Cree Stock Flirts with New Lows Following Weak Outlook

Options traders were expecting a post-earnings pullback from CREE stock

Aug 23, 2017 at 9:28 AM
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Analysts are weighing in on video game retailer GameStop Corp. (NYSE:GME), drug stock Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), and LED specialist Cree, Inc. (NASDAQ:CREE). Here's a quick roundup of today's bearish brokerage notes on shares of GME, RARE, and CREE.

Analysts, Options Traders Bearish on GME Stock

Ahead of the company's earnings release tomorrow evening, GameStop saw its price target dropped to $25 from $28 at SunTrust Robinson. This is still above the stock's close last night at $21.64. Year-to-date, GME has given back 14.3%, and the shares have closed lower the day after earnings in seven of the last eight quarters. 

Options traders certainly appear positioned for a pullback. GameStop has a Schaeffer's put/call open interest ratio (SOIR) of 2.39, which ranks in the 92nd annual percentile. This means put open interest more than doubles call open interest among options set to expire within three months. 

Analysts Crush Ultragenyx After Failed Drug Trial

Ultragenyx Pharmaceutical stock is pointed 11.7% lower in pre-market trading, due to news the company's muscle disease treatment failed in a late-stage study. This would put RARE shares in territory not seen since July 2016, after closing yesterday at $58.85. Several analysts have responded bearishly, including SunTrust Robinson, which downgraded Ultragenyx to "hold" from "buy," and slashed its price target to $55 from $105. Coming into today, nine of 15 brokerage firms had "buy" or "strong buy" ratings on the security. 

Put Traders Applaud CREE Sell-off

Cree stock is down 9.3% before the open -- which would put it in annual-low territory --following the company's downbeat current-quarter earnings outlook. Plus, Deutsche Bank cut its price target to $22 from $24, while J.P. Morgan Securities lowered its CREE target to $23 from $26. The shares closed yesterday at $23.03, not far below their year-over-year breakeven point of $23.53. 

A number of options traders will likely be cheering today's sell-off. For instance, CREE has a 10-day put/call volume ratio of 1.69 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 92nd annual percentile. In other words, put buying was unusually popular relative to call buying ahead of earnings. 

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