Leerink Waxes Optimistic on American Renal, Exact Sciences Stocks

L Brands is near the bottom of the NYSE today after poor guidance

Managing Editor
Aug 23, 2018 at 2:43 PM
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Stocks mostly lower today, as the legal saga surrounding President Donald Trump intensifies. Looking at individual names, shares of dialysis services provider American Renal Associates Holdings (NYSE:ARA) and healthcare company EXACT Sciences Corporation (NASDAQ:EXAS) are vaulting higher, while retail name L Brands Inc (NYSE:LB) is struggling. Here's a closer look at what's moving shares of ARA, EXAS, and LB.

Leerink Upgrade Sends ARA Toward New Highs

Several healthcare stocks are having a banner day, including ARA. American Renal Associates stock is up 7.3% to trade at $22.99, one of the best stocks on the New York Stock Exchange (NYSE) today, after Leerink upgraded the dialysis provider to "outperform" from "market perform," and boosted its price target to $26 from $22. The analyst in coverage expects margins to stabilize in 2019 thanks to an updated Medicare rate and improving patient care costs. ARA is a chip-shot from its March 7 annual high of $24.02, and has now added 57% in the past three months.

A continued uptrend could lead to a short squeeze, and more tailwinds for the equity. Short interest increased by only 2.4% in the most recent reporting period, yet the 2.29 million shares sold short represents 13% of ARA's total available float, and would take just over 17 days to buy back, at the security's average pace of trading.

EXAS Feels the Analyst Love After Pfizer Deal

Exact Sciences stock is up 5.5% to trade at $68.89, and earlier touched a fresh record high of $73.72, after no fewer than four brokerages issued price-target hikes, including to $90 from $75 at Leerink. An analyst at Jefferies called the company's recent deal with Pfizer (PFE) a "game-changer," and expects the Cologuard stool-screening test to become the gold standard in a lucrative market. EXAS stock is currently riding a six-day winning streak, and is heading toward its best week since June 2016, up 39.3%. 

Shorts are already hitting the exits, which could keep the wind at the security's back. Short interest fell by 7% in the two most recent reporting periods, while the 10.97 million shares sold short still represents a healthy 9% of EXAS' total available float, and seven days of pent-up buying power.

Slashed Guidance Buries LB Stock Near Bottom of NYSE

L Brands stock is down 12.1% to trade at $28.61, one of the worst stocks on the NYSE today. Driving the shares lower is the company's slashed full-year guidance, driven by weak demand for Pink lingerie. In response, four brokerage firms slashed their price targets, including to $20 from $23 at Jefferies. Earlier today, LB fell to a seven-year low of $27.95, and has now lost more than half its value in 2018. 

Several recent options traders could be kicking rocks, as L Brands calls have been quite prevalent in recent weeks. On the International Securities Exchange (CBOE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 18,758 calls compared to just 4,373 puts in the past two weeks. The resultant call/put volume ratio of 4.29 is 5 percentage points from an annual high. Today, however, LB puts flying off the shelves at 12 times the typical intraday pace, with the February 22.50 put seeing notable activity.


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