2 Construction Stocks Drilled With Downgrades

The brokerage firm also cut CAT's price target

Sep 12, 2019 at 10:17 AM
facebook X logo linkedin


Caterpillar Inc. (NYSE:CAT) and Deere & Company (NYSE:DE) were both downgraded to "market perform" from "outperform" at Wells Fargo, which said it believes "U.S. construction equipment demand is at or near peak," and that slow-to-flat growth in other divisions of the companies "will put downward pressure on earnings power." The brokerage firm also cut its CAT price target to $143 from $150, while maintaining its $170 price target on DE stock.

Most analysts are already bearish on CAT, with 10 of 15 calling the Dow stock a "hold" or "strong sell" prior to today. Plus, the average 12-month price target of $142.52 is a slim 7% premium to last night's close.

Elsewhere, several options traders set a short-term floor for the construction stock. The September 121 put saw the biggest increase in open interest over the past two weeks, due mostly to heavy sell-to-open action this past Tuesday, Sept. 10. CAT stock is down 1.7% at $130.77 this morning, but is holding above its 200-day moving average, currently located at $130.17.

DE stock, meanwhile, is off 2.1% at $161.69, holding near the site of its Aug. 1 bear gap. It's been a more volatile-than-usual stretch for the security, per its 30-day historical volatility of 36.6%, which registers in the 73rd annual percentile.

And while analysts are mostly upbeat toward Deere -- two-thirds maintained a "buy" or better rating through last night's close -- options traders have been initiating long puts relative to long calls at an accelerated clip. This is per the stock's 10-day put/call volume ratio of 1.57 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks above 74% of comparable readings taken in the past year.

Today, it looks like speculators are using call options to bet bearishly on Deere. Amid heavy volume -- the 6,100 contracts traded so far is three times what's typically seen -- the weekly 9/13 165-strike call is most active. Traders appear to be selling to open these weekly calls, betting on DE stock staying south of $165 through expiration at the close tomorrow, Sept. 13.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI