Analyst Downgrades: Isis, Lumber Liquidators, and Seadrill

Analysts downwardly revised their ratings on ISIS Pharmaceuticals, Inc. (ISIS), Lumber Liquidators Holdings Inc (LL), and Seadrill Ltd (SDRL)

Mar 2, 2015 at 9:38 AM
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Analysts are weighing in today on drug developer ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS), hardwood flooring retailer Lumber Liquidators Holdings Inc (NYSE:LL), and drilling firm Seadrill Ltd (NYSE:SDRL). Here's a quick roundup of today's bearish brokerage notes on ISIS, LL, and SDRL.

  • While ISIS announced it has received a $15 million milestone payment from GlaxoSmithKline plc (ADR) (NYSE:GSK) after making progress on a study of its familial amyloid polyneuropathy drug, the equity is still lower out of the gate, after a downgrade at Stifel. Specifically, the shares are down 2% at $67.01, after the brokerage firm cut its rating to "hold" from "buy." Before today, ISIS Pharmaceuticals, Inc. had been strong in 2015, adding 11%. Option traders probably don't mind today's decline, though, as put buying has been in fashion in the equity's options pits. For example, the security's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44 sits higher than 81% of all such readings from the past year. Said differently, puts have been bought to open over calls at a faster-than-normal rate in the past two weeks.

  • LL is having a rough morning, to say the least, losing 26% to hit $51.86, after "60 Minutes" released a report saying the company sold flooding with formaldehyde levels above California's health and safety standards. The shares were also hit with a downgrade at Morgan Stanley, which cut them to "equal weight" from "overweight." Today's downward move at Lumber Liquidators Holdings Inc is just more of the same, as the stock has dropped nearly 52% year-over-year. These struggles have opened the door to short sellers. Currently, roughly 30% of LL's float is sold short, representing almost three weeks' worth of trading, at typical daily volumes.

  • Since Friday, SDRL has seen two brokerage firms cut their price targets. Yesterday, Evercore ISI reduced its price target on the shares to $10 from $12, and this morning Global Hunter dropped its price target to $13 from $14. The former firm reiterated a "sell" rating, and the latter underscored an "accumulate" recommendation. As such, Seadrill Ltd is off 2.3% this morning at $11.27, bringing its 52-week loss to nearly 70%. It's not a surprise, then, to see short-term speculators have taken a put-skewed approach. According to SDRL's Schaeffer's put/call open interest ratio (SOIR) of 1.24 -- ranking in the 75th annual percentile -- near-term option traders have only been more put-focused 25% of the time in the past year.

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