Daily Archives: January 24, 2007

Cramer Predicts Private Equity Buys Gap Inc (GPS) For $25.00

On tonight’s MAD MONEY on CNBC, Cramer says that Gap Inc. (GPS-NYSE) keeps saying "I’m going higher!"  He says it’s a triple buy even though it is the worst of the worse.  He says he hated it more than anyone, but it’s a buy after Pressler left yesterday.

Their last miserable quarter and the CEO leaving and after all the miserable train wrecks happened it hasn’t fallen down.  He says this is telling you the worst is substantially behind and it’s ready to go up.  Dana Cohen, Cramer’s favorite retail analyst, said it could go to $25.00 on an earnings turnaround alone.  Liz Claiborne’s CEO also said that the company could be turned around.  He says this is the ideal size for private equity money to put the cash to work at $15 Billion, and their money will be recalled if it doesn’t get put to work (somewhat arguable point).  The leases according to Cramer are below market value so they can buy out of the leases cheaper on store closures (that actually is probably very true).  He pointed that even JCPenney was turned around.  Cramer said it could even see $30.00 ultimately.  But the multiple private equity firms that want to do the deal could be won by Thomas H. Lee, who turned JCPenney.  GPS closed up 0.6% at $19.39 today, but it went up 3% more to $19.96 after Cramer touted it,

Cramer predicted that Thomas H. Lee pays $25.00 for Gap Inc within 6-months.  We’ll see if this happens.  I ran break-up values by my own models and had a hard time getting much past $20.00 to $22.00.  Beauty is in the eye of the beholder and the deal could fetch an extra "we gotta put the cash to work" trade, so we’ll see.

I had Pressler as one of the top CEO’s that need to go.  Here is what I said on Monday when Pressler WAS FIRED left the company.

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 6:32 pm in Analyst Calls, Bait Shop, Corporate Governance, Cramer, Management Change, Mergers and Buy Outs, Retail

Cramer Drinks Up Diageo plc (DEO)

Cramer tonight on MAD MONEY on CNBC went over his favorite foreign stocks to the foreign legion for US investors.  Previously this week he added CVRD (RIO), NTL Inc (NTLI), and Bank of Nova Scotia (BNS). 

His #2 foreign pick is Diageo (DEO-NYSE/ADR), the spirits maker based in England.  He reminds that he owns it in his Action Alerts charitable trust.  He has been behind the stock since $62.90 and it has a 3.7% dividend.  This is more of a defensive play, and he notes that people won’t stop drinking on a bad economy and may even drink more.  Cramer said it’s the best liquor company in the world, has great exposure to emerging markets and it can deliver on its business plan.  It has 7 consecutive growth months in the US and owns a big stake in the Moet Hennessey empire.

DEO closed up 0.7% at $78.90 but shares went up another 0.7% to $79.50 after he talked this one up.  Keep in mind he has been very positive on this and already owns it outright.

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 6:15 pm in Uncategorized

Did AeroVironment Go From Hot to Cold Already?

AeroVironment (AVAV-NASDAQ) sure lost its momentum if you consider that it was a hot issue with a 50% premium.  It opened up about 50% from teh pricing yesterday at $25.00 on the first print.  It traded up marginally and then lower to close yesterday at $23.93 on 6.8 million shares.  For a hot IPO the volume felt light and it closed down $0.03 at $23.90  (with a tight $23.70 to $24.38 range today) on only 770,281 shares.  That’s pretty light trading today for a hot issue.

It looks and feels like this one is going to have to settle down to that $22.00 to $23.00 before Cramer comes out and gives it the thumbs up and the volume comes back in.  Part of the problem in this issue is that Cramer gave a play book aheadof the pricing and it stripped out a lot of the IPO whips that tradersnormally like to see.  Cramer gave his play book on this last week.  Here’s what I said right after the open yesterday so you see the same tone. 

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 6:11 pm in Cramer, Defense

eBay Results Satisfy Critics

eBay (EBAY-NASDAQ) posted $0.31 EPS and $1.7 Billion in revenues; it bought $1 Billion in stock and will add $2 Billion more to the buyback plan.  Estimates were $0.28 EPS and revenues of $1.67 Billion.

eBay’s users generated a total of 610 million listings in Q4-06, 12% higher than the 546 million listings reported in Q4-05. Gross Merchandise Volume (GMV) was $14.4 billion in Q4-06, representing a 20% year-over-year increase from the $12.0 billion reported in Q4-05.  Operating margin fell from 28% to 26%, but was 30% outside of options.

Q1 Guidance: expects revenues $1.67 to $1.72 Billion. Non-GAAP earnings $0.28 to $0.30.  STREET: Q1 2007 estimates were $0.29 EPS and $1.7 Billion in revenues.

2007 Guidance: expects revenues range of $7.05 to $7.3 Billion. Non-GAAP operating margin for 2007 is expected to be 33%. Non-GAAP EPS $1.25 to $1.29. STREET: 2007 estimates are $1.23 EPS and $7.15 Billion revenues.

They had to raise guidance to come in-line with street estimates, and they have done that with the added plus of the $2 Billion in share buybacks.  Shares closed up almost 5% in normal trading at $30.00, and the first reactions have the shares up almost 9% in after-hours trading around $32.65.  The 52-week trading range is $22.83 to $44.75.  So unless there is hidden bad news it looks like they have gotten past the hurdles and negative PR for price hikes and it looks like the street is going to be able to go back to analyzing the company results rather than the internal noise and past judging acquisitions.  Meg Whitman will be speaking on CNBC tomorrow at 9:30 AM EST. 

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 4:34 pm in Earnings

Netflix Adding to Strong Gains

Netflix (NFLX-NASDAQ) is trading up 5% at $23.96 in reaction to its earnings.  It ended with 6.3+ million subscribers; it posted EPS of $0.21 net and $0.24 adjusted, above the $0.17 estimate.  Its guidance of $304 to $310 million is around the $308.5 million estimate and expects 6.7 to 7 million subscribers.  The stock closed up 4.5% at $22.75 in normal trading, but the stock is up another 6% at $24.10 in after-hours.  The guidance looks marginally above estimates for the year, so we’ll only follow up on NFLS if there are any key reversals.

Its 52-week trading range is $18.12 to $33.12.

Posted on: January 24, 2007 – 4:21 pm in Earnings

Qualcomm Seems OK on First Glance

Qualcomm (QCOM-NASDAQ) $0.43 EPS on $2.02 Billion revenues; was expected at $0.42 and $2.07 Billion, but they had already guided slightly lower in December and Motorola had already given its warning.  QUALCOMM reaffirms most recent fiscal 2007 revenue and pro forma earnings guidance.  It ended with $10.5 Billion in cash and equivalents.  It is looking for $2.02 to $2.1 Billion in revenues and $0.42 to $0.44 EPS, and expects handset shipments 55M to 57M, and worldwide CDMA/WCDMA shipments at 82M to 86M with an average $217 price.  It is reaffirming $8.1 to $8.6 Billion and prior $1.72 to $1.77 EPS guidance. It also outlined the exposure to Nokia that is scheduled to end this year.

QCOM closed up 1.3% at $38.62, and the initial response so far is the shares up 2.2% at $39.48 in after-hours trading.  So far this looks like Paul Jacobs is keeping everything going, so we’ll have to see how negotiations and the legal environment is going later.  It is hard to know how the reaction will go on the street later after the conference call and after the dust settles from comments, but on first glance these actual numbers and metrics look good enough to keep the street happy with the stock down where it is.

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 4:14 pm in Earnings

Whisper Number Earnings Estimates

From Ticker Sense

WhisperNumber.com is a research firm that collects earnings expectations online from influential individual investors.  The estimates are "considered an alternative to analyst estimates for quarterly earnings" and are available for free on the website.

Since Whisper Number estimates come from investors themselves, the traditional thinking is that companies need to beat (miss) the Whisper estimate for the stock price to be "surprised" on the upside or downside.

We looked at Russell 1000 companies that have yet to report this earnings season for which Whisper Number estimates are available.  Then we screened the list to find the stocks that currently have the largest divergence between traditional analyst estimates and investor estimates.  Stocks highlighted in green below have a Whisper estimate that is below the average analyst estimate and stocks highlighted in red have higher Whisper estimates.

Whispernumber

http://tickersense.typepad.com/

Posted on: January 24, 2007 – 3:26 pm in Research

Cramer’s Two Chip Buys

On today’s STOP TRADING segment on CNBC, Jim Cramer said, "What a tape!"….

He thinks Level 3 (LVLT) up, Blockbuster (BBI) up….also Goldman Sachs (GS) as his $300 target price tag are all going well. 

Cramer has 2 chip buys: Marvell (MRVL) that has $2 downside risk and $10 up (he said the same yesterday)……Cramer also thinks that Broadcom (BRCM) up 4% after the CEO gets in options trouble is worth a trade.  Cramer said the hotels are doing very well and anyone that hates hotels isn’t doing homework: He thinks the Marriott (MAR) & Starwood (HOT) calls are right and he backs the research calls there.  Cramer said Trump Ent. (TRMP) is so low down now that the head of the company will do something if it gets weaker (sounds like an intro to a management buyout from Cramer if you ask me, let’s see if Cramer makes that call if the stock gets weaker).

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 2:48 pm in Cramer

BAIT SHOP UPDATE: First Community Bancorp

First Community Bancorp (FCBP) did show us the new financials last night, and this was important because they have been such an acquisition machine and staying positive required having faith that the books would look good.  Those who follow this one feel ok about shares because the FCBP shares are up over 2.5% to $52.75 on nearly double the average volume.   This appears as a net miss to estimates, but you have to be able to look past the acquisition charges to feel comfortable with the company.

Earnings for the year came in at $3.21 on an EPS basis ($3.28 was the estimate), up from $2.98 in 2005 (keep in mind acquisitions).  Its earnings per share for Q4 were $0.82, down from $0.88 in Q3 and down from $0.84 the year before.  While this looks lower, it is because of more shares outstanding after the acquisitions; the actual net income was sequentially higher.  As I noted in the last update about this being a BAIT SHOP member (takeover candidate) it is often difficult to have faith when you literally cannot envision what the financials will look like at all.  They have made 5 acquisitions since August 2005 and shares outstanding are up 40% y-o-y to some 23.68 million.

Nothing has changed at all on the potential buyout thesis here and it is still a BAIT SHOP member.  There are no options that can be used as a hedge yet, although the implied hedge here is that this amalgamated bank would become a target if the price ever fell too much because one of the Eastern US banks could easily use it as a gateway acquisition into California and some other micro-regional areas in the Western and Southwestern US.

If we trim the EPS from $3.65 and take it down to $3.50 it has a forward P/E of 15; if we take the estimate at face value is has a forward P/E of 14.45.  That doesn’t make it dirt cheap on a comparative basis, but it is cheap on many metrics and is well within the buyout guidelines for a regional banking acquisition in the Western US. 

Update JAN 24, 2007: No change to Bait Shop member status. 

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 1:23 pm in Analyst Calls, Bait Shop, Banking, Financial Stocks, Mergers and Buy Outs

Who Lost Out On Today’s Rally? MSFT, INTC, ORCL, MOT

A tech sector company really had to be out of favor not to get a big pop today. Yahoo! (YHOO) was up 7.4% at 1 PM eastern time to $28.96. Sun (SUNW) jumped 7.6% to $6.09. Corning (GLW) rose 11.2% to $20.95. And RF Micro (RFMD) was up 12.8% to $7.78.

Even EMC (EMC) is up 3.1% to $13.97. Ebay (EBAY) added 4.3% to $29.83. And, Level 3 (LVLT) is up 4.1% to $6.19. AT&T (T) is up 3.8% to $36.71. Its Cingular Wireless unit had a huge Q4.

A bad day today may be an indication that Wall St. thinks a tech firm doesn’t have juice now and may not have any in the near future.

AMD (AMD) was down 8% to $16.10. Earnings were so bad that the stock may never rise again. The chip price war is keeping the pressure on Intel (INTC), up only .9% to $20.75.

Also lagging the crowd is the world’s largest software company, Microsoft (MSFT). The stock is up 1% to $31.06. Maybe the Wall St. crowd is nervous about the Vista launch. Apple (AAPL) is only up .9% to $86.49, but they are facing a potential class action suit on options backdating.

Oracle (ORCL) is going nowhere up .4% to $17.19, but its major rival SAP (SAP) had a dreadful quarter. It could be catching.

In the handset stocks, Motorola (MOT) is flat at $18.53, and Nokia is up 1.4% to $20.24.

But, if its isn’t up today, it may not be going up.

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

Posted on: January 24, 2007 – 1:14 pm in Research

Charlie Gasparino Reports More on Why Chuck Prince Needs to Leave Citigroup

Stock Tickers: C, BAC, NYX, JPM

Charlie Gasparino on CNBC was reporting today is that the leadership of Citigroup (C-NYSE) by Chuck Prince is lacking, and he’ll be out in the next year if he doesn’t get the stock up.  Even the switch of Krawcheck to wealth management is just noise according to his report, and the Prince issue is the real issue.  Gasparino even went out and said these 3 were being touted as potential good replacements:  NYSE head John Thain; or J.P.Morgan Chase’s head Jamie Dimon; or Al de Molina formerly CFO of Bank of America. 

What wasn’t mentioned is that de Molina is the only really available.  It is unlikely Thain would leave NYSE to take that job and same goes for Jamie Dimon.  Who knows what they would have to pay to make it happen, but it would be in the hundreds of millions most likely.

This is all ongoing dirt on why Chuck Prince is still one of the 10 CEO’s that need to go.  Prince just needs to get out of the way.  So far Nardelli of Home Depot and Pressler of Gap have bitten the dust, and they were on that list of CEO’s that need to go.

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 1:07 pm in Banking, Financial Stocks, Management Change

Yahoo! Investors Pin Hopes on Early Panama Release

By Chad Brand of The Peridot Capitalist

I’m a little surprised that Yahoo! (YHOO) stock is jumping more than $1 today after it reported fourth quarter numbers last night. If you look at the company’s 2007 guidance, most metrics are below current consensus forecasts. Revenue growth for the fourth quarter was 15% and 2007 growth will fall between 9% and 20%, according to the company. Yahoo! hardly appears to be a high growth Internet leader anymore.

That said, the stock is rallying as investors hope that an early release of their new ad system, Panama, will boost the bottom line of their network’s online advertisements. Without actual evidence that Panama will boost Yahoo!’s ad margins (the program launches in February) and help it regain market share lost to Google (GOOG), I’d be cautious going forward. If Panama stops the bleeding, YHOO shares will likely trade well into the thirties, but if the platform’s bark is stronger than its bite, investors might be let down.

Full Disclosure: Long GOOG and short YHOO at time of writing

http://www.peridotcapitalist.com/

Posted on: January 24, 2007 – 12:48 pm in Research

Pfizer Cut By Bear Stearns, Cost Containment Woes

Bear Stearns downgraded Pfizer (PFE) to "peer perform". The bank seems to think that Lipitor will be eaten alive by generics and that Pfizer’s main weapon against this is cost cuts.

The move may be premature. Pfizer has committed to putting four new drugs into the field each year between now and 2011.

Pfizer’s cost cuts paired with even modest success with new products could get the company’s earnings moving again. And, the Bear could be wrong.

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

Posted on: January 24, 2007 – 12:46 pm in Research

YHOO Trading Higher on Earnings

From Ticker Sense

Yahoo! (YHOO) is currently trading up about $1.50 in the pre-market after reporting earnings last night.  Below is a table of prior times in which YHOO gapped higher on an earnings report (since 10/02).  As shown, there is a slightly positive bias for the stock to continue higher from the open to the close today.

Yhooearnings_1

http://tickersense.typepad.com/

Posted on: January 24, 2007 – 12:02 pm in Research

DELL, AMAT Down 8 Days in a Row

From Ticker Sense

The stocks listed below are S&P 500 names that currently have the longest winning or losing streaks in the Index.  CCU has been up 10 days in a row and BUD has been up 9 (can it make it through the Super Bowl?).  DELL and AMAT have been losers for 8 days in a row now, and YHOO looks to end its 6-day decline after trading up on earnings in after hours.

Updowndays124_1

http://tickersense.typepad.com/

Posted on: January 24, 2007 – 11:59 am in Research

Industrials: A Sector With The Calendar At Its Back

From Ticker Sense

A couple of days ago we highlighted how based on seasonal patterns the Technology sector could face some headwinds in the coming months, as the sector is entering a period of time which has resulted in negative returns over the last five years.  That got us thinking about what sectors (if any) are entering a period of time which has yielded positive returns.  One which stood out was Industrials.  Over the last ten and five years, the sector has tended to rally in the coming months (red dot represents today’s date).

Industrial_sector_seasonal_patterns

http://tickersense.typepad.com/

Posted on: January 24, 2007 – 11:58 am in Research

STM: STMicroelectronics Needs Better Forecasts

By William Trent, CFA of Stock Market Beat

When it comes to running semiconductor companies, we’re nothing but armchair quarterbacks.  But sometimes armchair quarterbacks, with the benefit of a high-def TV and the ability to tune out the screaming fans, can see the game unfolding better than the coaches on the field.
STMicroelectronics 4Q Jumps 51 Percent: Financial News – Yahoo! Finance

Swiss chip maker STMicroelectronics NV said Tuesday its fourth-quarter profit surged 51 percent from last year, despite what the company characterized as a “more pronounced than forecasted” market correction.Net income for the quarter was $276 million, or 30 cents per share, up from $183 million, or 20 cents per share, last year. Revenue for the quarter was $2.48 billion, up 4 percent from $2.39 billion last year.

Analysts polled by Thomson Financial expected the company to post earnings, on average of 21 cents per share on $2.56 billion in revenue.

“Looking at the fourth quarter and near-term environment, the current market correction underway in some of the key applications we serve is more pronounced than forecasted,” said President and Chief Executive Officer Carlo Bozotti.

Sounds to us like Mr. Bozotti needs to look for better forecasts.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Starbucks (SBUX) call options; Landstar (LSTR) put options; Plantronics (PLT) put options

http://stockmarketbeat.com/blog1/

Posted on: January 24, 2007 – 11:57 am in Technology Companies

Brazil’s Embraer share offering nearly doubles | Reuters.com

By William Trent, CFA of Stock Market Beat

We have said often that the future of passenger air travel lies in smaller jets flying to smaller cities. The hub and spoke model is outmoded, and large passenger jets are really only well suited for a few major city-pairs. Meanwhile, the freight market that would have helped to defray the costs (because air freight carriers really do need bigger aircraft) seems to remain tightly locked up.

A good example of the direction we see things going is evidenced by JetBlue’s (JBLU) current plans to offer nonstop service from Westchester County, New York.

The flights would begin in March, county officials said. Airport manager Peter Scherer said the airline is considering routines to Orlando, West Palm Beach and Chicago.

We have generally regarded this trend as positive for Brazilian regional jet manufacturer Embraer (ERJ). However, the current valuation may be a bit stretched if insiders are any indication.

Brazil’s Embraer share offering nearly doubles | Reuters.com

Brazilian aircraft maker Embraer said on Tuesday its proposed share offering will be about twice as large as planned because more of its shareholders decided to join the sale.Embraer, the world’s fourth largest commercial aircraft, said in a filing to Brazil’s securities regulator five of its shareholders will offer 72.9 million common shares. In a December filing, the company said two shareholders planned to offer 43.3 million shares.

With major shareholders all seeming to feel like this is a good time to lighten up, investors should probably be wary about buying right now.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Starbucks (SBUX) call options; Landstar (LSTR) put options; Plantronics (PLT) put options

http://stockmarketbeat.com/blog1/

Posted on: January 24, 2007 – 11:55 am in Transports

Can a Super Bowl Ad Pump infoUSA (IUSA)?

infoUSA (IUSA) is a stock that has sort of been quiet and almost forgotten on Wall Street, from an investor view anyhow.  The stock is up 0.5% today at $12.13 after announcing they will advertise in the Super Bowl pre-game show, well above the 52-week lows of $7.81 and close to the high of $13.05.  It trades at a mere 22-times earnings and has a market cap of $675 million.  The year-end balance sheet isn’t yet available but the company on 9/30 listed total assets at $554 million and total liabilities of $328 million.  A point of criticism is that $320 million of the assets come from Goodwill and another $60 million comes from "intangibles and other," so the balance sheet is misleading from a true asset or break-up value.  That does not mean the company is in trouble, because that’s not the case: it now does over $100 million in quarterly revenues and it posts net income every quarter; and as long as its top-line comes in with earnings it will have shown multi-year growth. 

It also is quite thinly followed on Wall Street with only Credit Suisse and Stephens Inc. as the two traditional brokerages that follow the stock.  It is very possible that some of the faster money crowd will start attempts to talk it up as largely undiscovered, and as a value play, and as a forgotten stock. 

The company is hoping that their announcement of its advertisement during the pre-game show of the Super Bowl for its Salesgenie.com unit will help boost traffic and customers, and this is their first time around the Super Bowl advertising.  You can watch a tease of the new ad at salesgenie.com/tv and visitors can get discounts if they sign up.  The company is scheduled to release earnings on Friday, February 2, so it throws some extra event risk into the mix.  The Super Bowl is on February 4, 2007.

Jon C. Ogg
January 24, 2007

Posted on: January 24, 2007 – 11:11 am in Internet, Media

China Will Be King Of The Internet: GOOG, AOL, MSN, YHOO

China’s number of internet users should pass the US figure in about two years. The country’s internet population rose over 23% last year to 137 million people according to the China Internet Network Information Center. The US has 210 million people on line. At the rate its is growing, the number of people on the internet in China could be larger that the entire US population of 300 million people in just a few years.

Companies based in China like Baidu.com (BIDU) have a huge lead over US based firms like Google. Its share of the Chinese search market is 70%. Some sources put Google’s (GOOG) China search share at only 16%, although the numbers appear to change depending on which audience tracking service is consulted.

Yahoo! (YHOO) is working to target business customers in China to help move its share of the search market up, but it is unclear why that would work. While AOL (TWX) and MSN (MSFT) appearing to be making little direct effort to drive up Chinese viewership, the country could be important to their expansion as internet usage growth slows in the US and Europe.

According to Alexa.com, the website traffic measurement service, three of the ten most popular websites in the world are Chinese (Baidu, Sina, and QQ) (SINA) With little to show for driving up market share in the world fastest growing internet market, US web firms may be facing a critical lost opportunity.

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

Posted on: January 24, 2007 – 10:10 am in Internet