Bearish outlook, bearish, sell off, bearish market, downtrend

Jefferies has hit several big packaging names with bear notes this morning

Jefferies this morning downgraded packaging and paper manufacturer International Paper Co (NYSE:IP) to “underperform” from “hold” earlier. The analyst also lowered its price target to $31 from $40, noting a huge glut in containerboard inventory, which Jefferies predicts will weigh on prices in the fourth quarter. Packaging Corporation of America (PKG) received a similar downgrade to “underperform” from the analyst, while it also hit sector peer WestRock (WRK) with a bear note. IP was last seen down 4.8% at $37.77. 

Jefferies joins a pretty pessimistic brokerage bunch, though there’s’ still room for more price-target cuts, as the 12-month consensus price of $45.18 sits at a solid 13.9% premium to last night’s close. Meanwhile, two of the 13 analysts in coverage still call IP a “strong buy,” compared to nine “hold,” ratings, and three “sell” or worse ratings. 

Earlier this week, IP broke below a recent floor at the $40 level to hit an almost two-year low of $39.36, and today’s drop could spell out another bottom for the equity. The stock’s 140-day moving average rejected a rally attempt from the stock in mid-August, and the 10-day moving average has emerged as immediate pressure, putting International Paper stock at a more than 15.5% year-to-date deficit. 

An unwinding of optimism among options traders could weigh further still on IP. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day put/call volume ratio of 2.69, which stands higher than 83% of readings from the past year. In other words, there’s been a healthier-than-usual penchant for calls of late. 

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