Submitted By Optiondragon
From Briefing.com
Periodicals Wrap-Up for Friday, July 18th
WALL STREET JOURNAL: According to people familiar with the matter, the Wall Street Journal reported that Freddie Mac (FRE) is considering raising capital by selling up to $10B in new shares to investors. The sources believe this effort may have the potential to avoid a full-blown government rescue…The Wall Street Journal also reported that, amid U.S. investigations into allegations it helped American clients evade taxes, UBS (UBS) said some Swiss-based private bankers will stop offering American clients Swiss bank accounts and other services…Starbucks (SBUX) will close store in 44 states plus the District of Columbia, including 88 closures in California, 59 in Florida and 57 in Texas, the Wall Street Journal reported…BLOOMBERG: After Cleveland Cliffs (CLF) bought Alpha Natural Resources (ANR), there may be many more acquisitions in the coal industry, Bloomberg said… REUTERS: Reuters noted that, according to a person with knowledge of the plans, Yahoo! (YHOO) could renew talks over News Corp’s (NWS) Web properties if Microsoft (MSFT) gets in the way of discussions with Time Warner’s (TWX) AOL.
More acquisitions may be ahead in the coal industry-Bloomberg
After Cleveland Cliffs (CLF) bought Alpha Natural Resources (ANR), there may be many more acquisitions in the coal industry, Bloomberg believes. The market valuations of some of the largest coal companies are far below the value of their coal deposits, while takeovers of energy and mining companies have soared this year, Bloomberg explains.
Credit crunch is beginning to ease, Deutsche Bank CEO says-FT
The credit crunch has reached “the beginning of the end” stage, Deutsche Bank (DB) CEO Josef Ackermann said yesterday. Banks and regulators have taken steps to deal with the crisis, and many businesses are becoming more normal, Ackermann explained.
Citigroup-C upgraded to Hold from Sell@DBAB
Google-GOOG: Would be buyers of shares on today’s pullback@BOFA
Banc of America believes GOOG’s positive query and revenue growth in all sectors, with the exception of real estate, supports their thesis that search will outperform other advertising in an economic slowdown. The firm maintains a Buy rating and $700 target.
GOOG: Consuemrs are hindering company’s growth@STFG
After Google reported in-line Q2 operating results, Stanford believes the company’s growth is being restrained by the consumer slowdown. Stanford maintained their Hold rating.
Pre-Market Movers: Ahead of the Bell
The story this expiration morning is the mass reversal to long anything financial – even questionable names – to short tech, even the strong. This sentiment shift is likely to provide some kind of bottoming process for the financial names and perhaps the undoing of the favorite long of the Street, tech stocks. The long side volume interest this morning is skewed heavily to the financials. The leader of the pack is Citigroup (C), trading up +7.7% on heavy volume after losses were less than feared. Bank of America (BAC), which reports on Monday before the open, is trading up in sympathy at +3.39% on heavy volume. Merrill Lynch (MER) is one of the few financials trading down (-1.88%), and which traded down to $27.50 last night in the after market, after results that were worse than even the most bearish loss estimates. The name may be helped by expiration pinning at the $30 area but that may not hold given the severity of the losses. Schlumberger (SLB) is trading up +1.97% after reporting better than expected results before the bell. On the downside we have some of the largest tech stocks by weight in the NDX trading down after reports that were less than hoped for. Google (GOOG) is trading down (-7.17%) after it missed earnings estimates and noted rising capital spending. Microsoft (MSFT) is trading down (-4.9%) after it reported weaker results amid rising expenses. Brokers disagree about prospects for the company with Banc of America bearish on the name and cutting its price target while Citigroup defended the name (see note here for details). Gilead Sciences (GILD) is trading down (-5.9%) after inline results with negative broker commentary from Jefferies & Company, which downgraded the name to Hold, and BMO Capital which downgraded the shares to Market Perform.
Markets try to sustain rally despite poor earnings from big tech names
U.S. equity futures are holding steady near fair value although the Nasdaq continues to be the weakest of the major averages. The weakness is to be expected with the poor earnings reports from Google (GOOG) and Microsoft (MSFT) last night. Despite the earnings miss by Google most brokerage firms saw more positives than negatives in the quarter. Most defended the shares, saying they would use the weakness as a buying opportunity. But ThinkPanmure cut their rating on the stock due to the slowing economy and its impact on the business. Most analysts continue to like Microsoft despite its missing estimates and lowered its forecast going forward. Many analysts cut their price target but kept their ratings intact. It will be interesting to see if the Nasdaq can hold up today despite these two reports and how it affects the rest of the market. :
SPWR deserves a premium valuation, reiterate Buy@STFG
After SunPower reported Q2 results Stanford views as solid, while increasing its 2008 and 2009 guidance, the firm thinks the company deserves a multiple premium due to its leadership in cell conversion efficiency, as well as its manufacturing plant expansion and cost reduction plans.
SPWR: Believe guidance for 2009 still too agressive@PACS
Pacific Crest thinks SPWR management is giving too much credit to emerging markets for possible growth, and not enough to the deteriorating conditions in the United States and Spain. Pacific Crest remains unconvinced that management can grow rev 40%+ in 2009. They prefer investments in First Solar (FSLR) and Evergreen Solar (ESLR) instead.
GOOG: Drop creates buying opportunity@AMTR
Am Tech believes Google reported strong revenue and good margins. The firm predicts that Google’s multiple will expand as its margins increase, and they think its growth has been very resilient.
GOOG: Would be buyers of the stock, maintain Overweight@JPMS
JP Morgan notes shares are trading at 21x their FY09 EPS estimate, which is below their expected earnings growth rate of 25%.
GOOG: The company’s fundamentals are still strong@KBRO
After Google reported lower than expected EPS due to lower than expected interest income, Kaufman Bros. still likes the stock, as they believe the company will benefit over the longer term from new advertisers, expansion into the display and video advertising sectors, and more market share gains. The firm maintained their Buy rating
GOOG: Positives outweigh the negatives@RBCM
RBC Capital said the sell-off in GOOG is overdone and remains their favorite long idea given share gains in the core business and its option value in its display/mobile business. Target $600.
GOOG downgraded to Accumulate from Buy@THNK
ThinkPanmure downgraded GOOG based on concerns regarding the slowing economy and the impact on the business. Target to $550 from $650.
US Bancorp-USB upgraded to Buy from Neutral@HDLY
XTO Energy-XTO upgraded to Buy from Hold@STFL
Stifel upgraded XTO based on valuation. Target $73
Range Resources-RRC upgraded to Buy from Hold@STFL
Stifel upgraded RRC based on valuation. Target $84
Merrill Lynch-MER: Continue to view shares negatively@OPCO
After Merrill reported weaker than expected results, Oppenheimer expects the company to continue to be hurt by mortgage-related securities. The firm thinks Merrill’s stock will continue to be under pressure until the company fully sells down its risky assets, and they maintained their Underperform rating.
Loan-loss provisions affecting banks’ earnings-WSJ
Some major banks have seen their share price surge up about 30% recently but a key to being able to continue that move upward can often be found in their loan-loss provisions, according to the Wall Street Journal’s “Heard on the Street”. That is how much each bank puts aside every quarter to cover future credit losses. The key is which banks can react the fastest to address their credit problems. The ones that are well prepared may also see their shares jump when the credit crisis begins to ease.
IBM Corp-IBM: See shares at $130-$140 by year-end@SBSH
Citigroup believes IBM Is “firing on all cylinders” after the company’s Q2 results and expects the stock to reach $130-$140 by year-end. The firm reiterates a Buy rating.
IBM Corp-IBM: Implications on strong Q2 report@BARD
Baird said IBM’s high-end server strength likely means the company took some share from HPQ and JAVA but that IBM’s strong virtualization trends is a positive for HPQ. In summary, the firm said IBM’s results were mostly positive for HPQ, a modest positive for NTAP, and is unclear of the impact on EMC.
Google-GOOG: Remain positive on shares following June quarter results@PIPR
Piper attributes the share weakness post results to GOOG’s suggestion of “a more challenging economic environment,” which the company has never acknowledged before. They expect shares to trade sideways until the September, but rally in the back half of the year. Shares remain Buy rated.
Apple-AAPL: Reiterate Buy rating ahead of June quarter results@PIPR
Piper believes upside to Mac and iPod units may drive upside to the June quarter. They believe Mac units could reach 2.35M, above the Street’s 2.2M estimate.
Teva Pharmaceutical-TEVA to acquire Barr Pharmaceuticals-BRL for $66.50/share
Teva Pharmaceutical Industries Ltd. and Barr Pharmaceuticals, Inc. announced that they have signed a definitive agreement under which Teva will acquire Barr, the fourth largest generic drug company worldwide. Under the terms of the agreement, each share of Barr common stock will be converted into $39.90 in cash and 0.6272 Teva ADRs. Based upon the unaffected NASDAQ closing price of Teva’s ADRs on July 16, 2008, the indicated combined per share consideration for each outstanding share of Barr common stock amounts to $66.50, or a total consideration of $7.46 billion plus the assumption of net debt of approximately $1.5 billion. Teva expects the transaction to close in late 2008 and to become accretive to GAAP earnings in the fourth quarter after closing. This purchase price represents a premium of 32% to Barr’s average daily closing price on the New York Stock Exchange for the 52-week period ending on July 16, 2008, and 42% to the closing price on July 16, 2008.
Potash-POT target to $375 from $340 on capacity expansions@RBCM
RBC Capital raised POT’s price target to $375 based on capacity expansion announcements at Allan, Cory, and Rocanville. Shares are Outperform rated.
Refining Sector downgraded to Market Weight, SUN & TSO downgraded@BERN
Bernstein downgraded the Refining Sector based on the weakening earnings outlook for the group. The firm downgraded SUN and TSO to Market Perform from Outperform.
Medivation-MDVN announce publication of Dimebon pivotal trial results
Medivation announced publication of the results of its first Alzheimer’s disease pivotal clinical trial of the investigational drug Dimebon in the July 19, 2008 issue of The Lancet. In this double-blind, placebo-controlled trial, patients with mild-to-moderate Alzheimer’s disease treated with Dimebon experienced statistically significant improvements compared to placebo in all the key aspects of the disease: memory and thinking, activities of daily living, behavior and overall function. After both six months and a full year of treatment, Dimebon-treated patients were significantly better than placebo-treated patients on all key aspects of the disease. The benefit on the primary endpoint, the Alzheimer’s Disease Assessment Scale-cognitive subscale at six months, was highly significant. Patients treated with Dimebon were also significantly improved at six months over baseline on all measures. Dimebon’s benefit over placebo continued to increase throughout the 12-month treatment period. At the end of 12 months, Dimebon-treated patients preserved their starting level of function on each measure of Alzheimer’s disease.
UAL Corp-UAUA upgraded to Overweight from Neutral@JPMS
JP Morgan upgraded UAUA based on valuation and expectations for the company to make a capital announcements on next weeks conference call.
Jim Cramer’s “Mad Money”
According to Cramer, three forces are driving the market higher: oil’s inability to breach the $150-a-barrel level (he says oil is headed to $110); the financials, as it’s now clear that both the Fed and SEC are stepping in to bail out the sector; and the home-build rate of single-family homes is finally slowing. Cramer predicted the bottom in home prices should occur in 2009. Cramer said for the short term, investors should take profits in the banking stocks, which have moved up too much. He suggested buying oil and gas stocks because they have gone too low. SELL BLOCK: Cramer added nursing homes, or senior living communities, to his sell-block list. He singled out Brookdale Senior Living (BKD) and Sunrise Senior Living (SRZ) as two of the worst offenders, and it’s a mistake to own shares of these nursing homes. They are building far too much capacity for the now declining demand. Also occupancy rates are declining. Cramer moved “Speculation Friday” to Thursday in order to talk about Symmetry Medical (SMA), a supplier of orthopedic implants to many of Cramer’s larger healthcare favorites, including BCR and SNN. Symmetry had a run-in with the SEC earlier this year, which led to earnings restatements and a $2.2M hit for accounting and legal costs. Cramer called Symmetry a tarnished stock, but not a tarnished company. He sees Symmetry reaching $21 a share, if it can reach Wall Street’s expectations for 8.5% revenue growth for 2008. Cramer said steel stocks have been crushed in recent weeks, with favorite Nucor (NUE) falling 11% after it lowered Q3 earnings guidance. Cramer spoke with the CEO Dan Dimicco who said business is still strong and he also expects Q3 to be strong. Dimicco called Nucor’s guidance conservative, and that the company is firing on all cylinders. Cramer said that while the markets have been punishing steel, he’s a buyer of Nucor. LIGHTNING ROUND: (Bullish) FGP; ENER; T; MET; MRO. (Bearish) SONC.
Fast Money position recap: First Moves: Jeff thinks GM is a sell, Karen likes PM, Pete likes CHK.
Macke Owns (WMT), (GS), (MSFT), (HAS); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (AAPL), (CHK), (TSO), (XLF); Najarian Owns (ANR) Puts; Najarian Owns (CSCO) Calls, (MER) Calls, (SLB) Calls, (YHOO) Calls, (UYG) Calls; Finerman Owns (GS); Finerman’s Firm Owns (MSFT), (NOK), (TSO), (SUN), (VLO), (AXP), (MRK), (PM); Finerman’s Firm Is Long SPX Index puts; Finerman’s Firm And Finerman Own (C) And (C) Leaps; Finerman’s Firm Is Short (IYR), (IJR), (MDY), (SPY), (IWM).
Next week will be pivotal and the key to the turnaround. If we can get more follow through next week, I feel the light is getting brighter at the end of the tunnel and we are headed in the right direction. The SEC is putting 19 firms including FNM, FRE on the short sale restricted list. These are the ones:
BNP Paribas Securities Corp
Bank of America Corp
Barclays PLC
Citigroup Inc
Credit Suisse Group
Daiwa Securities Group Inc
Deutsche Bank Group AG
Allianz SE
Goldman Sachs Group Inc
Royal Bank ADS
HSBC Holdings Plc ADS
JPMorgan Chase & Co
Lehman Brothers Holdings Inc
Merrill Lynch & Co Inc
Mizuho Financial Group Inc
Morgan Stanley
UBS AG
Freddie Mac
Fannie Mae
I will be looking to go long the financials and being light footed today since it is opex day. I went all in with my $2 million CNBC portfolio for the last day on airliners. Pick plays with a high probability of success, plan the trade and trade the plan, run technicals through support and resistance and have focus and patience. Great Luck and have a great weekend!
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