Analyst Downgrades: Rosetta Resources, Zillow, Sprint

Analysts downwardly revised their ratings on Rosetta Resources Inc. (ROSE), Zillow Group Inc (Z), and Sprint Corp (S)

Feb 24, 2015 at 9:27 AM
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Analysts are weighing in today on oil-and-gas issue Rosetta Resources Inc. (NASDAQ:ROSE), online real estate name Zillow Group Inc (NASDAQ:Z), and telecommunications concern Sprint Corp (NYSE:S). Here's a quick roundup of today's bearish brokerage notes on ROSE, Z, and S.

  • ROSE is more than 16% lower in electronic trading, after the company's fourth-quarter profit miss and downwardly revised 2015 production outlook was met with a round of negative analyst attention. BofA-Merrill Lynch, for example, cut its rating on the stock to "neutral" from "buy," and reduced its price target to $23. Elsewhere, BMO lowered its recommendation on ROSE to "market perform" from "outperform." Today's projected price move is nothing new for a stock that's shed almost 54% year-over-year, and closed last night at $21.87. In the options pits, speculators have been bracing for more downside, too. Rosetta Resources Inc.'s 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.70 ranks in the 82nd annual percentile, meaning puts have been bought to open over calls at an accelerated clip of late.

  • Macquarie cut its outlook on Z to "neutral" from "outperform," sending the shares roughly 1% lower ahead of the bell. Heading into today's session, the stock was sporting a more than 25% month-to-date gain -- thanks to last week's massive rally -- to trade at $121.33. Against this backdrop, Zillow Group Inc's 14-day Relative Strength Index (RSI) has soared to 65 -- approaching overbought territory -- suggesting a near-term pullback may have been in the cards. On the sentiment front, short sellers have refused to capitulate to Z's recent momentum. Short interest surged 16.4% over the last two reporting periods, and now accounts for nearly 54% of the equity's available float -- representing more than two weeks' worth of pent-up buying demand, at average daily trading volumes. Should Z resume its uptrend, an unwinding of these short positions could help propel the shares higher.

  • BTIG Research lowered its rating on S to "sell" from "neutral" overnight. In addition, analyst Walter Piecyk set a price target of $3.25 -- a 30.4% discount to the stock's current perch -- and said the company "needs to stop burning cash in order to establish any equity value in the stock, and to do that it needs to grow the subscriber base." On the charts, the equity has been a long-term laggard, shedding over 44% during the past 52 weeks. What's more, an earnings-induced boost earlier this month was quickly contained by the security's 120-day moving average, and since running headlong into this trendline on Feb. 13, the shares have lost 11%. Not surprisingly, most analysts have taken the skeptical route toward Sprint Corp. Of the 18 brokerage firms covering the shares, 16 maintain a "hold" or worse rating. Additionally, the average 12-month price target for S of $4.99 stands at a slim 6.9% premium to last night's close at $4.67.

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