Deere Earnings Could Leave Buffett With Seller's Remorse

Deere & Company (DE) stock could surge after earnings, if past is prologue

Feb 15, 2017 at 12:26 PM
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Deere & Company (NYSE:DE) is down 1.2% today at $108.75, after Warren Buffett's Berkshire Hathaway Inc. (NYSE:BRK.A) revealed in an SEC filing that it's dissolved a stake in the machinery maker. This is just the latest show of negativity from Wall Street, ahead of DE's earnings report on Friday morning. From options traders to analysts, everyone seems down on the shares.

For starters, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 1.39 puts for every call during the past two weeks. The corresponding put/call volume ratio ranks in the bearishly skewed 78th percentile of its annual range, meaning puts have been bought to open over calls at an accelerated clip.

Analysts echo this glass-half-empty opinion. Thirteen of 19 brokerage firms consider DE a "hold" or a "strong sell." Plus, the stock's average 12-month price target of $102.63 rests below current trading levels. Elsewhere, short sellers have piled on, as 18 million DE shares are sold short. At the stock's average daily volume, it would take about two weeks to cover those bearish bets.

On the charts, DE's been flexing its technical muscles over the long haul. Year-over-year, the stock has tacked on more than 36%, particularly benefiting from post-earnings bull gaps in August and November. If Deere & Company (NYSE:DE) can come close to replicating those single-session gains of 13.5% and 11%, respectively, a capitulation among bearish options traders, analysts, and short sellers could add fuel to the fire.

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