Schaeffer's Trading Floor Blog

Analyst Downgrades: Affymax, H.J. Heinz, Teva Pharmaceuticals Industries

Analysts downwardly revised their ratings on AFFY, HNZ, TEVA

by 2/25/2013 9:29 AM
Stocks quoted in this article:

Analysts are checking in today on drug maker Affymax, Inc. (NASDAQ:AFFY - 16.52), food giant H.J. Heinz Company (NYSE:HNZ - 72.66), and generic drug maker Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA - 38.08). Here's a look at the downgrades so far this morning:

  • After falling 13% on the stock charts so far this year, AFFY was hit with several downgrades this morning. Stifel Nicolaus cut the stock to "hold" from "buy," while AFFY was cut to "market underperform" from "market outperform" by JMP Securities. Also, Baird sliced its rating to "neutral" from "outperform" this morning, followed by MLV & Co. cutting the stock to "hold" from "buy." The moves come after the California-based company has suspended sale and recalled its anemia drug Omontys after five patient deaths. Yesterday's announcement has already pushed the stock down another 84% in pre-market trading. Before this, AFFY already struggling, down more than 36% as compared with the S&P 500 Index (SPX) over the last three months.

  • HNZ has been targeted for a major buyout by a series of investors including Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A). But today, Citigroup cut its rating on the food giant to "neutral" from "buy." The latest rating change moves another analyst into the skeptical camp -- there are now 12 who have a "hold" rating as compared with one "strong buy" and one "buy." Last week, HNZ shares traded briefly above the proposed buyout price of $72.50. The stock has rallied nearly 26% so far this year, and is up 36% year over year. Option traders also appear to be bearish toward HNZ: the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 2.12, meaning that there are more than two puts open for every call among options that expire in the next three months. In addition, that stands just 2 percentage points shy of an annual high when compared to other readings taken in the last year -- meaning traders have rarely been so attracted to puts.

  • Following the trend started earlier this month by other analysts, Argus cut TEVA to "hold" from "buy" this morning -- the third downgrade on the stock since early February. Shares have been underperforming the SPX over the last 60 trading days, but option traders have a bullish attitude for the stock. The 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 3.30, meaning that traders are picking up more than three calls for every put. In addition, that stands higher than all but 38% of other readings in the last 12 months -- meaning traders are leaning toward calls recently.

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