Buzz Stocks: Broadcom, Costco Wholesale, Yum! Brands

Today's stocks to watch in the news are BRCM, COST, and YUM

Dec 10, 2014 at 9:28 AM
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Markets are bracing for a lower open, as traders digest the latest drama on the crude oil front. Meanwhile, among specific equities in focus are semiconductor specialist Broadcom Corporation (NASDAQ:BRCM), bulk retailer Costco Wholesale Corporation (NASDAQ:COST), and fast-food issue Yum! Brands, Inc. (NYSE:YUM).

  • BRCM received no fewer than eight price-target hikes after the company gave a slight boost to the lower-end of its fourth-quarter revenue outlook, upped its quarterly dividend, and unveiled a $1 billion stock buyback program. The most optimistic outlook came from J.P. Morgan Securities, which raised its price target to $54 from $48 -- territory not charted since February 2001 -- and also underscored its "overweight" rating. On the charts, Broadcom Corporation has been a technical titan, boasting a nearly 44% year-to-date lead. Should the stock continue its upward momentum, another round of bullish brokerage notes could be on the horizon. Currently, eight out of 29 covering analysts maintain a "hold" or "strong sell" suggestion toward the outperformer, while the consensus 12-month price target of $44.73 is just a stone's throw from Tuesday's close at $42.65.

  • COST's 17% rise in fiscal fourth-quarter profit was enough to top expectations, but revenue fell short of the consensus estimate. Nevertheless, Morgan Stanley reiterated its "overweight" rating, and raised its price target to $155 -- never-before-seen territory for the shares. However, higher highs are not out of the question for a stock that's rallied more than 20% in 2014, and hit an all-time peak of $143.49 last Thursday. In the options pits, though, the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.33 ranks in the 96th annual percentile, meaning puts have been bought to open over calls at a near-annual-high clip in recent weeks. Given Costco Wholesale Corporation's technical tenacity, some of this activity may have been at the hands of shareholders protecting paper profits. Ahead of the bell, COST is pointed 1.5% higher after closing at $143.04 last night.

  • YUM is bracing for a 6% drop out of the gate, after the company warned of "negative mid-single digits" same-store sales growth in China this year. YUM sold off sharply in the wake of July's tainted-meat scandal, but since hitting an annual low of $65.81 in mid-October, the equity has bounced more than 14% to close Tuesday at $75.22. Options traders are wary, however, as evidenced by the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.15, which ranks higher than 77% of similar readings taken in the past year. Echoing this put-skewed bias is YUM's Schaeffer's put/call open interest ratio (SOIR) of 1.18, which ranks in the 60th percentile of its annual range. Simply stated, short-term speculators are more put-skewed than usual toward Yum! Brands, Inc. (NYSE:YUM).

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