Selling Continues on Foot Locker, Finish Line Stocks After 'Poison Pill' News

Finish Line is pacing to open in territory not seen since 2009

Aug 29, 2017 at 9:27 AM
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Analysts are weighing in on athletic apparel retailers Finish Line Inc (NASDAQ:FINL) and Foot Locker, Inc. (NYSE:FL), as well as drug stock Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Here's a quick roundup of today's bearish brokerage notes on shares of FINL, FL, and VRX.

Finish Line Shares Set for Lowest Open in Eight Years

Finish Line last night issued a dreary profit warning and a "poison pill" strategy to fend off a hostile takeover, sending the shares tumbling nearly 30% in electronic trading -- set to open at levels not seen in eight years. A handful of brokerage firms have since weighed in bearishly, including Citigroup, which downgraded the stock to "sell" and slashed its price target to $5 from $14, territory not seen since early 2009. 

FINL shares settled yesterday at $10.42, down dramatically from their all-time high of $31.90 from nearly three years ago. As such, the equity continues to reward short sellers. Short interest on Finish Line rose by almost 12% during the last two reporting periods, and now accounts for roughly one-fourth of the stock's total float. 

Foot Locker Stock Hit With Sector Headwinds, PT Cut

On top of the Finish Line news, a price-target cut to $50 from $65 at Morgan Stanley has Foot Locker stock set to open 3.5% lower. This would be just more of the same from the shares, which have been crushed this year due to two post-earnings bear gaps, the most recent occurring earlier this month. In total, FL has given back about half its value year-to-date, last seen at $35.70. 

There are still some bullish holdouts in the analyst community, despite the security's dismal price action. Six brokerages still recommend buying Foot Locker, and the stock's average 12-month price target stands at $41.53 -- a 16.3% premium to current levels. This could leave FL vulnerable to additional bearish attention. 

Options Traders Bet on a Valeant Breakout

Valeant Pharmaceuticals stock caught fire during the summer months, surging as high as $18.25 on June 29. The shares have since given back much of those gains, though, closing last night at $14.23. And they're now on pace to open 1.6% lower, due to a price-target cut to $7 from $8 at Mizuho, which said it expects the company to miss its 2017 financial expectations. This puts VRX stock in jeopardy of surrendering a short-term foothold north of its 200-day moving average. 

Options traders are hoping the security resumes its positive price action. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 5.61 for Valeant, which is in the 100th annual percentile. Said differently, speculators have bought to open calls over puts at an extreme rate in recent weeks.

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