Schaeffer's Daily Market Blog Features QLogic, Emulex, Starbucks, Dynamic Materials, and Chico's FAS

Business Wire, May 5, 2005

CINCINNATI -- Among the stocks featured in the May 5 edition of Schaeffer's Market Blog are QLogic (NASDAQ:QLGC), Emulex (NYSE:ELX), Starbucks (NASDAQ:SBUX), Dynamic Materials (NASDAQ:BOOM), and Chico's FAS (NYSE:CHS). Schaeffer's Market Blog is just one of the many free market commentaries written everyday at www.SchaeffersResearch.com - the home of Bernie Schaeffer and Schaeffer's Investment Research. The Market Blog is written throughout every trading day by Schaeffer's financial analysts and traders. They are quick insights to the day's most notable market activity from an options perspective. For additional information about this report or to have it delivered to you free via email every day click on the following link. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1M&PAGE=1.

Schaeffer's Market Blog for Thursday, May 5 2005:

Below are just a few of today's Market Blog entries. Click here to read all of today's Market Blog. http://www.schaeffersresearch.com/redirect.aspx?CODE=PROB1C&PAGE=1.

9:57 AM QLogic Beats Fourth-Quarter Forecast, but Guidance Disappoints

Semiconductor manufacturer QLogic (NASDAQ:QLGC) posted fourth-quarter earnings of 49 cents per share, beating the consensus estimate of 47 cents per share. However, the shares are trading down more than eight percent because the company issued guidance that was below some analysts' forecasts. J.P. Morgan analyst Mark Moskowitz cut his earnings estimate for the first-quarter saying that rival Emulex (NYSE:ELX) is outperforming QLGC. Ahead of the report, QLGC's sentiment picture was mixed. The Schaeffer's put/call open interest ratio was at its highest reading in the past year at 1.02. The short-interest ratio shows some signs of optimism with a reading of 1.48 and a 17-percent decline in the number of shares sold short in latest reporting period. Analysts were fairly bullish with 13 "buy" ratings, four "hold" ratings, and one "sell" rating.

10:24 AM Starbucks Same-Store Sales Better than Expected

Starbucks (NASDAQ:SBUX) reported that its same-store sales rose nine percent in April and that revenue for the four-week period ended May 1 jumped 23 percent to $487 million. After a rough first four months of 2005, which saw the stock drop from $62.36 to a low of $44.58 on April 20, the shares seemed to have found their footing and are now back above their short-term moving averages. The sentiment has turned more bearish recently, with the Schaeffer's put/call open interest ratio rising from 0.63 to 0.84 in recent weeks and the percentile ranking jumping from 13 percent to 43 percent. According to Zacks, there are six "buy" ratings and nine "hold" ratings, indicating a degree of pessimism from the analyst crowd. SBUX shares are up 3.25 percent this morning.

11:19 AM BOOM Bounces Higher

According to Yahoo! Finance, Dynamic Materials (NASDAQ:BOOM) is engaged in the explosive metalworking business, which uses explosives to perform metal cladding and shock synthesis. This morning before the market open, BOOM announced that first-quarter sales increased 72 percent to $17.5 million from $10.2 million. Net income also increased sharply, as the company reported net income of 28 cents per diluted share compared to net income of four cents per share last year. The stock has gained quite sharply on the news. In fact, BOOM was up more than 19 percent to $30.84 at last check. One thing that makes the stock particularly attractive from our contrarian perspective is that short interest accounts for nearly 33 percent of its float. Therefore, short players likely feel pressure to buy back their bearish bets against the stock on any positive developments. Short covering is probably bolstering BOOM's significant gains today.

11:37 AM Chico's FAS Jumps on Same-Store Sales

One equity that has been on my bull list for quite some time is Chico's FAS (NYSE:CHS). I have a positive outlook on CHS due to the stock's pessimistic sentiment backdrop in the midst of its positive price action. Although the shares recently dipped below support at their 20-week moving average, for the most part, CHS has been in a pronounced uptrend since mid-2003. Despite the positive technical outlook, skepticism abounds in CHS's sentiment backdrop. Option players are relatively pessimistic, as they hold 0.84 puts to every call on the stock. The stock's Schaeffer's put/call open interest ratio (SOIR) is higher than 89 percent of all readings taken over the past year. Furthermore, short sellers have made hefty bets against CHS, as it would take more than 19 days at the stock's average daily volume to buy back all the bearish bets against it.

This morning, CHS reported April same-store sales increased 15.5 percent. The company also reiterated its first-quarter earnings projection. This positive news has sent the stock sharply higher. At last check, CHS was trading more than 10 percent higher to $29.38.

1:46 PM More on Chico's

Today's option activity on Chico's (CHS) is interesting as well. Despite the strong fundamental news about same-store sales, and the positive reaction in the shares, there are still plenty of put option buyers out there betting against the shares. At the May 27.50 strike, put volume actually exceeds call volume by a count of 1,050 to 808. This could be a sign that the stock could continue higher from current levels.