Schaeffer's Trading Floor Blog

Analyst Update: Cliffs Natural Resources Inc, BlackBerry Ltd, and Hewlett-Packard Company

Analysts offered their two cents on CLF, BBRY, and HPQ

by 12/17/2014 11:36 AM
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U.S. stocks are higher in early trading, as crude oil extends its rebound and speculators await an announcement on diplomatic relations with Cuba and this afternoon's Federal Open Market Committee (FOMC) policy statement. Among equities attracting the attention of analysts are commodities concern Cliffs Natural Resources Inc (NYSE:CLF), mobile phone maker BlackBerry Ltd (NASDAQ:BBRY), and tech titan Hewlett-Packard Company (NYSE:HPQ).

  • CLF has plummeted 10.4% to $6.09, and earlier touched a 10-year low of $5.63, yet Credit Suisse expects the stock to steepen its slide by quite a bit. The brokerage firm today slashed its price target on Cliffs Natural Resources Inc to $1 from $10, and reiterated an "underperform" opinion, saying the company's "balance sheet handicap is simply too great." In 2014, CLF has now surrendered more than three-quarters of its value, so it's no surprise to find most analysts already in the bears' corner. Just one offers up a "strong buy" opinion, compared to seven "holds" and four "sell" or worse ratings. There could be more price-target cuts on the way, though, as the average 12-month price target of $8.18 represents a premium of 34.3% to CLF's current perch. Elsewhere, short sellers are likely cheering the equity's retreat, as more than half of the stock's float is dedicated to short interest.

  • BBRY is flirting with a 1.9% gain at $9.69, as traders applaud the company's highly anticipated Classic device launch and an upbeat analyst note. Specifically, BGC Financial upgraded BlackBerry Ltd to "buy" from "hold," and lifted its price target to $12.50 from $11. The shares have muscled 30.4% higher year-to-date, yet analysts remain unconvinced. Just one out of 19 brokerage firms deems BBRY worthy of a "buy" or better rating, meaning more upgrades could be coming down the pike. Furthermore, short interest makes up 23.2% of BBRY's total available float, representing more than nine sessions' worth of pent-up buying demand, at the stock's average pace of trading. As the shares extend their upward momentum, a short-squeeze situation could add fuel to the fire.

  • Finally, HPQ has added 2.6% to trade at $38.29, after Morgan Stanley upped its view of the IT hardware industry to "in line" from "cautious." The brokerage firm also hiked its price target on HPQ by $4 to $44 -- representing a new three-year high -- and underscored an "overweight" assessment. Hewlett-Packard Company has soared roughly 37% in 2014, led higher atop its 10-week and 40-week moving averages. Nevertheless, option traders have purchased HPQ puts over calls at a near-annual-high clip during the past two weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), as the stock's 10-day put/call volume ratio of 1.16 stands higher than 97% of all other readings from the past year. Considering HPQ's long-term ascent, though, some of those puts may have been purchased by shareholders looking to lock in profits.

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Herzfeld Caribbean Basin Fund, Inc (CUBA) Surges On Obama's Bold Move

Herzfeld Caribbean Basin Fund, Inc tagged a fresh seven-year high earlier

by 12/17/2014 11:33 AM
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Herzfeld Caribbean Basin Fund, Inc (NASDAQ:CUBA) -- which is tied to equities principally traded in the Caribbean Basin country -- has rallied nearly 43% today to linger near $9.71, and earlier hit a fresh seven-year peak of $9.87. Stoking the bullish flames are reports that the U.S. and Cuba will begin diplomatic discussions.

More details should emerge when President Barack Obama and Cuban President Raul Castro -- who spoke by phone earlier today -- take the podiums in their respective countries at 12 p.m. ET to formally announce a prisoner swap. Additionally, Obama is expected to unveil a number of changes to current travel and economic restrictions.

Should the strides taken between the two nations continue to benefit Herzfeld Caribbean Basin Fund, Inc (NASDAQ:CUBA) -- which is now in the black on a year-to-date basis -- a short-covering rally could ensue. Short interest surged 49.4% over the past two reporting periods, and at the fund's average daily pace of trading, it would take more than six sessions to cover all of these bearish bets.

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Analyst Upgrades: CVS Health Corp, Salix Pharmaceuticals, Ltd., and VeriFone Systems Inc

Analysts upwardly revised their ratings on CVS, PAY, and SLXP

by 12/17/2014 9:27 AM
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Analysts are weighing in today on pharmacy chain CVS Health Corp (NYSE:CVS), drug developer Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP), and electronic payments facilitator VeriFone Systems Inc (NYSE:PAY). Here's a quick roundup of today's bullish brokerage notes on CVS, SLXP, and PAY.

  • Following yesterday's announcement of a new share buyback program, CVS has been on the receiving end of price-target hikes from no fewer than seven analysts. The most ambitious among them is Guggenheim, which is targeting a move up to $110 -- a record high -- and calling the stock a "buy." Taking a step back, CVS Health Corp has run 29% higher this year to settle at $92.31 yesterday, so it shouldn't come as any surprise that Wall Street is behind the stock. Sixteen out of 19 covering analysts rate the shares a "buy" or better -- compared to three "holds" and not a single "sell" -- while less than 1% of CVS' float is sold short.

  • SLXP said yesterday it will clear excess inventory by the end of 2015 (subscription required) -- a year earlier than expected -- prompting a round of bullish brokerage attention overnight. In fact, no fewer than five analysts upped their price targets, including a $30 boost to $147 at Canaccord Genuity, which also reaffirmed its "buy" assessment on the equity. Meanwhile, Salix Pharmaceuticals, Ltd. has tacked on roughly 30% year-over-year to trade at $110.11, but has failed to win over options traders. Speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open close to four puts for every call during the last two weeks, yielding a 10-day put/call volume ratio of 3.96 -- in the 98th annual percentile. Given SLXP's technical tenacity, a portion of these put purchases may have been at the hands of shareholders hedging against a pullback.

  • Finally, a post-earnings rush of bullish brokerage attention on PAY is continuing this morning, with the shares scoring an upgrade to "overweight" from "equal weight" at Barclays, as well as an $11 price-target boost to $47. On the charts, the stock has provided plenty of reasons for such optimism, advancing 28% year-to-date to perch at $34.34, assisted by support from its 50-week moving average. In recent weeks, however, short sellers have increasingly set their sights on VeriFone Systems Inc. Specifically, short interest rose 43.5% during the latest reporting period to more than 4 million shares -- though this represents less than 4% of PAY's total float.

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Analysts are weighing in today on electric automaker Tesla Motors Inc (NASDAQ:TSLA), commodity concern United States Steel Corporation (NYSE:X), and telecommunications giant Verizon Communications Inc. (NYSE:VZ). Here's a quick roundup of today's bearish brokerage notes on TSLA, X, and VZ.

  • Morgan Stanley cut its price target on TSLA to $290 from $320 -- but maintained its "overweight" rating -- although this still represents expected upside of nearly 47% to last night's close at $197.81, TSLA's first finish south of $200 since May. In fact, the stock hasn't traded north of $290 on an intraday basis since Sept. 4, when it hit a record peak of $291.42, and has shed 32% during this time frame. Plus, the security notched a second consecutive close south of its 320-day moving average on Tuesday, something that hasn't happened since early November 2012. Against this backdrop, option traders have been growing increasingly pessimistic, as evidenced by Tesla Motors Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.19, which ranks at an annual bearish peak.

  • X was slapped with a price-target reduction to $31 at Jefferies, which also underscored its lukewarm "hold" recommendation. This bearish brokerage note isn't too surprising, considering X has surrendered 40% since hitting a three-year high of $46.55 in mid-September. Should United States Steel Corporation continue to struggle, another round of downwardly revised analyst ratings could be on the horizon. There are currently six "strong buy" ratings levied toward the stock, versus four "holds" and three "sell" or worse suggestions. Additionally, the average 12-month price target of $43.31 stands at a 55.2% premium to Tuesday's settlement at $27.90 -- and in territory not charted since late September.

  • Bernstein weighed in on VZ this morning, lowering its price target on the shares by $3 to $54. The brokerage firm did reiterate its "outperform" rating, however, echoing the general consensus on the Street. Meanwhile, Goldman Sachs downgraded VZ to "neutral" and slashed its price target by $7 to $48. Eighteen out of 24 analysts covering the equity maintain a "buy" or better recommendation, with not a single "sell" to be found. Elsewhere, the consensus 12-month price target of $52.98 stands 16.4% higher than last night's close at $45.53, and within striking distance of the shares' July 29 annual high of $53.66. On the charts, Verizon Communications Inc. has put in an uninspiring performance in 2014, and is down 7.3%. More recently, the stock has struggled along with its sector peers, and is 10% lower on a month-to-date basis.

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Buzz Stocks: Auspex Pharmaceuticals Inc, FedEx Corporation, and Sony Corp (ADR)

Today's stocks to watch in the news include ASPX, FDX, and SNE

by 12/17/2014 9:04 AM
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Futures are headed higher in electronic trading, ahead of this afternoon's policy statement from the Federal Open Market Committee (FOMC). In company news, today's stocks to watch include drugmaker Auspex Pharmaceuticals Inc (NASDAQ:ASPX), package delivery specialist FedEx Corporation (NYSE:FDX), and electronics guru Sony Corp (ADR) (NYSE:SNE).

  • ASPX is pointed nearly 83% higher ahead of the bell, following a successful late-stage trial on its chorea treatment. By reducing the involuntary movements associated with Huntington's disease -- a condition called chorea -- the drug (SD-809) significantly improved quality of life for patients, and reduced anxiety and depression rates. Moving to the charts, as of yesterday's close at $25.09, Auspex Pharmaceuticals Inc had advanced 67.3% since going public in early February. Not surprisingly, all seven brokerage firms covering the stock rate it a "strong buy," and its consensus 12-month price target of $41.83 sits in uncharted territory. This morning, in fact, a trio of analysts upped their price targets on ASPX -- BMO (to $60), Stifel (to $61), and Ladenburg (to $44) -- while reaffirming the equivalent of "buy" opinions.

  • FDX's fiscal second-quarter earnings rose year-over-year, but fell shy of the Street's consensus estimate. The firm also reiterated its 2015 per-share profit outlook of $8.50 to $9, anticipating benefits from lower fuel costs and moderate economic growth. Following these results, FedEx Corporation is down 3.7% in electronic trading, which would eat into its 21.2% year-to-date lead, based on Tuesday's close at $174.26. Ahead of the quarterly report, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) had been betting bullishly. FDX's 10-day call/put volume ratio across this trio of exchanges is 1.59, in the 84th percentile of its annual range.

  • Finally, SNE is grabbing headlines this morning, as its movie studio announced it will likely release the anti-North Korea comedy "The Interview," despite opposition from a group of hackers called the Guardians of Peace. However, the New York premiere of the film has been canceled -- allegedly because the Guardians of Peace threatened a cyber attack against the hosting theater. As if that isn't enough, several former Sony Pictures Entertainment employees are now suing the studio for failing to protect their personal data, which was illegally stolen and publicized late last month by the aforementioned hackers. Taking a step back, parent company Sony Corp (ADR) has had a solid 2014, tacking on 14% to rest at $19.72. Nevertheless, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio is docked at an annual high of 2.11, with more than two puts bought to open for every call in the last two weeks.

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