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
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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.


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