Buzz Stocks: Lululemon, ConAgra, Conatus Pharma

Today's stocks to watch include Lululemon Athletica inc. (LULU), ConAgra Foods Inc (CAG), and Conatus Pharmaceuticals Inc (CNAT)

Mar 26, 2015 at 9:30 AM
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With futures pointed lower, Wall Street is poised to extend yesterday's losses. Among the equities in focus are yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU), packaged food company ConAgra Foods Inc (NYSE:CAG), and biotech name Conatus Pharmaceuticals Inc (NASDAQ:CNAT).

  • LULU is set to drop 2% at the open, after the company's disappointing current-quarter forecast overshadowed strong fiscal fourth-quarter numbers. Many investors are likely cheering the dip in share price. For instance, put buying has been popular in Lululemon Athletica inc.'s options pits during the past two weeks, as the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.10 is only 4 percentage points from an annual high. Elsewhere, over 10% of LULU's float is sold short, a figure that equates to seven days' worth of trading, at normal daily volumes. The security has had a decent run on the charts in 2015 -- recently boosted by unconfirmed buyout rumors -- picking up 9.3% year-to-date to close yesterday at $60.96.

  • A strong third-quarter earnings report and upbeat outlook have CAG 1.6% higher in electronic trading. The shares have hit a rough patch lately, underperforming the S&P 500 Index (SPX) by more than 8 percentage points in the past two months, finishing yesterday at $34.94. However, ConAgra Foods Inc is still trading above its average 12-month price target of $34.80, as analysts are bearish on the equity. Also, seven of eight covering brokerage firms rate CAG a "hold" or worse. Speculators, on the other hand, have expressed a differing opinion. The security's 50-day ISE/CBOE/PHLX call/put volume ratio comes in at 7.85 -- 8 percentage points from an annual peak.

  • Ahead of the bell, CNAT has popped 49%, after the company announced successful top-line results for its non-alcoholic fatty liver disease drug, emricasan, in a phase 2 clinical trial. The pre-market surge has the shares ready to enter the black on a year-to-date basis, despite a current deficit of 17.7% as of yesterday's close at $5.76. Most analysts have high hopes for Conatus Pharmaceuticals Inc, with four of five covering brokerage firms issuing "strong buy" recommendations, compared to one "hold" and not a single "sell." Plus, CNAT's consensus 12-month price target of $13.17 is more than double current trading levels, and sits in territory not explored since March 2014.

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