Wall Street disappointed by earnings
by Jocelynn Drake ([email protected])
Wall Street turned a cold shoulder to Pan American Silver (PAAS) this morning, as a flurry of price-target cuts and a downgrade hit the shares. RBC lowered its price target to $43 from $46, while rating the stock an “outperform.” Cormark cut the stock to C$38 from C$39, while CIBC lowered its forecast to $48 from $54. UBS trimmed its price target to $49 from $50. Meanwhile, TD Newcrest downgraded the shares from “buy” to “hold,” and dropped its price target to $41 from $45.
All this action followed the company’s earnings report, which came out yesterday. The mining company announced that it had earned $46.4 million, or 43 cents per share, on revenue of $191.1 million. However, the Street’s estimate called for a profit of 47 cents per share on revenue of $185 million.
Overall, Wall Street is optimistic toward PAAS. According to Zacks, the stock has earned six “strong buys,” two “buys,” two “holds,” and two “strong sells.” There is still ample room for potential downgrades that could hit the shares during the near term.
Furthermore, the average 12-month price target for PAAS comes in at $45.78, according to Thomson Reuters. This estimate implies that analysts are expecting the shares to rally about 31% during the next 12 months from Wednesday’s closing price of $34.95. Additional price-target cuts could also hit the shares during the near term.
Looking in on options players, we find that call options are popular. The International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and the NASDAQ OMX PHLX (PHLX) have reported 8.2 calls purchased to open during the past 10 trading sessions for every one put purchased to open. This ratio of calls to puts is higher than 87% of all those taken during the past year.
Elsewhere, we find short sellers unloading their bearish bets on PAAS. During the past month, the number of shares sold short dropped by 36% to 2.2 million. This accumulation of bearish bets accounts for only 2% of the company’s total float, offering little in the way of potential short-covering support.
Technically speaking, the shares of PAAS are down more than 15% since the beginning of the year and are hovering near breakeven in trading today. The stock is perched on support at its rising 10-day moving average, which has guided it higher since the start of February.
