Analyst Upgrades

• Bristol-Myers (BMY) to hold from underperform at Jefferies.
• Pep Boys (PBY) to buy from hold at Stifel Nicolaus.
• Tesla Motors (TSLA) to overweight from equal weight at Morgan Stanley.
• Emerson (EMR) to buy from hold at Deutsche Bank.
• ARM Holdings (ARMH) to buy from neutral at BofA/Merrill.
• NetLogic (NETL) and Cavium Networks (CAVM) to buy from hold at Auriga.
• Aimco (AIV) to hold from sell at Citigroup.
• Ceragon Networks (CRNT) to overweight from equal weight at Barclays.

Target (TGT) overall option implied volatility of 24 is near its 26-week average, according to Track Data, suggesting non-directional term price movement.

Valeant Pharmaceuticals (VRX) announced it made a proposal to the Board of Directors of Cephalon (CEPH), to acquire Cephalon for $73.00 per share in cash. Cephalon overall option implied volatility of 25 is below its 26-week average of 30, according to Track Data, suggesting decreasing price movement.

Update is by Stock Specialist Paul Foster of theflyonthewall.com

Analyst Upgrades

• Philip Morris (PM) to conviction buy from buy at Goldman.
• Peet's Coffee (PEET) to neutral from sell at Janney Capital.
• Cephalon (CEPH) to equal weight from underweight at Morgan Stanley.
• StoneMor Partners (STON) to outperform from neutral at RW Baird.
• Tibco (TIBX) to buy from underperform at BofA/Merrill.
• Apollo Group (APOL) to outperform from market perform at BMO Capital.

Analyst Upgrades

• U.S. Steel (X) to buy from neutral and Barnes & Noble (BKS) to neutral from sell at Goldman.
• Salesforce.com (CRM) to buy from hold at Jefferies.
• Dollar Tree (DLTR) to overweight from equal weight at Barclays.
• Edison International (EIX) to hold from sell at Citigroup.
• Analog Devices (ADI) to overweight from neutral at JPMorgan.

Analyst Upgrades

• Interpublic Group (IPG) to buy from hold at Deutsche Bank.
• Radware (RDWR) to outperform from perform at Oppenheimer.
• Fluor (FLR) and Waddell & Reed (WDR) to buy from hold, as well as AllianceBernstein (AB) to hold from sell, at Citigroup.
• MetroCorp (MCBI) and American Capital (AGNC) to outperform from market perform at Keefe Bruyette.
• International Flavors (IFF) to overweight from equal weight at Barclays.
• BioCryst (BCRX) and Southern Company (SO) to buy from neutral at BofA/Merrill.
• Bunge (BG) to overweight from neutral at HSBC.

Analyst Upgrades

• BB&T (BBT) was upgraded to buy from neutral at Janney Montgomery.
• Amylin (AMLN) was upgraded to outperform from market perform at Leerink.
• Wells Fargo upgraded Morton's Restaurant (MRT) to outperform from market perform.
• Check Point (CHKP) was upgraded to overweight from neutral at HSBC.
• Deutsche Bank upgraded Excel Maritime (EXM) to buy from hold.
• JinkoSolar (JKS) was upgraded to buy from hold at Auriga.
• Piper Jaffray upgraded Compellent (CML) to overweight from neutral.
• BofA/Merrill upgraded Crane (CR) to buy from neutral.
• Goldman upgraded Wisconsin Energy (WEC) to conviction buy from buy and American Electric (AEP) to buy from neutral.
• Motorola (MOT) was upgraded due to increasing carrier support by MKM Partners.
• Under Armour (UA) was upgraded to buy from neutral at Sterne Agee.

Option traders appear to be setting up for a bullish move on TransDigm Group Incorporated (TDG). Traders plowed into 1,865 new call option contracts -- 84.77 times the average volume -- on the stock on Thursday. And we know that traders were eager to get into this trade because 96% of the trades came in on the ask price.

TransDigm has been hitting 52-week highs for a few days in a row now. The stock closed Thursday at $61.25, up 7.65% during the past month.

Cephalon (CEPH - option chain) stock is trading lower today after the company reported second-quarter earnings of $89.1 million, or $1.11 per share yesterday evening. Excluding one-time items, CEPH earned $2.05 per share, or $712.4 million. Analysts had forecast a profit of $1.77 per share on revenue of $693 million. However, shares of the stock are trading lower today after the company forecast 2010 revenue of $2.63 to $2.71 billion, below analysts' estimates of $2.73 billion. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CEPH.

This morning, CEPH opened at $60.67. So far today the stock has hit a high of $61.42 and a low of $58.71. As of 12:15, CEPH is trading at $59.24, down $3.66 (-5.8%). The chart for CEPH looks bullish and S&P gives CEPH a positive 4 STARS (out of 5) buy ranking.

Here are some highlights from last week's earnings coverage from BloggingStocks:

• Accenture Ltd. (NYSE: ACN) lower Q4 earnings met analysts' expectations but the Q1 outlook was weak.
• Cal-Maine Foods Inc. (NASDAQ: CALM) posted a Q1 net loss and said it will skip its dividend this quarter.
• Cephalon Inc. (NASDAQ: CEPH) earnings prospects for 2010 resulted in an analyst's downgrade.
• Darden Restaurants Inc. (NYSE: DRI) Q1 earnings beat by a penny but revenue fell short of estimates.
• Gannett Inc. (NYSE: GCI) shares rose after it forecast Q3 earnings above Wall Street estimates.

Analyst upgrades:

• UBS upgraded Apple (NASDAQ: AAPL) to Buy from Neutral and raised its target to $265 from $170, citing higher iPhone expectations, new partnerships, and likely upward revisions to Street estimates driven by gross margins.
• Wells Fargo upgraded Comcast (NASDAQ: CMCSA) to Outperform from Market Perform. The firm views a possible deal between end General Electric's (NYSE: GE) NBC Universal positively, as it thinks NBC will provide higher-margin growth for Comcast.
• Janney Montgomery upgraded Michael Baker (AMEX: BKR) to Buy from Neutral after the company completed the sale of its Energy business. The firm raised its target on shares to $46 from $40.
• Jefferies assumed coverage of Endo Pharma (NASDAQ: ENDP) and upgraded the stock to Buy from Hold. The firm cites valuation, a strong base business, and solid cash flow for the upgrade, and has a $30 target price on shares.
• Marten Transport (NASDAQ: MRTN) was upgraded to Overweight from Equal Weight at Stephens.
• U.S. Bancorp (NYSE: USB) was upgraded to Outperform from Market Perform at Keefe Bruyette.

Cephalon (NASDAQ: CEPH - option chain) shares are headed higher today after the company reported its positive results from a phase two clinical trial of its bipolar I disorder drug NUVIGIL. The company plans to advance the drug to phase three trials, and hopes to launch the drug in the third-quarter of 2009. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CEPH.

CEPH opened this morning at $66.50. So far today the stock has hit a low of $65.66 and a high of $68.13. As of 12:00, CEPH is trading at $67.51, up 4.32 (6.8%). The chart for CEPH looks bullish and S&P gives CEPH a positive 4 STARS (out of 5) buy ranking.

Monday, May 5

• Happy Cinco de Mayo!
• Day one of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Management Advisory Committees meeting: Purdue Pharma's NDA for Oxycontin.
  
• Anadarko Petroleum (NYSE:APC) to report Q1 earnings; conference call Tuesday at 10:00am.

Tuesday, May 6

• Day two of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Mgmt Advisory Committees meeting: Cephalon's (NASDAQ:CEPH) sNDA for Fentora.
• Molson Coors (NYSE:TAP) to report Q1 earnings; conference call at 12:00pm.
• Walt Disney Company (NYSE:DIS) to report Q2 earnings; conference call at 4:30pm.

Wednesday, May 7

• Marsh & McLennan (NYSE:MMC) to report Q1 earnings; conference call at 8:30am.
• Transocean (NYSE:RIG) to report Q1 earnings; conference call at 10:00am.
• Hot Topic (NASDAQ:HOTT) and Zumiez (NASDAQ:ZUMZ) to report April sales at 4:00pm.

Thursday, May 8

• Wal-Mart (NYSE:WMT) to report April sales at 8:00am. Abercrombie & Fitch (NYSE:ANF) to report sales at 8:15am. Target (NYSE:TGT) to report sales at 8:30am.
  
• NVidia (NADAQ:NVDA) to report Q1 earnings; conference call at 5:00pm.

Friday, May 9

• PDUFA date for Adolor Corp (NYSE:ADLR) and GlaxoSmithKline's (NYSE:GSK) Entereg for management of Post-operative Ileus.
• American International Group (NYSE:AIG) to report Q1 earnings; conference call at 8:30am.
• Sotheby's (NYSE:BID) to report Q1 earnings; conference call at 9:00am.

Cephalon Inc. (NASDAQ: CEPH) shares are trading higher today on news that Takeda Pharmaceutical, a Japanese firm, has agreed to buy Cephalon competitor Millennium Pharmaceuticals (NASDAQ: MLNM) for $25 a share. MLNM is trading up almost 50% to $24.45 currently, indicating that investors think this deal will most likely happen. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CEPH.

After hitting a one-year high of $84.83 in June, the stock hit a one-year low of $56.20 in February. CEPH opened this morning at $64.94. So far today the stock has hit a low of $64.45 and a high of $66.18. As of 12:45, CEPH is trading at $65.27, up 1.05 (1.6%). The chart for CEPH is neutral and improving, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 7.5% return in just five weeks as long as CEPH is above $55 at May expiration. Cephalon would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.

CEPH hasn't been below $56 at all in the past year and has shown support around $59 recently. This trade could be risky if the company's earnings (due out on 5/1) disappoint, but even if that happens, that position could be protected by support the stock might find between $55 and $60, where it bottomed out in the past two months.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CEPH or MLNM.

MOST NOTEWORTHY: Allscripts, Supertel Hospitality, Cephalon, Limelight Networks and Financial Federal were today's noteworthy downgrades:

• Allscripts (NASDAQ: MDRX) was downgraded to Neutral from Outperform at JP Morgan following its weak Q3 results and guidance.
  
• Supertel Hospitality (NASDAQ: SPPR) was downgraded to Neutral from Outperform at Baird and to Market Perform from Outperform at JMP Securities following its disappointing Q3 report.
  
• JMP securities downgraded Cephalon (NASDAQ: CEPH) to Market Outperform from Strong Buy citing uninspiring Q3 revenue growth.
  
• Friedman Billings downgraded Limelight Networks (NASDAQ: LLNW) to Market Perform from Outperform citing the tough pricing environment, competition, and upcoming IPO lockup expiration on 12/5.
  
• The firm also downgraded shares of Financial Federal (NYSE: FIF) to Underperform from Market Perform, as they expect the company to be impacted substantially from the slowing economy.

OTHER DOWNGRADES:

• JP Morgan removed Jones Lang LaSalle (NYSE: JLL) and CB Richard Ellis (NYSE: CBG) from its Focus List.
  
• Deutsche Bank downgraded Home Diagnostics (NASDAQ: HDIX) to Hold from Buy.
  
• Finisar (NASDAQ: FNSR) was downgraded to Hold from Buy at Jefferies.
  
• Banc of America downgraded RPM, Inc (NYSE: RPM) to Neutral from Buy.

Cephalon Inc. (NASDAQ: CEPH) is actually a lucky company today. Shares are getting hit hard (down 4.26% as of 12:08), but this could have been much worse, and it might still if the original reports become worse. Then CEPH shares could see a lot more selling. Reuters reported on "Dear Doctor" letter the company has been sending, warning them about deaths related to its FENTORA pain drug. FENTORA is a pain management drug used by cancer patients.

The company has reportedly sent out two seperate letters about serious side effects and deaths that occurred in Fentora users. It says that the deaths were tied to improper patient selection or dosing, or from improper product substitution.

The bad news follows a string of good news for the company and the drug. Only in late August, the FDA granted an Orphan Drug Designation to TREANDA, the company's investigational treatment for Chronic Lymphocytic Leukemia. In mid-August, the company released positive data on FENTORA from its Pivotal Study of FENTORA in Opioid-tolerant patients with non-cancer breakthrough pain.