Following through on Tuesday’s bullishness, stocks made another impressive gain today. In fact, the S&P 500‘s 1.0% advance to 2084.42 left it at the highest close in weeks, carrying it above a key resistance level as a result.
Here’s the deal.
Clovis Oncology Inc (CLVS)
Clovis Oncology shares were up-ended today after the company delivered some disappointing news about one of the drugs in its pipeline.
Long story made short, the FDA is delaying its final decision on lung cancer drug rociletinib, unsure that the treatment performs statistically better than current standards of care. Indeed, the advisory panel that makes an approval recommendation to the FDA on cancer drugs decided by a 12 to 1 margin that rociletinib could not yet be approved until more data was gathered.
While analysts responded to the news with various timbres and colors of opinion on the decision, they all basically agreed it was a concerning turn of events, pushing CLVS down 5% for the session.
Seagate Technology PLC (STX)
Clovis Oncology wasn’t the only name to wind up on the wrong side of analyst opinions on Wednesday. Disk-drive maker Seagate was also downgraded today, sending STX lower to the tune of 3% as a result. Deutsche Bank was the culprit. Analyst Sherri Scribner lowered the research outfit’s stance on STX from a “Buy” to a “Hold.”
And yes, it was a company-specific issue and not an industry-oriented one. Scribner made a point of highlighting peer and rival Western Digital Corp (NASDAQ:WDC) as a “Buy.”
The updated Deutsche Bank research explained:
“While we do not expect units to return to growth, we believe industry consolidation, more modest ASP declines, and a positive mix shift to higher value HDDs in the cloud and for capacity applications, will lead to revenue growth longer term. In the near term, the negative impact from declines in the PC market are too severe to be offset by these positive trends, but as we near 2020, these positive drivers should lead to stabilizing sales.”
Sprint Corp (S)
It’s not exactly a big secret that wireless service provider Sprint has a debt problem that could very likely lead to bankruptcy. Nevertheless, there’s something about seeing that reality splashed as headlines that spooked S shareholders each time it happened. That, coupled with a downgrade today, is the core of the reason Sprint shares led the charge among losing large caps on Wednesday.
Pacific Crest did the deed, lowering its opinion on Sprint from “Sector weight” to “Underweight”, noting the company’s aggressive discounting efforts weren’t paying off in terms of subscriber growth.
The title of Pacific Crest analyst Michael Bowen’s report on Sprint spoke volumes … “Light In Tunnel May Be A Train,” and if there was any doubt left, the report made the outlook clear by explaining:
“Sprint’s lack of competitive tools other than price suggests fundamental issues. If 50% off isn’t working, what will? We recommend investors take cover into Sprint’s fiscal Q4 earnings, and we would be selling shares.”
S shares closed 2% lower on Wednesday.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
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