Today's column includes the latest quarterly results from Amgen, Inc. (AMGN), a wave of post-earnings price-target adjustments on Potash Corp. of Saskatchewan (POT), a major FDA-related boost for Geron Corporation (GERN), and a negative analyst note for Clean Energy Fuels Corp. (CLNE). Each day, Early Edge focuses on the hot stocks in the news and gives you a unique insight into each stock's sentiment backdrop. Our time-tested contrarian approach centers on options, and gives you the trading tools to approach the day with a much-needed edge over the investing herd.
Amgen, Inc.
Amgen, Inc. (AMGN) unveiled its second-quarter results after Thursday's closing bell, with the drug maker reporting a profit of $1.2 billion, or $1.25 per share, down about 5.3% from the year-ago quarter. Excluding items, earnings arrived at $1.38 per share, exceeding analysts' expectations for a profit of $1.30 per share. Likewise, AMGN's revenue of $3.80 billion surpassed Wall Street's consensus estimate of $3.74 billion.
Looking ahead, AMGN downwardly revised its revenue forecast for 2010, citing weakness in the euro. The firm previously predicted full-year revenue of $15.1 billion to $15.5 billion, but sales are now expected to arrive "slightly below" the low end of that range. U.S. health care reforms are expected to have an impact of $200 million to $250 million on 2010 revenues.
AMGN has dipped fractionally lower ahead of the bell as traders consider the quarterly report. The equity is currently struggling beneath the weight of double-barreled resistance at its 50-day and 80-day moving averages, which have collaborated to push AMGN lower since late April.
Puts were popular Thursday ahead of AMGN's earnings release, with volume rising to 1.57 times the norm -- but these weren't necessarily bearish bets. The stock's out-of-the-money August 52.50 put saw 4,367 contracts change hands, with 73% crossing at the bid price. Open interest at this strike swelled overnight by 2,117 contracts, suggesting that traders sold to open puts here as a neutral-to-bullish pre-earnings play.
Potash Corp. of Saskatchewan
Potash Corp. of Saskatchewan (POT) has attracted a trio of price-target adjustments this morning, one day after the fertilizer firm hiked its 2010 earnings outlook. UBS raised its price target from $112 to $120 and reiterated its "buy" rating, while Soleil Securities upped its target from $89 to $100. Meanwhile, National Bank took the road less traveled by cutting POT's price target from $127 to $120.
POT settled at $102.80 on Thursday, and Thomson Reuters pegs the equity's average 12-month price target at $118.81. The shares are modestly lower in pre-market trading, backing away from recent resistance at their 50-week moving average.
Long-term bulls set their sights on POT in the wake of Thursday's earnings report, as evidenced by a large increase in open interest at the equity's out-of-the-money January 2011 120-strike call. More than 4,200 contracts traded here yesterday, with 52% trading at the ask price, and open interest jumped overnight by 3,104 contracts.
However, short-term bears were equally emphatic. Overnight, POT's weekly July 30, 2010-expiration 100-strike put added 1,215 contracts to open interest -- and most of the volume at this strike Thursday changed hands at the ask price, implying these soon-to-expire puts were most likely purchased.
Geron Corporation
Geron Corporation (GERN) stepped into the earnings spotlight last night, with the company reporting a slimmer-than-expected second-quarter loss -- but the big news driving the stock this morning comes from the Food and Drug Administration (FDA). GERN announced today that the FDA has lifted a clinical hold on its Investigational New Drug application, which means that the firm can continue with the world's first clinical trial of human embryonic stem cell-based therapy for acute spinal cord injuries.
GERN has galloped more than 13% higher in electronic trading, with the shares set to gap above resistance at their 10-week and 20-week moving averages. These trendlines haven't been surmounted on a weekly closing basis since late April.
If the shorts are caught off-guard by today's good news, a short-squeeze rally could help GERN extend its pre-market strength. Currently, more than 14% of the equity's float has been sold short, representing nearly 17 times the stock's average daily trading volume. Meanwhile, GERN won't have to contend with options-related pressure as it moves higher; peak call open interest of 1,547 contracts resides at the in-the-money August 5 strike.
Clean Energy Fuels Corp.
Clean Energy Fuels Corp. (CLNE) was hit with a downgrade this morning, as National Bank lowered its opinion of the stock from "sector perform" to "underperform." The negative note comes on the heels of strong gains for CLNE, which has caught a lift this week as traders anticipate the passage of an energy bill with incentives for alternative-fuel vehicles.
CLNE has shed 4.3% ahead of the bell, giving back a portion of its year-to-date gain of 21.4%. Traders will want to keep an eye on CLNE's 10-month moving average today -- the stock is poised to notch a monthly finish above this trendline for the first time since April.
On Thursday, traders rushed to add new bullish bets on CLNE. The equity's out-of-the-money August 20 call saw 2,699 contracts exchanged, with 54% trading at the ask price. Implied volatility climbed 5.3 percentage points by the close, and open interest ballooned overnight by 2,563 contracts. Now, the August 20 strike is home to peak call open interest of 3,513 contracts, creating the potential for an options-related speed bump here during the short term.
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