Daily Archives: February 8, 2007

Cramer’s SELL BLOCK (FEB 8, 2007)

On tonight’s MAD MONEY on CNBC, Cramer had his SELL BLOCK  calls.  This is where he reviews names that can usually be sold that are based on his recent picks.

Avon (AVP-NYSE) is one that Cramer thinks that Andrea Jung is no longer a CEO that has to go.  That wasn’t one of MY list of CEO’s that need to go because I didn’t agree with it.  Cramer said he wasn’t patient enough and he was wrong.

Wells Fargo (WFC) is one you need to sell.  It is trading too high on a multiple and he thinks you can sell at least some.  He also thinks Washington Mutual (WM) can be sold here.  You should use this to buy Goldman Sachs (GS).

On Abercrombie & Fitch (ANF) that is 50% from the summer and he thinks if you haven’t sold some yet you should.  Take your profits according to Cramer.

Cramer also said Sell Cicuit City (CC-NYSE) if you haven’t.

Citigroup’s (C-NYSE) Chuck Prince should be on the CEO’s that need to go list.  He is one of my own picks to go and I even said he hasn’t shown up for his own funeral yet on my CNBC interview on Monday.

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 7:03 pm in Cramer

Cramer Has Another Potential Buyout Pick

Cramer came back out on Mad Money on CNBC noting that Investors Financial Trust (IFIN) was acquired by State Street (STT) for a 38% premium.  As soon as the market opened Cramer thought DST Systems (DST-NYSE) would rise because they are competitor.  It didn’t go up and it is unchanged, but Cramer thinks this is just wrong.  He thinks it should be higher since IFIN was bought for that price.  He thinks DST is underpriced and another could buy it up, so you should buy it first.  At the same valuations, DST could be bought at $98.00, which is 36% above today.  DST traded up 2% in after-hours to $73.50 after Cramer touted it; and that is a new 52-week high.

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 6:21 pm in Cramer

Cramer Thinks Sears is the Beneficiary of the Fortress IPO

On tonight’s MAD MONEY on CNBC, Jim Cramer said that the biggest winner from the coming Fortress IPO is Sears Holdings (SHLD).  Here is why he thinks this: You might think of it as the retail department store, but Cramer reminds us this is a publicly traded investment vehicle that will now be more understood.  At $180 per share you might think SHLD is expensive, but to Cramer that is just a number.  The problem with Fortress coming public is that there are no comparables to use.  The street hasn’t been listening to Cramer (according to him) because they don’t have a yardstick to measure it.  SHLD can have a significantly higher stock price now that Fortress is coming public.

Fortress is coming public at 17-times earnings.  Cramer said that if Lampert loses performance and if the multiple takes a ahaircut then you can derive a $237 target comparison at SHLD.  He even noted the $371 target on the really high-end.  There are research notes saying they could raise $5 Billion in securitizations and that could take the stock to $320.00.  SHLD traded up another 1.5% to $183.66 after Cramer called it, which is actually a new all-time high.  Cramer thinks SHLD is the next Berkshire Hathaway (BRK/A).

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 6:10 pm in Cramer

Broadcom Reaction After Guidance

Broadcom Corp. (BRCM-NASDAQ) expects first-quarter revenue of between $890 million and $900 million,  according to acting Chief Financial Officer Bruce Kiddoo in a conference call after earnings.  Wall Street is expecting $900 million in revenues.  Shares are still up, but are now up 1.25% at $34.08 after-hours.

Here is what was posted after earnings:

Broadcom (BRCM-NASDAQ): Net revenuefor the fourth quarter of 2006 was $923.5 million, an increase of 2.3%sequentially and 12.5% year over year.  GAAP net income was $45.1M and$0.08 EPS, but non-GAAP was was $184.9 million, or $0.31 EPS.  Thestreet was expecting $0.31 EPS and $910M+ in revenues (non-GAAP).

BRCM also announced it would spend $1 Billion in share buybacks.The absolute best news in this is the Non-News.  There is absolutely nocomment about not being able to show results because of optionsinquiries on back-dating, hence why I said ‘clean’ earnings.  Sincethere is no guidance, the street is taking the cautious stance untilafter it is discussed in the conference call.

The company’s cash, cash equivalents and marketable securities atDecember 31, 2006 totaled a record $2.8 billion.  So far shares upmarginally up 0.5% at $33.85 in after-hours.  Shares closed up 0.5% innormal trading ahead of earnings.  The 52-week range is $21.98 to$50.00, so it has seen some real highs and lows.

"The year 2006 exemplified the ever-changing nature of thesemiconductor industry, as strength in the first half of the year wasfollowed by a slowdown in the second. However, on the whole, 2006turned out to be a very good year for Broadcom as we increased ourrevenue by 37% and increased our cash and marketable securities by morethan $900 million," said Scott A. McGregor, Broadcom’s President andCEO.

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 6:04 pm in Semiconductor

Energy Conversion Devices Shows Risks in Alternative Energy

Energy Conversion Devices (ENER-NASDAQ): The company reported a net loss of $2.9 million (or $0.07 per share) on revenues of $22.9 million in the second quarter of fiscal 2007.  We could discuss estimates, but there is no point.

Its CEO Robert Stempel said, "While we are not in the practice of providing guidance, I want to update an operating goal that we had established regarding sustainable profitability. We are on track with a number of our businesses, including our United Solar Ovonic business, but we do not at this time expect to achieve sustainable profitability by the end of this fiscal year as previously projected. This is in large part due to the fact that it is taking longer than we originally expected to secure additional funding opportunities for our emerging technologies. We remain firmly committed to sustainable profitability and will be pursuing funding and restructuring alternatives to achieve our goal in the near term."

Needless to say, this isn’t the sort of thing that alternative energy traders like to read.  Many of these names have been lingering around since before 2000 and most are still unprofitable.  With the recent rush of public Chinese companies that have come public as Profitable solar players, these American alternative energy better get their act together.  ENERshares are down over 10% at $31.75 on last look, and that is after a 2.5% drop to $35.50 ahead of earnings; its 52-week trading range is $29.03 to $56.00 and its market cap is $1.4 Billion as of the close.  ENER has been trading since before 1994, and while it has been much higher this used to trade well under $10.00 not that long ago.

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 5:39 pm in Alternative Energy

Vista’s Tail

Microsoft (MSFT) Vista may not single handedly save the flagging US PC business, but at least it is off to a good start.  According to Current Analysis research, sales of PCs rose 173% the week of February 3 compared to the immediately previous week.

The director of research at Current Analysis cautioned The Wall Street Journal that this is only one week of data. In other words, don’t get overheated.

Don’t tell that to Michael Dell.

Douglas A. McIntyre

Posted on: February 8, 2007 – 5:17 pm in Software

Broadcom Reports ‘Clean’ Earnings

Broadcom (BRCM-NASDAQ): Net revenue for the fourth quarter of 2006 was $923.5 million, an increase of 2.3% sequentially and 12.5% year over year.  GAAP net income was $45.1M and $0.08 EPS, but non-GAAP was was $184.9 million, or $0.31 EPS.  The street was expecting $0.31 EPS and $910M+ in revenues (non-GAAP).

BRCM also announced it would spend $1 Billion in share buybacks.  The absolute best news in this is the Non-News.  There is absolutely no comment about not being able to show results because of options inquiries on back-dating, hence why I said ‘clean’ earnings.  Since there is no guidance, the street is taking the cautious stance until after it is discussed in the conference call.

The company’s cash, cash equivalents and marketable securities at December 31, 2006 totaled a record $2.8 billion.  So far shares up marginally up 0.5% at $33.85 in after-hours.  Shares closed up 0.5% in normal trading ahead of earnings.  The 52-week range is $21.98 to $50.00, so it has seen some real highs and lows.

"The year 2006 exemplified the ever-changing nature of the semiconductor industry, as strength in the first half of the year was followed by a slowdown in the second. However, on the whole, 2006 turned out to be a very good year for Broadcom as we increased our revenue by 37% and increased our cash and marketable securities by more than $900 million," said Scott A. McGregor, Broadcom’s President and CEO.

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 4:36 pm in Earnings, Semiconductor, Technology Companies

DivX Mixed Results

DivX (DIVX-NASDAQ) has shown that licensing media compression players is not a bad model at all, although the gains in after-hours turned into losses in a hurry.  The company posted 80% revenue growth for all of 2006, but the company posted Q4 EPS at $0.21 and net income at $7.4 million on revenues of $16.4 million.  That is up from $0.03 and $2.2 million in Q4 2005.  This looks above the street estimates, but calling for estimates on a company that has been public only a few months is more "ranging" than it is science.  Its annual net income for 2006 was $16.4 million and EPS was $0.61.  For the first quarter of 2007, revenue is anticipated to be in the range of $17.3 to $19.3 million.

The initial reaction was up 4%, but now shares are down more than 4% to $22.65 in after-hours.  This is a recent Hot IPO so it probably isn’t a shock to see all the volatility in the name.  DIVX closed up 1.1% at $23.69 on only half its normal volume ahead of the report.  Its market cap at the close was $778 million.

Posted on: February 8, 2007 – 4:19 pm in Earnings, IPOs, Internet, Media, Technology Companies

Cramer Talks More on Subprime Lenders

On today’s STOP TRADING segment on CNBC, Cramer discussed the subprime sector from New Century (NEW) and from the extra fallout in HSBC (HBC).  Cramer said HSBC had really lowered standards, and the New Century (NEW) drop is one that could have been avoided.  Cramer said this does not denegrate the Bank of America (BAC) and Wells Fargos (WFC).  Cramer is still not worried about Countrywide (CFC) and he would be a buyer here of it.

Cramer still likes JCPenney (JCP) and thinks the new Jewel launch and Ralph Lauren (RL) will catapult the stock.  He thinks you should buy ahead of next week.

Earlier today he noted roughly the same earlier today before he talked about some solid retailing same-store-sales numbers.

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 2:49 pm in Cramer

How Many Days Can Microsoft Drop?

How many days in a row can Microsoft drop?  If you have been around since before 2000 when the tech bubble burst, you know the answer to this can be a painful one.  Since Microsoft hit $31.00 in early January, it has been in a steady downhill slide since January 24, 2007.  That also coincides with the Vista launch.  There were not the lines and mad rushes inside the computer stores compared to the Xbox 360 or compared to Windows 98 or other launches.  What makes this launch entirely different is the processing power of PC’s, which means this is a much larger investment.  Most PC’s already on the market will not actually run that well on Vista because the processors and RAM may not meet the suggested requirements for a successful Vista OS experience.

The market hasn’t closed but today would mark the 6th day in a row of a drop and it has traded lower in 9 of the last 12 days.  The volume looks lower today so we may just be seeing a buyers strike, but the selling frenzy also ‘feels’ like it is lightening up.  The volume is also starting to lighten up, which is usually a good sign for dip-buyers that want to build positions, even if it is solely for a trade.  MSFT trades on average 61+ million shares per day. We still have to see how today turns out.

8-Feb  32M @2:20PM    $29.25
7-Feb  65,145,500    $29.37
6-Feb  79,281,100    $29.51
5-Feb  99,102,100    $29.61
2-Feb  60,401,700    $30.19
1-Feb  55,355,800    $30.56
31-Jan 73,968,400    $30.86
30-Jan    61,900,400    $30.48
29-Jan    57,605,900    $30.53
26-Jan    96,103,700    $30.60
25-Jan    97,378,700    $30.45
24-Jan    58,527,800    $31.09

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 2:32 pm in Uncategorized

Cramer Talks on Lender Problems & Retail Winners

Stock Tickers: HBC, NEW, LEND, JCP, RL, JWN, FD, SKS

On today’s Wall Street Confidential video on the TheStreet.com, Jim Cramer was on discussing retailers and lenders.   HSBC (HBC) is bringing lenders down (HBC down 2.5% today).  ING came into the US softly just wanting the bank accounts but Cramer said HSBC (HBC) bought business by being a lender of last resort which is different and were willing to lose money by high interest checking to win consumer business.  New Century (NEW) expects mortgages to drop 20% as they tighten lending standards, and its shares are being hit 28% today.  That is also hurting Accredited Home Lenders (LEND) by over 7% and Cramer thinks the whole group is coming down further and he’d give it a couple days before tip-toeing in.

He also said investors want the next big name in retail and apparel.  Cramer said Federated (FD) has fixed the May Stores integration problem, and JCPenney (JCP) being down off of slightly missing same store sales estimates may be an opportunity to get into the stock.  Ralph Lauren (RL) is also one that has tremendous momentum and short sellers may get hit.  He was also briefly positive on Nordstrom’s (JWN) and Saks (SKS) on this.

Jon C. Ogg
February 8, 2007

Posted on: February 8, 2007 – 12:28 pm in Banking, Cramer, Earnings, Financial Stocks, Retail

Sirius Paid Howard Stern $302 Million

Forbes says that Sirius Satellite Radio (SIRI) paid Howard Stern $302 million in 2006. That is a good deal more than Jay Leno or David Letterman. The difference is that they make CBS (CBS) and NBC (GE) a lot of money.

There is not much point is disputing the Forbes number. It includes stock, bonuses, salary. All of it. Forbes tracks pay and net worth as well as any publication in the world.

Of course, the problem with Stern’s pay is that Sirius is not doing very well. In the last quarter, the company had revenue of $167 million and an operating loss of $154 million. The company also has well over $1 billion in debt.

Sirius missed its most rosy forecasts for year-end subscribers. The company said it will be cash-flow positive in Q4 06, but the last quarter of the year drive a big number because of the holidays. Future quarters may not be so hot, at least at the bottom line.

The biggest question about Sirius is whether the huge subscription bump that Stern brought when he came over from plain old regular radio will continue into 2007.

If not, maybe he is being overpaid.

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

Posted on: February 8, 2007 – 11:06 am in Satellite

50- and 200-Day Extremes (AMD)

From Ticker Sense

Below is our list of the S&P 500 stocks currently trading furthest above and below their 50- and 200-day moving averages.  AMD remains the most oversold.

50200day_1

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

Posted on: February 8, 2007 – 10:37 am in Research

A Crude Update

From Ticker Sense

As we noted yesterday, the $60 mark for crude is a key price level.  Unfortunately for oil bulls, the commodity was unable to break above the top of its downward channel, and it finally gave way towards the end of trading yesterday to close at $57.71.  Crude is trading slightly lower this morning as well, and it looks as if the downtrend remains intact.

Crude208

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

Posted on: February 8, 2007 – 10:35 am in Oil & Gas

24/7 Wall St. 2007 Break-Up Values: Fedex $130 (Current Price $114.20)

By Ryan Barnes. Edited By Douglas A. McIntyre

FedEx Corp. (FDX) – Price $114.20); Break-up Value $130

FedEx obviously dominates in the international air freight space, and given the high capital costs to operate here and their brand recognition, revenue has some protection on the pricing side.  The stock is currently trading at a PEG of just slightly above 1; usually a leading firm like FDX would command a premium, but a combination of economic concerns and rising fuel prices (their largest operating expense outside of employee costs) could be pointed at as culprits to the multiple compression now found in the stock. 

Another big factor is that the company has three other segments that it very much does not lead in, including ground transportation, heavy freight, and the FedEx Kinko’s stores, the latter of which has been an operational eye sore since they acquired the chain.  The retail stores could be thought of as loss-leaders for the other segments or a glorified ad budget, but our breakup analysis will focus on divesting all three non-core segments in the hopes of allowing FedEx to float to a premium valuation that is deserved based on the high barriers to entry.

FedEx Ground has very similar metrics to UPS in terms of margins and revenue growth, so we can feel safe applying a similar valuation of 1.6x sales, providing a value of just over $9 billion.  FedEx LTL Freight (less-than-truckload) has shown decent revenue growth of late, some of which is due to acquisition, but freight is a pretty commoditized business with low margins (currently less than 7%) where FDX doesn’t have the scale to effect pricing if the environment becomes unfavorable.  They also have to compete against UPS in this space, and FDX just doesn’t throw off quite enough cash flow to make this an area they can focus resources on.  Based on opaque industry levels, this segment should be able to sell for 5-6x operating earnings, or $2.8b.

They will be needing all of their “spare” cash flows to help invigorate the FedEx Kinko’s stores, which we’re actually going to let them keep in our analysis.  With current operating margins less than 2%, who else is going to want it?  With some effort and a little capital, FedEx could turn this segment around, and a little could go a long way to the bottom line.  But in truth the segment is really just a user-friendly way for customers to get express packages into the hands of the company for air shipping, and results could simply be measured against revenue growth at the core business over time. 

With the 2 divestitures, FedEx ought to be able to a) solidify their cash position, b) invest in a few more planes just to further enhance their capacity, c) pare down debt, and d)invest in the retail stores, any or all of which should help the PEG get to the 1.4 – 1.5 level worthy of a leading logistics company with a worldwide footprint and the #2 most respected brand in the world (according to Forbes magazine).  This would bring the total breakup value to $130/share, a 13% premium to share prices – and with any increased performance at the retail stores becoming grave to earnings estimates in the eyes of analysts and investors.

Ryan Barnes

Ryan Barnes has over 10 years’ experience in portfolio management and investment research, covering equities, fixed income, and derivative products. Ryan spent the past 5 years working as an institutional trader & manager for high-net worth investors, working with Merrill Lynch, Charles Schwab, Morgan Stanley, and many others.  Ryan is currently working as a writer and financial modeling consultant on hedging and capital appreciation strategies, and does not own securities in the companies being covered.

Methodology

Posted on: February 8, 2007 – 10:33 am in Mergers and Buy Outs

NBC Bashes YouTube

According to TechCruch, the new head of NBC Universal (GE) is going after YouTube (GOOG) for lacking proper filtering technology. But, YouTube is not doing it. Why?

The TechCrunch theory is that YouTube cannot afford to lose all its best content. But, maybe not. Most of the most viewed content on YouTube is actually user-created junk.

The networks and studios obviously get some benefit from YouTube views, in terms of PR. But, when full-length programming is pirated, it may cut into viewing.

What is not so obvious is whether YouTube actually has software that is sufficiently sophisticated to screen out copyrighted content.

It is odd that NBC, Viacom (VIA), and Google have all avoided showing any public proof that technology can solve the piracy problem. That would seem easy enough to do. Or not.

Douglas A. McIntyre

Posted on: February 8, 2007 – 10:11 am in Media

Analyst Double Speak On Apple (AAPL)

Goldman Sachs took Apple (AAPL) off of its prized "conviction buy list".  The reason according to MarketWatch is that the stock may be subject to "negative speculation" between now and the mid-year launch of the iPhone.

On the other hand, Goldman kept its 12-month target of $110. Which is it?

Goldman went further by saying that it preferred Hewlett-Packard (HPQ) to Apple "at this time".

So, if you have $1, where will you put it?

Not in Apple. Not based on Goldman. Now, that’s conviction.

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

Posted on: February 8, 2007 – 9:31 am in Research

Same Store Silliness (WMT)(TGT)(CC)(COST)

No one is likely to be happy with all of the same-store sales coming from the big retailers.

Wal-mart (WMT) said its sales in February would be up 1% to 2%. After a decent January, the market was probably hoping for more.

Costco (COST), the big warehouse retailer said January was up 2%. Wall Street hoped for over 3%.

Things are so bad at Circuit City (CC) that it will close a ton of stores and change its management structure. Apparently Best Buy (BBY) is beating CC like a red-headed mule.

Target (TGT) seemed to be the exception. January same store sales rose 5.1% and revenue was up 37% to $4.89 billion. Other retailers must be green with envy.

Federated (FD) also had an exceptional month with same store figures up 8.6% and revenue up 19%.

JC Penney (JCP) just matched Wall St. expectations at 3.6%.

The best performance compared to expectations may have been from Nordstrom (JWN) where same store numbers rose 11% and total sales by 42% to $610 million.

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

Posted on: February 8, 2007 – 9:22 am in Retail

McDonald’s: A Burger In Every Pot

"A chicken in every pot, a car in every garage" — Herbert Hoover

McDonald’s (MCD) global same store sales rose 4.9% in January as the huge fast food company continues its mad run. With over 30,000 stores around the world, it seem impossible that the company keeps growing.

With the current growth rate, every man, woman and child in the world is likely to be eating at McDonald’s sometime soon.

The stock has gone from below $28 in June 2005 to its current $44.75, but, why should a gain like that stop it from going higher? Maybe it will just keep tracking same store sales.

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

Posted on: February 8, 2007 – 8:20 am in Uncategorized

Level 3 Lays An Egg (LVLT)

A number of analysts thought Level 3 should trade closer to $5 than its current $6.57.

It seems that they may get their wish. The company announced earnings and EPS was below expectations, about $.04 below Reuters estimates. Guidance for the next quarter was within Wall St.’s range.

The stock is down 4% before the open, and that could just be the beginning.

Douglas A. McIntyre

Posted on: February 8, 2007 – 8:12 am in Uncategorized