Schaeffer's Trading Floor Blog

Analyst Upgrades: Mattel, Inc., EMC Corporation, and Cyberark Software Ltd

Analysts upwardly revised their ratings on Mattel, Inc. (MAT), EMC Corporation (EMC), and Cyberark Software Ltd (CYBR)

by 4/17/2015 9:28 AM
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Analysts are weighing in today on toy tycoon Mattel, Inc. (NASDAQ:MAT), hardware provider EMC Corporation (NYSE:EMC), and cybersecurity firm Cyberark Software Ltd (NASDAQ:CYBR). Here's a quick roundup of today's bullish brokerage notes on MAT, EMC, and CYBR.

  • MAT is gaining ahead of the opening bell, with shares surging 5.7%, thanks to better-than-anticipated first-quarter results. In response, Barclays raised its price target to $25 from $24, and B. Riley upped its target to $29 from $27.25. It's a boost the stock needs, as it's fallen 18.3% year-to-date, finishing at $25.27 yesterday. Call buyers have been stepping up recently, anticipating a recovery. Mattel, Inc.'s 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.09 is higher than 71% of all readings from the past 12 months. This suggests call buying has been more popular than usual versus put buying of late.

  • EMC is getting a lift in pre-market trading, after Bernstein raised its outlook to "outperform." Like MAT, EMC Corporation has been struggling recently. With its close at $26.05 yesterday, the equity is down 11% since its late-February high of $29.24. Like Bernstein, though, most analysts are still believers, with 18 of 24 brokerage firms tracking the shares rating them a "buy" or better. Plus, at $30.35, EMC's average 12-month price target stands in territory not charted since late December. Looking ahead, the company will report first-quarter earnings before the open next Wednesday, April 22.

  • For the second time this week, CYBR is set to benefit from bullish analyst attention. Overnight, JMP Securities initiated coverage on the shares with a "market outperform" assessment and $72 price target -- considerably higher than the equity's consensus 12-month price target of $50.56. However, the target isn't out of the question, considering Cyberark Software Ltd closed at $61.12 yesterday, and has been storming up the charts of late. The security has beat out the S&P 500 Index (SPX) by almost 63 percentage points over the past three months. It's surprising, then, to see 63% of analysts issuing "hold" or worse recommendations on CYBR. Should the stock extend its technical strength, it could see a round of price-target hikes and/or analyst upgrades.

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Random Friday: Timing China's Collapse, Backtesting, and Baseball

Why China's momentum is bound to end badly

by 4/17/2015 8:39 AM
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It's Friday, and volatility is firmly on the "eh" part of the continuum. So how about a few random thoughts? But first Star Wars!

Anyway we're always on the lookout for counter-trend indicators. To me, the best sign a trend might continue occurs when there's evidence that the masses don't believe in the trend. Well, here's one that fits that mold via Bespoke:

"According to the weekly survey from the American Association of Individual Investors (AAII), bullish sentiment rose from 28.7% up to 32.07%. This is now the sixth straight week where bullish sentiment has been below the bull market average of 38.7%, which is the longest streak since last August."

I can certainly understand the "why" of this. We sputter every time we get around 210 on the SPDR S&P 500 ETF Trust (SPY), 5,000 on the Nasdaq Composite (COMP), et. al. But it does suggest there's fuel for a rally if relatively few expect said rally. I'll believe it when I see it, though.

There's certainly no lack of bullishness in China. It's tough to stand in the way of momentum, but if you're of the mind to try, it just got easier, as per Bloomberg:

"Futures on the small-cap CSI 500 Index started trading on Thursday, giving investors a cheaper way to wager on declines in shares valued at more than twice the level of the benchmark Shanghai Composite Index. The CSI 500 has surged 47 percent this year, versus a 26 percent gain for the Shanghai measure.

"The contracts, which come five years after China introduced futures on the large-cap CSI 300 Index, are part of the nation's efforts to allow more sophisticated trading strategies as policy makers open up the $7.1 trillion market to the rest of the world. Bocom International Holdings Co., China International Capital Corp. and Deutsche Bank AG say the new futures will probably weigh on smaller stocks as investors bet valuation premiums over larger companies will narrow."

We saw this movie here back in 1999. You know it will end badly at some point, but it's really tough to time bearish bets to play for the inevitable.

I'm always backtesting data for this space -- in fact, I did it as recently as yesterday. But there's a couple things I want to make clear: It is always for informational purposes. I don't now, nor did I ever, trade with some sort of strict system. I do occasionally go long at times of overbought CBOE Volatility Index (VIX), but it's always just one piece in a larger puzzle.

Also, I often run the data to disprove, or at least better examine, some lazy "systems" I read about or see on TV -- again, such as yesterday. Small sample sizes, magic ratios, inexact time frames, graphs that look good from 10,000 feet (but not so good when you squint a little) are all signs there's not much "there" there. I bring that up because here's a very good analysis of backtesting mistakes via Quantopian.

And finally, let's play ball! The following statements are all true:

  1. Major league baseball is strictly anti-gambling. They are fighting against legalization right here in New Jersey, in fact.

  2. Daily Fantasy Sports (DFS) games for money are legal because they are considered games of skill. But no one can say with a straight face that it's not de facto wagering.

  3. Major League Baseball (MLB) agrees that it's de facto wagering. They have officially banned players from playing DFS.

  4. DFS is growing exponentially. Everyone wants to invest, from hedge funds, to Walt Disney Co (NYSE:DIS), to Major League Baseball.

So if it all seems inconsistent well, of course, it's inconsistent. It's a complete joke that barely gets called out. But let's face it, the sports leagues aren't really anti-gambling. They're anti "someone else making money from it while we figure out how to best get our cut." They've all solved the DFS riddle with the tie-ins. They'll solve the straight-wagering riddle someday, too, and their tunes will magically change.

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: Big-Caps, Web Titans Report; Apple Watch Launches

Next week's calendar features earnings from several Dow members, as well as Internet issues Facebook Inc (FB), Google Inc (GOOGL), and Yahoo! Inc. (YHOO)

by 4/16/2015 4:52 PM
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Earnings season is fully underway, as blue chips and big-cap firms are the showcase of next week's calendar. Among the stocks reporting earnings are Dow components DuPont (NYSE:DD), Procter & Gamble Co (NYSE:PG), and Caterpillar Inc. (NYSE:CAT); Internet giants Facebook Inc (NASDAQ:FB), Google Inc (NASDAQ:GOOGL), and Yahoo! Inc. (NASDAQ:YHOO); and tech bigwigs Microsoft Corporation (NASDAQ:MSFT), United Technologies Corporation (NYSE:UTX), and QUALCOMM, Inc. (NASDAQ:QCOM).

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

  • There are no notable economic reports scheduled for Monday. However, IBM (IBM), Halliburton (HAL), Hasbro (HAS), Morgan Stanley (MS), and Steel Dynamics (STLD) will report earnings.

Tuesday

  • Tuesday's economic calendar is relatively empty. Telling all in the confessional are DuPont (DD), Travelers Companies (TRV), United Technologies (UTX), Verizon Communications (VZ), Broadcom (BRCM), Chipotle Mexican Grill (CMG), Under Armour (UA), Yahoo! (YHOO), Amgen (AMGN), Arch Coal (ACI), ARM Holdings (ARMH), Baker Hughes (BHI), Brinker International (EAT), Cree (CREE), Discover Financial Services (DFS), Fifth Third (FITB), Harley-Davidson (HOG), Kimberly-Clark (KMB), Lockheed Martin (LMT), TD Ameritrade (AMTD), VMware (VMW), and Yum! Brands (YUM).

Wednesday

  • Existing home sales and weekly crude inventories are due out on Wednesday. Boeing (BA), Coca-Cola (KO), AT&T (T), Facebook (FB), Qualcomm (QCOM), Abbott Laboratories (ABT), Angie's List (ANGI), Cheesecake Factory (CAKE), Citrix Systems (CTXS), D.R. Horton (DHI), eBay (EBAY), EMC Corporation (EMC), F5 Networks (FFIV), O'Reilly Automotive (ORLY), Owens Corning (OC), St. Jude Medical (STJ), T. Rowe Price (TROW), Texas Instruments (TXN), Thermo Fisher Scientific (TMO), Tractor Supply Company (TSCO), and Xilinx (XLNX) will step into the earnings spotlight.

Thursday

  • Hitting the Street Thursday are weekly jobless claims, Markit's flash purchasing managers manufacturing index (PMI), and new home sales. The day is packed with quarterly reports from 3M (MMM), Caterpillar (CAT), Microsoft (MSFT), Procter & Gamble (PG), Amazon.com (AMZN), General Motors (GM), Google (GOOGL), Pandora Media (P), Starbucks (SBUX), AbbVie (ABBV), Alaska Air (ALK), Altera (ALTR), Altria (MO), Capital One Financial (COF), Domino's Pizza (DPZ), Dow Chemical (DOW), Dr Pepper Snapple (DPS), Dunkin' Brands (DNKN), E*Trade Financial (ETFC), Eli Lilly (LLY), Freeport-McMoRan (FCX), Freescale Semiconductor (FSL), Hershey (HSY), Juniper Networks (JNPR), Newmont Mining (NEM), Novartis (NVS), Peabody Energy (BTU), PepsiCo (PEP), PulteGroup (PHM), Raytheon (RTN), Southwest Airlines (LUV), and Stanley Black & Decker (SWK).

Friday

  • The week's economic calendar will close out with durable goods orders. Also, the Apple Watch will officially be released. American Airlines (AAL), AstraZeneca (AZN), Biogen (BIIB), ImmunoGen (IMGN), LyondellBasell (LYB), Steven Madden (SHOO), Tyco International (TYC), and Xerox (XRX) are scheduled to release quarterly numbers.

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Earnings Preview: Advanced Micro Devices, Inc., General Electric Company, and Seagate Technology plc

Analyzing recent option activity on Advanced Micro Devices, Inc. (AMD), General Electric Company (GE), and Seagate Technology PLC (STX)

by 4/16/2015 1:47 PM
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Among the stocks gearing up to report earnings are chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD), blue chip General Electric Company (NYSE:GE), and data storage provider Seagate Technology PLC (NASDAQ:STX). Below, we'll gauge the pre-earnings temperature of AMD, GE, and STX.

  • AMD has spent the past month range-bound, with the shares fluctuating between support near $2.60 and resistance in the $2.80 neighborhood. Today, the shares are 4.3% higher to linger near $2.82 ahead of tonight's trip to the earnings confessional. Heading into today's session, traders have been betting bearishly on Advanced Micro Devices, Inc., as its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.86 reads in the 94th percentile of its annual range. Additionally, short interest increased by nearly 11% over the last reporting period, and now accounts for 16.3% of AMD's available float. Traders banking on post-earnings downside for the stock have history on their side -- in the session immediately following its last eight earnings reports, AMD has shed an average of 4.1%, including a 16.2% plummet in July. Speculators are paying relatively attractive prices for their short-term bets on AMD, as its Schaeffer's Volatility Index (SVI) of 64% is higher than 42% of all equivalent readings from the past year.

  • On the other hand, GE has been trending upwards, with the shares up 8.1% year-to-date to hit $27.32. The stock's 2015 lead is thanks to an April 10 bull gap to six-year highs, after the firm announced it will sell the bulk of its real estate division to Blackstone Group LP (NYSE:BX) while initiating a $50 billion share repurchase program. Accordingly, options traders have been picking up GE calls over puts at a rapid-fire clip ahead of tomorrow morning's earnings release, as General Electric Company's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.24 sits in the 79th percentile of its annual range. What's more, GE's Schaeffer's put/call open interest ratio (SOIR) of 0.53 is the lowest such reading taken over the past year, showing that short-term traders have never been this call-skewed on the stock. Meanwhile, in the session immediately following its last eight earnings reports, GE has gained an average of 0.8%. Near-term options on the equity are available for historically fair prices, as its SVI of 19% ranks in the 49th percentile of its annual range.

  • J.P. Morgan Securities initiated coverage on STX this morning with a "neutral" rating and a price target of $57 -- just a stone's throw from the stock's current perch of $55.85. Technically speaking, the shares of Seagate Technology PLC are down 1.4% ahead of earnings tomorrow morning, and have fallen 19.5% from their Dec. 23 all-time high of $69.40. In light of this negative price action, puts have been prominent in the options pits, as STX's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.76 ranks higher than 76% of all similar readings from the last 12 months. Elsewhere, in the session immediately following its last eight earnings reports, STX has lost an average of 2.4%, with just two of those sessions yielding positive outcomes. Near-term options on the security are available for historically middling prices, as its SVI of 33% ranks in the 53rd percentile of its annual range.

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Receptos, Inc. (RCPT) Drug Data a Boon to Bulls

Receptos Inc (RCPT) is continuing its unbelievable run on the charts

by 4/16/2015 11:55 AM
Stocks quoted in this article:

Receptos Inc (NASDAQ:RCPT) is up 5.4% at midday to wink at $166.81, after the company reported encouraging mid-stage study results for its ulcerative colitis drug, ozanimod. This is welcome news for a recent crop of call buyers at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

Diving right in, during the past 10 days across this trio of exchanges, nearly four calls have been bought to open for every put. Along similar lines, RCPT's Schaeffer's put/call open interest ratio (SOIR) is 0.63, revealing call open interest outstrips put open interest among options with a shelf-life of three months or less.

Options traders aren't the only ones that are optimistic toward the shares. In fact, all three analysts covering RCPT have designated it a "strong buy." However, it's worth noting that the stock's average 12-month price target of $169 is just 1.3% away from current trading levels -- and matches today's intraday high -- potentially paving the way for a round of price-target hikes.

Turning to the charts, bullish sentiment on Receptos Inc (NASDAQ:RCPT) is well-deserved. The equity has more than quintupled in value year-over-year, and is fresh off a record peak of $203.25, touched earlier this month on another positive drug update.

Weekly Chart of RCPT since April 2014


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