Morgan Stanley: 'We Have Been Wrong' on Snap

CUDA options traders were bracing for a post-earnings retreat

Jul 11, 2017 at 10:03 AM
facebook twitter linkedin


Analysts are weighing in on Snapchat parent Snap Inc (NYSE:SNAP), cybersecurity stock Barracuda Networks Inc (NYSE:CUDA), and luxury retailer Michael Kors Holdings Ltd (NYSE:KORS). Here's a quick roundup of today's bearish brokerage notes on shares of SNAP, CUDA, and KORS. 

Lead Underwriter: 'We Have Been Wrong' About SNAP

Morgan Stanley -- a lead underwriter on Snap's initial public offering (IPO) earlier this year -- downgraded the stock to "equal weight" from "overweight," and slashed its price target by nearly 43% to $16. "We have been wrong about SNAP's ability to innovate and improve its ad product this year," said the analysts, who also noted escalating competition from Facebook-owned Instagram.

SNAP stock on Monday closed below its IPO price of $17 for the first time since going public back in March, settling at $16.99. In early trading, the shares are steepening their slide into record-low territory, down 4.6% at $16.21 -- earlier bottoming at $16. The negative price action could encourage a fresh batch of bearish traders to Snap's table. Short interest surged 81.5% in the two most recent reporting periods, but accounts for just 6% of the stock's available float.

Barracuda Networks Issues Lackluster Guidance

Barracuda Networks reported in-line per-share earnings and reported quarterly revenue above forecasts. However, the cybersecurity company's current-quarter guidance fell short of estimates, sending CUDA stock down 5% to trade at $22.81. Adding salt to the proverbial wounds, Piper Jaffray trimmed its price target on Barracuda stock to $28 from $29. CUDA is now trading back below recent resistance in the $23.00-$23.50 region.

CUDA options traders were seemingly bracing for a post-earnings pullback. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 0.72 ranks in the 72nd annual percentile, meaning puts have been bought to open relative to calls at a faster-than-usual clip.

KORS Stock Started at 'Sell'

While MKM Partners initiated coverage of fellow luxury goods producer Coach stock with a "buy" endorsement, the brokerage firm started Michael Kors stock with an ice-cold "sell" rating. KORS stock is down 4.4% at $34.30, and has racked up a year-to-date loss of 20%, with recent rebound attempts capped at its 80-day moving average.

Not surprisingly, of the 15 analysts following KORS stock, 14 carry a tepid "hold" rating. Meanwhile, short-term options traders are more put-heavy than usual, as Michael Kors stock sports a Schaeffer's put/call open interest ratio (SOIR) of 1.42 -- higher than 86% of all others from the past year.

 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 

 

300x250 - Banner 3 - v1