The Drug Stock Cut in Half on Disappointing Data, Downgrade

General Electric was hit with a round of bearish brokerage notes

Oct 23, 2017 at 9:29 AM
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Analysts are weighing in on Dow stock General Electric Company (NYSE:GE), Viaskin maker DBV Technologies SA (NASDAQ:DBVT), and pharma name Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Here's a quick roundup of today's bearish brokerage notes on shares of GE, DBVT, and VRX.

General Electric Dividend Concerns Draw Downgrades

In the wake of last Friday's "unacceptable" earnings report, General Electric saw its stock rating downgraded to "neutral" from "buy" at UBS and "underweight" from "neutral" at Morgan Stanley, each citing heightened expectations for a dividend cut. Plus, both brokerage firms cut their price targets on the stock -- joining at least four others -- although BofA-Merrill Lynch raised its rating to "buy" from "neutral."

In reaction, GE shares are down 1.5% ahead of the bell. The equity is already down 24.6% year-to-date based on last Friday's close at $23.83 -- hitting a two-year low of $22.11 in intraday action -- and is easily the worst Dow stock of the year so far. Short sellers have ramped up the pressure, too, with short interest up 25.7% in the two most recent reporting periods to 125.75 million shares -- the loftiest perch since last December.

DBV Technologies Stock Set to Plunge on Peanut Allergy Drug Data

DBVT stock is bracing for a 50% drop out of the gate -- on track to open the session at its lowest point since February 2016 -- after the company announced late Friday its peanut allergy drug failed in a late-stage study. Stoking the bearish flames is a round of negative analyst notes, including a downgrade to "equal-weight" from "overweight" at Morgan Stanley, while no fewer than five brokerages lowered their price targets.

The shares had been enjoying a solid year, with last Friday's close at $48.07 representing a roughly 48% gain from DBVT's mid-June lows near $32.40. Nevertheless, short sellers have held out hope for reversal of fortune. Short interest surged 81% in the last two reporting periods to 1.06 million shares -- a record high. Given the stock's significant pre-market downside, though, DBVT will most likely be placed on the short-sale-restricted list today.

J.P. Morgan Cuts Price Target on VRX Stock

Valeant Pharmaceuticals stock is down 0.3%  ahead of the bell, after J. P. Morgan Securities cut its price target to $10 from $12. This represents expected downside of 17.6% to last Friday's close at $12.13, as well as territory the stock hasn't traded near since a mid-May bull gap.

Regardless of which direction options traders think VRX stock is headed, it's an attractive time to buy premium on short-term contracts. The equity's Schaeffer's Volatility Index (SVI) of 72% ranks in the 26th annual percentile, meaning lower-than-usual volatility expectations are being priced in.


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