Daily Archives: August 17, 2007

Is Target Still Killing Wal-Mart? (TGT, WMT)

Target Corp. (NYSE:TGT) reports earnings on Tuesday, and it traded up with the broader market today.  Shares closed up 2.3% at $61.18.  First Call is expecting EPS to be $0.80 on revenues of $14.7 Billion.  As far as the next quarter, estimates are $0.67 EPS on $15 Billion in revenues.  Wal-Mart (NYSE:WMT) already warned and with the huge wide back-to-school price cuts it instigated you just have to wonder if ‘Waldemart’ managed to burn the neighbors’ village and poisoned their well too since they are having village problems.

Target analysts are still favorable on the stock and the average stock target is $72.00 or so.  Its chart has been weak with the broad market, with the key difference being that so far is hasn’t pierced that $57 to $58 support that has been in place over and over for the last 9 months.  It appears that options traders as of today’s close are braced for an underlying stock move of nearly $3.00 in either direction.  Target has been hurting Waldemart, but the question is if the slightly more upscale customers and cleaner format stores are more cause and effect or if they are victim of the recent credit woes as well.

Wal-Mart (NYSE:WMT) managed to do the unthinkable today.  It closed down.  Granted it was only by a whole penny, but if you look up at the DJIA tape you’ll see the DJIA closed up 233 points after Bernanke & Co trimmed the discount rate.  We have been readdressing the issue that Wal-Mart may have to start rethinking the role of Lee Scott as Chief Sith Lord of the company.  It isn’t fair to blame a soft economy on him and we aren’t naive like that, but when things are able to turn for the better the retail beast needs to have a team in place that can take the stock higher.  We sure thought they were trying to be shareholder friendly after its annual meeting, but those efforts have failed and its recent earnings woes have changed the tone against much hope right now.  They also suckered a bunch of analysts into upgrading the stock.

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Posted on: August 17, 2007 – 3:57 pm in Earnings, Management Change, Retail, , , , ,

Earnings Preview For Staples in Aug. 2007 (SPLS)

Next Tuesday we have earnings from Staples, Inc. (NASDAQ:SPLS) and First Call has EPS at $0.25 and revenues at $4.3 Billion.  The following quarter is expected to have $0.41 EPS on $5.2 Billion in revenues.

Here is the hardest part to guage in Staples shares: it has been acting like a little pig.  It didn’t rally all that much with the broad market at all this year and for the most part it gave up just as much as the market in the last drop.  Shares closed down $0.02 on a strong market day at $23.25, and its 52-week trading range $22.25 to $28.00.  In fact, Staples has been dead money for most of the time since the end of 2004 to early-2005.  Options traders are only putting what looks to be a $0.70 max stock price move in either direction, although we’ll revisit this since today was expiration.

Fundamental analysts are still positive on the office supply retailer, and the average target appears to be $29.00 or higher.  If you interpolate the 2007 EPS estimate (actually fiscal JAN-2008) of $1.44, then the forward multiple of earnings is only 16.15. If you use the $1.67 EPS target for fiscal JAN-2009 then you only get an 18-month forward earnings multiple of 13.9, and that is representative of almost 16% EPS growth.  If I was trying to tell you what the tea leaves were saying I’d have to conclude that there is a huge belief that a slowing economy is going to really hit it and that its earnings aren’t going to hit target.  But our crystal ball is in the shop and I can’t say that with knowledge besides a guess. 

The thing is that Staples is a good store for office supplies.  It’s not so great at electronics and the like that would bring in more electronics buying from business people or individuals, but how often do you see people getting fired up to go there for that?  Maybe the rest of the country is becoming like me in that printing is at an all-time low and outgoing snail mail physical use of products is lower and lower. When I took this picture of the front of the store the other night in NYC, it sure looked like things were brighter than the stock.

Staples_image

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Posted on: August 17, 2007 – 3:22 pm in Earnings, ,

The 52-Week Low Club

Accuray (ARAY) Radiosurgery company has quarterly loss. Down to $12.90 from 52-week high of $31.09.

Home Solutions (HSOA) Problems with credit facility. Down to $2.85 from 52-week high of $8.24.

Tarragon (TARR) Apartment and condominium builder says it may have to close. Stock falls to $.52 from 52-week high of $13.50.

Douglas A. McIntyre

Posted on: August 17, 2007 – 3:09 pm in HI/LOW, , ,

Cramer Puzzled on EMC/VMware (EMC, VMW, TXN, GOOG, CSCO, INTC, SLB)

On today’s STOP TRADING on CNBC Jim Cramer said investors can now focus on what is cheap again and he was positive on Schlumberger (NYSE:SLB) with it to go back to $95.00.  His real picks were in technology: Texas Instruments (NYSE:TXN), Google (NASDAQ:GOOG), Intel (NASDAQ:INTC), and Cisco Systems (NASDAQ:CSCO). 

Cramer was very positive on EMC Corp. (NYSE:EMC) as one of his charitable trust positions, but oddly enough he said he is surprised that it has been been not acting too strong since it still owns most of VMware (NYSE:VMW) after the partial spin-off and IPO.  If you are a reader of the Special Situation Investing Newsletter, you aren’t surprised at all on EMC (sample on EMC/VMW now off embargo).  It looks and feels like the valuations of VMware are in the stratosphere right at the time that the emerging virtualization market is getting rapidly crowded.  The super-low free float has a lot to do with this strong performance.  There just aren’t enough shares for fund managers to have very much of on their books since EMC is hoarding 87% of the stock and almost all the votes.  We’ve seen this play book before on widely telegraphed partial spin-offs like this and VMware is really more of a tracking stock right now than they would have you believe.

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.

Posted on: August 17, 2007 – 2:29 pm in Cramer, Software, Technology Companies, , , , , , ,

Earnings Preview: Medtronic August 2007 (MDT)

Medtronic (NYSE:MDT) posts earnings after the close on Tuesday, August 21, and First Call estimates are $0.62 EPS on $3.17 Billion in revenues.  The following quarter is looking like estimates are $0.65 EPS and $3.3 Billion in revenues.

Believe it or not, the company didn’t get the down market memo.  Shares are at $52.88, and its 52-week trading range is $44.10 to $54.86.  Sinc before summer this has been nestled into a trading band of $51.00 to $54.00.  Options are hard to use with today being expiration date, but it appears options traders are bracing for a move of $1.75 or so either way.  Analysts have mostly maintained their positive ratings and the average price target is almost $59.00 for the stock.

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

Posted on: August 17, 2007 – 1:39 pm in Earnings, Medical, ,

Lowe’s, Praying For Hurricane Dean To Head North Ahead of Earnings (LOW, HD)

Lowe’s Companies (NYSE:LOW) reports earnings on Monday and First Call estimates put earnings at $0.61 EPS on revenues of $14.1 Billion.  Estimates for the following quarter are $0.47 EPS on revenues of $12.1 Billion.

Maybe this is a better retailer than its larger compatitor Home Depot (NYSE:HD), but its a super hardware store chain in a whole sector that is just very hard to get excited about.  Maybe that means that the whole goal just has to be ‘less bad’ instead of good.  The stock is trading only 5% above its year lows and the 52-week trading range for the stock is $25.98 to $35.74.  Analysts are mixed to positive on the stock, but it looks like their price targets are still above the year high.  Anything is possible, but it’s hard to imagine that happening any time soon.  Options are hard to use since today is option expiration and the next expiration is more than a month away.  So including the longer time-value, it looks like options traders are prepped for a move of up to $1.25 or $1.30 in either direction.

Home Depot (NYSE:HD) shares are in their own funk over the recent push-out of its unit sale and delayed repurchase tender terms.  With shares down this much and that industry feeling serious pain, you know that management team has to be praying that Hurricane Dean will turn and hook north in a hurry.

Jon Ogg can be reached at jonogg@247wallst.com; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: August 17, 2007 – 1:13 pm in Earnings, Hardware, Housing, , , ,

Reuters $1B IT Outsourcing Pact Names Fujitsu Instead of TIBCO (TIBX, VMW, RTRSY, TOC)

We confirmed that Reuters (NASDAQ:RTRSY) has apparently given a $1 Billion IT outsourcing pact to Fujitsu Services to launch a standardized IT platform across its global operations.  Reuters wants to save $1 Billion over the course of a 10-year pact.

According to CNET, the pact is covering Reuters’ core IT internal services, including e-mail and desktop, and consolidates a number of existing deals and will manage some outside suppliers.  We took our own peak at the announcement and it isn’t from this morning and during a weak where market malaise and volatility ruled it probably seems muted in comparison.  Oddly enough, the term virtualization is thrown in for the entire network, which has to be noise to the ears of VMware (NYSE:VMW) and the few other virtualization providers.  Fujitsu is working with several other organisations, including Dell, Satyam, Siemens and Verizon, to deliver the overall service.

TIBCO Software used to be under Reuters and it eventually was jettisoned into its own company.  That was in the 1990’s and a few years ago it looks like ties were severed.  TIBCO still lists Reuters as a top 100 client on their site and they are still active with the company, but as an ex-parent you have to wonder if it could have gone their way.

We could speculate on it, but there are too many unknowns in light of the pending Reuters merger with Thomson (NYSE:TOC) and we don’t want to create any false buzz on a deal from earlier this week.  TIBCO does still do a lot of work with Reuters and TIBCO did just over $517 million in revenues in 2006 and is expected to jump to $585 million this year.  There is always even the possibility that TIBCO could even get to pick up more crumbs from it.

Jon Ogg can be reached at jonogg@247wallst.com; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: August 17, 2007 – 12:55 pm in Software, Technology Companies, , , ,

Would EBAY Sell Skype To Comcast?

Skype is not working out very well for Ebay (ABAY). That is not just because the service has been down for two days, keeping it over 200 million subscribers off of the VoIP service. It is also because there has been very little money in it. EBAY paid $2.6 billion for Skype with potential back-end payments that could take the figure to $4.1 billion.

Who could use Skype? Comcast (CMCSA) among others.

Skype brought in $89 million last quarter, so it will be a $500 million business a year business, if it keeps growing. The operations has some paid businesses like "Skype Out" that bring in revenue, but it is still hard to see how the VoIP operation fits with EBAY.

VoIP revenue was about 6% of Comcast’s total sales of $7.7 billion last quarter. The company has 3.5 million customers, which puts it in first place among US companies. Of course, Comcast’s VoIP customers pay for their service, and most Skype subscribers don’t. And, a number of Skype subscribers are outside the US.

Does owning Skype give Comcast a tactical advantage in its fight against telecom companies like Verizon (VZ) and AT&T (T). Probably. Converting them to a paid service would be a challenge. And, Comcast might have to license the Skype platform to companies like Deutsche Telekom (DT) to get value in large countries where the VoIP service already has customers.

Skype is worth more to cable or telecom company than it is to online auction company. If it can mine the customers with paid services

Douglas A. McIntyre

Posted on: August 17, 2007 – 12:45 pm in Uncategorized, , , , ,

Whole Foods Ruling Good News For Google/DoubleClick, Sirius/XM. Really.

(WFMI)(OATS)(SIRI)(XMSR)(GOOG)

From Silicon Alley Insider

What do organic grocery stores, online ad giants, and satellite radio companies have in common? Just a bunch of regulators who decide whether to approve mega-mergers like Google’s takeover of DoubleClick, XM’s merger with Sirius, and Whole Foods’ acquisition of Wild Oats…continued here

Posted on: August 17, 2007 – 11:21 am in Uncategorized, , , , ,

IPO FILING: Concentric Medical, A Stroke Treatment Device (CLOT)

A medical device company for the treatment of strokes called Concentric Medical, Inc. has filed to come public via an IPO under the NASDAQ ticker "CLOT."  The filing is for up to $69 million in shares, although that is for filing purposes and can be changed.  Merrill Lynch and Lehman Brothers are the lead underwriters, and Thomas Weisel Partners is a co-manager.

Concentric Medical estimates that over 6,000 patients have been treated to date with its Merci sytem. During fiscal year 2006 and the first six months of 2007, it claims worldwide revenue of approximately $11.3 million and $7.8 million, respectively, and incurred net losses of approximately $6.9 million and $3.5 million, respectively.

Here is the company’s self description: We are a medical device company that designs, develops and markets products for restoring blood flow in patients who have suffered ischemic strokes, which result from blood clots in the vessels of the brain. Our Merci Retrieval System is a minimally invasive device designed to restore blood flow in the neurovasculature of ischemic stroke patients by removing blood clots in order to improve the clinical outcome of patients. In 2004, we received clearance from the U.S. Food and Drug Administration, or FDA, to market our Merci Retrieval System. Our system is the only FDA cleared device for the restoration of blood flow in ischemic stroke patients through clot removal. We have also received FDA clearance to market our device for use in the retrieval of foreign bodies misplaced during the interventional radiological procedures in the neuro, peripheral and coronary vasculature.

The number of shares of common stock that will be outstanding after this offering is based on 75,227,038 shares outstanding.  The company competes against many of the big medical device players out there and it is a licensee to The Regents of the University of California for patents and technical information relating to a blood clot retrieval device.  It states these patents expire in 2016 and also states that it could become the target of patent litigation and administrative proceedings.  It would seem that an IPO filing of this sort shouldn’t have any serious problems soming to market.  It is even possible that the company might not make it public because a predator could approach it if the valuations aren’t deemed astronomical. 

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: August 17, 2007 – 9:17 am in IPOs, Medical, , , ,

IPO Filing: Chimera, A Vulture Fund With Annaly (CIM, NLY)

Annaly Capital Management, Inc. (NYSE:NLY) announced the filing for an IPO of Chimera Investment Corporation under the NYSE tick "CIM."  Chimera is a newly-formed specialty finance company that will invest in residential mortgage loans, residential mortgage-backed securities, real estate-related securities and various other asset classes.  Does this sound like a vulture fund to you?  It should.  For filing purposes it lists up to $250 million in common stock that it will sell, although that number could easily change.

Chimera will be externally managed by Fixed Income Discount Advisory Company, or FIDAC, a wholly-owned subsidiary of Annaly, a New York Stock Exchange-listed real estate investment trust. Concurrent with this offering, Annaly will acquire 9.8% of Chimera’s outstanding shares of common stock after giving effect to the shares issued in the offering. Chimera intends to elect and qualify to be taxed as a REIT for federal income tax purposes.

Merrill Lynch & Co. will act as the sole lead manager and book-runner for the proposed offering.  Since this is a new company, there are no real financials and there is no real operating history.  It says it will focus on higher quality residential mortrgage loans, but it lists that it can look right down into asset-backed securities, commercial mortgage backed securities, and CDO’s.  This was filed ahead of the discount rate cut today, but this looks to be the first new public distressed fund filing out there.   

They arent calling it a vulture fund, but it is.  Chimera in mythology is a creature made up of multiple creatures.  And it’s a mean one.

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: August 17, 2007 – 8:56 am in Financial Stocks, IPOs, , , , , , , ,

Top Financial Gappers on Discount Rate Cut (GS, BSC, LEND, ETFC, TMA, NLY, WM, WFC, CFC, MBI, PMI)

These intra-meeting cuts like the 50-basis point discount rate cut this morning, even if this one is the discount rate rather than the funds rate, do act as stabilizers and you are seeing it in the financials directly and in most of the other sectors.  We hate to look a gift horse in the mouth, but when these rate cuts occur pre-market the actually tend to not be as good for traders as they are when the FED does this during trading hours.  Some of these gaps may hold, but it won’t be a huge shock if some of these give a little back after these huge gap ups this morning.  The fact that today is stock options expiration date may also create some different actions.  Needless to say, there is a massive amount of short covering going on and this may have staved off another horrible day in the markets after Asia opened and slid massively.

This is just a small sample of the gappers, but here goes:

Goldman Sachs (GS) +3.78 at $176.27.

Countrywide (CFC) +18% at $22.40.

Accredited Home Lenders (LEND) +15% at $7.58.

Thornburg Mortgage (TMA) +27% at $15.85.

Annaly Capital Mgmt. (NLY) +6.5% at $14.97.

Washington Mutual (WM) +9% at $38.75.

Wells Fargo (WFC) +4.8% at $37.00.

E*Trade (ETFC) +14% at $15.50.

Bear Stearns (BSC) +7.4% at $125.00.

MBIA (MBI) +6.5% at $60.00.

PMI Group (PMI) +16% at $33.00.

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he is the publisher of the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: August 17, 2007 – 8:39 am in Banking, Brokerage Firms, Financial Stocks, HI/LOW, , , , , , , , , , ,

FED Cuts Discount Rate, Futures Spike

What appears to be the beginning of another bad day for Wall St.. was turned around as the Federal Reserve cut the discount rate from 6.25% ot 5.75%. Futures are now up sharply.

In its statement, the agency said "To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility." "

"Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward."

Douglas A. McIntyre

Posted on: August 17, 2007 – 7:42 am in Uncategorized

Google To Buy Into China

Google (GOOG) plans to make several acquisitions in China over the next several quarters, according to TechCruch.

GOOG market share there trails China search engine Baidu (BIDU) by a large margin. By some measures, BIDU has as much as 60% of the market.

GOOG cannot afford to be so far behind in the world’s second largest internet market. Buying in may be the only way to solve that.

The most likely candidates would seem to be portal Sina (SINA) and Sohu (SOHU). Sohu’s market cap is just over $1 billion and SINA;s is about $2 billion.

GOOG has little to lose buy putting $5 billion into owning large internet properties in China. It would almost assure the huge search company of a large presence there.

The only question is whether the communist Chinese government would kick about it.

Douglas A. McIntyre

Posted on: August 17, 2007 – 6:37 am in Uncategorized, , , ,

Ebay Plan For Skype Falters As Service Stays Off-Line

After Ebay’s (EBAY) last earnings report, CEO Meg Whitman made it clear that the company was not getting a good return on its investment in free VoIP service Skype. EBAY is paying as much as $4.1 billion for the property.

EBAY chief financial officer Bob Swan put a point on it: “Activation levels are not where we want them to be.”

Well, making up for lost ground is hard to do when the Skype service is not even working.

It is down now, for a second day in a row.

Douglas A. McIntyre

Posted on: August 17, 2007 – 6:24 am in Uncategorized, ,

Does Hewlett-Packard PC Success Hurt Apple

Hewlett-Packard (HPQ) had a break-out quarter in its PC business. And Apple (AAPL) is hoping to take PC market share with it iMac line. The increase in AAPL computer sales is seen as critical to the company’s future.

Sales in the HPQ personal systems group (PCs) rose from $6.9 billion in the quarter a year ago to almost $9 billion. Operating income in the group more than doubled from $275 million to $519 million. It does not look like HPQ is doing much discounting to sell its PCs.

Revenue in HPQ’s critical notebook division rose from $2.8 billion to almost $4.3 billion. Demand for notebooks has been much greater that for desktops at all of the PC companies and AAPL.

DELL has not reported yet, but with HPQ’s strength in PC sales in the last quarter, it is looking tougher for AAPL to sharply increase its market shares above the 5% where it sits now.

AAPL may be making great strides in marketing Macs, but the next move up the mountain could come at a high price.

Douglas A. McIntyre

Posted on: August 17, 2007 – 5:47 am in Uncategorized, , ,

Europe Markets 8/17/2007

Markets in Europe were off slightly at 6.20 AM New York time.

The FTSE fell .2% to 5,845. Barclays (BCS) was down 1.2% to 598. Rio Tinto (RTP) was down 2.5% to 2857.

The DAXX fell .3% to 7,249. Commerzbank was up 1.8% to 29.42. Man AG was down 2.2% to 93.68.

The CAC 40 was down .3% to 5,250. AXA (AXA) was up 1.3% to 28.13. Societe Generale was up 2.8% to 117.01.

Data from Reuters

Douglas A. McIntyre

Posted on: August 17, 2007 – 5:35 am in Uncategorized, , ,

Nasdaq Gets Slapped Down Again

The NASDAQ Stock Market (NDAQ) struggle for months to buy the London Stock Exchange to expands it global reach. It got nowhere. London kept turning it away.

It looked like NDAQ finally has a winner in it move to get overseas. It came to an agreement to buy Nordic stock exchange operator OMX, and all was right with the world.

Now Borse Dubai has topped the NDAQ bid by almost 14%, offering over $4 billion.

NDAQ management is beginning to look like the gang who couldn’t shot straight. According to MarketWatch the US exchange company says that the Dubai bid is "inferior". Since when is a higher bid a bad thing?

If NDAQ ups its bid, it risks paying too much to get a strategic asset to get it a footprint in Europe.

The fumbling by NDAQ management has not been lost on Wall St. Its stock is flat over the last year while share in NYSE Euronext (NYX) are up 20%.

NDAQ has shown it can run an exchange, but its M&A record is awful.

Douglas A. McIntyre

Posted on: August 17, 2007 – 5:22 am in Uncategorized, ,

Dell Has Problems Getting Notebooks

Dell (DELL) is having problems getting enough notebooks to meet rising demand. According to the Taiwam Economic Times DELL suppliers Quanta Computer Inc. and Wistron Corp. are being asked to up their production of notebook PCs.

The UK Inquirer writes that DELL demand is far ahead of supply.

Tought for DELL to have improving quarterly number if it cannot get enough PCs to sell.

Douglas A. McIntyre

Posted on: August 17, 2007 – 5:02 am in Uncategorized,

Sun Microsystems Keeps Scrambling For Revenue

Sun Microsystems (SUNW) has come up with another new way to make revenue. It sales were flat in the last quarter, and that does not seem likely to change in the next quarter or two.

SUNW has made an arrangement with IBM (IBM) to market its Solaris operating system along with Windows, Linux, and IBM’s own OS. The Wall Street Journal quotes one expert as saying "developers have already successfully run Solaris on IBM mainframes, which he said is appealing to many customers"

SUNW needs some success. Its shares have fallen from a 52-week high of $6.78 to $4.72, near the 52-week low.

Recently, SUNW said its would begin to market its new chips to rival server companies, but Wall St. is skeptical the competitors would help the company by buying its products.

SUNW also announced that it will market its StarOffice product with Google (GOOG).

But, the core server business at Sun has to start growing again. If it does not, all of these other project won’t make a difference.

Douglas A. McIntyre

Posted on: August 17, 2007 – 4:54 am in Uncategorized, , ,