Depomed Pacing for New Lows; Another Hospital Stock Hit by Weak Earnings

Short interest has been rising on Twitter stock in recent weeks

Aug 8, 2017 at 9:20 AM
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Analysts are weighing in on micro blogging site Twitter Inc (NYSE:TWTR), drug stock Depomed Inc (NASDAQ:DEPO), and hospital operator Tenet Healthcare Corp (NYSE:THC). Here's a quick roundup of today's bearish brokerage notes on shares of TWTR, DEPO, and THC.

Short Sellers Take Aim at Twitter Stock

Mizuho reinstated its coverage on Twitter stock with an "underperform" assessment and $14.50 price target, well below last night's close of $16.40. TWTR recently gapped lower following disappointing earnings, sending the shares tumbling further from their year-to-date high of $20.88 from July 20. 

In the meantime, short interest has been on the rise again after a sharp drop earlier in the year that corresponded with the equity's brief surge on the charts. That is, short interest has steadily increased since early June, including a 8.1% rise during the past two reporting periods. These bears now control roughly 10% of Twitter's float. 

DEPO Stock Ready to Sell Off After Earnings

Shares of Depomed yesterday touched a three-year low of $9, but the stock is set to hit new lows today. Specifically, DEPO is pointed 18% lower in pre-market trading, following the company's disappointing second-quarter earnings and a lower-than-expected full-year sales outlook. Janney responded with a downgrade to "neutral" and a price-target cut to $8 from $18, while RBC lowered its price target to $10 from $13. 

In the options pits, volume has been light on DEPO on an absolute basis, but the action that has taken place has been overwhelmingly bearish. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 3.17, ranking in the 94th annual percentile. In simpler terms, this means there's been a stronger-than-normal appetite for put buying, compared to call buying. 

Tenet is Latest Hospital Stock Hit by Weak Patient Volume

Similar to sector peer Community Health Systems, Tenet Healthcare stock is on pace for an ugly post-earnings session, as weak patient volumes took a toll on the company's second-quarter earnings. Mizuho responded with a price-target cut to $14 from $18, while Jefferies trimmed its price target to $24 from $26, saying it sees the "admissions growth headwinds facing the hospital sector as longer-term issues." 

As such, THC stock is down 7% before the open, after settling Monday at $16.69. The shares were trading above $21 just over two weeks ago, but options traders are seemingly well-positioned for a pullback. Tenet Healthcare's Schaeffer's put/call open interest ratio (SOIR) of 1.03 ranks in the 83rd annual percentile, showing an unusual put-skew among short-term options traders. 


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