy" or better ratings, compared to five "hold" or worse suggestions. Meanwhile, TSLA's average 12-month price target of $273.21 stands at a 42.3% premium to last night's close at $191.93. Should Tesla Motors Inc's struggles continue, another round of bearish brokerage notes could be on the horizon.

  • Brean Capital lowered its price target on FCX to $29 from $37 -- and underscored its "buy" rating -- although this new forecast still represents expected upside of 50% to last night's close at $19.27. As a result, the shares are lower in electronic trading, and on pace to deepen their 45.3% year-over-year decline. In the options pits, speculators have taken note of FCX's downward spiral, but most analysts remain enamored with the stock. Specifically, 75% of those covering FCX have doled out a "buy" or better recommendation, with not a single "sell" to be found. Plus, Freeport-McMoRan Inc's consensus 12-month price target of $31.60 rests in territory not charted since late October. In other words, the door is wide open for downgrades and/or more price-target cuts, especially if the company reports lackluster earnings next Tuesday.

  • CL received a downgrade to "neutral" from "buy" at UBS overnight, sending the shares lower ahead of the bell. Since notching an all-time high of $71.31 on Dec. 24, the equity has pulled back to its 60-day moving average -- currently located at $68.50 -- and closed last night just north of this mark at $68.60. On the sentiment front, near-term traders have shown a preference for calls over puts, per CL's Schaeffer's put/call open interest ratio (SOIR) of 0.59, which ranks in the 24th percentile of its annual range. Meanwhile, with CL slated to step into the earnings confessional before next Thursday's open, premium on the stock's front-month options is relatively expensive at the moment. Specifically, Colgate-Palmolive Company's Schaeffer's Volatility Index (SVI) of 17% sits higher than 65% of similar readings taken in the past year.

permanent link

Will ECB Determine the Market's Next Move?

Will Draghi take investors to Wally World -- or on an endless roundabout past Big Ben and Parliament?

by 1/21/2015 9:18 AM
Stocks quoted in this article:

Well, we never quite got "officially" overbought on this particular VIX-go-round. CBOE Volatility Index (VIX) peak-closed at 22.39 (so far) on Jan. 15, about 14% above its 10-day simple moving average (SMA). And then on Friday, VIX grudgingly declined late in the day in the face of a sizable market rally and a long weekend ahead.

What's interesting about that action is that even with the decline, VIX clearly had some weekend worries on its mind … or rather, traders that buy and sell actual S&P 500 Index (SPX) options had some worries. A 1% pop in stocks coupled with a long weekend could send options tanking … but not when oil continues to crash, the Swiss franc soars, and general instability rules.

On a normal long weekend, traders and investors fear paying extra for weekend decay. But now, traders and investors fear extra time between regular sessions means extra time for another bad story to hit from somewhere. As well they should, as we've had three months of that. We could make a strong case that we've had a full calendar year's worth of "bad" stories, albeit with long stretches where the market ignores (or discounts) the news.

That's a long-winded way of explaining Tuesday's seemingly odd volatility action. Stocks were volatile and mostly down, while VIX acted heavy. Normally, volatility has an appearance of strength on a Monday, and especially on a Tuesday following a long weekend. But when you go into a weekend with fear of news, there's a built-in "relief" when nothing disastrous came out. It seems like "down 0.5%" is the new "up."

I really doubt volatility goes down much at all over the next couple days, at least until the ECB speaks:

"WHEN the European Central Bank's (ECB) governing council meets on January 22nd, it will take a historic decision. Among the main central banks, the ECB alone has abstained from a big programme of quantitative easing involving the creation of money to buy sovereign bonds with the aim of spurring growth and inflation. The economic case for QE in the euro area is overwhelming: the feeble economic recovery that has followed Europe's double-dip recession is faltering; headline inflation has turned negative and longer-term inflation expectations have also declined to a worrying extent. Mario Draghi, the ECB's president, seems determined to adopt QE in some form, but he will have to compromise on the way that the risks are shared among the euro-zone national central banks in order to get the policy through."

What could possibly go wrong? No way the market gets disappointed that QE-Europe is a weak sequel to our own QE-America! The same way "European Vacation" paled next to "Vacation". Bernanke got us to the Wally World of economic recoveries; can Draghi do the same?

And yes, I have a degree in economics and that's the best analogy I can come up with.

But seriously, if this volatility cycle ends -- or at least cools -- it's not likely because of anything the ECB might say. Likewise, if we start tanking, I won't blame them either. There's little doubt we have a backdrop set for either a short squeeze or a bigger shakeout. And if it happens this week, we'll either blame or credit the ECB. But it feels more likely it's something that might happen very soon anyway.

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

permanent link

Partner Center

© 2015 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email:

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by | Data delayed 15-20 minutes unless otherwise indicated.