Analyst Update: Chesapeake Energy, Level 3 Comm, Agrium

Analysts weighed in on CHK, LVLT, and AGU

Nov 6, 2014 at 2:38 PM
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Markets are flirting with record highs today, as traders cheer stimulus chatter from across the pond. Among equities attracting attention are oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK), telecom services specialist Level 3 Communications, Inc. (NYSE:LVLT), and agricultural firm Agrium Inc. (USA) (NYSE:AGU).

  • Despite yesterday's earnings-induced pop, CHK saw its price target reduced to $33 from $37 at SunTrust Robinson this morning, although the brokerage firm maintained its "buy" rating. Today, the shares are 1.2% lower to trade at $22.49, amid reports the company has been subpoenaed by the Department of Justice and a number of states over royalty payments. Wednesday's upside was a bit of an anomaly for CHK, which has shed roughly one-quarter of its value since hitting an annual high of $29.92 in early July. Not surprisingly, sentiment around the Street is skewed toward the skeptical side. In the options arena, the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.23 ranks in the 95th annual percentile. Elsewhere, short interest jumped 10.2% in the latest reporting period, and now accounts for a healthy 8.7% of the stock's available float.

  • Jefferies weighed in on LVLT following Wednesday's quarterly earnings announcement -- and the stock's first day as a member of the S&P 500 Index (SPX) -- boosting its price target to $56 from $55, and underscoring its "buy" rating. The equity is failing to capitalize on this upbeat outlook, though, and was last seen 1.4% lower at $46.18. Longer term, Level 3 Communications, Inc. has been a standout on the charts, and has tacked on 39% year-to-date. Should LVLT resume its uptrend, an unwinding of skepticism could help propel the shares higher. At the ISE, CBOE, and PHLX, for instance, LVLT's 10-day put/call volume ratio of 1.46 ranks higher than 81% of similar readings taken in the past year. Outside of the options pits, short interest accounts for 10.6% of the security's available float, representing nearly seven sessions' worth of pent-up buying demand, at average daily trading levels.

  • It's been a big week for AGU, which reported third-quarter earnings, hosted its annual analyst day, and, most recently, said it is taking an equity stake in CH Biotech. CIBC and BMO appear to have taken kindly to the fundamental developments, and raised their respective price targets to $118 and $105 overnight. On the charts, the stock gapped sharply higher on Oct. 24, after ValueAct Capital Management LLC disclosed a stake in Agrium Inc. (USA), and has yet to look back. In fact, since its Oct. 23 close at $86.38, the stock has rallied more than 14%. Today, in fact, AGU hit the $98.83 mark -- its loftiest perch since March 2013 -- before easing back to its present price of $98.81. Going forward, the security's momentum could get an additional boost from a round of upgrades. At present, 13 out of 19 analysts maintain a "hold" or "sell" suggestion toward the shares.

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