Buzz Stocks: PetSmart, Oplink Communications, Agios

Today's stocks to watch in the news include PETM, OPLK, and AGIO

Nov 19, 2014 at 9:23 AM
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U.S. stocks are sticking close to breakeven this morning, as Wall Street awaits the latest Federal Open Market Committee (FOMC) meeting minutes. Among the equities in focus are pet products provider PetSmart, Inc. (NASDAQ:PETM), optical components designer Oplink Communications, Inc (NASDAQ:OPLK), and drugmaker Agios Pharmaceuticals Inc (NASDAQ:AGIO).

  • After settling at a year-to-date closing high of $73.62 yesterday, PETM is pointed 3.9% higher ahead of the bell, as traders digest the company's solid quarterly earnings and reports of a bid to be taken private. Specifically, KKR & Co. L.P. (NYSE:KKR) and Clayton, Dubilier & Rice LLC will join forces to take PetSmart, Inc. private for more than $7.5 billion, and are expected to unveil their joint bid sometime next month, Reuters reported. Already, analysts are waxing optimistic, with Credit Suisse upping its price target on PETM to $75 from $65, and BofA-Merrill Lynch upgrading the stock to "neutral" from "underperform." Despite outperforming the record-setting S&P 500 Index (SPX) during the past three months, today's upbeat analyst attention is relatively rare for PETM, as not one of the 18 brokerage firms following the stock deems it worthy of a "buy" rating. Plus, short interest represents nearly eight sessions' worth of pent-up buying demand, at PETM's average pace of trading. Additional upgrades and/or a short squeeze could add fuel to the equity's fire.

  • After being temporarily halted in pre-market action, OPLK is set to surge 13.7% on buyout news of its own. Privately held Koch Industries this morning said it will acquire Oplink Communications, Inc for roughly $445 million in cash, or $24.25 per share -- a 14% premium to OPLK's closing price of $21.25. Short-term options traders are likely cheering the news, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.13 sits just 1 percentage point from a 12-month low. In other words, near-term speculators have rarely been more call-biased during the past year.

  • AGIO is poised to open with a 5% lead, thanks to encouraging data on its cancer drug, AG-120. As such, the stock will likely explore record-high territory north of $90, adding to its already impressive year-to-date gain of 250%. Canaccord Genuity expects to see AGIO shares in triple digits soon, upping its price target on the security to $111 from $97 and maintaining a "buy" endorsement. There could be more on the way, as the average 12-month price target for Agios Pharmaceuticals Inc is $83.20, representing a discount to the stock's closing price of $83.81 on Tuesday. Meanwhile, it would take a week to buy back all the AGIO shorted shares, at the stock's average pace of trading -- ample fuel for a short-covering rally.

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