Daily Archives: January 10, 2007

Cramer Visited “FAST MONEY”; Look Out!

Stock Tickers: ICE, AH, HON, RAD, JNJ, CSCO, AAPL, SHLD, AA, PETM, SKS, GOOG

Tonight was a different show on CNBC’s FAST MONEY hosted by Dylan Radigan with the round table, because Jim Cramer came on with the Fast Money Five.  There is a brief 2 paragraph synopsis about what the regular crew said on their own, and Cramer’s comments were later plus a recap of his Mad Money stocks.

Intercontinental Exchange (ICE) was listed by "the boys" on FAST MONEY as the hidden oil trade; Armor Holdings (AH) was listed as the Iraq trade; and Honeywell (HON) was listed as a takeover candidate.

On the Cisco/Apple case: Jeff Mackey said what I said that the Cisco case against Apple doesn’t matter and it’s irrelevant.  Eric Bolling said the market isn’t paying much attention to it.  I agree with the pro side of the case for Apple, but my partner Doug agrees with the the other side; that’s a market.  Guy Adami said to take money off the table with the volume so high.

On Fast Money Cramer discussed why he is not a commodity fan, and he said Alcoa (AA) was a sideshow winner right now; but he can’t be a long-term bear on commodities.  Cramer likes financials as the best sector for the year.  Cramer did come out positive on Sears Holdings (SHLD) as I suspected he would, but Mackey came out against it and said Lampert isn’t a good retailer.  Adami and Cramer both were out positive again as a turnaround with a great CEO.  Cramer also came out in favor of J&J (JNJ)

On Mad Money Cramer was positive on Petsmart (PETM) and you can click here for the full comments on the turnaround.

His pick for humans was Saks (SKS) as a turnaround, and he thinks it gets bought out.  Here are the comments.

Boy, I tell you what…..watching 5 Pundits who ALL have personality and ego go at it all at once is a Catch-22.  It has value because you can see both sides, but it is troubling to follow and I hope they never do one of these while the stock market is open in normal trading or even when after-hours is still fairly liquid.

Cramer earlier on CNBC noted that he wants to Buy Google (GOOG) at any price under $500, because it’s going into the $600’s.

Good night.

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 8:44 pm in Analyst Calls, Bait Shop, Cramer, Defense, Earnings, Exchange, Exchange News, Financial Stocks, Media, Mergers and Buy Outs, Metals, Oil & Gas, Press Digest

Cisco Systems Sues Apple Over iPhone

Cisco Systems (CSCO) is suing Apple (AAPL) over the iPhone, but keep in mind that this has no impact on the phone itself other than the name. The suit was filed in the United States District Court for the Northern District of California against Apple, Inc., seeking to prevent Apple from infringing upon and deliberately copying and using Cisco’s registered iPhone trademark that it has owned since 2000 via the acquisition of Infogear.

"Cisco entered into negotiations with Apple in good faith after Apple repeatedly asked permission to use Cisco’s iPhone name," said Mark Chandler, senior vice president and general counsel, Cisco. "There is no doubt that Apple’s new phone is very exciting, but they should not be using our trademark without our permission.  Today’s iPhone is not tomorrow’s iPhone. The potential for convergence of the home phone, cell phone, work phone and PC is limitless, which is why it is so important for us to protect our brand."

In short: Either Apple didn’t want to pay enough or Cisco decided it wanted too much.  If you will recall the street had already become used to the fact that Cisco had the name iPhone before this was introduced.  With all the hype over the "Apple Phone," Apple can either change the name or fight it.  Jobs & Co could even call it the Poop Phone now and get away with it.  Shame on Cisco or Shame on Apple, but if this creates any substantial weakness beyond the 0.6% drop seen in after-hours you know it is just an overreaction.

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 7:23 pm in Consumer Electronics, Law, Technology Companies, Telecom, Wireless

Why The iPhone Won’t Work: Cisco Owns The Name

The press has been full of speculation about the new Apple (AAPL) iPhone. The range of opinion runs from Apple become the firm that completely changes the model of the wirelss industry to the phone will flop because it is too expensive.

Add to the reasons that things won’t work out Cisco’s (CSCO) suit claiming that it owns the iPhone name and that is it using the trademark in violation of trademark law. Cisco filed the suit in federal court today.

Just another good reason the iPhone won’t work.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: January 10, 2007 – 7:00 pm in Wireless

Cramer’s Heavy Petting

On tonight’s Cramer found two retail turnarounds that are begging to be exploited.

Cramer’s second pick is Petsmart (PETM).  The turnaround is going well and fuelled by better margins and merchandising.  PETM just jumped 3.25% to $31.20 on Cramer’s comments. It is also worth noting that Petco was bought by private equity. Petsmart could go takeover some of the old stores that Petco closed right after the private equity buy.  The company can win just by doing what it is now and it has special services.  He likes that they have pet hotels and they are becoming the high-end provider of doggie day care and pet pampering.  He also thinks they can start getting better terms from suppliers as they grow, and they are only at 22-times earnings and he thinks it goes to $40.  Its 52-week trading range is $22.07 to $31.38.

Cramer likes Saks (SKS) as the first pick.  Cramer thinks that once retailers tank, they stay down and dormant.  Cramer thinks the first pick won’t even be public in a year, but if so he thinks it goes higher. 

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 6:25 pm in Consumer Goods, Cramer, Mergers and Buy Outs, Retail

Cramer Looks at Saks

On tonight’s Cramer found two retail turnarounds that are begging to be exploited.

Cramer likes Saks (SKS) as the first pick.  Cramer thinks that once retailers tank, they stay down and dormant.  Cramer thinks the first pick won’t even be public in a year, but if so he thinks it goes higher.  He likes the earnings story, and then again he likes the asset takeout plays.  The guts behind the turnaround is their merchandising and it is misunderstood by Wall Street.  He likes the sales per square foot and the metrics here are subjective.  He likes that they are carrying and selling higher-end items.  Their last comp sales were 11% and it already paid out two $4 special dividends since he first recommended it around the time that Neiman’s was acquired.  Cramer thinks it gets bought since management has sold off divisions and it seems they’ll sell the whole company.  Dana Cohen thinks her $21 target is a 50/50 chance of being bought.

SKS ran 3.5% to $18.30 after hours, and the 52-week range is $14.10 to $21.45.

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 6:11 pm in After-Hours Activity, Cramer, Retail

Wal-Mart Calling for Higher Minimum Wage?

Wal-Mart (WMT) issued a press release today calling for support in a minimum wage increase, and even disclosed that Lee Scott had called for a hike in the minimum wage in October 2005.  Wal-Mart is trying to convey a "freindlier them" with this statement, particularly if you consider it is on the back of that recent new ad campaign (which I said seemed too late and trying not to seem too empty-hearted).

It is still suspect and they still need to not only make these positive PR ploys, they need to focus on doing more fun things publicly and then they need to make their shopping experience more fun and more palatable.  That will be a start, and maybe Lee Scott and company made "making a nicer and less dogmatic impression" part of their new years resolutions.  I am still under the impression that this is too little too late, but if he can keep it up he might actually save his own job and might even get to come off 24/7 Wall St.’s 10 CEO’s that need to go list.  If they will stop changing work schedules and the like it would help, because they are the most scrutinized company in America.  We’ll see.

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 5:02 pm in Consumer Goods, Management Change, Retail

Genetech Reacts to Q4 Earnings

Genentech (DNA) traded up marginally after beating expectations.  The company posted $0.61 EPS vs $0.56 estimates and total product sales of $2.053 Billion; revenues were $2.714 Billion versus $2.55 Billion estimates. 

They forecast 2007 EPS at $2.79-2.90, ahead of expectations.  Shares closed down 1.1% on the day on 6.3+ million shares, and shares are up 1% at $84.65 on last look.

Here were quarter sales in the U.S. (in millions):
Rituxan®         $560
Avastin® *        $490
Herceptin®        $322
Tarceva®          $107
Nutropin®         $101
Xolair®           $117
Thrombolytics     $62
Pulmozyme®        $53
Raptiva®          $24
LUCENTIS®         $217

Here was our directional call ahead of the earnings from earlier.

Jon C. Ogg

Posted on: January 10, 2007 – 4:32 pm in Biotech, Earnings, Pharmaceuticals

US Stock Market Close (JAN 10, 2007)

DJIA    12,442.16; Up 25.56 (0.21%)
NASD    2,459.33; Up 15.50 (0.63%)
S&P500    1,414.85; Up 2.74 (0.19%)
10YR-Bond    4.682%     Up 0.026
NYSE Volume    2,698,448,000
NASD Volume    2,242,837,000

Apple (AAPL) continued its meteoric rise up another 4.8% to $97.00 (new highs) after analysts raised targets and estimates as expected.

eBay (EBAY) fell 1.3% to $25.28  after reports surfaced it was buying StubHub for some $300 million, a hefty sum.

Eastman Kodak (EK) proved irrelevance by falling 1.4% to $25.28 after selling ist health imaging unit for some $2.55 Billion.

Placer Sierra (PLSB) rose 15% to $27.19 after Wells Fargo acquired the company at a rough 20% premium; see the Bait Shop call that is a similar stock to Placer Sierra.

Gap (GPS) Fell 0.75% to $20.04 after firing some key managers at Gap Adult and Old Navy, but they kept Pressler on as CEO (one of 10 CEOS that need to go).

Sears Holdings (SHLD) rose 3.5% to $172.09 on higher earnings and lower same-store-sales. See our take.

International Aluminum (IAL) rose 4% to $52.08 after Genstar Capital announced a $51 buyout, anticipating a higher price.

Alcoa (AA) rose 6% to $30.23 after beating yesterday’s earnings.

Adaptec (ADPT) fell 7% to $4.16 on an earnings warning.

JCrew (JCG) fell 4% to $36.24 after the private equity owners sold 1/3 of their holdings into the lock-up expiration.

Walgreens (WAG) fell 0.7% to $45.58 on a $1 Billion share buyback plan.

Exxon (XOM) fell 1.5% to $70.99 on lower oil prices and Chevron (CVX) fell 1.7% to $69.41 on earnings and margin warnings.

Jon C. Ogg

Posted on: January 10, 2007 – 4:16 pm in Market Close

Cramer Reviews More Top Picks

On today’s STOP TRADING segment on CNBC, Jim Cramer said to focus on $5′ and $6’s in his top picks.

Blockbuster (BBI) was one of his picks, as taking back lost ground from Netflix (NFLX).

He also noted Rite Aid (RAD) again, another favorite speculative stock of 2007.

Denny’s (DENN) was one noted as a magnificent turnaround, as he has been saying.

He also renoted Level 3 (LVLT), his #1 speculative stock for 2007.

Out of the LUCKY 13 picks of another guest, Cramer said he likes Sysco (SYY) but he has a problem with the other auto insurance.  On Polaris (PII) off because of 15% Cramer said he agrees with teh call to defend because they have many other businesses.  On Teleflex (TFX) he likes it as a chicken-cyclical.

Cramer briefly noted that Sears (SHLD) was going up tomorrow.

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 2:51 pm in Cramer

Telephone Co. Won’t Like Comcast Outlook

The CEO of Comcast (CMCSA) says his venture into the VoIP business is gaining momentum. Brian Roberts projects that 20% of his customer base will subscribe to voice service by 2009, and that the service will be available to 40 million homes by the end of the year.

The telephone companies are already trying to catch-up to being able to offer voice/broadband/TV in one package, but the leader in the charge, Verizon, only has slightly more than 100,000 subscibers. And, Comcast is not alone. Time Warner Cable (TWX), Charter (CHTR), Cox, and other large cable companies are poised to take million of customers away from the land line businesses of Qwest (Q), Verizon (VZ), and AT&T (T).

Can’t get a dial tone? Call you cable company.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: January 10, 2007 – 2:38 pm in Telecom

What Can Eastman Kodak Do Right?

Antonio Perez, Chairman & CEO of Eastman Kodak, is facing more and more pressure.  The market hasn’t been under pressure today, and the market is greeting this sale of its health imaging for up to $2.55 Billion with a resounding thud.  It is $2.35 Billion plus up to $200 million if internal rates of return can be achieved, so just assume the sale price is $2.35 Billion.  Shares are down 1.5% at $25.23.

This is the company formed in the shadow of x-ray discovery and accounts for one-fifth of its business, although it has seen the same prospects as normal film imaging with declining sales.  The company is turning in one-fifth of their business to pay down $1.15 Billion in debt and the rest for undisclosed purposes.

The company has a market cap of $7.25 Billion.  As per the last quarter balance sheet the company had $1.1 Billion in cash and $2.6 Billion in receivables, and it carried $12.2 Billion in debt and total assets arecarried as $14 Billion and after backing out goodwill and other the Assets are $8.9 Billion.  This is going to shrink the balance sheet across the board, but this pig needs some lipstick and a real makeover.  They should boost their dividend by a much larger sum, or at least do a one-time dividend.  Forget share buybacks, that’s a waste of its cash for a company in its state.

They also need to get Machiavellian on their job cuts (lots of them and all at once).  Perez is one of my 10 CEO’s that need to go, and the recent Sony settlement isn’t even close enough.  This guy may be the nicest in the world, but Eastman needs a true digital leader that knows how to do digital better then he.  Sorry, but that is what Wall Street is telegraphing.  Here was the original article from December 14 about why he has to go and here is the article from last week after the Sony digital settlement.

The street doesn’t like the sale it appears, or at least they don’t like the use of proceeds.  This might pawn part of the restructuring off onto the buyer Onex Healthcare, but the company still is restructuring. 

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 2:38 pm in Bait Shop, Dividend, Management Change, Mergers and Buy Outs, Old Media

THQ: In The Way, Way Back Fold

From AAO Weblog

It’s been a while since I mentioned the way, way back option restaters. Here’s a new one in the fold: THQ, Inc., who filed a non-reliance 8-K on January 9 outlining the extent of their problems.


The company’s special committee conducting the investigation found “instances where documentation of certain grants was lacking”and that “the company used incorrect measurement dates for financial accounting and reporting purposes on a number of occasions, primarily from misapplication of accounting standards”, noting that most of the understated compensation related to grants made to non-executive employees.

The aggregate corrections sound pretty minor: after-tax effects on net income for the from January 1, 1996 through March 31, 2006 amount to about $11 million. The fiscal year 2007 are deemed immaterial and will be shown in the September 10-Q. For each of the 2006, 2005 and 2004 fiscal years, “the after-tax adjustments were approximately $2 million and will be reflected in the company’s amended” FY 2006 10-K – again, minor compared to the net income of the same period.

As has been typical of such releases, no word on any added tax burdens. While THQ seems to have escaped with relatively minor effects, it does show that their controls needed polishing (no documentation?). It’s a minimum lesson to learn from the backdating maelstrom: controls over financial reporting matter. (As we still wait to see how widespread will be the SEC prosecution of these cases.)

http://www.accountingobserver.com/blog/

Posted on: January 10, 2007 – 2:05 pm in Accounting

Earnings Season Blues

From Ticker Sense

With earnings season now upon us after Alcoa (AA) reported last night after the close, we have updated our chart that shows the S&P 500 cumulative returns during and outside of earnings season since the bull market began.  As shown, almost all of the market’s gains have come during the earnings off season.  (Our earnings season is from Alcoa’s report to Wal-Mart’s report).  We have, however, managed to make gains during the last two earnings seasons, with the S&P 500 going up 1.03% and 2.94% respectively.

Earningsseason_1

http://www.tickersense.typepad.com/

Posted on: January 10, 2007 – 2:02 pm in Research

EBay Buys StubHub, Scalps Tickets

Ebay (EBAY) is reportedly purchasing ticket auction operation StubHub for $300 million. That is about 30 times cash flow according to the Wall Street Journal. Ebay currently has a unit that competes in the same space.

The deal is very expensive, considering that a number of sports teams have blocked StubHub from selling tickets to their games. The teams consider the sales a form of "scalping" which is actually not legal in some states. Many teams also have provisions on the tickets saying that they cannot be resold in the open market.

But, Ebay has a big bank account and the New York Yankees and Oakland Raiders may want to ask for some of that cash for selling tickets which are marked "This Ticket Is The Property Of The Owner, And May Not Be Sold To Third Parties."

Thirty times cash. Ouch.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: January 10, 2007 – 1:26 pm in Internet

The Best of: Sirius Has Made a Deal with the Devil…

From Contrarian Edge

In light of Howard Stern making the headlines with his $83 million bonus, I thought I’ll share this article with you that I wrote awhile back.

I thought I had seen the epitome of stupid management decisions during the dot-com bubble when ludicrous sums of money were thrown at pie-in-the-sky ideas under the guise of “strategic investments.” But Sirius’ (SIRI) management has proven me wrong. The firm has agreed to pay $500 million (real, not Happy Meal) dollars to Howard Stern for five years of his invaluable services. Assuming Stern works 500 hours a year, this amounts to $3,333 a minute for Stern’s uncompromising pursuit of radio excellence. Surely this is a bargain for someone who has spent years honing his interview skills with women in various stages of undress.

http://www.contrarianedge.com/

Posted on: January 10, 2007 – 1:14 pm in Satellite

Gap’s Management Changes Aren’t Enough

There was almost an exciting headline on the tape at 12:30 called "Gap Inc. Announces Senior Management Changes at Gap and Old Navy Brands."  Gap Inc. (GPS-NYSE) is making management changes in the design and merchandising divisions at its Gap and Old Navy brands.

Denise Johnston, 47, president of Gap Adult, is leaving the company effective January 12. A search for her replacement will be conducted, and Gap Brand North America President Cynthia Harriss will oversee the adult business until a successor is named.

Gap named Karyn Hillman as senior vice president of merchandising for Gap Adult. She has been with Gap since 1991 and in the Banana Republic unit for about 5 years.

Old Navy’s Executive Vice President of Product Design, Ivy Ross, 51, will leave the company effective January 17. In the interim, the design team will report to Old Navy President Dawn Robertson.

Here is the problem, the company has already hired Goldman Sachs to explore strategic alternatives and that is going to make it a difficult decision for someone to step in because they could be marched out the door as fast as they came in.  Paul Pressler should have left the company as his news years resolution and THEN the company should have announced it hired Goldman Sachs.  Now they are in a quagmire that is even worse than before, and this is another example of why Pressler was one of my 10 CEO’s that need to go.

The Fisher family needs to determine who is in their best interest and who is the best for shareholders.  Mr. Pressler may be a good guy personally, but he hasn’t been the answer for Gap and didn’t have the right background.  Now the company has driven away customers to other spots in such droves that they will have to have many consecutive seasons of cool merchandise before kids and younger adults change their minds to go back to the company to buy their clothes.

As far as a buyer is concerned, now the prospects are for a turnaround company buyer and it will have to be a big one because Gap has a $16 Billion market cap.  It also has very few plots of dirt to sell, meaning there is not a huge hidden real estate play underneath the company since it leases stores.  So what you can probably expect out of a strategic alternative is that Goldman Sachs will try to break the company up.  Gap has a face to save, Banana Republic is still salvageable, and the Forth & Towne brand looks like it can be saved.  Old Navy is so lame that the clothes aren’t even cool for people sneaking across the border, so they need to spin that off or if not just turn it into dollar stores where they can sell the rejects and returns. 

When I conducted buyout analysis for Gap as an overall cashflow story (stock was around $17 then) and turnaround story it was really hard to make the math work out to where anyone would dare pay over $20.00 per share for it.  Even there it was hard to know if the company would go for a deal, and the Fisher’s (founding insiders) have such a large stake that they could block any deal if they wanted to.  There is also a huge risk that the company starts to decide to take the US-Auto model by thinking they can shrink themselves into better companies, but then you’ll see the earnings and cash flow story gone because of huge losses.

So the prospects here with the stock trading at $19.78 are most likely a break-up or a "take-under buyout."  Pressler is on borrowed time and he knows it.

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 1:09 pm in Analyst Calls, Bait Shop, Earnings, Management Change, Retail

Cramer Looks Better Than the Analysts on Apple

Today, Cramer on TheStreet.com is out saying that the new iPhone’s cool factor isn’t in the numbers and that the guys who make the numbers are too young to have kids.  If you will recall, this is his #2 growth pick for 2007 from last week.

I think a lot of the analysts do get it or are starting to get it, although he is right that they have been and probably are way behind the curve.  This morning there were price target hikes and raised estimates (or the same type of call) from Credit Suisse, Prudential, Sanford Bernstein, UBS, Deutsche Bank, Citigroup, Merrill Lynch, and more.  Yesterday I noted how so many analysts would have play catch-up on this because they had been public about saying the "Apple Phone" was not likely coming out in the release, so they’d have to go back and crunch their numbers.

One thing that is worth noting is that if you go to Blogma, Engadget, TechCrunch, listen to Herb Greenberg,
and the like, then you’ll see a lot of comments about the technology shortcomings on the iPhone.  The one consideration that hasn’t been made and hasn’treally been factored in is that one has to consider that what was show yesterday will also be the subject of Moore’s Law and that it is likely a bandaid release before the second generation iPhone will come out after they have had time to add all the other cool features and be able to change out to newer and faster technologies.  What is most important to remember right now is that even if the first phone isn’t all that successful compared to how Palm or Blackberry took the market, it is incremental revenue and income and is not at all in the old estimate models before yesterday.

This really took the sails out of the likes of R-I-M (RIMM) and Palm (PALM) yesterday, although these are recovering today because the features of the iPhone aren’t business class yet.  What you can expect is that this will be an ongoing case of urban warfare among all the players several quarters out.  If Palm or R-I-M have any next-new things lurking they better start unveiling them faster and faster because there is a new competitor coming to town.  I am personally happy with my Palm Treo for now, but the future is a different story. 

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 12:36 pm in Analyst Calls, Consumer Electronics, Cramer, Technology Companies, Telecom, Wireless

IPO Filing: GSI Technology

GSI Technology has filed to come public via an IPO of some $57.5 million worth of stock, although terms have not been set.  The joint book-runners are Needham and W.R.Hambrecht; and others in the underwriting are R.W.Baird and Stanford Group.  The proposed ticker on NASDAQ is "GSIT."

GSI is a provider of high speed static random access memory (SRAM) used primarily in high-performance networking and telecommunications equipment, such as routers, switches, wide area network infrastructure equipment, wireless base stations and network access equipment; and the company operates in the "very fast" segment of operating in less than 10 nanoseconds.  The company is fabless and uses Taiwan Semi as its OEM and claims to work with Cisco, Huawei, and Nortel. It was incorporated as Giga Semiconductors in 1995 and changed the name in 2003.

2006 and 2007 may be a transitionary period away from older products and into newer ones, because its revenues in 2005 were higher than 2006.  The 2005 revenues were $45.7 million and net income after tax was $4.78 million; with 2006 revenues of $43.1 million and income aftertaxes of almost $4.25 million.

The company did file to come public back in 2004, but later withdrew the IPO filing.  As this gets closer we’ll follow up on more.

Jon C. Ogg
January 10, 2007

Posted on: January 10, 2007 – 11:28 am in IPOs, Semiconductor, Technology Companies

24/7 Wall St. 2007 Price Forecasts: Ford, $6.50

Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high.

Ford Motor Company. (F) Unlike cross-town rival GM, Ford’s shares did not stage a furious rally over the last year. As a matter of fact they dropped about 10%. And, that trend may well continue. Ford has made a series of odd decisions. One is to keep losing units like Jaquar. The other was to take on a debt load that drove some of the common shareholders out of the stock.

Several brokerage firms have upgraded the stock. They like the new CEO and think that the cash Ford brought in will allow it to hang tough in negotiations with the UAW in the event that talks break down and this leads to a strike. But, quite the opposite may be true. The UAW like companies with cash. When Ford looked like a potential Chapter 11 candidate the big (but shrinking) union was more likely to play ball instead of losing massive numbers of workers in a bankruptcy court.

Even Ford sees it share of the US market dropping as low as 14%. That’s a tough way to make a living.

Factors that could move stock above forecast: Ford is bleeding share, especially with its most profitable products like the F-series pick-up. If better product of lower gas prices bring buyer back, Ford shares could turn North.

Factors that could move the stock below forecasts: Wall St. is very, very concerned with Ford’s cash consumption. If that picture darkens a lot of shareholders will head for the doors.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies the he writes about.

Posted on: January 10, 2007 – 11:25 am in Autos

24/7 Wall St. 2007 Price Forecast: GM, $36

Over the next week 24/7 Wall St. will set mid-year price targets (June, 30, 2007) for the sixty most widely traded stocks. These targets will be based on past price performance, industry activity, forward projections of financial performance, outside analyst opinions, and research conducted for doing past articles on these firms. The price targets assume flat markets over the next six months. In other words, if the Nasdaq moved up 25% between now and mid-year, the target share price targets would probably be too low. If the market moved down by 20%, they would probably be too high.

General Motors. (GM) Some Wall St investors think GM’s stock has risen too much in the last year to make it a possible "buy". In other words, the turnaround, to the extent that it is a turnaround, is already priced into the stock. GM has cut its $9 billion a year in costs, and sold assets like a piece of GMAC. Market share will probably drop again in North America during 2007, and the big car company will continue to do well in overseas markets like China. GM’s management has even said it would sacrifice US share for more profitable sales.

There are others in the investment community who think the run at GM is not over. Forbes and Thomson’s IBES have polled analysts and think that, based on their methodology, GM will have an upside earnings surprise for Q4.

GM is doing a lot of the right things. It is rapidly entering the crossover, small SUV market and also working on smaller, fuel-efficient pick-ups. Forty percent of the cars in dealers this year will be new models. The company also says that it can further reduce costs. And, the fact that the company now sells more cars overseas than in the US is something of a buffer for doing business in the tough North American market

Whether Toyota overtakes GM as the world’s largest car-maker is academic for GM’s share price. The gamble is whether its profit-per-car in the US can move up. Most of what GM is doing seems to point that way.

Factors that could push shares above forecast: If GM can hold US share while offering fewer discounts, Wall St. will cheer. GM is now the largest car manufacturer in China. If it can keep it rapid sales growth there going, it should add a lot to the company’s financial performance.

Factors that could push share below forecast: The bear case on GM is that profit per car in the US will not improve. If that is right, the shares should get knocked.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: January 10, 2007 – 11:06 am in Autos