2 Sinking Chinese Internet Stocks

One analyst expects quick approval of SRPT's DMD treatment

Patrick Martin
Aug 1, 2018 at 3:05 PM
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Stocks are mostly lower today, though Apple's earnings reaction has the Nasdaq outperforming. Among individual names making outsized moves, drugmaker Sarepta Therapeutics Inc (NASDAQ:SRPT) is pointed higher, while Chinese stocks Baidu Inc (NASDAQ:BIDU) and Pinduoduo Inc (NASDAQ:PDD) are significantly lower. Below, we'll take a closer look at how shares of SRPT, BIDU, and PDD are trading today.

Sarepta Stock Upgraded On DMD Drug Optimism

Sarepta Therapeutics stock is up 5% to trade at $122.06 today, after Morgan Stanley upgraded the biopharma to "overweight" from "equal weight."  The analyst in coverage thinks the company's Duchenne muscular dystrophy (DMD) gene therapy will easily get approval from the U.S.  Food and Drug Administration (FDA) by year's end.

SRPT stock has more than doubled in 2018, but more recently, pulled back sharply from its record high of $176.50 set on June 9. Nevertheless, this retreat was contained by the security's 60-day moving average -- which has served as support since May 2017. 

A continued round of short covering could provide even more tailwinds for the equity. Short interest fell by 4% in the two most recent reporting periods, yet the 9.60 million shares sold short still represents nearly 16% of SRPT's total available float, and almost 12 days of pent-up buying power, at the stock's average pace of trading.

Google Rumors Sink BIDU Stock

Baidu stock is struggling today, down 6.7% at $230.59. Although the company reported second-quarter earnings that exceeded expectations, the shares are under pressure from reports Alphabet's (GOOGL) Google may be working on a censored search engine in China. The drop today takes BIDU shares below their year-to-date breakeven level, and are now in danger of closing below their 320-day moving average for the first time in over a year. 

In the options pits, traders have been betting bearishly lately. This is indicated by Baidu's 10-day put/call volume ratio of 0.62 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 80th annual percentile. In other words, while calls still outnumbers puts on an absolute basis, the elevated ratio indicates the rate of put buying has been unusual.

Pinduoduo Stock Dips Below IPO Price on China Probe

Pinduoduo stock is down 8% to trade at $20.79, after it was reported the Chinese government is investigating reports that third-party vendors are selling counterfeit goods on the e-commerce concern's marketplace. Earlier today, PDD stock breached $19, home to its July 25 initial public offering (IPO) price. The troubled e-commerce name, dubbed "the Groupon of China," has shed 15% in the past week, and is currently on the short-sale restricted (SSR) list. 


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