Huawei Warning Smacks Cree Below Key Trendline

PLCE was targeted for a bearish roll after earnings

Aug 21, 2019 at 2:01 PM
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The U.S. stock market is soaring today on a round of strong retail earnings. Among individual names making notable moves are LED specialist Cree, Inc. (NASDAQ:CREE), retailer Childrens Place Inc (NASDAQ:PLCE), and media firm MSG Networks Inc (NYSE:MSGN). Here's a quick look at what's moving the shares of CREE, PLCE, and MSG.

Cree Options Bulls Eye a Big Bounce

Cree shares are down 16% at $48.95 -- breaching recent support at their 160-day moving average -- after the company forecast a surprising per-share loss for its current quarter. CEO Gregg Lowe cited "the Huawei ban and softness in the LED market," which will "continue to impact the sector in the short term."

This is offsetting a fiscal fourth-quarter adjusted profit and revenue beat, and sparked a downgrade to "market perform" at JMP Securities, as well as price-target cuts at Canaccord Genuity (to $72) and BMO (to $50). Cowen and Company, on the other hand, raised its CREE price target to $56.

CREE options traders are active today, too, with roughly 20,000 contracts on the tape so far -- 11 times the average intraday pace and a new annual high. The September 55 call is most active, and it looks like new positions are being purchased here. By doing so, call buyers are betting on Cree stock to bounce back above $55 by September options expiration.

Children's Place Stock Hits New Low After Earnings

Children's Place stock tapped a three-year low of $70.42 earlier, last seen down 7% at $72.55, bringing its year-to-date deficit near 19%. Although the retailer's second-quarter adjusted earnings came in above the consensus estimate, revenue fell short, and PLCE downwardly revised its full-year profit forecast.

Today's sell-off has one options bear lowering the bar on the retail stock. Amid heavy trading -- put volume is running at 10 times the typical intraday clip -- it looks like someone sold to close 1,500 weekly 8/23 80-strike puts, while simultaneously buying to open the same amount of October 75 puts, rolling their position down and out.

Evercore Downgrades MSG Networks After Earnings

MSG Networks reported fiscal fourth-quarter earnings of 54 cents per share on $168.4 million in revenue -- lower than analysts were expecting. In reaction, Evercore ISI downgraded the stock to "underperform" from "in line," and slashed its price target by $4 to $18.

Against this backdrop, MSGN stock is down 12.5% at $14.75, earlier hitting a six-year low of $14.46. The shares are headed toward their worst day since October 2015, and options traders are in overdrive. Amid light absolute volume, options volume is running at nine times what's typically seen at this point. The September 15 call is most active, and it's possible new positions are being sold here.

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