Analyst Update: Alibaba, Netflix, Advanced Micro Devices

Analysts are chiming in on BABA, NFLX, and AMD

Karee Venema
Oct 17, 2014 at 12:18 PM
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Stocks are soaring today, as traders cheer a round of upbeat quarterly earnings, economic data, and dovish comments from a handful of Fed officials. Among equities in focus, China-based e-commerce concern Alibaba Group Holding Ltd (NYSE:BABA), streaming giant Netflix, Inc. (NASDAQ:NFLX), and semiconductor issue Advanced Micro Devices, Inc. (NYSE:AMD) have all attracted the attention of analysts.

  • BABA is 0.8% higher today after Brean Capital started the shares with a "buy" rating and $110 price target -- representing expected upside of 22.8% to the equity's current perch at $89.59, and a move into territory yet to be charted by the shares. The bullish brokerage note comes on the heels of news BABA has expanded its cloud service in China, and ahead of its inaugural trip into the earnings confessional as a publicly traded company, tentatively slated for the third week of November. Since Alibaba Group Holding Ltd's Sept. 19 IPO, the shares have shed nearly 3.4%, yet option traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have shown a preference for long calls over puts in recent weeks. Specifically, the equity has racked up a call/put volume ratio of 2.03 on this trio of exchanges over the past 10 sessions.

  • It's been a rough week for NFLX, and today, the shares are off 3.6% at $348.56, after Goldman Sachs cut its price target on the equity to $450 from $550. However, the brokerage firm underscored its "buy" rating, echoing the majority of the 29 analysts following the stock. This optimism is echoed in the options pits, where the security sports a 50-day ISE/CBOE/PHLX call/put volume ratio of 1.04, which ranks just 6 percentage points from a 52-week peak. Additionally, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.93 ranks lower than 95% of similar readings taken in the past year, meaning short-term speculators have rarely been as call-skewed toward Netflix, Inc. as they are now.

  • AMD's third-quarter earnings miss and dismal fourth-quarter outlook prompted a wave of bearish brokerage notes, with the most skeptical outlook coming from Bernstein, which cut its price target to $2 from $3, while reiterating its "underperform" rating. Not all brokerage firms took the glass-half-empty approach, as Pacific Crest upgraded the shares to "sector perform" from "underperform," citing new leadership and "prospects in both the embedded and ARM server market in 2015-2016." Wall Street is forgiving, though, with AMD up 3.6% at $2.73, as traders cheer Advanced Micro Devices, Inc.'s restructuring efforts; specifically, a 7% haircut to its workforce. Heading into last night's report, pessimism was pretty easy to find toward a stock that's surrendered 29% of its value year-to-date. Today, however, option bulls have emerged, with buy-to-open activity detected at the equity's November 3 call.

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