Analysts downwardly revised their ratings on American Eagle Outfitters (AEO), Lululemon Athletica inc. (LULU), and Valeant Pharmaceuticals Intl Inc (VRX)
Analysts are weighing in on apparel retailers American Eagle Outfitters (NYSE:AEO) and Lululemon Athletica inc. (NASDAQ:LULU), as well as drugmaker Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Here's a quick roundup of today's bearish brokerage notes on AEO, LULU, and VRX.
- AEO is poised to dip 1% at the open, following a downgrade to "perform" from "outperform" and a price-target cut to $17 from $19 at Oppenheimer, with the brokerage firm citing valuation concerns. The stock has been faring well in 2015, advancing over 18% to trade at $16.40 -- though recent breakout attempts have fizzled at its 100-day moving average. Of course, the moment of truth arrives Wednesday evening, when American Eagle Outfitters will report third-quarter earnings. Short sellers are counting on a post-event swoon, as one-quarter of the stock's float is dedicated to short interest -- an amount that would take close to eight sessions to repurchase, at AEO's average daily volume.
- LULU is gearing up for a 4.8% drop this morning, after FBR downgraded its opinion to "underperform" from "market perform," and lowered its price target to $42 from $55. Along similar lines, Canaccord Genuity trimmed its price target to $52 from $54. These bearish notes aren't exactly timely; though the stock is down about 6% in 2015, Lululemon Athletica inc. has bounced strongly from its mid-November annual low of $43.14, settling at $52.50 on Friday. Not everyone's betting against the shares. Based on data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have been very bullish -- buying to open 3.53 calls for every put during the past 10 weeks. The corresponding call/put volume ratio ranks just 6 percentage points from a 52-week high.
- While Bill Ackman may be confident in VRX, others on the Street are not, as the stock continues to reel in the wake of Citron Research's short-seller report. Today, CIBC piled on, cutting its price target by more than half to $90 from $200. There are plenty of brokerage firms that could follow suit, as 10 of 14 rate Valeant Pharmaceuticals Intl Inc a "buy" or better, with not a single "sell" opinion on the books. Plus, the stock's consensus 12-month price target of $168.91 represents a 94% premium to last week's settlement at $87.09. As noted, VRX has been swooning in recent months, giving up two-thirds of its value since notching a record high of $263.81 in early August.