Schaeffer's Trading Floor Blog

Stocks On the Move: Digital Ally, Inc., FireEye Inc, and Wynn Resorts, Limited

DGLY, FEYE, and WYNN are moving sharply in Tuesday's trading

by 9/2/2014 12:15 PM
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U.S. stocks are modestly lower this afternoon, as speculators digest the latest manufacturing and construction reports. Among the names making significant moves are on-the-go video issue Digital Ally, Inc. (NASDAQ:DGLY), cyber security concern FireEye Inc (NASDAQ:FEYE), and casino titan Wynn Resorts, Limited (NASDAQ:WYNN). Here's a quick look at how DGLY, FEYE, and WYNN are faring on the charts today.

  • DGLY has skyrocketed 57% to $29.36, and earlier notched a five-year high of $32.50, after the firm said post-Ferguson inquiries for its wearable police cameras have jumped "five-fold." The company subsequently expects full-year sales of about $22.5 million, according to a regulatory filing. Digital Ally, Inc. has more than tripled in 2014, and short sellers are likely feeling the heat. Short interest rocketed 24.6% higher during the most recent reporting period, and now accounts for 11.1% of DGLY's total available float.

  • FEYE has added 4.7% to wink at $32.61, with some speculators on StockTwits citing unsubstantiated buyout buzz. Others, meanwhile, have FEYE in their crosshairs in the wake of the Apple Inc. (NASDAQ:AAPL) celebrity iPhone scandal. Despite today's pop, FireEye Inc shares remain roughly 25% lower on a year-to-date basis, and have underperformed the broader S&P 500 Index (SPX) by 16 percentage points during the past two months. Now, the security is looking to challenge its 10-week and 20-week moving averages, which are converging on the $33 area.

  • WYNN is down 5% at $183.15, amid reports that Macau gambling revenue fell for a third straight month in August. While Wynn Resorts, Limited shares have underperformed the SPX by more than 12 percentage points during the past month, Wall Street remains optimistic. Two-thirds of covering analysts maintain "strong buy" opinions, and the equity's Schaeffer's put/call open interest ratio (SOIR) sits at an annual low of 0.58. In other words, near-term options players haven't been more call-biased during the past year.

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Analyst Downgrades: 3D Systems Corporation, The Boeing Company, and Freeport-McMoRan Inc

Analysts downwardly revised their ratings on DDD, BA, and FCX

by 9/2/2014 9:29 AM
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Analysts are weighing in today on 3-D printing concern 3D Systems Corporation (NYSE:DDD), aerospace issue The Boeing Company (NYSE:BA), and mining magnate Freeport-McMoRan Inc (NYSE:FCX). Here's a quick roundup of today's bearish brokerage notes on DDD, BA, and FCX.

  • Needham cut its price target on DDD to $65 from $70, but maintained its "buy" rating on the equity. This new price target still represents expected upside of 21.5% to Friday's closing price of $53.51, and is above the average 12-month price target of $59.90. Elsewhere, seven analysts maintain a "strong buy" rating toward 3D Systems Corporation, compared to eight who deem DDD a "hold" or worse.

  • Buckingham reduced its outlook on BA to "underperform" from "neutral, while RBC slashed its price target on the stock by $11 to $134. Overall, sentiment toward The Boeing Company is optimistic, despite the shares sitting on a 7% year-to-date deficit. No fewer than 14 out of 20 analysts deem the equity a "strong buy," compared to six tepid "holds." Plus, the consensus 12-month price target of $154.32 stands at a 22% premium to the equity's current perch at $126.80, and in territory yet to be charted.

  • Morgan Stanley weighed in on FCX, cutting its outlook to "equal weight" from "overweight." Freeport-McMoRan Inc spent the month of August churning between $36 and $37, and on Friday, closed at the lower end of this range, at $36.37. Not surprisingly, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.90 ranks in the bearishly skewed 99th percentile of its annual range.

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Analyst Upgrades: Tesla Motors Inc (TSLA), Groupon Inc, and Zulily Inc

Analysts upwardly revised their ratings on TSLA, GRPN, and ZU

by 9/2/2014 9:24 AM
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Analysts are weighing in today on electric car concern Tesla Motors Inc (NASDAQ:TSLA), and online shopping issues Groupon Inc (NASDAQ:GRPN) and Zulily Inc (NASDAQ:ZU). Here's a quick roundup of today's bullish brokerage notes on TSLA, GRPN, and ZU.

  • TSLA is poised to notch a new record high right out of the gate, after Stifel raised its outlook on the equity to "buy" from "hold." Year-to-date, shares of TSLA have added more than 79%, yet six out of 13 analysts covering the equity maintain a "hold" or worse suggestion. Plus, the consensus 12-month price target of $251.06 stands at a discount to Friday's closing price of $269.70. Should Tesla Motors Inc continue its rally up the charts, an additional round of upgrades and/or price-target hikes could help fuel the security's fire.

  • RBC raised its outlook for GRPN to "sector perform" from "underperform," and upped its price target to $6 from $5 (although, this still represents a discount to the stock's current perch at $6.80). Overall, sentiment toward Groupon Inc is tilted toward the bearish side, which shouldn't be too surprising, considering the stock has surrendered more than 42% this year. Specifically, two-thirds of analysts have levied a "hold" or "strong sell" rating toward the equity, and short interest accounts for more than 21% of the stock's available float.

  • CRT joined the majority of analysts covering ZU, by raising its outlook on the shares to a "buy." On the charts, Zulily Inc has put in a dismal performance, and is off nearly 21% year-to-date to trade at $32.80. Option traders at the international Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) are keeping the faith, too, and have bought to open 4.16 calls for every put during the past 10 sessions.

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Buzz Stocks: Dollar General Corp., Visa Inc, Norwegian Cruise Line Holdings Ltd, and Novartis AG (ADR)

Today's stocks to watch in the news include DG, V, NCLH, and NVS

by 9/2/2014 9:11 AM
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U.S. stocks are flirting with breakeven this morning, with manufacturing and construction data in focus. In company news, today's stocks to watch include discount retailer Dollar General Corp. (NYSE:DG), credit card issue Visa Inc (NYSE:V), travel concern Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH), and drug maker Novartis AG (ADR) (NYSE:NVS).

  • Dollar General Corp. (NYSE:DG) isn't giving up on its pursuit of Family Dollar Stores, Inc. (NYSE:FDO), upping its bid to $80 per share. Last month, FDO's board officially rebuffed DG's $78.50-per-share bid in favor of a previous bid from Dollar Tree, Inc. (NASDAQ:DLTR). (MarketWatch)

  • Visa Inc. (NYSE:V) -- along with sector peers MasterCard Inc (NYSE:MA) and American Express Company (NYSE:AXP) -- are reportedly partnering with Apple Inc. (NASDAQ:AAPL) to turn the next iPhone into a mobile wallet. The deal -- along with the next device -- will allegedly be unveiled on Sept. 9. In other news, AAPL has reportedly corrected a bug that may have allowed hackers to gain access to private celebrity photos. (Bloomberg; USA Today)

  • Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) will acquire Prestige Cruises International for $3.025 billion in cash and stock. The merger "will provide solid accretion to earnings per share and drive long-term shareholder value," opined Norwegian Cruise Line CEO Kevin Sheehan. (CNBC)

  • Novartis AG (ADR) (NYSE:NVS) is pointed higher ahead of the bell, after the Swiss drug maker reported solid data for its heart failure drug -- the launch of which could be NVS' "most exciting" ever, according to David Epstein, Novartis' head of pharmaceuticals. As such, sales forecasts for LCZ696 have been ramping up at near fever pitch. (Reuters)

  • Finally, CONN's, Inc. (NASDAQ:CONN) is poised to plummet more than 25% out of the gate, after offering up lackluster earnings and cutting its full-year guidance. (San Antonio Business Journal)

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An Interesting Development in the Volatility Complex

The VXX avoided new all-time lows again last week

by 9/2/2014 8:39 AM
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Another week, another -- well, nothing much. There were new highs in the S&P 500 Index (SPX), and some modest drifting in the CBOE Volatility Index (VIX). We did expect that last week would stay quiet, and it certainly lived up to those expectations.

But, hey, we did see one modestly interesting development in the volatility complex: iPath S&P 500 VIX Short-Term Futures ETN (VXX) didn't make new all-time lows! In fact, it hasn't made an all-time low since July 3, when it bottomed at 26.95. That's 40 trading days, and if this goes on another week or so, we can start talking about where it ranks in terms of VXX non-ugliness.

VXX outperformance last week makes some sense. The pending holiday weighed on VIX, given that realized volatility tends to lag on holiday weeks. VXX proxies a 30-day VIX rolling future, and a holiday now won't have much impact on where traders 30 days from now expect to see implied volatility 30 days beyond that.

That VXX all-time low on July 3 coincided with a VIX of about 10.30. Since then, VXX is up 3% while VIX is up about 16%. Believe it or not, that's a reasonable performance for VXX.

Selling VXX into VIX pops still looks like a winning strategy. Here's an update of the table of VXX performance after VIX has closed greater than 20% above its 10-day simple moving average.

VXX Returns

I looked at five-, 10-, and 15 trading-day returns in VXX if you bought it on the close of sessions where VIX closed overbought. At the bottom I show median and average VXX returns in each category vs. median and average returns if you bought VXX on any random date.

And just for laughs, I included VIX and VXX values on the close of the days VIX went overbought.

Yes, VXX adjusted for reverse splits really was that high back in 2009.

You actually do better on an average basis if you buy VXX after VIX gets overbought. But that's really misleading -- it's thanks almost entirely to the monster returns in August 2011. The median comps provide a better example of the typical VXX ownership experience. And you do quite poorly over the five- and 15-day windows. Over 25 days, you actually do slightly better than random buys.

And it's very important to remember that no matter how you look at it, owning VXX for even a short length of time is a terrible idea. Unless you catch an August 2011-type pop -- and probably catch it before the VIX pop even happens -- you're doomed. Buying VXX randomly is merely less bad than buying after VIX lifts.

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

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