The Spiraling Chinese Internet Stock; Mattel Gets Rocked

Baidu cited the Communist Party Congress for its downwardly revised revenue forecast

Oct 27, 2017 at 9:45 AM
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Analysts are weighing in on Chinese internet stock Baidu Inc (NASDAQ:BIDU), Barbie maker Mattel, Inc. (NASDAQ:MAT), and electric car concern Tesla Inc (NASDAQ:TSLA). Here's a quick roundup of today's bearish brokerage notes on BIDU, MAT, and TSLA.

Baidu Stock Drops on Disappointing Revenue Guidance

Baidu stock is down 7% to trade at $242.29, after the company gave a lower-than-anticipated revenue forecast for the current quarter -- citing a decline in advertising sales during the Communist Party Congress earlier this month. And while Wells Fargo cut its rating on the stock to $275 from $290, Benchmark raised its BIDU price target to $285 following the firm's third-quarter earnings beat, while Deutsche Bank bumped its target up to $217 from $212.

Today's downside runs counter to Baidu's longer-term trend, considering the shares were up 58.5% year-to-date heading into today's trading. Plus, BIDU stock hit a record high of $274.94 on Oct. 17. Some of this recent upside is likely due to short covering. Short interest dropped 16.7% in the two most recent reporting periods to 5.36 million shares -- the fewest since mid-March.

Earnings Miss, Suspended Dividend Levels Mattel Stock

It was a massive miss for Mattel's third-quarter earnings, with the toymaker reporting an adjusted profit of 9 cents per share versus an expectations for 58 cents per share. Revenue came in below estimates, too, with North American sales negatively impacted by the Toys 'R' Us bankruptcy. Mattel also said it would miss its full-year revenue forecast and suspended its quarterly dividend.

Analysts have been quick to chime in, too, with no fewer than five brokerages cutting their price targets on MAT stock. Included in the bunch is Jefferies, which lowered its Mattel price target to $12.50 from $14, saying these quarterly results were "not the all clear, but worse seems hardly possible."

Against this dismal backdrop, MAT shares are down 16.7% at $12.81 -- a level not seen since April 2009. This will just be more of the same for the security, which had shed 44.2% year-to-date ahead of today's open. And while short sellers will likely be pleased, there's room for more bearish brokerage notes, considering four out of 11 analysts still maintain a "strong buy" rating on the shares.

Tesla Stock Downgraded on Model 3 Production Concerns

Evercore ISI downgraded Tesla stock to "in line" from "outperform" and cut its price target to $312 from $330, citing a "cautious view on Model 3 production" following concerning tweets from CEO Elon Musk earlier this month. After closing last night at $326.17, TSLA shares are down 2.5% at $317.99.

More broadly, it's been a standout year for Tesla shares, which are up almost 50% in 2017. Since hitting a record high of $389.61 on Sept. 18, though, the shares have pulled back to their 200-day moving average, a trendline that has ushered the shares higher since last December.

Regardless of whether traders are expecting the equity to resume its longer-term rally or extend its recent losses, it's getting pricey to purchase short-term options. With Tesla earnings due after the market closes next Wednesday, Nov. 1, the stock's Schaeffer's Volatility Index (SVI) of 47% is ranked higher than 79% of all comparable readings taken in the past year -- meaning elevated volatility expectations are being priced in.


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