Schaeffer's Trading Floor Blog

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.


  • 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.


  • 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).


  • 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).


  • 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.


  • 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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Earnings Preview: Goodrich Petroleum Corporation, Isis Pharmaceuticals, Inc., and JinkoSolar Holding Co., Ltd.

Analyzing recent option activity on Goodrich Petroleum Corporation (GDP), ISIS Pharmaceuticals, Inc. (ISIS), and JinkoSolar Holding Co., Ltd. (JKS)

by 2/26/2015 1:35 PM
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Among the stocks gearing up to report earnings in the next two trading days are oil-and-gas firm Goodrich Petroleum Corporation (NYSE:GDP), drugmaker ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS), and alternative energy issue JinkoSolar Holding Co., Ltd. (NYSE:JKS). Below, we'll break down how options traders are positioning themselves, and how much speculators are willing to pay for their bets on GDP, ISIS, and JKS.

  • GDP, which will release its fourth-quarter earnings report tomorrow morning, has been a technical laggard, with the shares down 65.6% year-over-year -- including a 5.5% drop so far today amid a resumed downtrend in oil -- to reach $4.45. Meanwhile, put activity in the equity's short-term options pits is nearing an annual peak, as Goodrich Petroleum Corporation's Schaeffer's put/call open interest ratio (SOIR) of 0.81 sits just 2 percentage points away from the highest reading taken over the past year. What's more, short interest accounts for over half of the equity's available float. Traders betting on additional downside for GDP have history on their side -- in the session following its last eight earnings reports, the shares of GDP have fallen an average of 4.2%. Traders are paying relatively cheap prices for their near-term bets on the stock, as its Schaeffer's Volatility Index (SVI) of 108% sits in the 36th percentile of all similar readings taken over the past year.

  • ISIS, which will also report fourth-quarter earnings tomorrow morning, has been sliding over the past month, with the shares down over 10.3% since notching an all-time high of $75.24 on Jan. 13 to hit $67.47. Accordingly, bearish sentiment in the options pits is ramping up, as ISIS Pharmaceuticals, Inc.'s 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.47 sits in the 80th percentile of its annual range. Additionally, in the session following its last four earnings reports, ISIS has lost an average of 2.8%, including a 9.5% drop in February of last year. Near-term options for the security are available for bottom-of-the-barrel prices, as its SVI of 56% sits in the 13th percentile of its annual range.

  • Since hitting an annual low of $16.10 on Jan. 20, JKS has been in recovery mode, with the shares advancing 35.7% to reach $21.84. In the options pits, put activity has been extremely prevalent ahead Monday morning's scheduled fourth-quarter earnings release. Specifically, JinkoSolar Holding Co., Ltd.'s SOIR of 1.68 sits in the 99th percentile of its annual range, showing that short-term speculators have rarely been this put-skewed over the past year. Meanwhile, in the session following its last four earnings reports, JKS has lost an average of 3.4%, with the equity failing to have a positive post-earnings session since Nov. 18, 2013. Historically speaking, speculators are paying inexpensive prices for their bets on the stock, as its SVI of 67% sits in the 28th percentile of all similar readings taken over the past year.

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Analyst Update: Avago Technologies Limited, American Express Company, and Town Sports International Holdings, Inc.

Analysts adjusted their ratings on Avago Technologies Ltd (AVGO), American Express Company (AXP), and Town Sports International Holdings, Inc. (CLUB)

by 2/26/2015 12:06 PM
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Analysts are weighing in today on semiconductor firm Avago Technologies Ltd (NASDAQ:AVGO), blue chip American Express Company (NYSE:AXP), and fitness club operator Town Sports International Holdings, Inc. (NASDAQ:CLUB). Here's a quick look at today's brokerage notes on AVGO, AXP, and CLUB.

  • Last night, AVGO announced it is acquiring Emulex Corporation (NYSE:ELX) for $8 per share in cash (or more than $600 million total), and released an earnings report highlighted by impressive second-quarter profits and triple-digit revenue growth. In response, no fewer than 16 brokerage firms upped their price targets on Avago Technologies Ltd, boosting the shares to a fresh all-time high of $129.25 before settling at $127.82, for a 13.4% gain so far on the day. Drilling down, the loftiest price target came from RBC, which hiked its target to $150, followed by Morgan Stanley, Brean Capital, Sterne Agee, and Canaccord Genuity, which all lifted their price targets to $145. AVGO has advanced about 27.1% so far in 2015, and accordingly, calls are popular in the stock's options pits -- over the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 4.13 AVGO calls have been bought to open for every put.

  • Yesterday, a spokeswoman for AXP said the company has raised interest rates on several credit card accounts by an average of 2.5 percentage points, prompting Deutsche Bank to lift its price target on the security to $90 from $88, and its rating to "buy" from "hold." On the charts, the shares are up nearly 1.2% this morning to trade at $83.11, chipping away at a 10.7% year-to-date deficit. Despite American Express Company's recent technical woes, bullish sentiment is popular in the stock's options pits. Specifically, AXP's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.54 sits just 7 percentage points away from the highest similar reading taken over the past year.

  • CLUB also had a big day in the news yesterday, as the company released a disappointing fourth-quarter earnings report and announced that it might put itself up for sale. Reacting was Craig-Hallum, which upped its price target to $6 while reiterating a "hold" opinion, sending the shares up 6.4% to reach $7.18. Looking back, Town Sports International Holdings, Inc. has been in recovery mode, with the shares up 79% since hitting a multi-year low of $4.01 on Aug. 12. Not surprisingly, call activity has reached fever pitch in the options pits, as CLUB's Schaeffer's put/call open interest ratio (SOIR) of 0.11 is its lowest reading taken over the past year. Simply stated, near-term speculators have never been more call-skewed over the past 12 months.

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