Analyst Downgrades: The Gap, Inc., NewLink Genetics Corporation, and Rackspace Hosting, Inc.

Analysts downwardly revised their ratings on Gap Inc (NYSE:GPS), NewLink Genetics Corp (NASDAQ:NLNK), and Rackspace Hosting, Inc. (NYSE:RAX)

by Griffin Kruse

Published on May 12, 2015 at 9:59 AM

Analysts are weighing in today on retailer Gap Inc (NYSE:GPS), biotech firm NewLink Genetics Corp (NASDAQ:NLNK), and cloud concern Rackspace Hosting, Inc. (NYSE:RAX). Here's a quick roundup of today's bearish brokerage notes on GPS, NLNK, and RAX. 

  • The shares of GPS are down 3.1% lower at $38.62, after the firm posted worse-than-expected April sales and offered lackluster preliminary earnings. In response, no fewer than seven brokerage firms weighed in on the equity, such as Sterne Agee CRT, which lowered its price target to $38, and FBR, which downgraded the stock to "market perform" from "outperform" and decreased its target to $40. On the other hand, Bernstein was the lone brokerage firm to issue a positive note on Gap Inc, as it raised its price target to $95 while keeping its "market perform" opinion. Technically speaking, the stock is down 12% from its March 31 year-to-date high of $43.90, pressured lower beneath its 10- and 20-day moving averages. Accordingly, puts have been prominent in the options pits, as GPS' 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 10.30 stands in the 95th annual percentile. 
  • Cantor cut its price target on NLNK to $44 from $48 while reiterating its "buy" rating, following news that the drugmaker is continuing late-stage clinic trials for its pancreatic cancer drug. Traders were hoping for the biotech to file for marketing approval. Heading into today's session, NewLink Genetics Corp had been an outperformer. Today, however, NLNK is down 21% at $41.31, trimming its year-to-date lead to 3.7%. Looking to the options pits, traders have been buying puts at a faster-than-usual clip, as NLNK's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.55 is higher than 98% of all equivalent readings from the last year. Elsewhere, short interest declined by 7% during the past two reporting periods, but still accounts for nearly 25% of NLNK's available float. While it would take these bettors over seven sessions to cover their positions, at average trading volumes, NLNK has landed on the short-sale restricted (SSR) list. 
  • RAX posted disappointing first-quarter earnings and lowered its current-quarter guidance, sending the shares down 15.1% to $45.11. Reacting were no fewer than five brokerage firms, which all downgraded their ratings and/or price-targets on the equity. For instance, Morgan Stanley cut its rating to "equal-weight," RBC decreased its target by $1 to $43, and CLSA downgraded RAX to "outperform" from "buy" while slashing its price target to $52 from $55. On the charts, Rackspace Hosting, Inc. just hit an all-time high of $56.20 on April 27, but is now 3.7% lower year-to-date -- and on the SSR list. Sentiment in the options pits has been bearish, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.86 stands in the 91st percentile of its annual range. 

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