Analyst Downgrades: Biogen, Transocean, DreamWorks

Analysts downwardly revised their ratings on BIIB, RIG, and DWA

Nov 19, 2014 at 9:41 AM
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Analysts are weighing in on biopharmaceutical firm Biogen Idec Inc (NASDAQ:BIIB), oil-and-gas issue Transocean LTD (NYSE:RIG), and entertainment name DreamWorks Animation SKG, Inc. (NASDAQ:DWA). Here's a quick roundup of today's bearish brokerage notes on BIIB, RIG, and DWA.

  • For the second time in a week, BIIB was hit with a bearish brokerage note; this time, from Credit Suisse, which cut its price target by $25 to $400, while reiterating its "outperform" rating. On the charts, the shares are up 9% year-to-date to trade at $304.77, and are currently testing support atop their 60-week moving average -- a trendline that's ushered BIIB higher for more than four years. Option traders have been encouraged by the equity's long-term uptrend, as evidenced by BIIB's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.23, which ranks in the bullishly skewed 73rd percentile of its annual range. This optimism is echoed outside of the options pits, as well, where just 1.1% of the stock's float is sold short.

  • Evercore ISI cut its price target on RIG to $23 from $24 and underscored its "sell" rating, following the company's fleet update. This bearish positioning isn't surprising, considering RIG has lost almost half its value in 2014 to churn near $25.53, and today hit a fresh 10-year low of $25.42 out of the gate. What's more, it's a sentiment shared in all corners of the Street. In the options arena, for example, RIG's 50-day ISE/CBOE/PHLX put/call volume ratio of 2.13 ranks higher than 95% of similar readings taken in the past year, meaning puts have been bought to open over calls at a near-annual-high clip in recent months. Elsewhere, one-quarter of Transocean LTD's available float is sold short, and all 16 analysts covering the shares maintain a "hold" or "strong sell" suggestion.

  • It's been a volatile two weeks for DWA, which rallied in the wake of acquisition rumors, only to erase all of those gains once the proposed deal was taken off the table. Against this backdrop, BofA-Merrill Lynch reinstated coverage on the shares with a "neutral" rating, echoing the general consensus seen among the brokerage bunch. Option traders, meanwhile, have been initiating long calls over puts at a faster-than-usual pace during the past 10 weeks, per DWA's 50-day ISE/CBOE/PHLX call/put volume ratio of 1.64, which ranks higher than 67% of similar readings taken in the past year. With 13.6% of the stock's float sold short, though, a portion of this call buying may have been at the hands of short sellers hedging against an unexpected surge. On Tuesday, DreamWorks Animation SKG, Inc. closed at $22.48, 36.7% below its year-to-date breakeven line.
 

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