Jefferies downgraded the struggling stock to 'hold' from 'buy'
Frontier Communications Corp (NASDAQ:FTR) stock is down 25.3% to trade at $6.90, after the telecom company suspended its quarterly cash dividend. In response, Jefferies downgraded FTR stock to "hold" from "buy," and took a hatchet to its price target -- cutting it by 68%, to $8 from $25 -- with the analysts stating they "see no near-term catalyst to lift [the] shares." In addition, three other brokerages chimed in with price-target cuts, and J.P. Morgan Securities reiterated an "underweight" rating, advising investors to "continue to avoid the shares."
The drop today has Frontier stock within a chip-shot of its Nov. 24 record low of $6.08, and leading the Nasdaq losers. The shares have carved out a path of lower lows since March 2016, guided by their descending 10-week and 20-week moving averages. The equity is on track to post its worst-single day loss since Nov. 1 -- much to the delight of many short sellers.
Short interest increased by 38% since early August, and the 32.65 million shares sold short represents a whopping 42% of FTR's total available float. Today, however, the stock is on the short-sale restricted (SSR) list.
In the options pits, Frontier Communications calls have been en vogue recently. Data from International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows FTR with a 10-day call/put volume ratio of 5.13, ranking in the 88th percentile of its annual range. This indicates calls have been purchased over puts at a faster-than-usual clip over the past two weeks. However, this recent burst of call activity could also be short sellers initiating an options hedge against any unexpected upside risk.