Analyst Downgrades: AK Steel, Open Text, and VMware

Analysts downwardly revised their ratings on AK Steel Holding Corporation (AKS), Open Text Corporation (USA) (OTEX), and VMware, Inc. (VMW)

Jan 28, 2015 at 9:29 AM
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Analysts are weighing in today on metal manufacturer AK Steel Holding Corporation (NYSE:AKS), software developer Open Text Corporation (USA) (NASDAQ:OTEX), and virtualization specialist VMware, Inc. (NYSE:VMW). Here's a quick roundup of today's bearish brokerage notes on AKS, OTEX, and VMW.

  • AKS reported better-than-expected fourth-quarter earnings yesterday, but was nonetheless hit with a pair of price-target cuts from BMO (to $5) and Jefferies (to $4.75), with both firms reiterating the equivalent of a "hold" rating. Ahead of the bell, the shares are sitting nearly 3% higher, poised to extend yesterday's advance. Longer term, this represents a change of pace for AKS, considering the stock has shed more than two-fifths of its value in the last year to land at $4.25. If AK Steel Holding Corporation starts to make some headway on the charts, there's plenty of sideline cash to fuel a run higher. Specifically, 26.5% of AKS' float is sold short, which would take one week to buy back, at its typical daily trading levels.

  • OTEX issued mostly disappointing fiscal second-quarter results last night -- highlighted by weaker-than-anticipated sales. The brokerage bunch responded with a trio of price-target reductions, from BMO (to $57), Credit Suisse (to $60), and National Bank Financial (to $60), with the latter pair downgrading the shares to the equivalent of a "hold" rating. However, Susquehanna boosted its price target on Open Text Corporation by $2 to $52. In electronic trading, the stock is sitting 5.5% below breakeven, threatening to take it south of year-to-date breakeven. Longer term, however, the shares have rallied more than 21% year-over-year to perch at $59.59. This technical tenacity has prompted a rush of bullish options betting on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Across those exchanges, OTEX's 50-day call/put volume ratio of 2.33 ranks in the 95th annual percentile.

  • After issuing lackluster guidance, VMW was hit with no fewer than 10 price-target cuts -- the severest of which came from Cantor, which lowered its target to $82 from $88. On the flip side, Piper Jaffray boosted its price target by $5 to $74, but maintained its "underweight" opinion. It's been a rough year for VMware, Inc., which has dropped 15% in the last 12 months to rest at $80.61. Understandably, options traders are in the bears' corner, per VMW's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.08 -- which sits just 1 percentage point from a 52-week peak. Ahead of the open, the stock is down 2.9%.

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