2 Retailers Collapsing Post-Earnings; A Devastating Development for One Drug Stock

Cytokinetics stock is crumbling after its ALS drug failed a late-stage trial

by Patrick Martin

Published on Nov 21, 2017 at 10:21 AM

U.S. stocks are surging this morning following a fresh round of earnings reports, with the S&P 500 Index (SPX) and Nasdaq Composite (IXIC) fresh off record highs. However, jewelry maker Signet Jewelers Ltd. (NYSE:SIG), shoe peddler DSW Inc. (NYSE:DSW), and biotech Cytokinetics, Inc. (NASDAQ:CYTK) are three stocks currently short-sale restricted (SSR), after barreling lower this morning. Here's a closer look at what's moving shares of SIG, DSW, and CYTK.

SIG Stock Slides On Surprise Loss, Slashed Outlook

Signet Jewelers stock is down 26.3% to trade at $55.91, after the company reported an unexpected third-quarter loss and revenue miss on disappointing same-store sales. The jeweler also cut its fiscal 2018 outlook. SIG stock has shed over 40% year-to-date, and is now trading at its lowest point since an earnings-induced second-quarter bull gap in late August.

Short sellers are likely cheering the collapse. Even though the stock is SSR today, short interest increased by 14.6% during the last reporting period to 15.47 million shares, a hefty 28% of SIG's total available float.

Dismal Earnings Bury DSW Stock

DSW stock is down 10.8% to trade at $20.10, after the firm reported third-quarter earnings that fell short of analyst expectations. The shoe retailer, which cited a negative impact from hurricanes as a reason for the subpar results, also cut its fiscal 2017 guidance. DSW stock had tacked on 44% over the past three months, and may have been due for a short-term pullback. Specifically, its 14-day Relative Strength Index (RSI) closed last night at 71, in "overbought" territory.

This earnings reaction is just what short sellers were looking for. Short interest increased by almost 14% during the last two reporting periods to 12.48 million shares, a six-year high. This represents 19% of DSW's total available float.

Cytokinetics Stock Plummets After Pulling ALS Drug

Shares of Cytokinetics are down a whopping 30% to trade at $7.78, earlier hitting a new 20-month low of $7.00, after the biotech abandoned its treatment for amyotrophic lateral sclerosis (ALS), or Lou Gehrig's disease, due to failed late-stage trials. CYTK stock has now shed 37.2% in 2017 -- and downgrades are certainly a high probability, considering all seven of the brokerages covering CYTK stock rate it a "buy" or "strong buy."

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