Daily Archives: April 18, 2007

Cramer Has a Bank Buyout Pick; So Do We

Cramer on MAD MONEY tonight noted a stock that has upside is Downey Financial Corp. (DSL-NYSE), but Cramer said you have to review this one deeply before you go buy it.  Cramer thinks this one could be acquired since Wachovia (WB-NYSE) made an acquisition out in California.  He also said that at comparable levels this one could go for much higher.  He also noted that it has a huge short interest, which he went as far as saying was "Dendreon-like" in his calls.

This brings up one of our own BAIT SHOP calls, where we have identified companies that could be takeover bait.  Back when Wells Fargo (WFC-NYSE) announced plans to acquire Placer Sierra (PLSB-NASDAQ), we noted company in San Diego and elsewhere in California called First Community Bancorp (FCBP).  This is one we have as a candidate that could be acquired, and here is what we have said on this during this year as a follow-up as to why we think it could be acquired.  The same reasons that Cramer was looking for this was the reasoning we used to choose First Community Bancorp in California, although our choice had nothing to do with short interest plays.

In a call-in, Cramer also said he is rasing his price target on Goldman Sachs (GS-NYSE) from $250.00 to $320.00.

Jon C. Ogg
April 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 5:26 pm in Bait Shop, Banking, Cramer, Mergers and Buy Outs

Cramer Restates That Semel Should Leave Yahoo!

Tonight Cramer on CNBC’s MAD MONEY reviewed his WALL OF SHAME where he reviewed CEO’s that would make a rally if they simply left the company.  Terry Semel of Yahoo! (YHOO-NASDAQ) showed his true stripes after the stock fell 12%.  Cramer is putting him on the #1 position on the Wall of Shame for steady overpromise and underdelivery.  Cramer thinks that Semel should go.

I actually noted Semel on this list of OUR 10 CEO’s THAT NEED TO GO back in December.  Before you read that list, 4 of the 10 have gone (if you count the XM-SIRI merger) but not all of these remaining on the list are outright calls to leave. 

Jon C. Ogg
April 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 5:13 pm in Cramer

Google Earnings Preview (Q1 2007)

Google (GOOG) reports after the close tomorrow (Thursday, April 19); GOOG expectations: $3.30 EPS & R$2.495 Billion; next quarter $3.42 EPS & R$2.64 Billion.

Google Internal Metrics:  Google does not offer guidance and now the street has two major deals to content with in forward numbers.  Late last year it consumed YouTube, and now it has started the process of consuming DoubleClick.  Google is in a pact to allow radio ad placements now with Clear Channel, and they already have tested "excess line ad and classifieds" placement at papers on an ongoing basis.  There is still talk of the Google Phone, so we’ll see if the recent reports get any confirmation.  We’ll also potentially get to hear just how the Google "Office" suite of word processor and spreadsheets are doing.  Google’s Checkout is still expected to not show much in contributions yet.  TAC (Traffic Acquisition Costs) have run 31% of advertising revenues in each of the last two quarters. Last quarter it said that ‘cost of revenues’ from data centers and credit card processing grew to 10% of revenues, up from 8% in the prior quarter.  It ended last quarter with $11.2 Billion in cash, but that should drop in the cming quarters after the DoubleClick acquisition. One last key metric to look at is HEADCOUNT, as some analysts watch this for "growth expectations": it ended with 10,674 employees last quarter, up from 9,378 the quarter before.

Google held up quite well today if you look at the fact that Yahoo! (YHOO-NASDAQ) stumbled on its earnings.  Shares are also being marginally helped by eBay (EBAY-NASDAQ), even if they aren’t really related in the direct operations.

If you read into the comScore search metrics from March, you’ll see that Google hasn’t really shown any signs of loosing its dominance in online search (it actually grew market share again).  In fact, Yahoo! actually fell at the expense of everyone else.  The overall search world is still growing; it grew 6% from February and 14% from March 2006.

                                                    Feb-07       Mar-07    
Total Internet Population       100.0%       100.0%      
Google Sites                             48.1         48.3      
Yahoo! Sites                             28.1         27.5   
Microsoft Sites                          10.5         10.9   
Ask Network                               5.0          5.2   
Time Warner Network              4.9          5.0   

Jon C. Ogg
April 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 4:27 pm in Earnings, Internet

eBay Auctions Off The Skeptics

eBay (EBAY-NASDAQ) reported earnings: $0.33 EPS & R$1.77 Billion versus estimates of $0.30 & $1.72 Billion.

Guidance: Q2 $0.31 to $0.33 and EPS $1.75 to $1.80 Billion versus $0.31 & $1.75 Billion estimates; 2007 guidance was put at $1.30 to $1.34 EPS and Revenues $7.2 to $7.4 Billion versus $1.29 & $7.25 Billion estimates.

STRONG METRICS: GAAP operating margin increased to 26.5% in Q1-07, up from 23.2% in Q1-06. Non-GAAP operating margin increased to 33.6% in Q1-07, from 33.1% in Q1-06.  The company purchased approximately 10 million shares of its common stock at a total cost of approximately $333 million during the quarter (may purchase up to additional $2 Billion in shares through JAN. 2009).

Marketplaces net revenues totaled a record $1.25 billion in Q1-07, a growth rate of 23% over the $1.02 billion reported in Q1-06. The eBay platform confirmed registered user base at the end of Q1-07 totaled 233 million, representing a 21% increase over the 193 million registered users reported at the end of Q1-06.  eBay’s users generated a total of 588 million listings in Q1-07, 2% higher than the 575 million listings reported in Q1-06. These listings led to eBay GMV of $14.28 billion in Q1-07, representing a 14% year-over-year increase from the $12.50 billion reported in Q1-06.

PayPal net revenues totaled $439 million in Q1-07, a growth rate of 31% over the $335 million reported in Q1-06. PayPal had 143 million total accounts at the end of Q1-07, a 36% increase from the 105 million reported at the end of Q1-06. Those accounts helped drive record TPV of $11.36 billion in Q1-07, a 30% increase from the $8.77 billion reported in Q1-06.  PayPal Merchant Services contributed a record $4.38 billion to the $11.36 billion in global TPV in Q1-07, representing a 51% increase from the $2.91 billion reported in Q1-06.

Skype net revenues totaled $79 million in Q1-07, a growth rate of 123% over the $35 million reported in Q1-06.  Skype had 196 million registered users at the end of Q1-07, representing a 107% increase from the 95 million users at the end of Q1-06.

The company is actually seeing shares surge in after hours, up 5% at $36.25 and its shares are up from $30.07 at the close 2006.

Jon C. Ogg
April 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 3:24 pm in Earnings, Internet,

The 52-Week Low Club

The Dow closed up today, but twenty of its thirty components were down.

Georgia Gulf (GGC) Company in building and chemicals businesses. Showed loss in latest reported quarter. Shares down to $15.34. The 52-week high was $32.88.

Clearwire (CLWR) Stock chart beginning to look like Vonage (VG). WiMax company may need another $5 billion over the next five years, according to Citigroup.

Tvia (TVIA) Fabless semiconductor company still falling due to stock options problems and restatements. Falls to $.31 today from 52-week high of $3.88.

Komag (KOMG) Hard disk maker falls in sympathy with Seagate (STX) Disk drive prices off across the board. Shares hit $29.15 down from 52-week high of $47.84.

Avant Immunotherapeutics Inc (AVAN) Vaccines and therapeutics maker to cut staff 30%. Falls to $1.16 from 52-week high of $2.04.

Douglas A. McIntyre

Posted on: April 18, 2007 – 3:07 pm in HI/LOW

Motorola: Still Overpriced?

Motorola (MOT) had a bad quarter, but it does give some insight into what the company is actually worth.

The company has a market cap of $44 billion and about $8 billion in cash. The stock buy-back is taking cash down fairly fast.

The handset business is awful. The company shipped 45 million units in the quarter compared to almost 66 million in the fourth quarter of last year.

The company’s telecom equipment business is doing better. While mobile devices revenue dropped from $6.4 billion in the quarter a year ago to $5.4 billion in the just reported quarter, telecom equipment revenue rose from $2.5 billion to $3 billion.

Nortel (NT), which is a modestly close comparable to the Motorola’s equipment operation, trades for about 1x revenue. So, that business should be valued at about $12 billion.

Motorola’s set-top box business is growing quickly and has a revenue run rate of about $4 billion a year. Its operating income for the quarter was $142 million, giving it the best margin of Motorola’s three businesses. This segment of the company may well be worth $7 billion.

That leaves the handset operation with a market value of $17 billion, based on the current company market cap. With an annual revenue run-rate of about $22 billion, the operation trades for less than 1x revenue. Nokia (NOK), the No.1 handset company, trades for about 1.7x revenue at the top of its 52-week range. But, it is not losing money and hemorrhaging market share. Motorola might be lucky to get 1x revenue for it handset operation.

Based on this view of the company, it may be hard to make a case that Motorola is worth much more than $18 a share.

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

Posted on: April 18, 2007 – 2:00 pm in Earnings

Cramer on STOP TRADING (APR 18, 2007)

Stock Tickers: STX, KOMG, JCP, UTX

On today’s STOP TRADING segment on CNBC, Cramer said that Donald Trump is dead on that the Fed needs to begin cutting rates.  He has some stock evaluations for today:

As far as Seagate (STX-NYSE) down more than 5%, Cramer said he does at least have some hope because the CEO is maintaining that demand is strong for their products.  But he doesn’t think the stock has bottomed yet and thinks it should still go lower.  Since Komag (KOMG-NASDAQ) got crushed he thought it was the tell for the sector to go lower.

He is also maintaining a positive stance on JC Penney (JCP-NYSE) and gtiving the CEO the benefit of the doubt.  He thinks that stock will be at $85.00 in 3-weeks, although options this week will drive it to stay around $80.00.  He thinks this is actually a multi-year story that is not done going higher.

On United Technologies (UTX-NYSE), Cramer said that analysts were too negative and that the earnings are stronger than they noted.  He thinks it is going to $70.00 instead of the sub-$67.00 today.

Jon C. Ogg
April 18, 2007

JOn Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 1:50 pm in Cramer

Cramer Thinks Linear Tech Is Key

On today’s Wall Street Confidential video on TheStreet.com, Cramer said that he thinks Linear Technology Corp. (LLTC-NASDAQ) is the key to the chip stocks much more than Intel (INTC-NASDAQ).  LLTC shares are up more than 12% on the day.

He thinks people are misinterpeting Intel (INTC-NASDAQ) as the key for the chip sectors.  He thinks Linear Tech (LLTC-NASDAQ) is driving the chip stocks because they are raising cash to buyback one-third of the company.  These chip and equipment companies have such large cash positions that the companies all have to worry about being taken over.  All the short sellers in Applied Materials (AMAT-NASDAQ), Novellus (NVLS-NASDAQ) and KLA-Tencor (KLAC-NASDAQ) shorts have to be running for cover after this.  Cramer says IBM (IBM) is not a factor on this regardless of what they said about capital expenditures because technology is not monolithic.

Jon C. Ogg
April 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 1:38 pm in Cramer, Semiconductor, Technology Companies

Yahoo: Q1 Should Be The Trough

From Internet Outsider

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Posted on: April 18, 2007 – 12:51 pm in Earnings

Largest $ Movers of Note – StreetInsider.com – 04/18/2007

UPWARD MOVERS:
Lufkin Industries (Nasdaq: LUFK) +$5.90; Reports Q1 EPS of $1.17, versus the consensus of $1.04. Revenues came in at $148.1 million versus the consensus of $146.1 million. Sees Q2 EPS of $1.00-$1.20, versus the consensus of $1.20. Sees FY EPS of $4.60-$5.40 versus the consensus of $5.07.

The Genlyte Group (Nasdaq: GLYT) +$5.71; Reports Q1 EPS of $1.20, 11 cents better than estimates. Revenues were $394.4 million vs. $388.59 million consensus.

Overseas Shipholding Group (NYSE: OSG) +$5.11; Stock moving higher with no specific news releases.

Linear Technology (Nasdaq: LLTC) +$3.87; Reports Q3 GAAP EPS of $0.32 (Non-GAAP EPS was $0.37) vs. consensus of $0.32. Revenues were $255 million vs. $253.98 million consensus. The Company also announced its plans to enter into an accelerated stock repurchase transaction, subject to market and other conditions, pursuant to which it will repurchase approximately $3 billion of its shares of common stock.

Teekay Shipping (NYSE: TK) +$3.77; Announced that Teekay and A/S Dampskibsselskabet TORM (Nasdaq: TRMD) have entered into a definitive agreement to acquire OMI Corporation (OMI) (NYSE: OMM), a major international owner and operator of Suezmax and product tankers.

DOWNWARD MOVERS:
National Oilwell Varco (NYSE: NOV) -$3.76; Citigroup downgrades NOV from Buy to Hold.

Yahoo! (Nasdaq: YHOO) -$3.62; Reports Q1 EPS of $0.10 ($0.17 Non-GAAP) vs. consensus of $0.11. Revenues were $1.183 billion vs. $1.21 billion consensus. Sees Q2 revenues between $1.2-1.3 billion vs. $1.28 billion consensus. Sees FY revenues between $4.95-5.45 billion vs. consensus of $5.33 billion

Hancock Holding Company (Nasdaq: HBHC) -$3.30; Reports Q1 EPS of $0.58. 8 cents worse than estimates.

Intevac (Nasdaq: IVAC) -2.57; Goldman Sachs downgrades IVAC from Neutral to Sell.

IBM (NYSE: IBM) -$2.52; Reports Q1 EPS of $1.21, in-line with estimates.(1.21) Revenues were $22 billion vs. $21.86 billion consensus. Also, a number of downgrades.

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Posted on: April 18, 2007 – 12:49 pm in Research

eSpeed (ESPD) Holder WC Capital Wants Evaluation of Tullet Bid, Encourages Cantor to Make Bid

From 13D Tracker

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Posted on: April 18, 2007 – 12:48 pm in SEC

Loeb Reiterates Call for PDLI’s CEO’s Head; Says Company Should Follow MEDI to the Auction Block

From 13D Tracker

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Posted on: April 18, 2007 – 12:46 pm in SEC

APH: Amphenol Beats, But By Less Than We Would Have Thought

By William Trent, CFA of Stock Market Beat

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Posted on: April 18, 2007 – 12:44 pm in Earnings

MOT: More of the Same Expected for Motorola

By William Trent, CFA of Stock Market Beat

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Posted on: April 18, 2007 – 12:39 pm in Research

Sector Relative Strength

From Ticker Sense

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Posted on: April 18, 2007 – 12:37 pm in Research

Consensus Commodity Price Forecasts

From Ticker Sense

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Posted on: April 18, 2007 – 12:35 pm in Management Change

AGN Up 13 Days in a Row; JNS Up 11; JNJ Up 10

From Ticker Sense

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Posted on: April 18, 2007 – 12:32 pm in Research

CSX Moves Up Again – Will Pricing Power Increase Buyout Talk?

The U.S. rails are all to the upside today even as weaker-than-expected earnings were released yesterday by CSX Corp (CSX).  As of 11:30 EST, CSX is up 4.2% to $45.15, Burlington Northern (BNI) is up 1.25% to $92.81, Union Pacific (UNP) is up 3.29% to $114.08, and Norfolk Southern (NSC) is up 3.15% to $55.74

CSX reported EPS (excluding items) of $0.50 vs. expectations of $0.53; profits were down slightly year-over-year as total volumes fell 4%, but total revenue was actually up by 4%.  The reason for the discrepancy is pricing power, something the rails seem to have in spades these days.  Average prices per unit volume were up 8%, all the more impressive in the face of declining volumes.

In the company’s conference call this morning, CSX’s CEO Michael Ward said that 2nd quarter volumes are expected to be flat over 2006 levels, with expected price increases of about 6% for the remainder of the year. 

Union Pacific reports tomorrow, and Burlington reports next Tuesday; we should hear more about increasing pricing power from these two, considering the valuable West Coast intermodal network and access to Wyoming’s Powder River Basin for coal. 

We’ve seen this group post about two years’ worth of gains in just the past few months, as buyout talks and high profile investments have won out over fears about the economy.  There have been some analysts questioning whether railroads are really an attractive target, and for good reason.  High debt loads and capital requirements, and historically sensitive earnings results don’t make for conventional buyout talk. 

But if during this earnings period the rails can show they have the ability to consistently raise prices, it could be the tipping argument – especially with fuel and trucking costs heading higher by the month, and a record corn crop expected this year. 

The rails all have a definite value per mile of track, and that value should continue to rise if the rails can show pricing power in the face of macroeconomic weakness.  How much more is difficult to say, as there aren’t many sales to mark-to-market against.  We took a stab at measuring this for Burlington Northern earlier in the year, and we hope to update this calculation if buyout rumors strengthen in the coming weeks. 

Ryan Barnes

April 18, 2007

Ryan Barnes can be reached at ryanbarnes@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 11:27 am in Transports

24/7 Wall St. Starbucks Store Evaluation Tour Heads to Texas

Peter Lynch encourages investors to look at what they use and what they know for investing, and Starbucks (SBUX-NASDAQ) has become one of the largest household names out there. 24/7 Wall St. is reviewing numerous locations between the rush hours of 7:30 AM and 8:30 AM local time in numerous cities throughout the country putting the Peter Lynch methods to test and to see if the company’s growth plans will be as successful as the company hopes. 

This morning was an interesting Starbucks store evaluation because this is the dueling Starbucks’ in Houston, where the company has two stores across the street from each other at the intersection of West Gray and Shepherd in Houston, Texas in an area that is definitely more affluent.  While these are both Starbucks and while they are within about 150 feet of each other, they are quite different inside-out. 

The store at the northeast side of Gray & Shepherd (2050 W. Gray) is an in-and-out location.  This is true from the drive-thru to the inside layout of the store itself.  Visit time was 7:45 AM Central Time (4/18/07)

Overall Ratings (1 to 3, 3 being best)   Wait Time – 3, Cleanliness – 2, Bathrooms – 3, Space – 3, Personnel – 3, Inventory – 2, Ambience – 2.

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Posted on: April 18, 2007 – 11:05 am in Product Review,

Clearwire: Citigroup Isn’t As Bullish As Others

Clearwire (CLWR-NASDAQ) isn’t getting the same rosy call from Citigroup this morning after most of the analysts unsuccessfully went out with positive calls yesterday.  The analyst cites the substantial funding risks required to deploy their WiMAX technology over the coming 5 years (has been disclosed in all of the filings, as well; and it has been well-noted that the company will have to raise cash in multiple stages).  Citigroup is initiating coverage with a HOLD rating and a $23.00 target.   

The stock is down almost another 4% after the open, but based on yesterday’s call this still would represent a 29% upside from yesterday’s close.  Please keep in mind that this call, even though it is on this morning’s call, was actually posted right after yesterday’s close; so this “29% upside” is actually more than what the real call would have implied if this one went out to customers during yesterday’s trading.  Either way, Citigroup is one of the more muted coverage initiations than we saw from the rest of the pack (most analyst calls were positive yesterday).

Jon C. Ogg
April 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: April 18, 2007 – 9:12 am in Analyst Calls