Schaeffer's Trading Floor Blog

Analyst Downgrades: Google Inc, Citigroup Inc, and Amazon.com, Inc.

Analysts downwardly revised their ratings on GOOGL, C, and AMZN

by 4/21/2014 9:31 AM
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Analysts are weighing in today on technology guru Google Inc (NASDAQ:GOOGL), financial kingpin Citigroup Inc (NYSE:C), and e-commerce platform Amazon.com, Inc. (NASDAQ:AMZN). Here's a quick roundup of today's bearish brokerage notes.

  • Bernstein joined the other GOOGL bears on Wall Street, slashing its price target to $700 from $750 this morning, in the wake of the stock's 3.6% earnings-induced fall to $543.34 on Thursday. Still, the average 12-month price target of $662.54 stands at a roughly 22% premium to GOOGL's current price, and 25 of the 29 covering analysts maintain their "buy" or better endorsements on the stock.

  • C -- which is down 7.5% year-to-date to trade at $48.22 -- received a $1 price-target cut to $67 at Nomura earlier today. In the options pits, meanwhile, Citigroup Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.79 ranks in the bottom quartile of its 12-month range, indicating short-term speculators have been more call-heavy than usual toward the stock. Should C shares continue to fall, a capitulation of bullish bets could be in the cards, creating additional pressure on the charts.

  • Susquehanna lowered its price target on AMZN to $465 from $475, ahead of the company's Thursday evening earnings report. While Amazon.com, Inc. has dropped 18.5% year-to-date to trade at $324.91, its SOIR of 0.81 ranks the lowest of all other comparable readings from the past year, demonstrating short-term calls are being traded over puts at an annual-high pace right now.

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Analyst Upgrades: Advanced Micro Devices, Inc., Under Armour Inc, and Chipotle Mexican Grill, Inc.

Analysts upwardly revised their ratings on AMD, UA, and CMG

by 4/21/2014 9:22 AM
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Analysts are weighing in today on semiconductor concern Advanced Micro Devices, Inc. (NYSE:AMD), athletic apparel name Under Armour Inc (NYSE:UA), and burrito expert Chipotle Mexican Grill, Inc. (NYSE:CMG). Here's a quick roundup of today's bullish brokerage notes.

  • AMD reported positive first-quarter earnings and an encouraging sales forecast for the current quarter Thursday evening, leading Bernstein and FBR to lift their price targets on the stock by $0.50 to $3 and $6, respectively. Heading into the quarterly event, short-term call open interest (relative to put open interest) was at a near-annual-high level. This is evidenced by the fact that the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.88 ranks in the 92nd percentile of its 12-month range. While Advanced Micro Devices, Inc. is down 10.4% from its April 2 month-to-date high of $4.12 to trade at $3.69, the stock is poised to regain much of these losses in today's session.

  • UA -- which is set to enter the earnings confessional Thursday morning -- received a price-target hike to $50 from $48 at Susquehanna this morning. For comparison, the average 12-month price target among analysts is $52.83, representing a slim discount to the equity's current price of $53.06. Furthermore, Under Armour Inc maintains 18 "hold" or worse suggestions, compared to eight "strong buy" recommendations from its covering analysts. Considering the shares are up 29.4% on a three-month basis, more upgrades and/or price-target boosts may be in the cards, which could add more contrarian fuel to UA's fire.

  • While CMG's first-quarter earnings results -- announced Thursday morning -- missed analysts' estimates, they still showed an increase over last year's figures. Subsequently, J.P. Morgan Securities upgraded the stock to "overweight" from "neutral." Technically speaking, Chipotle Mexican Grill, Inc. has shed 9.8% over the past month to trade at $519.61. However, the equity's SOIR of 0.88 ranks lower than all other comparable readings from the past year, demonstrating short-term speculators' preference for calls over puts is higher now than it has been at any time during the previous 12 months.

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Buzz Stocks: General Mills, Inc., Kraft Foods Group Inc, Pfizer Inc., and American Airlines Group Inc

Today's stocks to watch in the news include GIS, KRFT, PFE, and AAL

by 4/21/2014 9:17 AM
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It appears the stock market will sustain its upward momentum from late last week, as futures are pointed higher in pre-market trading. In company news, here are some stocks to watch today:

  • Following the public outcry over a change to its terms of service, General Mills, Inc. (NYSE:GIS) has scrapped the revised language and returned to the original terms. The now-voided language could have limited customers' right to sue GIS, saying, "all disputes related to the purchase or use of any General Mills product or service [are] to be resolved through binding arbitration." (CNNMoney)

  • Kraft Foods Group Inc (NASDAQ:KRFT) has issued a recall of nearly 100,000 pounds of "Oscar Mayer Classic Wieners" packages because they may actually contain "Classic Cheese Dogs." Fortunately, despite the prevalence of milk allergies, there have been no reports of illness caused by the consumption of cheese -- which isn't an ingredient in the Classic Wieners, and thus, isn't listed on the packaging. (USA Today)

  • Despite having a $101 billion takeover bid rejected, Pfizer Inc. (NYSE:PFE) may continue its pursuit of AstraZeneca plc (ADR) (NYSE:AZN). PFE is especially interested in AZN's immunotherapies, which strengthen the body's ability to fight cancerous tumors. (Reuters)

  • A federal judge has denied AMR Corp. -- now a part of American Airlines Group Inc (NASDAQ:AAL) -- the right to cut off the retiree benefits of former union workers, even though the firm filed for bankruptcy in 2011. The conflict could now proceed to negotiations or end up in court again. (Associated Press, via Los Angeles Times)

  • Also, Halliburton Company (NYSE:HAL), Hasbro, Inc. (NASDAQ:HAS), and Kimberly Clark Corp (NYSE:KMB) reported quarterly earnings. (MarketWatch; Reuters)

  • Finally, a teenage boy recently snuck aboard a Hawaiian Holdings, Inc. (NASDAQ:HA) flight to Maui from San Jose, Calif., and survived -- despite being stuck in the wheel well for the duration of the trip. An FBI spokesman said the boy was unconscious for the majority of the flight and remembers nothing. (Mashable)


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Options Check-Up: Facebook Inc (FB), Tesla Motors Inc (TSLA), and SINA Corp

Analyzing recent option activity for FB, TSLA, and SINA

by 4/21/2014 8:24 AM
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Among the equities attracting attention from options traders lately are social media giant Facebook Inc (NASDAQ:FB), electric car maker Tesla Motors Inc (NASDAQ:TSLA), and Chinese Internet concern SINA Corp (NASDAQ:SINA). Below, we'll look at how options buyers are betting on FB, TSLA, and SINA, and how much they are willing to pay to do so.

  • Short-term options are growing more expensive as Facebook Inc (NASDAQ:FB) prepares for its post-close turn in the earnings confessional on Wednesday. The stock's Schaeffer's Volatility Index (SVI) now sits at 62%, above 65% of all other readings from the past year, suggesting short-term contracts are fetching a pretty penny, from a volatility standpoint. Digging deeper, traders have purchased FB puts over calls at a near-annual-high clip during the past two weeks, as the equity's 10-day put/call volume ratio of 0.60 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands just 2 percentage points from a 52-week peak. Echoing that, FB on Thursday saw roughly 149,000 puts change hands -- a 13% mark-up to its average daily volume. By the close, Facebook Inc shares gave up 1.3% to settle at $58.94.

  • Tesla Motors Inc (NASDAQ:TSLA) has also been more popular than usual among option bears of late. The stock sports a 10-day put/call volume ratio of 1.05 on the ISE, CBOE, and PHLX, which registers in the 94th percentile of its annual range. Meanwhile, the equity's Schaeffer's Volatility Scorecard (SVS) stands at a lofty 98, implying that TSLA has tended to make outsized moves relative to what the options market has priced in -- a boon for option buyers. Analysts are also skeptical when it comes to the automaker, as seven out of 12 brokerage firms maintain "hold" or "sell" opinions. While the equity has given back about a quarter of its value since tagging a record high of $265 in late February, the stock remains almost 32% higher year-to-date, closing a choppy session at $198.12 on Thursday.

  • SINA Corp (NASDAQ:SINA) notched a gain of 6.7% on Thursday to finish at $56.55, thanks to a solid IPO from Weibo Corp (ADR) (NASDAQ:WB), of which SINA owns a majority stake. One speculator is counting on more upside for the shares over the intermediate term, initiating a three-legged, bullishly biased spread in the September series. Specifically, the trader sold to open September 40 puts and September 70 calls, and bought to open September 60 calls, resulting in a net debit of $1.03 per trio of contracts. The spread will be profitable if SINA ends atop $61.03 (bought call strike plus net debit) when September-dated options expire. While the stock hasn't been much to write home about on the charts -- it's shed almost a third of its value in 2014, and Thursday marked its first daily close atop its 10-day trendline since March 17 -- short-term options speculators were already in the bulls' corner. In fact, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.39 stands higher than just 22% of all comparable readings from the past year. What's more, those options are slightly more expensive than usual, as evidenced by SINA's SVI of 63%, in the 57th percentile of its annual range.

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Reading the VIX Tea Leaves for Signs of a Shift

Tracking the 'large amount of noise' in today's choppy trading environment

by 4/21/2014 7:30 AM
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There's a theory out there that volatility picks up right before a market turn. Well, we're certainly getting that volatility pickup, especially in the Nasdaq as we noted last week.

The big question though is, which move are we about to reverse? Is it the longer-term bull move that's ending? We can say it goes back to 2012, 2011, or 2009 -- it depends on your definition. Or is it the shorter-term choppiness that's about to end? That, I would say, goes back to the turn of the year into 2014.

Something significant is clearly going on -- we haven't had intraday volatility like we saw last week in quite some time. We'll just have to wait a bit more to see which way we break, but it sure feels like it's about to happen.

SPDR S&P 500 ETF (SPY) looked scary early on, before recovering to put in a pretty strong shortened week. We lifted 2.7% in four days, just about reversing all the ugliness from the week before. I noted last week that the CBOE Volatility Index never got extreme … at least in my subjective view of how it "should" act in a market as ugly as the end of the week before. Well, apparently it got extreme enough. It dropped a cool 21.5%, back to right where it closed two weeks ago.

In a calmer market, VIX would have likely looked way worse last week as it is generally a slow trade into extended holiday weekends. That's especially true when it's also an expiration. At least that used to be true … the popularity of weekly options has diminished expiration effects on options. Or rather, it's diffused the effects.

In big-cap world, 2014 has barely even happened net-net. It's an incredibly large amount of noise for a gain of around 1%.

Meanwhile, our good friend iPath S&P 500 VIX Short-Term Futures ETN (VXX) continues to shine … or at least not get clocked. It's now up to 61 trading days without hitting all-time lows. Its the fourth-longest streak EVER! OK, "EVER" only goes back five years, but still…

And we're within striking distance of hitting third place all time. That would be a 67-day streak from March to June in 2012. It's meaningless, of course, as VXX is a path-driven derivative that proxies a hypothetical rolling future that seeks to divine the forward value of a statistic. But hey, it's fun. The key number is $39.85 … and we're one good market week away from getting there.

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


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