Citi: Sell This Stock Before Earnings

Tyson Foods is reportedly considering a bid for Foster Farms

Feb 5, 2019 at 2:17 PM
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U.S. stocks are higher today, as traders gear up for the State of the Union address tonight. Meanwhile, three names making sharp moves today are cloud concern Box Inc (NYSE:BOX), telecom issue CenturyLink, Inc. (NYSE:CTL), and poultry producer Tyson Foods, Inc. (NYSE:TSN). Here's what's moving shares of BOX, CTL, and TSN today.

Analyst: Buy BOX Stock

BOX shares are up 8.7% at $23.36, after Goldman Sachs launched coverage with a "buy" rating and $31 price target -- a near 44% premium to yesterday's close. The brokerage firm said it views Box "as one of the best-positioned vendors in cloud content management."

BOX is now pacing for its best day since April, with the shares set to take out their 200-day moving average for the first time since early October. The equity has soared roughly 49% since its Dec. 24 low of $15.64, helped in part by M&A buzz.

In light of the new Goldman rating, BOX calls are flying off the shelves at 10 times the average intraday pace, with about 10,000 contracts traded so far. It appears some traders are buying to open the February 23 call, anticipating more upside for the shares through the close next Friday, Feb. 15, when front-month options expire.

Analyst: Sell CTL Stock Before Earnings

CenturyLink shares are 3.4% lower to trade at $14.52, after Citigroup downgraded the equity to "sell" from "neutral," and predicted the company's dividend to be halved in 2020. The analyst -- citing a "growing tug of war" on cash flow -- also hacked its price target on CTL to $11, representing expected downside of 27% to yesterday's close. CenturyLink is slated to report earnings next Wednesday, Feb. 13.

The stock has been in a channel of lower highs and lows since peaking north of $24 in August, and touched a 52-week low of $13.97 on Dec. 26. Short sellers have clearly been in control, with short interest rising 9.1% in the most recent reporting period, and now accounting for almost 18% of CTL's total available float.

Buyout Buzz Weighs on Tyson Foods

Ahead of Tyson Foods earnings on Thursday, Feb. 7, the stock is down 0.7% to trade at $61.33, as traders mull reports the company's considering buying Foster Farms for about $2 billion. However, the two firms are reportedly at odds over a sale price, and talks could fall apart.

On the charts, Tyson shares have made serious headway since their Dec. 26 low just south of $50, but upside momentum has stalled in the face of the equity's 200-day moving average. After the firm's last turn in the earnings spotlight, TSN dropped 5.6% in the subsequent session. Over the past eight quarters, the security has swung 3.4% after earnings, on average, regardless of direction. This time around, the options market is pricing in more than double that, with implied volatility data pointing to an expected 7.7% swing.

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