Premarket Analysis for 5/20- Upgrades/Downgrades, Gappers, Actionable Calls
Periodicals Wrap-Up for Tuesday, May 20th
WALL STREET JOURNAL: The Wall Street Journal reported that a federal judge said that the government had “sufficient evidence”" for a jury to conclude that a conspiracy to fraudulently boost the financials of American International Group (AIG) began with former CEO Maurice R. “Hank” Greenberg. That led to a transaction that artificially inflated AIG’s loss reserves…Citigroup’s (C) Falcon Strategies fixed income hedge fund is down 75%, the Wall Street Journal reported, bad news for the three U.S. banks that invested in it to help increase returns on employee life insurance. One of the banks, Fifth Third (FITB), is suing Transamerica Life and Smith Barney, both of whom helped to arrange the investment, and some are now questioning whether Citigroup will be forced to give back some of the investments as they have with individual investors…FINANCIAL TIMES: After it stopped offering some mortgages last month because it was swamped by volumes of new applications, the Financial Times reported that First Direct, a unit of HSBC (HBC), has resumed lending to new customers. The bank said it has continued to receive “significant interest” in its mortgages from existing customers…TELEGRAPH: In an effort to raise capital from shareholders, the Telegraph reported that Barclays (BCS) is considering a takeover bid for a rival in the U.S. or UK. According to Barclays’ finance director Chris Lucas, “all options are open” at this point, including launching a large rights issue. Sources believe Barclays may attempt to acquire an investment bank, a struggling bank or a deal in a fast-moving economy.
CNQ upgraded to Outperform from Neutral@FBCO
Watch this for reaction to upgrade.
CEO upgraded to Outperform from Neutral@FBCO
TXI initiated with a Buy@GABE
Gabelli expects cement margins to remain strong and believes the company is a takeover candidate in a consolidating industry.
TGT reports Q1 EPS 74c vs. consensus of 71c
Reports Q1 revenue $14.8B vs. consensus of $14.92B.
Oil Services: Price target raised@LEHM
Lehamn raised price targets for Oil Service stocks based on a strong recovery in 2008 and 2009 for North American natural gas drilling and international growth. The firm’s top picks are: WFT (target to $121 from $98), HAL ($68 from $58), SLB ($142 from $120), TDW ($85 from $75), NBR ($51 from $45), HERO ($44 from $32), CLB ($176 from $143) and IO ($23 from $20).
CRM: Forecast solid quarter, maintain Outperform@WCHV
Wachovia forecasts that Salesforce.com will report revenue of $235.5M and pro-forma EPs of 15c for its April quarter. The firm believes the company’s business trends are strong, and their checks indicate continued strong sales momentum.
BCSI: Expect to meet or beat Q4 estimates@PACS
PacCrest says their checks are coming back positive and as a result they expect the company’s Q4 results to meet or beat their 40c on $90M in revenue estimates. They reiterate a Sector Perform rating.
Boone Pickens says he bough 10M shares of Yahoo-YHOO-CNBC
Pickens also said he expects oil to hit $150 per barrel this year.
SNDK: Maintain Neutral following conference presentation@JPMS
JP Morgan believes caution is warranted after SNDK’s CEO stressed the depth and length of the NAND cycle downturn at their conference yesterday. The firm left the presentation confident in their below consensus estimates for 2008.
Boeing showing off 787 progress-Seattle Post-Intelligencer
Boeing (BA) is making progress on the 787 program after slipping 15 months behind schedule. The company said that the there has been significant improvement in each 787 and that the kinks are being worked out during a media tour on Monday.
NCTY: Q1 beats on lower tax rate and marketing costs@PACS
PacCrest adjusted their EPS estimates by 11c to account for a lower tax rate and marketing costs, but was not impressed with the quarterly results. They believe new games are failing to gain traction. PacCrest reiterates their Sector Perform rating.
SPWR completes 1.4MW solar power plant in S. Korea
SunPower Corporation announced that it has completed design and construction of a new 1.4-megawatt solar electric power plant project in Hampyeong, South Korea.
ECA upgraded to Outperform from Neutral@FBCO
GS, UBS AG-UBS and Morgan Stanley-MS agree for dark pool access
Goldman Sachs, Morgan Stanley and UBS announced a series of bi-lateral agreements that will allow each firm to offer their respective clients access to each other’s pool of non-displayed liquidity. These arrangements allow algorithmic trading orders of each firm to interact with the U.S. equity liquidity found in three of the largest broker-dealer operated “dark” liquidity pools in the U.S. - Goldman Sachs’ SIGMA X, Morgan Stanley’s MS POOL and UBS’ PIN ATS.
Recommend Pair Trade: Long CVD; Short PPDI post Q1 reports@GSCO
MS: Estimates lowered, maintain Equal Weight@LEHM
Lehman lowered MS Q2 EPS estimate to 87c from $1.31 and 2008 to $4.72 from $5.16 based on weak activity levels. The firm notes there could be a trading opportunity ahead of Q2 results given reduced risk in the balance sheet and declining hedging losses.
GS: Estimates lowered, maintain Equal Weight@LEHM
Lehman lowered GS Q2 EPS estimate to $3.18 from $3.75 and 2008 to $15.04 from $15.60 based on weak activity levels. The firm notes there could be a trading opportunity ahead of Q2 results given reduced risk in the balance sheet and declining hedging losses.
Google holds emergency meeting to discuss possible Microsoft-Yahoo deal-UK Times
Google (GOOG) reportedly held an emergency meeting Monday evening in an effort to discuss the implications of a potentially revived deal between Yahoo (YHOO) and Microsoft (MSFT) that would deal with the control of advertisements displayed next to Internet search results. Founders Larry Page and Sergey Brin, along with Google CEO Eric Schmidt said they would give Yahoo CEO Jerry Yang “refuge within Google” should investors push him out, also adding they believe Google is “recession-resilient”. Brin commented that the company has not yet ruled out a tie-up with Yahoo.
BTU downgraded to Add from Buy@LYON
Target to $88 from $66.
Foundation Coal-FCL upgraded to Add from Neutral@LYON
Calyon upgraded FCL citing the strong coal price environment. Target to $74 from $56.
Arch Coal-ACI upgraded to Add from Neutral@LYON
Calyon upgraded ACI citing the strong coal price environment. Target to $71 from $52.
DE initiated yesterday with a Strong Buy, target $110@BUCK CMI initiated yesterday with an Underperform, target $66@BUCK TEX initiated yesterday afternoon with a Strong Buy, target $93@BUCK
Large Banks: Credit crisis will extend well into 2009@OPCO
Oppenheimer thinks that the credit crisis may even extend beyond 2009, and they predict the crisis will ultimately result in three years of multi-billion dollars in revenue reductions. By the end of 2009, Oppenheimer forecasts that there will be a total of over $170B in reserve builds at the banks, in addition to normal loan loss provisions. Oppenheimer significantly lowered their estimates for the large banks, and their estimates for FY2008 and FY2009 are now 72% and 37% below consensus, respectively.
GU target raised to $18.75 from $14, maintain Buy@SOLE
Soleil raised their estimates to reflect pricing strength.
GOOG: Recent news supports long-term thesis, reiterate Buy@BOFA
Banc of America believes recent news regarding GOOG’s content network opened to 3rd party ad servers and the launch of Google Health are incrementally positive. They reiterate a Buy rating and $700 target on the stock.
AZO reports Q3 EPS $2.49 vs. consensus of $2.43
Reports Q3 revenue $1.5B vs. consensus $1.52B.
EXM: Reiterate Buy and $67 target after Q1 results@JEFF
Jefferies believes shares remain attractively valued with further upside potential.
HD reports Q1 EPS 41c vs. consensus of 37c
Reports Q1 revenue $17.9B vs. consensus of $17.61B.
HD CEO says housing and home improvement markets remained difficult.
HD CEO says conditions ‘worsened’ in many areas of the country.
Netflix-NFLX upgraded to Overweight from Equal Weight@LEHM
Louis Navellier’s Quantum Growth Update
Louis Navellier’s Quantum Growth Update is positive on AMKR, BBV, DRYS, and HES; cautious on ADBE, PCLN, and SPSS.
Fast Money position recap- Guy likes BA, Pete likes DD, Jeff likes shorting ERTS, Karen thinks short FXB.
Adami Owns (C), (GS), (INTC), (MSFT), (AGU), (BTU), (NUE); Najarian Owns (AAPL), (TSO), (XLF); Najarian Owns (TE) Calls; Macke Owns (DIS), (INTC), (ATVI), (EMC); Finerman Owns (GS); Finerman’s Firm And Finerman Own (HD) And (HD) Puts; Finerman’s Firm Owns (GLNG), (MSFT), (SUN), (TSO), (VLO); Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm Owns SPX Index Puts; Finerman’s Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM).
Watching energy but weary of market conditions to start the day. Keep an eye on the leading indicators GOOG, AAPL, GS, XLF, XOM, FXI, VIX, IWM. Confirm market buying with the TRINs. Focusing on UNG plays and also the energy sector- coals, OIH, CNQ, NOV, ECA, APA. Stay positive, be patient, and pick plays with a high probability of success. Great luck and great trading.
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