Analyst Downgrades: GameStop Corp., EMC Corporation, and American Eagle Outfitters, Inc.

Analysts downwardly revised their ratings on GameStop Corp. (GME), EMC Corporation (EMC), and American Eagle Outfitters (AEO)

by Griffin Kruse

Published on Mar 27, 2015 at 9:25 AM
Updated on Apr 20, 2015 at 5:32 PM

Analysts are weighing in on video game retailer GameStop Corp. (NYSE:GME), IT service provider EMC Corporation (NYSE:EMC), and clothing concern American Eagle Outfitters (NYSE:AEO). Here's a quick roundup of today's bearish brokerage notes on GME, EMC, and AEO.

  • GME is pointed 4.2% lower in electronic trading, after last night's disappointing sales and full-year guidance was met with a round of bearish brokerage notes. Drilling down, no fewer than seven firms lowered their ratings on the equity, with the most dramatic cut coming from Benchmark, which decreased its price target to $27.98. Meanwhile, B. Riley downgraded GME to "neutral" and trimmed its price target to $44. On the charts, GameStop Corp. is up 22.4% from its Jan. 12 annual low of $31.69, to close yesterday at $38.79. Accordingly, option traders were picking up long calls at a rapid-fire rate ahead of earnings, as GME's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.54 ranks higher than 85% of all equivalent readings taken over the past year. Meanwhile, nearly 45% of GME's available float is sold short, which would take roughly six weeks to cover, at average trading volumes.

  • Last night, Pacific Crest cut its rating on EMC to "sector perform" from "outperform," sending the shares about 0.6% lower ahead of the bell. The downgrade comes as no surprise, considering that the shares of EMC Corporation have fallen 13.2% year-to-date to close yesterday at $25.81. As such, put buying in the options pits is nearing a yearly peak, as EMC's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.62 stands in the 99th percentile of its annual range.

  • AEO is down nearly 4.6% in pre-market trading, after Goldman Sachs reduced its opinion of the stock to "sell" from "neutral," citing waning mall traffic, growing competition, and high earnings expectations. The downgrade is somewhat surprising, given that the shares of American Eagle Outfitters have advanced 39.6% year-over-year to close yesterday at $16.92. What's more, the stock notched a fresh annual high of $17.40 on March 16. Option buyers have also grown increasingly pessimistic, as AEO's 50-day ISE/CBOE/PHLX put/call volume ratio of 2.88 is higher than 99% of all equivalent readings taken over the past 12 months. Elsewhere, the brokerage bunch is divided on the equity, with 48% of covering analysts rating the stock a "buy" or better, and the remaining 52% doling out "hold" or worse ratings.

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