Daily Archives: February 1, 2007

Cramer’s SELL BLOCK (FEB 1, 2007)

Cramer tonight had a quick SELL BLOCK feature where he reviewed names he has previously liked and usually suggests taking your profits.

He has been behind Boston Scientific (BSX-NYSE) for some time thinking the negative cloud swirling was too much.  He said buy at $16+ but now he said you can sell it now and need to sell it now.  Cramer is hearing another stent rumor about problems that he thinks if are true will cause a real negative PR campaign against stents for some time, so he said take the 11% profit on his call and walk away.

Gilead (GILD-NASDAQ) is one he says is NOT on the SELL BLOCK after it rose 11% today and he thinks estimates are too low. He said you can sell a smal bit of it to be safe but hold most of it.

Laureate (LAUR-NASDAQ) is on he said by 14 months ago even though he hates the group.  He thinks it is time to sell into the LBO/MBO now.  He doesn’t want to be in the ARBITRAGE TRADE and it could have downside if the deal is not approved.

Cramer said 3M (MMM-NYSE) is PERMANENTLY on the SELL BLOCK.  They are unpredictable and he said he made a mistake getting behind it.  He’s throwing in the towel on it and management is in the way.  He thinks this one is a bad DJIA stock that you can own better DJIA compoents; even if the next quarter is better it doesn’t mean the company is OK.

Smith & Wesson (SWHC-NASDAQ) is one where he is glad he maintained the sell stance.

Jon C. Ogg
February 1, 2007

Posted on: February 1, 2007 – 6:54 pm in Cramer

Cramer Still Likes Chipotle

Cramer tonight on CNBC’s MAD MONEY was discussing when he had previously brought on Danny Meyer last week to review what multiples he will pay for the forward earnings on restaurant stocks.  He is introducing a multiple for hospitality.  Cramer talked about Chipotle (CMG-NYSE) and said the hospitality is one of the issues you have to consider with restaurants instead of just earnings and forward estimates.  Cramer said the CMG trades at 49-times earnings and it’s richly valued and at a premium to the other restaurants.  Cramer is saying this isn’t just a bunch of numbers on paper. CMG said the numbers look expensive on the surface, but this one isn’t if you break it down.  He was hard to follow tonight on the logic because he was going super-fast (even compared to normal ranting evenings).  He is also violating his normal valuation methodologies; but he says he’d buy Chipotle (CMG).

Jon C. Ogg
February 1, 2007

Posted on: February 1, 2007 – 6:28 pm in Cramer, Food

Cramer a Bit Reserved on Starbucks (SBUX)

Tonight on Cramer’s MAD MONEY on CNBC he featured his SELL BLOCK where he reviews his past picks.  He briefly noted the reactions in Google and Under Armour.  Some of these high multiple names can’t just report in-line results. 

He said that is what happened to Starbucks (SBUX).  The street wanted to see a great job even though the company thought it did a good job.  It may have hit a wall by Cramer’s view.  Cramer interviewed Howard Schultz (CEO of Starbucks) and Schultz said the company has not hit any wall at all.  He said the quarter was strong and there are 30% more customers with Starbucks cards.  He talked India, Russia, and China coming online too.  The street expectation is one thing but they are targeting 20% revenue growth and 25% earnings growth.  But Cramer said he had to trim off a penny from the EPS model.  The 2400 stores thatare planned to be opened are already having signed leases and the actual rents aren’t going up; they are pre-paying for leases and locking in deals.  SBUX closed down 1.5% today at $34.41.  Cramer said this adds up for a longer-term horizon but he says this isn’t one he is sure if he can pull the trigger on yet.  Shares traded down marginally after Cramer said this, as it is far from his usual bullish stance on the stock.

Jon C. Ogg
February 1, 2007

Posted on: February 1, 2007 – 6:14 pm in Cramer, Earnings, Food, Retail

Anything Brewing in Empire Resources?

What happened in Empire Resources Inc. (ERS-AMEX) shares today?  We often screen for small cap metals-related companies and this one was a head scratcher today to more than just us.  There wasn’t any real news yet the stock moved up 15% on more active than normal volume.  The stock traded 1.3 million shares. 

Empire Resources is a Fort Lee, New Jersey-based distributor of value-added, semi-finished aluminum products whose main markets include North America, and though a subsidiary, Empire Resources Pacific Ltd., Australia and New Zealand.

With the word aluminum you have to assume someone is trying to call for a takeover, although we have not heard anything along those lines that has any credibility.  Some small cap traders have said that may be the case, but trust is hard to come by these days and you never know who is out just trying to tout a stock they are in long and wrong.   

ERS closed at $11.72, and its 52-week trading range is $8.10 to $64.20 (yes, that’s a sixty-four).  There are no major brokerages that maintain active coverage, although the company has been profitable.  It has a tiny market cap at $114.7 million and a large portion of the company stock is tied up by insider ownership.  As of January the short interest was over 1.1 million shares, which is apparently 25% of the free float.

Jon C. Ogg
February 1, 2007

Posted on: February 1, 2007 – 6:11 pm in Metals

More Home Depot Management Changes

Home Depot (HD-NYSE) announced more management changes, although traders probably won’t treat it with much event impact.   Frank Fernandez, executive vice president, secretary and general counsel, AND Dennis Donovan, executive vice president, Human Resources, have resigned, effective February 14.  That’s called house cleaning.
The company has promoted Tim Crow, most recently senior vice president, Talent, Organization and Performance Systems, to executive vice president, Human Resources; he’s been there since 2002.

In addition, The Home Depot has named Jim Snyder, vice president, Litigation and Risk Management, as interim head of the Company’s Legal department; he’s been there since 2001.

After Nardelli was forced out, you had to expect more changes.  These aren’t major and you can probably expect more changes soon. Shares closed up 0.8% to $41.08 and are down almost 0.5% to $40.88 in after-hours.  This isn’t a huge event for holders.  A change in Supply chain, merchandising, purchasing, and marketing is what you have to really watch out for in the huge retail chain stores outside of a CFO change.

Jon C. Ogg
February 1, 2007

Posted on: February 1, 2007 – 4:54 pm in Consumer Goods, Housing, Management Change, Retail

Can Rackable Try Passing Itself as a Value Stock?

Rackable Systems (RACK-NASDAQ) has backed itself into a corner.  The company took the server space by storm in its niche, but what happens when a hi-flyer and hi-beta stock starts to miss and then becomes mediocre? Massive haircuts. And if you name is Rackable, racks happen too.  It posted EPS $0.19 on non-GAAP and revenues were $106.9 million.  Today’s numbers didn’t matter because they had already warned two weeks ago.

FOR 2007 PROJECTIONS:
Revenue is projected to be in the range of $450-$525 million ($490 million is consensus); up from 2006 of $360.4 million. Non-GAAP diluted net income per share is projected to be $0.75-$ 1.05 per share ($1.05 EPS is the consensus estimate; compared to $0.94 in 2006. GAAP diluted net income (loss) per share is projected to be $ (0.10) – $ 0.20 per share.  GAAP gross margin is projected to be in the range of 16.8%-21.0%; Non-GAAP gross margin is projected to be in the range of 18%-22%, compared to 22.4% in 2006.

So the revenue growth is expected to be up roughly 30% at the mid-point, with a mid-point EPS projection that would actually be under 2006 and on lower margins.  High growth and high beta is only fun on the way up.  Shares closed up over 6% at $20.34 on the day in hopes that today wouldn’t matter, but shares are giving up half of those gains to about $19.70 in after-hours trading.  The 52-week range is $18.34 to $56.00, so you can see the air has come out of the balloon.  Its market cap was $571 million, so at 1.2 times forward revenues and 22 times forward earnings can you call a recently former high-flyer a value stock?  Doubtfully so, but you can expect some will try soon.

Jon C. Ogg
Febrauary 1, 2007

Posted on: February 1, 2007 – 4:35 pm in Uncategorized

Electronic Arts Holds Up After News Already Anticipated

Electronic Arts (ERTS-NASDAQ) posted revenues of $1.28 Billion and posted EPS of $0.63 on a non-GAAP basis and $0.50 net. Estimates were $1.27 Billion revenues and $0.57+, so it is a slightbeat.

Guidance is $550 to $600 million and non-GAAP EPS expected at $0.00 to $0.03, GAAP EPS is expected -$0.12 to -$0.17. Estimates for the coming quarter are $0.02 & $644 million.  While this is light, as a reminder the next quarter cycle is one of the two throwaway quarters for video gamers and isn’t a real test for a video game producer (particularly the largest one).

The Company also announced today that, starting in fiscal 2008, the Company will begin recognizing revenue associated with certain online-enabled packaged goods games over the estimated hosting service period. As a result, the Company anticipates that a significant amount of net revenue that otherwise would have been recognized in fiscal 2008 will be recognized in fiscal 2009.

Shares are actually up about 2% at $51.70 in after hours trading and that is after closing up 1% on the day. The 52-week high on ERTS is $59.85 and it had been sliding over the last two months.  So while the beat is good, the in-line to cautionary comments look like they are bing forgiven since the stock had already slid so much in the last 60 days.

Jon C. Ogg
February 1, 2007

Posted on: February 1, 2007 – 4:18 pm in Casinos, Consumer Electronics, Earnings

Amazon Goes Insane

Amazon (AMZN) rallied into the close. Shares closed up over 2.7% at $38.70.

And, then the big online retailer beat. Revenue hit $3.99 billion compared to estimates of $3.78 billion. EPS hit $.23 compared to $.21 estimated by Reuters. Lazard was looking for even less, $3.75 billion.

AMZN said its next quarter should hit $2.85 billion to $3 billion compared to estimates of $2.77 billion. The company also guided higher than the consensus for its full year revenue.

According to the company International segment sales, representing the Company’s U.K., German, Japanese, French and Chinese sites, were $1.78 billion, up 37% from fourth quarter 2005. And Worldwide Electronics & Other General Merchandise grew 55% to $1.40 billion in fourth quarter 2006.

The market went insane over the numbers. With the company saying it is still growing over 25% a year, the stock rocketed over 5% at 4.10 PM eastern to $40.70.

What a tour de force.

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

Posted on: February 1, 2007 – 4:11 pm in Retail

Does Nickelodeon & Crocs Make Sense?

Crocs, Inc. (CROX-NASDAQ) announced that it has entered into a creative licensing agreement with Nickelodeon.  So the shoe-fad is partnering with one of the top entertainment brand for kids.  This partnership will introduce an exclusive, limited edition line of footwear incorporating the popular Dora the Explorer and SpongeBob SquarePants characters available at select U.S. retail locations in summer 2007. 

This doesn’t look as big as the Disney deal, this is a true cult stock.  It hasn’t seemed to matter that the ugliest shoes turned out to be the hottest stock.  Shares are up 0.6% at $52.09 in after-hours after closing up 2.8% today.  The 52-week high is $53.00.  As of january’s short interest, 11.9+ million, about 48% of the float, was the listed short interest.

Short selling fads usually ends up being correct, but that doesn’t mean that many short sellers don’t implode before they are proven right.

Jon C. Ogg
Febrauary 1, 2007

Posted on: February 1, 2007 – 4:07 pm in Consumer Goods

A Bite From Apple: A Zune Phone

Not to be outdone, Microsoft (MSFT) is apparently working on a Zune phone, according to Crunchgear. That is not great news for Apple (AAPL). The iPhone is not to be released until mid-year and will work on the Cingular network.

The Zune phone will work as a phone and a multimedia streaming device. It could be out before the end of the year.

Oddly enough, the father of the Zune left Microsoft today. Perhaps Zune sales have been poor. Or, perhaps Microsoft management thought he was too slow to react to rumors of an iPhone.

If Microsoft is willing to pay up for a fast launch and a deal with a company like Verizon (VZ), it could be a nice fight.

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

Posted on: February 1, 2007 – 3:50 pm in Wireless

Cramer on Earnings (GOOG, CMCSA, UA)

On today’s STOP TRADING segment on CNBC, Jim Cramer said there is instantreaction to a whole group of stocks.  MSNT/BA/ADM…..he said it’s a fulcrum day and he’s extremely bullish. 

3 names to discuss are Under Armour (UA) down 7% is one that is ok. They are down because they reaffirmed instead of raised guidance.  He expects the drop to shakeout some of the weaker money.  He thinks it will be down again tomorrow because there wasn’t more accelerated revenue growth.  He thinks if you can get it at $43 to $44 then you want look at it.

Comcast (CMCSA) is down on spending $1 Billion more.  Cramer said he is actually impressed because it’s a real growth story.  He is spending his money to grow instead of to buy back stock.

On his favorite GOOGLE (GOOG) Cramer said the revenues not showing accelerated is why people are being shaken out.  Cramer said it probably isn’t done going down and could fall to $450, but now he says it’s cap is $600.  In prior shows he has used $650 as his number; so this is a much less bullish stance from Cramer on GOOG.

Jon C. Ogg
February 1, 2007

Posted on: February 1, 2007 – 2:50 pm in Cramer, Earnings

GM Sales Dropped, But Shares Unphased

General Motors (GM-NYSE) sales were down at -19.7%, but while it was worse than expected the shares are actually up marginally (very marginally).

Total January 2007 US auto sales out of GM were 247,464, down from 296,003 year over year; the beloved truck sales were 143,308 compared to 161,536 in 2006 for an 11% drop.

Edmunds.com predicted GM would sell 277,000 units in January 2007, down 17.2 percent compared to December 2006. GM’s market share was expected to be 24.1 percent of new vehicle sales in January 2007, down from 25.8 percent in January 2006 but up from 23.5 percent in December 2006.

So as far as the order of the new big 3 now: Ford has lost its #2 position to Toyota, but GM is still far in the lead for now.

Douglas A. McIntyre
February 1, 2007

Posted on: February 1, 2007 – 2:07 pm in Autos

Honda’s Tough Month

Sales for Honda (HMC) in the US only rose 2.4% in January, hitting 100,790. Oddly enough, truck sales rose 15.7% to 47,378. Detroit’s auto companies have been struggling in the pick-up and SUV departments, so maybe Honda’s smaller more fuel efficient truck models have appeal.

Edmunds has Honda sales up over 5%, so they missed. Too bad.

Douglas A. McIntyre

Posted on: February 1, 2007 – 1:18 pm in Autos

Toyota Slows, A Little: Jan Car Sales

Toyota’s (TM) US sales were up only 9.5%. That is "only" in like the Detroit car companies would die for the number. But, some forecasts had Toyota’s sales up over 14% for January.

Total US sales hit 170,850 for the month. Lexus outperformed the the Toyota brand. The luxury unit has a sales increase of over 12%.

Maybe the big Japanese car company is beginning to fight the rule of large numbers. It can’t grow at 20% forever. There aren’t enough people in the US with driver’s licenses.

Douglas A. McIntyre

Posted on: February 1, 2007 – 1:13 pm in Autos

Ford Bleeds, To Death, Jan Sales Off

Ford’s (F) sales in January fell 18.9%. That’s right, and it must have been very hard to do.

Research firm Edmunds said that Ford’s sales could be down 20% for the month. Bloomberg lists the expectations of Wall St. at a drop of 14.9%.  But, there must have been some hope, in some quarters, that it could not be that bad.

With gas prices falling, certainly there was a chance that sales of Ford’s pick-ups like the F-series and the company’s SUVs might save it from a sharp slide. But, sales of the F-series actually fell almot 15%.  And, Edmunds said Ford raised incentives by 20% in January to move inventory.

Ford sold 166,835 vehicles in the US compared to 205,671 in January last year.

It’s like watching the Hindenburg crash and burn. "Oh, the humanity."

Douglas A. McIntyre

Posted on: February 1, 2007 – 12:30 pm in Autos

Before you throw 3M in the wood chipper, stop and think

3M Company (MMM) has been around since the dawn of time, founded in 1902 at Lake Superior town of Two Harbors, Minnesota. The founding fathers all sounded Fargo (1996)like the cast from Fargo (1996) and they came up with ground breaking inventions such as Scotch® Tape, Scotch-Brite™ Cleaning Pads, and Post-it® Notes. They’ve made countless revenue from sticky substances in the past 100 years and in the 1990’s 3M sales reached the $15B mark, oh sure you betcha’, $15 Billion. 3M has an endless list of products (besides the ones you know) and they are used all over the world. They just reported a stellar quarter and lowered their 2007 guidance only to have Wall Street put the smack down on 3M’s shares faster than Paul Bunyan wolfing down a full stack of hotcakes.

3M’s net income was $1.2B for Q4 06, that’s a 58% increase when compared to the same period last year. Those results included a $354M net profit related to the sale of the company’s global branded pharmaceuticals business in December. If you exclude the impact of that sale, 3M’s earnin3M logo - websitegs per share during the quarter comes to $1.10 per share. Analysts were expecting 3M to report $1.14 earnings per share and once they lowered the 2007 guidance, it was all over.
3M - 5 Day Chart
3M said they were hurt by competitive pressures for weakness in its optical films segment (which makes films used in LCD televisions). The crying continued after they said a slowdown in the housing industry hurt businesses that normally buy up 3M shingles like Minnesotans’ eat up potato pancakes. Goldman Sachs analyst Jack L. Kelly cut his target price to $80 from $86 and kept a "Neutral" rating on shares. America sold millions of 3M shares yesterday and sell-off continues today, pushing the stock down to $74 and change.

Why would anyone want to be in 3M?

First off, the dividend alone makes me want to jump into all of Minnesota’s 10,000 lakes. 3M’s dividend pays out $.46 per share every quarter. Buying the stock today and just waiting for the company to come back is worth the dividend alone. Not everyone hates 3M – JPMorgan Securities Inc. analyst C. Stephen Tusa Jr. said "the quarter was tough, but investors should take advantage of a weak share price to buy, due to growth expectations." Even Jim Cramer who has pimped 3M for years said last summer:
I like 3M quite a bit actually, and I even recommended it on my "Mad Money" television show last night. I believe 3M is a classic growth stock that can be held for the long-term. Historically, 3M has shown consistent earnings and dividend growth, and while it may not put up Google (GOOG)-esque numbers, I believe it will outperform the market over the next few years.
I only quote Cramer just to knock some sense into the 3M haters. Be reasonable people, do you think this stock isn’t going to come back? Come on. Now with a lower guidance, they are setting the bar low and just imagine if things start to improve or the beat Wall Street’s expectations next Quarter?

3M has a history of splitting its shares, let’s just look at the share splits since 1994 because do you really care about what happened in 1902? Didn’t think so.
3M Share Splits
Are you reading this article from your PC? Then look on your desk, find the Post-It Notes you have laying around all over the place and flip them over. That’s right, 3M’s got the patent on Post-It Notes, and you can bet they are working on the next sticky substance that will make 3M even more money.

So make up your mind people. Pressure and stress may be upon you if you are a 3M share holder, so let’s do a little roll-play. Let’s pretend Jerry Lundegaard is a 3M share holder and freaking out, and Marge Gunderson is a Wall Street analyst (both from the movie Fargo). And action!….

Fargo - JerryJerry Lundegaard: Well, heck, if you wanna play games here! I’m workin’ with ya on this thing, but I… Okay, I’ll do a damned lot count!
Marge Gunderson: "Sir, right now?"
Jerry Lundegaard: "Yah, right now. You’re darn tootin’."

We know Jerry doesn’t have the stomach for this kind of play, but you can bet once 3M shares start to rebound, guys like Jerry will be wishing they didn’t put their shares in the wood chipper. But if you do put your shares our yourself in the wood chipper, you can betcha’ Marge Gunderson will have a word of two fer ya.

Marge Gunderson: So that was Mrs. Lundegaard on the floor in there. And I guess that was your accomplice in the wood chipper. And those three people in Brainerd. And for what? For a little bit of money. There’s more to life than a little money, you know. Don’t you know that? And here ya are, and it’s a beautiful day. Well, I just don’t understand it.

Neither do we Marge, neither do we.

Fargo - Woodchipper

Article written by: Phil McCallister
Article posted on: January 31st, 2006

Disclaimer: The Author does not own any shares or hold any short/long positions in MMM

http://thestockmasters.com/index.asp

Posted on: February 1, 2007 – 12:14 pm in Uncategorized

GOOG Trendline: Will It Hold?

From Ticker Sense

With GOOG down $13 to around $488 following last night’s earnings, its short-term trendline is coming into play.  This could help to stabilize the stock at these levels.

Goog_trendline_1

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Posted on: February 1, 2007 – 12:05 pm in Research

ISM Inflation

From Ticker Sense

In this month’s ISM commodities survey, respondents said they saw price increases in five commodities and price decreases in six, for a net of minus one.  Below we have updated our chart which shows the relationship between the ISM commodities survey and the CPI.  Historically, trends in the CPI have been preceded by the ISM survey.  If this month’s survey is any indication, then the up tick we saw in December’s CPI report will prove to be short-lived.

Cpi_vs_ism_020107

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Posted on: February 1, 2007 – 12:03 pm in Research

Index Breakouts

From Ticker Sense

Yesterday, the Dow and S&P 500 staged breakouts to new highs but failed to close above the highs on January 24th.  This morning, the indices continue to show strength and have again taken out the January 24th highs, but it will be key to watch if they can close above them.  The Nasdaq chart looks a little different and still has about 35 points to go to reach its highs seen in mid January.

Indu201

Spx201

Naz201

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Posted on: February 1, 2007 – 12:01 pm in Research

Analyst Sentiment

From Ticker Sense

Regular readers of our research will know that we often cite various indicators to track investor sentiment. One group which we haven’t highlighted in a long time is analysts, and as the chart below highlights, they do not seem too bullish. Overall, buy recommendations as a percent of all recommendations is at its lowest level in over ten years. What does this mean? As we have often discuessed in the past, when the herd is in agreement on the market’s direction, the opposite usually occurs.

Analyst_buy_calls_1

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Posted on: February 1, 2007 – 12:00 pm in Research