Schaeffer's Trading Floor Blog

Buzz Stocks: Biogen Idec Inc., Vitae Pharmaceuticals, Inc., and Horizon Pharma Public Limited Company

Today's stocks to watch include Biogen Idec Inc (BIIB), Vitae Pharmaceuticals Inc (VTAE), and Horizon Pharma PLC (HZNP)

by 2/27/2015 9:51 AM
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U.S. benchmarks are slightly lower this morning, as traders take in an in-line fourth-quarter gross domestic product (GDP). Among the equities in focus are drugmakers Biogen Idec Inc (NASDAQ:BIIB), Vitae Pharmaceuticals Inc (NASDAQ:VTAE) and Horizon Pharma PLC (NASDAQ:HZNP).

  • This morning, BIIB and Swedish Orphan Biovitrum AB announced positive top-line efficacy and safety results for the hemophilia drug, alprolix, in their phase 3 pediatric study. The news has the shares of the former stock up slightly out of the gate, gaining 0.2% at $410.19. Biogen Idec Inc's year-to-date lead now stands at roughly 21%, yet put buyers have been piling on recently. BIIB's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.09 ranks higher than 71% of all similar readings from the past year. In other words, puts have been bought to open over calls at a faster-than-normal rate recently. Meanwhile, analysts have shown confidence in the security, with 76% of covering brokerage firms calling it a "buy" or better.

  • VTAE is getting walloped this morning, down 13.3% at $11.51, after partner Boehringer Ingelheim put a temporary clinical hold on its experimental Alzeimer's drug to investigate potential side effects. The stock is used to disappointment, considering it's lost 51% since hitting an all-time high of $23.35 on Dec. 11. Brokerage firms have maintained their faith, though. All the analysts covering Vitae Pharmaceuticals Inc say it's a "strong buy," while the equity's consensus 12-month price target of $21.75 comes in at a 47% premium to current trading levels. However, just this morning, JMP Securities reduced its price target on VTAE to $16 from $21.

  • Last night, HZNP reported fourth-quarter net sales and profit that beat analysts' expectations, and also upped its full-year revenue forecast. As such, the stock is up 11.9% this morning at $21.33 -- and earlier touched a record high of $21.39. The shares have been blazing a path higher for some time now, tacking on 74.5% year-over-year. In the options pits, call open interest outweighs put open interest by a wide margin among options with a lifespan of three months of less, per Horizon Pharma PLC's Schaeffer's put/call open interest ratio (SOIR) of 0.18. This reading ranks in the 29th percentile of its annual range, meaning short-term speculators are more call-skewed than normal.

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Analyst Upgrades: FedEx Corporation, CSX Corporation, and ACADIA Pharmaceuticals Inc.

Analysts upwardly revised their ratings on FedEx Corporation (FDX), CSX Corporation (CSX), and ACADIA Pharmaceuticals Inc. (ACAD)

by 2/27/2015 9:41 AM
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Analysts are weighing in today on package delivery expert FedEx Corporation (NYSE:FDX), transportation supplier CSX Corporation (NYSE:CSX), and drugmaker ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). Here's a quick roundup of today's bullish brokerage notes on FDX, CSX, ACAD.

  • Credit Suisse upgraded FDX to "outperform" from "neutral" -- and raised its price target to $203 from $177 -- citing improving returns and demand. As such, the shares are up 1.1% this morning to trade at $176.53, bringing their year-over-year advance to 32.4%. For comparison's sake, rival United Parcel Service, Inc. (NYSE:UPS) has gained less than 7% on an annual basis, after recently getting hit by a weak fourth-quarter outlook. Looking more closely at the charts, FedEx Corporation is resting atop its rising 80-day moving average (located at $174.50) -- a trendline that's served as support for nearly a year, and could continue to do so going forward. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has seen near-extreme levels of put buying in recent weeks. FDX's 10-day put/call volume ratio of 2.04 is just 1 percentage point shy of a 12-month peak. However, some of these positions may have been initiated by shareholders hedging against unexpected downside.

  • CSX saw its rating bumped to "outperform" from "market perform" at BMO, which also upped its price target by $2 to $40. The bullish note is well deserved, considering the stock has tacked on 23.6% over the last year -- though it was last seen slightly lower at $34.26. Not surprisingly, option bulls have taken a shine to CSX Corporation. The equity's 10-day ISE/CBOE/PHLX call/put volume ratio is 10.56 -- meaning nearly 11 calls have been bought to open for every put. What's more, this ratio outstrips 92% of similar readings from the past 12 months.

  • Despite reporting a wider-than-expected fourth-quarter loss yesterday, ACAD has received additional bullish brokerage attention. Specifically, JMP Securities, Cowen and Company, and Ladenburg Thalmann raised their respective price targets to $50, $49, and $43. As such, ACADIA Pharmaceuticals Inc. is 0.9% higher at $38.10, which is good news for this group of option bulls. Longer term, ACAD has gained 34.6% year-over-year. Analysts have recognized this technical prowess, doling out eight "strong buy" ratings, compared to one "hold" and not a single "sell."

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Analyst Downgrades: Bank of America Corporation, TubeMogul, Inc., and Pharmacyclics, Inc.

Analysts downwardly revised their ratings on Bank of America Corp (BAC), TubeMogul Inc (TUBE), and Pharmacyclics, Inc. (PCYC)

by 2/27/2015 9:25 AM
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Analysts are weighing in on financial firm Bank of America Corp (NYSE:BAC), digital branding specialist TubeMogul Inc (NASDAQ:TUBE), and drugmaker Pharmacyclics, Inc. (NASDAQ:PCYC). Here's a quick roundup of today's bearish brokerage notes on BAC, TUBE, and PCYC.

  • BAC has had a solid month, tacking on nearly 6% to trade at $16.04 -- thanks to a lift from its 20-day moving average. In spite of this recent flexing of technical muscle, UBS cut its outlook on the shares to "neutral" from "buy," and lowered its price target to $16 from $20. While the options crowd has been all in on the equity, the brokerage bunch is mixed, with nine maintaining a "strong buy" rating, versus nine that have levied a "hold" or worse suggestion toward Bank of America Corp. Should the shares extend their momentum into March, a round of upgrades could help fuel their fire. Meanwhile, BAC announced yesterday that a trio of top leaders will be departing.

  • TUBE is bracing for an 18% plunge out of the gate, after the firm's lower-than-expected full-year forecast was met with price-target cuts at RBC (to $20) and JMP Securities (to $21), although both brokerage firms underscored their respective "outperform" ratings. Overall, analysts have been pretty upbeat toward the shares -- despite their 20.4% year-to-date deficit -- as evidenced by the 80% of brokerage firms that maintain a "buy" or better, with not a single "sell" to be found. Additionally, TubeMogul Inc's average 12-month price target of $22.22 stands at a steep 24% premium to last night's close at $17.94, and in territory not charted since the start of the year.

  • It's been quite a week for PCYC, as the stock has added 22.7% to trade at $217.82, amid reports the company could be flirting with potential suitors. In spite of this surge, Goldman Sachs overnight lowered its rating on the security to "neutral" from "buy," and removed PCYC from its "America's Buy List." In the options pits, the stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.69 ranks in the 93rd annual percentile, meaning puts have been bought to open over calls at a near-annual-high clip. Echoing this put-skewed bias is PCYC's Schaeffer's put/call open interest ratio (SOIR) of 1.31, which rests higher than all comparable readings taken in the past 12 months. Simply stated, short-term speculators are more put-heavy now toward Pharmacyclics, Inc. than they've been at any other time during the last year.

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February's Big Rally, VIX's Big Drop, and More Things You Shouldn't Overanalyze

Apple's (AAPL) massive market cap makes for some odious -- and useless -- comparisons

by 2/27/2015 8:41 AM
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Some week we just had in the markets. First we had Yellen talking to the Senate, followed by Yellen talking to Congress, followed by … actually, it was a pretty slow news week. Which makes it perfect for a Random Thoughts Friday!

The market is up about 6% in February. Beware of any analyst pointing out that it's an unsustainable pace. That's because it's a fairly obvious point, about as insightful as saying "volatility will rise." If we rallied 6% every month, the market would double in a calendar year (remember the old Rule of 72?). Of course, it's not happening. But hey, it makes for an impressive month, especially since it's only 28 days.

The CBOE Volatility Index (VIX) has dropped 34% in February. That's a record for a calendar month as per Callie Bost of Bloomberg. So, what does it mean going forward?

I'll get back to you on that, perhaps as soon as Monday (teaser alert). I will say this before going into the numbers -- calendar months are arbitrary endpoints by definition, so the results could get a little funky. But by and large, big VIX drops don't predict all that much. It's modestly bullish on the "train in motion stays in motion" theory. Panic tends to resolve itself relatively quickly (2008 not included). Complacency often lingers.

Opinions on Fed action are valuable in the context of "if Fed does 'X,' the market should move 'Y'." They're not valuable in the context of "the Fed should do 'X'." To me, that makes the pundit sound like either a concern troll ("what about the children?"), or someone just talking their book. As in, "I'm positioned for 'X,' so that's what they should do." Unfortunately most of the commentary involves the non-value-added variety.

Speaking of which, I believe very few parse every last Fed shrug and comma and whatever, compared to what the media would have us believe. You have to pay attention, because at times it does beget some serious moves. But at the end of the day, they're going to react to the basic facts on the ground.

Also, ignore comps of the market cap of Apple Inc. (NASDAQ:AAPL) to … whatever. We've had these comps all the way up, as in "I can't believe AAPL is worth as much as these 472 countries combined, plus the entire NFL." And before AAPL, it was Exxon, and Microsoft, and GE, and IBM, and I'm sure others. It really doesn't mean anything as far as future market prognostication is concerned. AAPL is literally worth what the market is willing to pay for it. I'm no fundamentalist, but I do know it's not priced like a 1999 internet startup.

It will top someday … hey, maybe it already happened! But it's not going to cause a market implosion simply because of the percent of a given index it comprises. If AAPL drops 10% tomorrow, in and of itself that causes a 1% drop in the Nazz. And that assumes every seller just simply takes the cash from the sale and puts it into something other than just another stock. An indexer actually has to reallocate into other stocks now that they have greater weight. And incidentally, as AAPL dips, it comprises less of a percentage of a given index, and thus causes less of a ripple. Rinse and repeat. Worry about your investment in AAPL if you think the share price is too rich; don't worry at all about the market cap. That's my humble opinion.

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


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The Week Ahead: All Eyes on Jobs Data

Next week's calendar features jobs and manufacturing data, as well as earnings from Canadian Solar Inc. (CSIQ) and Abercrombie & Fitch Co. (ANF)

by 2/26/2015 6:24 PM
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Along with Institute for Supply Management (ISM) manufacturing data, employment reports will take the spotlight next week, punctuated by Friday's highly anticipated nonfarm payrolls report. Reporting earnings are retailers Abercrombie & Fitch Co. (NYSE:ANF), Best Buy Co Inc (NYSE:BBY), and Costco Wholesale Corporation (NASDAQ:COST); a slew of solar energy concerns, led by Canadian Solar Inc. (NASDAQ:CSIQ); and communications technology specialists Ciena Corporation (NYSE:CIEN) and Ambarella Inc (NASDAQ:AMBA).

Below is a brief list of some key market events scheduled for the upcoming week. All earnings dates listed below are tentative and subject to change. Please check with each company's respective website for official reporting dates.

Monday

  • The week kicks off with personal income and spending, Markit's purchasing managers manufacturing index (PMI), the ISM manufacturing index, and construction spending. Caesars Entertainment (CZR), Halozyme Therapeutics (HALO), JinkoSolar (JKS), Mylan (MYL), Palo Alto Networks (PANW), Sotheby's (BID), and Stratasys (SSYS) will all step into the earnings spotlight.

Tuesday

  • February auto sales are due out on Tuesday. Earnings reports are expected from Ambarella (AMBA), AutoZone (AZO), Best Buy (BBY), Bob Evans Farms (BOBE), Dick's Sporting Goods (DKS), JD.Com (JD), Kate Spade (KATE), Smith & Wesson (SWHC), and TiVo (TIVO).

Wednesday

  • Hitting the Street Wednesday are ADP's employment report, the ISM services index, weekly crude inventories, and the Fed's Beige Book. Companies entering the earnings confessional include Abercrombie & Fitch (ANF), H & R Block (HRB), PetSmart (PETM), ReneSola (SOL), Trina Solar (TSL), and Vivint Solar (VSLR).

Thursday

  • Weekly jobless claims, productivity and labor costs, and factory orders are set for release Thursday. Canadian Solar (CSIQ), Ciena (CIEN), Costco Wholesale (COST), Diamond Foods (DMND), Finisar (FNSR), Joy Global (JOY), and Kroger (KR) will release quarterly results.

Friday

  • The week closes out with the highly anticipated nonfarm payrolls report, as well as international trade data. Foot Locker (FL) and Staples (SPLS) will take their turn on the earnings stage.

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