Schaeffer's Trading Floor Blog

Analyst Upgrades: Crocs, Inc., GrubHub Inc, and Lululemon Athletica inc.

Analysts upwardly revised their ratings on CROX, GRUB, and LULU

by 12/16/2014 9:25 AM
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Analysts are weighing in today on molded shoe manufacturer Crocs, Inc. (NASDAQ:CROX), online food-ordering portal GrubHub Inc (NYSE:GRUB), and yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU). Here's a quick roundup of today's bullish brokerage notes on CROX, GRUB, and LULU.

  • Following last night's appointment of a new CEO, CROX was upgraded to "buy" from "neutral" at Sterne Agee. These developments have the shares up 5.7% ahead of the open -- though, as of last night's close at $12.16, they're down 23.6% year-to-date. Today's projected rally is bad news for Crocs, Inc. short sellers. Nearly 9% of the stock's float is sold short, which would take roughly 12 sessions to buy back, at CROX's typical daily trading levels.

  • Goldman Sachs raised its assessment of GRUB to "buy" from "neutral," despite the stock's recent slide. Specifically, since hitting a record high of $45.80 in mid-August, the shares have given back 30.7% to rest at $31.74. However, the bullish analyst note has GrubHub Inc pointed 2% higher in electronic trading. Taking a step back, Goldman Sachs isn't alone in its optimism; seven out of nine covering analysts have given the shares a "buy" or better rating, compared to two "holds" and not a single "sell." What's more, GRUB's consensus 12-month price target stands at a lofty $45.75 -- just shy of its all-time peak.

  • Finally, LULU received a price-target hike to $62 from $60 at SunTrust Robinson, which also reiterated its "buy" opinion. This stock has been on a tear in December, up almost 12% month-to-date at $53.87, helped recently by a well-received turn in the earnings confessional. What's more, Lululemon Athletica inc. has outperformed the broader S&P 500 Index (SPX) by 29.4 percentage points over the last three months. Not surprisingly, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been upping the bullish ante in recent months. LULU's 50-day call/put volume ratio across this trio of exchanges is 2.54 -- just 11 percentage points shy of a 12-month high.

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Analyst Downgrades: General Motors Company, Priceline Group Inc, and The Coca-Cola Co

Analysts downwardly revised their ratings on GM, PCLN, and KO

by 12/16/2014 9:24 AM
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Analysts are weighing in today on automaker General Motors Company (NYSE:GM), online travel issue Priceline Group Inc (NASDAQ:PCLN), and beverage stalwart The Coca-Cola Co (NYSE:KO). Here's a quick roundup of today's bearish brokerage notes on GM, PCLN, and KO.

  • One day after GM announced a fresh round of faulty ignition claims, RBC downgraded the stock to "sector perform" from "outperform," and cut its price target to $35 from $41. Against this backdrop, the stock is pointed lower ahead of the bell -- and on pace to extend its 24.2% year-to-date decline. What's more, the door is wide open for other brokerage firms to follow in RBC's footsteps. Currently, 58% of analysts covering General Motors Company maintain a "buy" or better rating, while the average 12-month price target of $40.38 stands at a 30% premium to last night's close at $31 -- and in territory not charted since January.

  • Goldman Sachs removed PCLN from its coveted "Conviction Buy" list, citing forex concerns. The brokerage firm did, however, maintain a "buy" rating on the equity. On the charts, Priceline Group Inc is down 7.2% year-to-date, and following several recent rejections from its 320-day moving average, was last seen trading at $1,078.64. Option traders have kept the faith, though, as evidenced by PCLN's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.16, which ranks in the 93rd annual percentile. Simply stated, calls have been bought to open over puts at a faster clip just 7% of the time within the past year.

  • KO was hit with a trio of price-target cuts, after the company reiterated a lackluster full-year profit forecast -- and a notable shareholder called for a changing of the guard. The most pessimistic outlook came from Jefferies, which reduced its target by $2 to $40 -- and underscored its "hold" rating -- roughly in line with last night's closing price of $40.57. It's been a tough month for The Coca-Cola Co, which is off 9.5%. Amid this decline, the stock has seen a shift in sentiment among option traders. At the ISE, CBOE, and PHLX, the stock's 10-day put/call volume ratio of 1.49 ranks just 8 percentage points from an annual bearish peak. Additionally, KO's Schaeffer's put/call open interest ratio (SOIR) of 1.11 rests higher than 91% of similar readings taken in the past year, meaning short-term speculators are more put-skewed than usual toward the stock.

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Buzz Stocks: BlackBerry Ltd, CVS Health Corp, and Talisman Energy Inc. (USA)

Today's stocks to watch in the news include BBRY, CVS, and TLM

by 12/16/2014 9:15 AM
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Intensifying fears about the future of Russia's economy are pressuring U.S. futures lower this morning. In company news, today's stocks to watch include handset maker BlackBerry Ltd (NASDAQ:BBRY), pharmacy chain CVS Health Corp (NYSE:CVS), and oil-and-gas producer Talisman Energy Inc. (USA) (NYSE:TLM).

  • BBRY is selling enterprise services to Vodafone Group Plc (ADR) (NASDAQ:VOD), the latter of which secured an $850 million loan from Export Development Canada (EDC), the nation's independent financial arm. "Vodafone's global presence makes it a company that Canada's telecom sector has to have a relationship with," EDC Senior Vice President Carl Burlock said. BlackBerry Ltd is rising ahead of the bell on this news, and is already up 52.2% year-over-year to trade at $9.43. A continued run up the charts could prompt analysts to rethink their negative stance toward the equity, via a round of upgrades. Despite its technical tenacity, BBRY has received just one "buy" rating, versus 14 "holds" and four total "sell" recommendations.

  • CVS revealed a new $10 billion share repurchasing initiative that will last for the next several years, adding to an already existing $2.7 billion buyback program. Additionally, the firm said it will up its quarterly dividend by 27% to 35 cents per share early next year. On the charts, CVS Health Corp has rallied an impressive 32.6% year-over-year to perch at $89.87, and outstripped the broader S&P 500 Index (SPX) by 11.8 percentage points over the last three months. Option traders, however, aren't necessarily on the stock's bullish bandwagon. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CVS has racked up a put/call volume ratio of 0.76, in the 72nd percentile of its annual range. Of course, a portion of these bets may have been at the hands of shareholders hedging against a potential pullback.

  • Finally, recent takeover talks between TLM and Repsol SA have borne fruit, as the latter has agreed to purchase the former for $13 billion. Madrid-based Repsol has sought a foothold in the North American energy market for some time, and CEO Josu Jon Imaz said he was eager to secure the deal since "our valuation of Talisman assets is higher than the price we are paying." TLM is soaring on the news, up nearly 48% ahead of the bell, despite a price-target cut to $5 from $7 at Barclays. This could be bad news for option traders, who are decidedly more bearish toward the equity than usual. TLM's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.48 ranks higher than 88% of similar readings taken in the last year.

Editor's Note: An earlier version of this article misstated the nature of the BBRY/VOD deal. We apologize for the error.

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2015 Predictions: Will the Pundits Get It Right This Year?

Can we expect the same ol' forecasts for the S&P 500 Index (SPX) and CBOE Volatility Index (VIX)?

by 12/16/2014 9:03 AM
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It's nearing the end of the year, which of course means it's time to start making predictions for next year. So here we go!

The market will go up 8-10% next year: That's a safe prediction. Anybody who is anybody on TV always says the market is going up about this amount next year. And then they show up on TV at the end of the year and say it again. I assume it's the long-term median. If I entered some sort of contest and wanted to win it for whatever reason, I would answer that I expect either a 10% decline or a 30% rally. And that answer would have no relationship to what I actually expect; I just want an outlier. What difference does it make if I miss by 30%? It's the same as missing by 3%, as far as winning a contest is concerned. On TV, though? It's probably best to go conservative. Someone might remind me that I missed by more than a tad.

Actually, who am I kidding, the best plan is to call for an implosion -- and then keep calling for it. Eventually, the market tanks and you can say you "called" it. So that's my call. Big declines!

Do I really believe that? Honestly, the best call is "the present trend will continue." Slow-paced rally! Maybe those calling for 8-10% upside actually have it right this time, at least as far as probability is concerned.

Volatility will pick up: We wrote about this a while back. No one ever says that volatility will go lower going forward. CBOE Volatility Index (VIX) futures never expect it. And, when they do, it's because VIX itself has actually flown higher. So unless VIX itself has already lifted, it's safe to say volatility will lift next year.

My real prediction is that VIX will see three or four blasts next year. In fact, that's my prediction every year. Real and lasting VIX turns don't happen all that often. A longer-term turn up is probably coming within the next couple of years, but you can go broke trying to time it. Check out that iPath S&P 500 VIX Short-Term Futures ETN (VXX) chart since January 2009.

Next year will be a stock picker's market: No one gets on TV and says "it doesn't really matter what stocks you buy, you're better off just indexing." They're paid to beat their benchmarks. If they don't, why am I paying those fees again? I certainly don't begrudge anyone talking their book. It's their livelihood. In some alternate universe, though, the host wouldn't ask the question to begin with.

The Giants will win the Super Bowl: It's not too early to say Odell Beckham Jr. is the best wide receiver in the NFL. He might be the second best ever after Jerry Rice. How tough is it to find 45 more great players to surround him with?

While we're at it, let's assume the Mets win the World Series and we all can party like it's 1986-87 again. Of course, last time the Giants and Mets were reigning title holders, the market crashed eight months later. So remind me to get my portfolio ready for the crash of 2016.

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

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Analyst Update: Cheniere Energy, Inc., Capstone Turbine Corporation, and TriQuint Semiconductor

Analysts adjusted their ratings on LNG, CPST, and TQNT

by 12/15/2014 3:31 PM
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Analysts are weighing in today on liquid natural gas specialist Cheniere Energy, Inc. (NYSEMKT:LNG), microturbine concern Capstone Turbine Corporation (NASDAQ:CPST), and radio frequency solutions provider TriQuint Semiconductor (NASDAQ:TQNT). Here's a quick look at today's brokerage notes on LNG, CPST, and TQNT.

  • Even after Credit Suisse reinstated its "outperform" rating and an $84 price target -- a 35.1% premium to its current price of $62.20 -- LNG has dropped 4.1% today. It's just more of the same for a stock that's underperformed the broader S&P 500 Index (SPX) by almost 23 percentage points in the past three months. Options traders foresee more downside on the horizon. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 2.86 Cheniere Energy, Inc. puts for every call in the past two weeks, marking an annual bearish extreme for this reading. This is contrary to the sentiment among brokerage firms, as 60% of analysts covering LNG rate it a "buy" or better.

  • CPST shrugged off a price target cut from FBR (to $2 from $2.50), thanks to news that it received a "substantial order" for a pipeline project in Mexico. The equity was last seen 7% higher at $0.76. Despite today's price-target cut -- and CPST's year-to-date loss of roughly 41% -- all four covering firms have doled out "strong buy" recommendations. Capstone Turbine Corporation's jump today may be the result of a short-squeeze situation, as short interest makes up nearly 15% of the equity's total float. It would take over five weeks for these traders to cover their bearish bets, at CPST's average daily trading volume.

  • D.A. Davidson cut TQNT -- and RF Micro Devices, Inc. (NASDAQ:RFMD), with whom the company is merging later his month -- to "neutral" from "buy." The equity dropped 2.8% today to $25.14, but its year-to-date gain is still an astounding 202%. Sentiment surrounding the stock is mostly bullish. For starters, 67% of covering analysts rate the stock a "buy" or better. Elsewhere, TriQuint Semiconductor's 10-day ISE/CBOE/PHLX call/put volume ratio of 16.35 lands in the 82nd percentile of its annual range.

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