Broadcom Options Volume Explodes Amid Stock Sell-off – Schaeffers Research (blog)

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The tech sector is spearheading a major rally in U.S. stocks. Three names making notable moves are chip giant Broadcom Inc (NASDAQ:AVGO), women’s apparel retailer Cato Corp (NYSE:CATO), and biotech Zogenix, Inc. (NASDAQ:ZGNX). Below, we’ll take a closer look at what’s moving shares of AVGO, CATO, and ZGNX.

Analysts Bash Broadcom Purchase

Broadcom stock has been clobbered following the company’s decision to buy CA Technologies (CA) for almost $19 billion in cash. AVGO shares were last seen 15% lower at $206.65 — set for their worst session ever — and earlier hit an annual low of $197.46.

A number of Wall Street firms have questioned the M&A move — calling it “out of left field” and “bizarre,” for instance — and at least four analysts have officially weighed in bearishly. For example, Evercore ISI reduced its rating to “in line,” and Nomura dropped its price target to $225. Considering the backlash this acquisition has drawn, it’s worth pointing out that 26 of 28 brokerage firms say to buy Broadcom — suggesting there’s a least room for more bearish analyst attention to come through. In the meantime, options volume is exploding, with almost 154,000 contracts traded today — more than double the previous peak.

CATO Stock Sells Off On SSS Update

CATO is one of many retail stocks under pressure today, last seen 15.5% lower at $21.05, earning it a spot on the short-sale restricted list (SSR). The sell-off is in response to the company’s disappointing same-store sales for June, though the shares are finding support at a line of higher lows from their February bottom, and still sport a year-to-date gain of more than 31%.

Many have been betting on a pullback, though, with short interest on Cato rising 28.2% in the last two-week reporting period. As it stands now, 5.7% of the security’s float is dedicated to short interest, or 4.3 times the average daily trading volume.

Zogenix Hits Record High on Drug News

ZGNX is one of the best stocks on Wall Street today, trading 23% higher at $56.95, and it earlier hit a record peak of $58.30, thanks to news the drugmaker’s treatment for childhood epilepsy met its goals in a late-stage study. Before today, the shares had essentially been drifting sideways since their massive bull gap from near $13 to the mid-30s back in September.

All five covering brokerage firms already had “strong buy” ratings on Zogenix shares, and the average 12-month price target is still out of reach, standing at $62.20. On the other hand, ZGNX stock is heavily shorted, with over 17% of the float controlled by short sellers.

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