Analyst Update: Netflix, NVIDIA, Level 3 Comm

U.S. markets have been on both sides of breakeven today, as traders digest the latest batch of economic reports. Meanwhile, among equities in focus are streaming giant Netflix, Inc. (NASDAQ:NFLX), semiconductor concern NVIDIA Corporation (NASDAQ:NVDA), and networking specialist Level 3 Communications, Inc. (NYSE:LVLT).

• NFLX has given back 2.3% today to linger near $348.38, after Stifel downgraded the stock to "hold" from "buy." Specifically, the brokerage firm said it remains upbeat on the company's "longer-term international opportunity, but think[s] third-quarter results were a sign that investors are still focused on domestic subscriber growth in the near term." Netflix, Inc. has made some volatile moves since reporting earnings in mid-October, with the shares off more than 22% from their Oct. 15 close at $448.59. A continued slide could prompt another round of bearish brokerage notes, considering more than half of analysts covering the shares maintain a "buy" or better rating, and the consensus 12-month price target of $417.81 stands at a roughly 20% premium to current trading levels.


• NVDA, meanwhile, hit a three-year peak of $20.72 earlier -- and was last seen lingering near breakeven at $20.58 -- following a price-target hike to $25 from $23 at Nomura, with the brokerage firm underscoring its "buy" opinion. The equity has been a technical standout in 2014, boasting a 28.5% year-to-date advance -- and, more recently, gaining a foothold atop the round-number $20 mark. However, not everyone has climbed on board the bullish bandwagon, considering a healthy 7.2% of the stock's float is sold short. What's more, it would take more than six sessions to cover these shorted shares, at average daily trading volumes, leaving the door wide open for a short-covering rally, should NVIDIA Corporation extend its longer-term advance.


• Macquarie cut its rating on LVLT to "neutral" from "outperform," saying it believes the stock is "overvalued." Since bottoming out at its most recent low of $37.61 in mid-October, the security has rallied more than 29% to its current perch at $48.61, yet option traders have taken a glass-half-empty approach. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 10-day put/call volume ratio of 1.04 ranks in the 70th percentile of its annual range. Echoing this put-skewed trend is LVLT's Schaeffer's put/call open interest ratio (SOIR) of 0.72, which sits higher than 83% of similar readings taken in the past year. Simply stated, short-term speculators are more put-heavy than usual toward Level 3 Communications, Inc.