Baxter International Stock Downgraded on Margin Concerns

Morgan Stanley downgraded BAX to “underweight” from “equal weight”

Shares of Baxter International Inc (NYSE:BAX) are down 2.9% at $34.28, after a downgrade from Morgan Stanley to “underweight” from “equal weight,” with a price-target cut to $30 from $39. The firm raised concerns over the medical equipment name’s margin goals, noting its financial outlook may be more challenging than previously thought, particularly after its acquisition of Hillrom. 

On the charts, support at the $33 level kept losses in check over the past couple months. However, overhead pressure at the 60-day moving average rejected the security’s latest rally. Year to date, BAX is down 10.4%. 

Bear notes haven’t been uncommon for the stock. Of the 17 analysts in coverage, 14 carry a “hold” or worse rating. Options traders also lean bearish, per Baxter International stock’s Schaeffer’s put/call open interest ratio (SOIR) that stands in the 95th percentile of annual readings.

It’s worth noting that the security tends to outperform volatility expectations — a boon for premiums traders. In fact, BAX’s Schaeffer’s Volatility Scorecard (SVS) stands at an elevated 96 out of 100.

 

Shorts are piling on as well, with no signs of slowing down. Over the last month, short interest rose 60.3%, though it only represents 1.7% of the security’s available float.

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