Periodicals Wrap-Up for Monday, June 23rd
WALL STREET JOURNAL: Last November, Google (GOOG) and 30 partners were said be developing a new type of handset using Android software that was expected to revolutionize the industry. The first new phones were expected to be available in this year’s second half but are now slated for the fourth quarter the Wall Street Journal reported…According to people familiar with the situation, the Wall Street Journal reported that Citigroup (C) will make sharp cuts in its investment banking division this week.The Wall Street Journal reported that Live Nation (LYV) Chairman, Michael Cohl, stepped down down as a director and executive to end the strategy feud over how to pursue the “360 deals” with music superstars with CEO Michael Rapino…FINANCIAL TIMES: There Financial Times reported that there are worries that investment banks will accelerate the pace of their layoffs this summer, after it became known that Goldman Sachs (GS) gave pink slips to workers in its investment banking division last week. Goldman is now expected to lay off up to 10% of the workers at the division…STAR LEDGER: New Jersey put its $150M center for stem cell research on hold, the Star Ledger reported, eight months after ground was broken on the project…
H&R Block back in the hot seat-NY Post
H&R Block (HRB), whose shares are up 17% this year after closing Option One, is back in the hot seat. Block, which agreed last week not to foreclose on any Massachusetts mortgages until at least July 14, could be forced to take hundreds of millions of dollars in writedowns if Massachusetts Attorney General Martha Coakley proves the tax preparation giant used predatory lending practices to sell over 30,000 mortgages in the state between 2004 and 2007. Coakley believes there is increasing evidence Option One was pressured to inflate home values to complete mortgages. H&R Block representatives did not comment.
Google’s cellphone plans delayed-WSJ
Last November, Google (GOOG) and 30 partners were said be developing a new type of handset using Android software that was expected to revolutionize the industry. The first new phones were expected to be available in this year ’s second half. Now they’re slated for the fourth quarter as deadlines are repeatedly pushed back, reports the Wall Street Journal. On issue is that the software hasn’t enthuastically been supported by mobile phone software developers.
Citigroup to make more cuts in investment banking this week-WSJ
People familiar with the situation say that Citigroup (C) will make sharp cuts in its investment banking division this week.Citigroup which will likely suffer through more writedowns this quarter is looking to reduce the business unit by 10%.
Weekly additions to the Investors Business Daily-100
The following are additions to the Investors Business Daily- 100 list for the week of June 20: Renesola Ltd. (SOL), Metalico Inc (MEA), Tera Nitrogen Co.(TNH), Penn Virginia Corp (PVA), American Public Education (APEI), Transocean Inc (RIG), Diana Shipping Inc. (DSX), Oceaneering International (OII), Wabtec (WAB), Chart Industries (GTLS), Ensco International Inc. (ESV).
Weekly subtractions from the Investor’s Business Daily-100
The following are subtractions from the Investors Business Daily-100 list for the week of June 20: Valmomt Industries (VMI), Nordson Corp.(NDSN), Petroleo Brasileiro SA (PBR), Joy Global (JOYG), Plexus Corp. (PLXS), Darwin Professional Underwriters (DR), Mindray Medical International (MR), Millicom International Cellular SA (MICC), Atheros Communications (ATHR) Robbins & Myers (RBN), Anadarko Petroleum Corporation (APC).
High Tech Computer’s new Touch Diamond outshines Apple’s smartphone - Barron’s
The Taiwanese company, High Tech Computer, launched its sleek Touch “Diamond” smartphone in London in May. The phone is a 3G model that combines the professional features of Research in Motion’s (RIMM) BlackBerry with an Apple-like (AAPL) touchscreen and a number of selling points the new Apple 3G iPhone lacks. HTC also has some partnerships with Google (GOOG) and Microsoft (MSFT). Barron’s says, If strong sales of its phones help High Tech generate double-digit earnings gains in the next couple of years, and possibly merit a higher price/earnings multiple, its stock (ticker: 2498.Taiwan) could resume the run it enjoyed before getting steamrolled by the debut of Apple’s 3G iPhone. Based on his expectation of 25% earnings and revenue growth, one hedge-fund manager who owns the company’s shares sees them rising from last week’s 705 Taiwanese dollars (US$23) to as high as NT$1200, a 70%-plus gain, in 12 months. HTC’s price-earnings ratio of 12.4, based on 2008 estimates, sure looks cheap next to AAPL’s 34 and RIMM’s 38. Although Goldman Sachs and Deutsche Bank have more conservative projections for the stock, namely, a rise of about 30% to 35%, both have HTC on their Buy lists. The new Diamond rivals the looks and, in many respects, tops the performance of the 3G iPhone. Barron’s says, the “rub” is price. As, Apple’s CEO Steve Jobs says the iPhone will begin selling in July at $199 for an eight-gigabyte model, a lower-than-expected price that some think will undercut HTC’s margins. HTC set a high bar by including leading-edge technological specifications, such as super-fast chips, a 3D interface and a high-resolution touchscreen on their smartphone, says Goldman’s Cheng, who has put HTC on his firm’s Asia Conviction Buy list. The Diamond boasts certain video niceties that the iPhone doesn’t have. The Diamond also is constructed with a computer chipset supplied by Qualcomm (QCOM), the leader in 3G wireless processors, that many think is superior to the Infineon Technologies (IFX) product Apple opted to use. Goldman’s Cheng looks for HTC earnings to rise 18% next year and 22% in 2010, driven by wide adoption of Diamond handsets by multiple carriers around the world. His price target for the shares is NT$910, or about 30% above last week’s levels
Advice to Intel: Get out of Flash - Barron’s
Technology Trader columnist Eric Savitz revisits his thesis on Intel (INTC) and NAND flash-memory chip pricing, which continues is steel price declines. He recaps a note from late week by Lazard Capital’s analyst Daniel Amir who asserted that Seagate Technology (STX) might be interested in buying Intel’s stake in its flash memory joint venture with Micron Technology (MU) called IM Flash Technologies. Savitz says, it seems like a good idea for both sides. The flash business is a nightmare for Intel; investors would welcome their exit from the segment. He also mentioned Avi Cohen, an analyst at Avian Securities, who proposes that Seagate should buy SanDisk (SNDK), which makes flash-memory cards sold in the retail market. Whatever Seagate decides, Savitz repeats his advice to Intel: Get out of flash.
Onyx’s promising cancer treatments make its volatile stock look cheap - Barron’s
Despite its number of starts and stops, shares of Onyx Pharmaceuticals (ONXX), based on its promising cancer treatments, looks cheap. What sets Onyx apart from all but a handful of its rivals is the distinction of having actually brought a new oncology drug to market, a drug approved to treat not one, but two kinds of deadly tumors. Dubbed Nexavar (generic name: sorafenib), the compound was developed in 50-50 partnership with a unit of Bayer AG (BAYRY). It won FDA approval in December 2005 for advanced kidney cancer. Then, late last year, after clinical trials showed a noteworthy increase of 44% in patient survival, Nexavar got the green light for liver cancer. The flurries of excitement surrounding the company and the stock’s parabolic spikes can be explained not only by Onyx’s impressive successes, but also by the expectation that Nexavar will exhibit significant benefits across a wide range of cancers. Investment positives: ONXX now is in the black and boasts a robust balance sheet, no debt and more than $7 a share in cash and securities. Plus, ONXX has a lucrative 50-50 partnership with pharma giant Bayer and the potential for explosive earnings growth over the next couple of years as Nexavar, the first and only systemic treatment for liver cancer, is introduced around the globe. What distinguishes Nexavar is the ability of most patients to take it without serious side effects. Moreover, since Nexavar comes as a tablet rather than as an infusion, therapy can be done at home. A big plus. Onyx’s chief medical officer, Hank Fuchs, is optimistic Nexavar will ultimately work in lung cancer, the world’s largest cause of cancer deaths of more than 1.3M each year. Hedge-fund manager Larry Feinberg, at Oracle Partners, sees Onyx’s research and marketing expenses moderating and contends investors have grossly underestimated revenue and earnings power. By next year, he figures Nexavar will be a $1B drug and pegs Onyx’s net at $1.93 a share. He reckons the company’s worth $65-$70 a share. And should Nexavar ultimately work in other cancers, $65-$70 might just prove, if anything, unduly conservative.
Oil Bubble?: Oil may be peaking in $130 to $140 a barrel range - Barron’s
In the next decade, oil indeed may hit $200 a barrel. But Barron’s says, prices could fall to $100 a barrel by the end of this year if Saudi Arabia makes good on its pledge to increase production; global demand eases; the Federal Reserve begins lifting short-term interest rates; the dollar rallies, and investors stop pouring money into the oil market. China raised prices on retail gasoline and diesel fuel by 18% Thursday, in a move that is expected to curb demand. A sharp drop in energy prices would help whole swaths of the U.S. economy, including retailers, food and household-goods makers, auto makers and transportation concerns. Beleaguered U.S. airlines would benefit because they’re expected to spend $61B on fuel this year, up $20B from 2007. Few oil stocks would be safe if crude falls $20 to $30 a barrel. Independent E&P companies like DVN, APA and XTO could get hit hard because they’re up sharply in the past year. The majors, including XOM, CVX and COP, might hold up better because they have refining and related businesses like chemicals, whose profitability isn’t directly linked to crude and natural-gas prices. Some of the biggest oil companies, notably XOM, RDS/A and BP, have badly lagged in the past year. BP, for one, has been beset by problems, including a troubled joint venture in Russia. The majors may be the best energy values because they trade for less than 10x this year’s earnings and around 8x estimated 2009 profits. The ‘09 earnings consensus reflects an assumption of $100 crude, not the current $135.
Rio, BHP seek record iron ore price increases-FT
Rio Tinto (RTP) and BHP Billiton (BHP) have told Chinese steel companies that they will have to either swallow a record increase in the price of iron ore, or face the possibility of supply interruptions. Rio and BHP are looking for price increases of 85%-95%, traders and industry officials said.
Microsoft’s Johnson says company may bid for Yahoo again-FTD
According to Microsoft’s (MSFT) head of the company’s platform and services unit, Kevin Johnson, the company may make a new offer for Yahoo! Inc. (YHOO).
FSLR: See near-term trading opportunity ahead of earnings@AMTR
Am Tech believes the Q208 pre-earnings trade is setting up similarly to Q2 of 2008 as the company is currently ramping capacity in Malaysia, similar to the German ramp in mid-2007. They reiterate a Buy rating and $450 target price.
RIMM: Expect Q1 report of 86c/$2.3B@RBCM RBC Capital expects a solid Q1 for RIMM of 86c/$2.3B, above the Street’s 85c/$2.27B. The firm expects EPS guidance of 94c-97c and revenue guidance of $2.6B-$2.7B. Target raised to $165 from $150. Shares are Outperform rated.
DECK estimtaes and target raised on strong outlook@SALI
Sterne Agee raised DECK estimates and boosted its price target to $185 following checks that indicate a strong outlook for both UGG and TEVA.
EBAY: Believe initatives will enhance buyer activity@TWPT
After eBay announced discounts and other new incentives for buyers, Thomas Weisel predicts that the initiatives will increase buyer activity on the website, leading to increased seller activity. The firm maintained their Overweight rating on the stock.
EU agrees to impose new sanctions against Iran-Dow Jones
EU agrees to ban Iran’s bank Meli from operating in Europe.
Brokers & Asset Managers: Estimates lowered ahead of Q2 results@BOFA
Banc of America expects to see continued write-downs in Q2 on troubled asset inventories as well as declining fee income on Q1’s equity market declines. The most significant estimates cut were for Merrill Lynch (MER) and UBS AG (UBS). Banc of America made less significant estimate revisions for M&A boutiques like Lazard (LAZ), Greenhill & Co (GHL), and Evercore Partners (EVR). The firm recommends sticking with the boutiques, especially LAZ.
AMZN: Company is well-positioned to offset higher fuel costs@OPCO
Oppenheimer believes that Amazon is poised to offset higher fuel costs with its highly efficient regional distribution network, postal injection and negotiated carrier discounts. However, the firm maintained their Market Perform rating.
DE: View the recent pullback as a buying opportunity@JPMS
JP Morgan believes the Midwest floods will have a limited impact on EPS and reiterates an Overweight rating on the stock.
FSLR target raised to $335 from $280, maintain Overweight@LEHM
Lehma believes concerns regarding margin expansion and increased competition are overdone and expects upside to Q2 consensus estimates.
NVDA: Expect company to become more competitive@KBRO
After meeting with Nvidia’s CEO, Kaufman Bros. predicts that Nvidia will regain its strong competitive position with AMD (AMD) beginning in Nvidia’s 3Q09, when its products are refreshed. The firm reiterated their Buy rating.
ESLR believes Asian manufacturing will drive down costs@STFG
After attending Evergreen Solar’s analyst day, Stanford reports that the company believes its new production facility in Asia will reduce its capex per watt to $1.22 in 2010 from $2.33 currently. Stanford thinks the company deserves a premium due to its quad ribbon technology, manufacturing expansion, and solid backlog. The firm maintained their Buy rating.
Owens Illinois-OI: Recent weakness presents a buying opportunity@SBSH
Citigroup attributes the recent weakness to technical factors and some near-term concern over volumes and energy costs. They see an attractive buying opportunity and reiterate a Buy rating with a $70 target.
US Portfolio Strategy: Financial & Consumer Discretionary downgraded@GSCO
Goldman downgraded the U.S. Financial Sector and Consumer Discretionary Sector to Underweight from Neutral.
NUE removed from Conviction Buy List; maintain Buy@GSCO
Note the firm added X to the list.
X added to Conviction Buy List; maintain Buy@GSCO
Note the firm removed NUE from the list
ELN added to Conviction Buy List; maintain Buy@GSCO
BLK upgraded to Buy from Neutral@GSCO
Goldman upgraded BLK citing valuation. Target $220.
NOV upgraded to Sector Perform from Underperform@RBCM RBC Capital upgraded NOV citing a re-acceleration in business trends, specifically new land and deep water rigs.
ACOR downgraded to Market Perform from Outperform@FBRC
Friedman Billings downgraded ACOR citing valuation. Target $32
SAC Capital reports a 7.1% Passive stake in Sanderson Farms-SAFM
AAPL target raised to $235 from $225 on iPhone upside@PACS
Pacific Crest raised their target as their analysis of elasticity around the $199 iPhone price point suggests the potential for significant upside to their current FY09 iPhone unit estimate of 15.5M. Shares remain Outperform rated.
CELG: Velcade approved by FDA for front-line multiple myeloma@BARD
While the firm expected the approval, it was not expected to have the label to be approved as broad as it was. This broad label will give a significant advantage to Millenium/Takeda’s sales compared to CELG’s Revlimid of which we are incrementally cautious. Reiterate $61 price target and Neutral rating.
AMZN: Believe Kindle should drive higher profitability@PACS
Pacific Crest believes Kindle may drive digital books much as the iPod has fueled digital music, making AMZN more profitable given the higher margins. The firm continues to find the stock attractive but maintains a Sector Perform rating.
SPX: Pivot Points
The following are the pivot points for the S&P 500 (SPX). Pivot High: 1330.375, Pivot Low: 1302.105. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.
Nasdaq 100 Index-NDX: Pivot Points
The following are the pivot points for the Nasdaq 100 Index (NDX). Pivot High: 1945.935, Pivot Low: 1902.775. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.
Dow Jones Industrials Index-DJX: Pivot Points
The following are the pivot points for the Dow Jones Industrials Index (DJX). Pivot High: 11952.440, Pivot Low: 11709.080. These were calculated using the DeMark method. It is generally believed to be bullish when price breaks out above the pivot high or bearish when price breaks down below the pivot low.
Fast Money position recap- Adami Owns (AGU), (C), (BTU), (GS), (INTC), (MSFT), (NUE); Macke Owns (INTC), (MSFT), (WMT), (DIS); Najarian Owns (AAPL), (BHI), (CHK), (ENER), (NOK), (TSO), (XLF), (HPQ); Najarian Owns (MER) Puts; Najarian Owns (MYGN) Calls, (SD) Calls; Najarian Owns (HRB) Puts; Quint Tatro Is The Principal Of Tatro Capital; Tatro Owns (C), (DV), (PETS), (STRA), (ESLR), (GLD), (GLW), (GS), (QQQQ), (RIMM), (SDS); Tatro Capital Owns (SLV), (ASTI); Tatro Capital Owns (USO) Puts
Financials are being downgraded as a sector by GS this morning. Fertilizer plays get a little jump on the BG buyout of CPO. HK and the shale plays seeing a little life on oil prices moving higher this morn. Shale plays- CLR, XCO, SM, NFX, HK, CRK, XTO, GMXR, SD, GDP, WLL. I still expect market weakness within this bear market with small cover rallies. I recently read about the Hindenburg Omen on Seeking Alpha which verified what I saw and felt on June 6th and 9th.
So being defensive and keeping cash on hand is very important. There are still pockets of strength in the market if you choose to look for long ideas. Keep focused, have patience, and pick plays with a high probability of success.
Great luck and great trading.
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