Buzz Stocks: Dunkin Brands, Yelp, Alibaba Group

Today's stocks to watch include DNKN, YELP, and BABA

Oct 23, 2014 at 10:05 AM
facebook twitter linkedin


Stocks are on pace to recover a portion of yesterday's losses, with help from solid earnings from Caterpillar Inc. (NYSE:CAT). In other company news, breakfast behemoth Dunkin Brands Group Inc (NASDAQ:DNKN), online review issue Yelp Inc (NYSE:YELP), and Chinese e-commerce concern Alibaba Group Holding Ltd (NYSE:BABA) are three stocks to watch in today's trading.

  • DNKN is down 6.2% at $43.89, after a full-year sales warning (subscription required) trumped stronger-than-expected third-quarter earnings. The shares of DNKN are now down 9% year-to-date, and could get slapped with a few downgrades. In fact, 10 out of 18 analysts offer up "buy" or better opinions. Meanwhile, the stock's Schaeffer's put/call open interest ratio (SOIR) sits near an annual low at 0.23, implying short-term speculators have rarely been more call-biased during the past year. An unwinding of optimism in the options pits could exacerbate selling pressure on Dunkin Brands Group Inc.

  • In a similar situation is YELP, which has plummeted 16% to $59.07 as its disappointing fourth-quarter guidance overshadows a stronger-than-expected third quarter. More than a dozen analysts have cut their price targets as a result, and Stifel Nicolaus downgraded YELP to "hold" from "buy." (However, B. Riley upped its opinion to "buy" from "neutral.") More than a few options traders will likely be cheering Yelp Inc's earnings miss, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.84 sits in the 81st percentile of its annual range, reflecting a growing appetite for bearish bets over bullish of late. As a result, the security's SOIR is docked at 1.34 -- just 8 percentage points from an annual peak.

  • BABA is up 1.6% at $93.10, amid reports the company is looking to expand its U.S.-made content offerings in China. In addition, Barclays launched coverage of Alibaba Group Holding Ltd with an "overweight" endorsement and a $107 price target -- which would mark a record high for the shares, which have yet to explore triple-digit territory. Most analysts are already fans of BABA, which sports six "strong buy" ratings, compared to not one "hold" or "sell." Ahead of the company's first turn in the earnings spotlight on Tuesday, Nov. 4, short-term options buyers are favoring calls over puts.
 

  

These investors are using the market's volatility to their advantage and scoring triple-digit gains on many of their trades.

Even in today's sideways bear market, this trading strategy has continued to provide consistency and profitability to a small group of investors. By using this approach, these traders are removing directional risk and still hitting triple-digit returns. If you want access to this strategy, and lower risk with higher returns sounds good to you, then don't wait another minute.

Join us now to receive our next trades the moment they come out!

 

Common mistakes options traders make
 


 


 
Special Offers from Schaeffer's Trading Partners