MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Thursday, May 24, 2012
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5:46 PM As Suntech's (STP) CEO warns of the potentially devastating impact of European tariffs, Auriga notes recently-imposed U.S. tariffs had an immediate retroactive impact on Suntech's Q1 results to the tune of $0.11/share. The firm adds Suntech's U.S. module manufacturing ops will limit the future impact of the tariffs, but still doesn't expect the company to turn a profit until 2014 on account of intense price pressure. It has a PT of $3, or just 1x book value. Comment!
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5:27 PM Following the guidance-driven bloodletting seen today, BMO thinks NetApp (NTAP -12.3%) could be a buyout target. The networked storage giant is now worth just ~$6.5B and trades at just ~5x free cash flow after backing out net cash. FBN, which is upgrading NetApp, feels the same way, and believes gross margin improvement and layoffs could result in guidance being conservative. (more on NTAP) (transcript) Comment!
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3:48 PM Contributing to today's drop in LinkedIn (LNKD -5.3%) is a cautious note from ITG, which thinks the company's pricing and volume have dipped in Q2. This leads ITG to think LinkedIn, which has beat the guidance set for each of its first 4 post-IPO earnings reports, will only report in-line sales. And that, it thinks, could disappoint investors who have given the company a sky-high valuation. Comment!
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3:26 PM Westlake Chemical (WLK +2.4%) is upgraded to Neutral from Sell by UBS, which believes the stock has pulled back more than the market due to concerns that natural gas increased while oil prices declined. The firm notes the ratio of WTI oil price to U.S. natural gas dropped from 55x to 36x; "a ratio in the 5.0s is not sustainable," it says, and the stock "got ahead of itself." Comment!
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2:24 PM Forum Energy (FET -0.4%) is initiated at Buy by Deutsche Bank, which says the stock fills an investment void in the oil service space as a high quality small-midcap name with leverage to secular industry growth themes and "one of the highest quality management teams [it has] seen in a company this size." FET has enjoyed several positive outlooks recently, but shares have barely budged. Comment!
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1:51 PM Mark Cuban discloses he bought 150K Facebook (FB) shares at $33, but says the purchase is a trade, not an investment. Cuban also provides downbeat commentary about Facebook and its disappointing IPO: he predicts the offering will further discourage retail investors from participating in the market, and joins Jim Cramer in predicting mobile usage is bad news for the company. He also sees mobile's monetization challenges as a problem for Google (GOOG) and other online ad sellers. 10 Comments
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11:59 AM Calling the stock a potential "four-bagger," Jefferies starts coverage of XPO Logistics (XPO +5.5%) at Buy with a $23 price target. New CEO Brad Jacobs has created billions of dollars of value in multiple industries via an aggressive growth template, the firm says, adding that while execution risk is high, shares could hit $70 if XPO achieves its full business plan. Comment!
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11:46 AM Heavily-shorted Pandora (P +16.8%) soars thanks to its FQ1 beat, which was fueled by share gains and better monetization, and strong FY13 guidance. Needham (Buy) sees the results as evidence Internet radio is a "winner-take-most" market, while Maxim Group (Buy) thinks they indicate Pandora's sales investments are paying off. SA's Rocco Pendola is encouraged by Pandora's earnings call commentary, which he sees as more proof of the company's disruptive impact on the radio industry. Comment!
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10:38 AM Noble Energy (NBL -0.2%) is upgraded to Buy from Hold at S&P Capital IQ, which foresees several years of double-digit production and cash flow growth. NBL has a deep prospect inventory, the firm says, and its "near/mid term growth prospects, geographic scope, margin expansion and superior cash flow generation warrant a premium." Comment!
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9:57 AM NetApp (NTAP -12.6%) has pared some of the losses seen due to the poor FQ1 guidance that came with its FQ4 beat, but still remains off sharply. Brean Murray is downgrading shares to Hold, citing concerns about revenue visibility and operating expenses. Needham remains bullish, and notes Asia-Pac and U.S. commercial were strengths, but admits there's weakness within defense, financial services, and some top accounts. (also) (transcript) Comment!
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9:38 AM Though reiterating a Market Perform on H-P (HPQ +4.7%), BMO sees it as a better play than Dell (DELL -0.6%), following H-P's FQ1 beat and restructuring announcement. Dell's efforts to improve margins "will take too long to play out," BMO argues, whereas H-P will get a boost over the next few quarters from its restructuring. The fact Dell is underperforming a bit this morning suggests the Street takes H-P's results as evidence Dell's problems are partly of its own making. (HPQ transcript) Comment!
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9:09 AM Arch Coal (ACI) +2.3% premarket after Goldman Sachs upgrades shares to Neutral from Sell with an $8 price target. The firm says the risk/reward is more balanced as concerns about thermal volume cuts and its balance sheet are now mostly discounted in the stock. 3 Comments
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Wednesday, May 23, 2012
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6:25 PM Courtesy of corporate insiders, the bull market may have dodged a bullet, based on the historical ratio of the number of shares insiders have sold to the number they've bought. The average level for the ratio over the last four decades is between 2-to-1 and 2.5-to-1; the ratio was just 1.63-to-1 last week after reaching 6.56-to-1 in March. 1 Comment
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5:15 PM Are railroads the new way to play the oil sands boom? Rail sports several advantages over pipelines, thus the weekly number of carloads of oil products in North America has been surging since early 2011. But there are disadvantages too: it costs ~2x as much to move oil on rails than through a pipe, and the boom in oil traffic for trains merely replaces part of what’s being lost in coal traffic. 7 Comments
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1:57 PM Alcatel-Lucent (ALU +4.7%), down ~40% since February, outperforms with the help of bullish commentary regarding its 7950 XRS core router line, launched yesterday. Deutsche thinks the products offer "meaningful improvements" over rival offerings, and could take 5%-10% of the U.S. core router market simply by leveraging Alcatel's mobile carrier relationships. Goldman thinks the hardware could cause some headaches for Juniper (JNPR -4.8%). (previous) 1 Comment
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1:12 PM Aflac (AFL) is among the names that pop up when DividendChannel screens its top ranked dividend stocks for those which have also seen insider buying over the past 6 months. Insiders sell for a variety of reasons. They buy because they they want to make money. The stock currently yields 3.4%. 12 Comments
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10:46 AM More on Cree: Wunderlich's Theodore O'Neill suggests the company is the First Solar (FSLR) of the LED world. He notes both Cree and First Solar rely on exotic materials few others in in their respective industries use, and argues each company's competitive edge is withering as the materials typically used by rivals - polysilicon for First Solar's competitors, sapphire for Cree's - get cheaper. Meanwhile, Digitimes reports LED prices have stabilized in Q2 thanks to strong demand. (also) 1 Comment
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10:42 AM In the wake of the PCX disaster, is there any bottom in sight for trashed coal stocks (KOL -1.8%)? Not yet, chartist Robert Sinn writes. "A stock like ANR at $11/share has almost turned into a call option on the Chinese economy and thermal coal prices," Sinn says, but "just like a call option, it will bleed time premium if China continues to deteriorate and thermal prices continue lower." Comment!
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10:39 AM Cree (CREE -5.1%) adds to the losses seen yesterday on news of CFO John Kurtzweil's plans to leave for Extreme Networks (EXTR -2.1%). Not helping is a downbeat assessment from Canaccord, which views the move as a "momentum killer" that while drive Cree shares lower over the near-term. The firm speculates Kurtzweil's departure is linked to a shift in Cree's business model to selling LED lighting fixtures instead of LED chips. Comment!
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9:46 AM More on Dell: Though lowering its PT, Stifel tries to make a bull case for the company. It views a growing mix shift to non-PC enterprise solutions (now 31.4% of revenue) as a positive, as well as its guidance for stable FQ2 gross margins. Overall, it sees "an improved/cleaner 2H2012 story" driving shares higher. Also of note: Dell, which has a market cap of $22.9B now has $8.2B in net cash and investments. (transcript) Comment!
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