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Zynga, Expedia, and Vertex Pharmaceuticals Get Downgraded


This earnings season, analysts downwardly revise their ratings on ZNGA, EXPE, and VRTX.

Analysts are weighing in today on social game provider Zynga (NASDAQ:ZNGA), online travel company Expedia (NASDAQ:EXPE), and drug maker Vertex Pharmaceuticals (NASDAQ:VRTX). Here's a quick roundup of today's bearish brokerage notes.
  • Needham downgraded its rating for ZNGA to "hold" from "buy," while Canaccord, Piper Jaffray, and Macquarie all lowered their price targets following ZNGA's dismal earnings report. Since the start of 2013, ZNGA has gained a whopping 48.3% to trade at $3.50, but is poised for a 16% drop out of the gate. Elsewhere, short interest on ZNGA has grown more than 22% over the past month, representing escalating pessimism among stock traders. What's more, short interest now accounts for 5.3% -- 30.5 million shares -- of Zynga Inc's available float.
  • EXPE also reported lower-than-expected earnings last night, leading RBC, JPMorgan Securities, Susquehanna, Benchmark, Jefferies, Cantor, and Cowen to slash their price targets for the stock. Likewise, Lazard dropped EXPE's rating to "underperform" from "buy." Technically speaking, EXPE has advanced 42% year-over-year to its current perch at $65.00, but is bracing for a 23% plunge at the opening bell. Expedia Inc's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day put/call volume ratio of 1.11 ranks in the 87th percentile of its annual range, demonstrating speculators have bearishly picked up puts over calls at a faster-than-usual rate during the last two weeks.
  • UBS cut its rating for VRTX to "neutral" from "buy," and sliced its price target to $83 from $86, ahead of the company's turn in the earnings confessional on Monday, and after the drug maker unveiled a setback regarding its experimental hepatitis C treatment. On the charts, VRTX has tacked on an impressive 109% in 2013 to its current price of $87.62, spurring bullish activity in the options pits. Specifically, VRTX sports a Schaeffer's put/call open interest ratio (SOIR) of 0.51, with calls nearly doubling puts among options expiring in the next three months. This ratio ranks just 10 percentage points above its 12-month nadir, conveying short-term speculators' appetite for Vertex Pharmaceuticals Incorporated calls is at a near-annual high.

This article by Milissa Hudepohl was originally published on Schaeffer's Investment Research.

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