Daily Archives: September 20, 2007

September Short Interest Decreases At NYSE & AMEX (NYX, NDAQ)

The short interest data for the NYSE Euronext (NYSE:NYX) and the American Stock Exchange are both out and they are both showing something we haven’t seen for some time:  short interest declined, if you can believe it.  For months this was a growing number as the market was rising. 

The NYSE Group showed short interest on the September 14 settlement date listed as 11,841,051,529 shares, down from 12,466,511,521 as of August 15, 2007.  This is the first drop from when January 2007 short interest of 9.68 Billion shares fell to 9.595 Billion shares in February 2007.

Over at the AMEX, there was also a drop in the total short interest.  August 15, 2007 showed 1,194,902,117 shares in the total short interest, yet today’s numbers shows 1,032,872,816 shares as of the September 14, 2007 settlement date.  The last drop seen on AMEX short interest was listed when the 877,477,463 shares short in March 2007 fell to 865,833,907 in April 2007.

It appears that maybe short sellers figured it out this time and decided that being short stocks going into a rate cutting cycle wasn’t a good play.  The short interest report for NASDAQ (NASDAQ:NDAQ) will not be out until next week, so stay tuned.  Throughout the night or tomorrow we’ll have some individual short interest data.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 6:20 pm in Exchange News, Short Interest, , , , ,

3COM Seemed Good, But… (COMS)

3Com Corp. (NASDAQ:COMS) posted a net loss of $18.7 million, or -$0.05 EPS, but on a non-GAAP basis outside of restructuring costs it made $12.2 million, or $0.03 EPS.  Analysts were expectingg $0.02.  Revenue rose to $319.4 million, above the $300.1 million a year ago and slightly above analyst estimates of $318.3 million.

Shares closed up almost 4% today at $3.74.  We didn’t get to listen to this conference call, but shares are giving back the gains in after-hours with shares down close to 5% at $3.57.  The 52-week trading range is $3.24 to $5.24.  Since we didn’t get to hear what the sell-of was about we won’t speculate as this is a small company now.  But here are some points investors should consider:

If we get a chance, we’ll look further into this one later.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 6:15 pm in Earnings, Technology Companies, , ,

Will Saber Rattling Kill NASDAQ/OMX/LSE/Dubai Deal? (NDAQ, NYX, C)

The NASDAQ Stock Market (NASDAQ:NDAQ) has been in a long hunt over how it plans to grow and compete in a new world of mega-exchanges, and frankly its second place status in the U.S. for stocks is one that it would acknowledge is far from that of the NYSE Euronext (NYSE:NYX).  It was unsuccessful in its buyout of the London Stock Exchange.  Then it focused on the Nordic OMX, only to get a rival bid over OMX from Borse Dubai.  The NASDAQ finally reached a deal that can be secured, but the much needed help that arrived may have been slapped in the face by observers.

The NASDAQ yesterday reached a mutual deal with Borse Dubai that will allow it to gain control of the OMX.  In exchange, NASDAQ is giving up most of its holding (appears to be a 28% stake of 31.5%) in the London Stock Exchange.  But NASDAQ is also kicking in a 20% stake of its own stock.  The NASDAQ purchase price would be equivalent to about $41.00 per per share, and it appears this is for only a 5% voting stake with an ‘independent trustee’ holding the rest. NASDAQ will also get a stake in Borse Dubai, but we are going to stop there. because this is starting to sound like a monopoly game where the second and third tier players gang up on the likely winner. 

Read More »

Posted on: September 20, 2007 – 5:55 pm in Exchange News, Financial Stocks, Regulation, , , , , , , , ,

Cramer: Buy Yum! On Any Pullback (YUM)

Cramer on CNBC’s Mad Money also came out in favor of YUM! Brands (NYSE:YUM) tonight.  He said it is one you buy every time it pulls back.  The growth from China is huge, and the company serves up the right menu at the right price.  Cramer is a fan of all Taco Bell, KFC, and Pizza Hut.

David Novak, Chairman & CEO, came on for a quick interview.  He was bullish of course, but not unrealistically.  He said the company does have to deal with food inflation.  The major factor for the company is its international growth as it is opening a store per day in China.

Here are some more tid-bits investors should consider:

YUM! closed down 0.6% today at $34.03, but its adjusted year high after a split is $35.05 and the low is $25.85.  Its market cap is now just under $18 Billion.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 5:35 pm in Cramer, Food, , , , ,

Cramer Back On The Goldman Sachs Wagon (GS, BSC)

On tonight’s MAD MONEY on CNBC, Jim Cramer wanted to review how all brokerage firms aren’t cut from the same cloth.  The broker to own is the one Cramer always touts as the best, and that is Goldman Sachs (NYSE:GS).  After this last quarter reports from brokers this week from the brokerage firms, he thinks it is quite clear that Goldman Sachs is the winner.

With a 50/50 rate cut Cramer thinks it is time for brokers and time for Goldman Sachs with $6.13 versus $4.35 estimates.  They even were short mortgages and made money.  Cramer still thinks this is worth $300.00 this time next year and is the best one to own.

As far as Goldman Sachs here are some other pertinent tid-bits to contemplate:
They were a TOP PICK FOR 2007 by Cramer
Even with an "Alpha Fund" hit in the news, they won
The bets were on them ahead of the report
The stocks acted weird, but the report was better than Bear Stearns (NYSE:BSC)
Who else can call $135/barrel in oil and get away with it in a "Super-Spike" possibility?

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 5:19 pm in Brokerage Firms, Cramer, , , , ,

Nortel (NT): Alcatel-Lucent (ALU) Hangover Gets Worse

Barron’s writes that RBC Capital is not looking for a turnaround at Nortel (NOT) anytime soon. The research firm’s opionion–“Investors continue to remains frustrated at Nortel’s pace of improvement and the company has yet to display meaningful reversals in market share loss in its numerous key segments such as GSM and optical, and recent weakness in Metro Ethernet.”

Nortel shares had been under pressure before, but when rival Alcatel-Lucent (ALU) disclosed that it would not meet its financial forecasts, the entire telecom equipment industry came under scrutiny by Wall St. Over the last three month, both stocks are down over 30%.

Alcatel-Lucent (ALU)

If Nortel and Alcatel-Lucent are both losing market share, where is it going?

Good question.

Douglas A. McIntyre

Posted on: September 20, 2007 – 4:12 pm in Analyst Calls, ,

Apple’s Steve Jobs Subpoena: More Serious Than Sounds

From Silicon Alley Insider

WSJ et al reports that Steve Jobs has been subpoenaed to testify in a civil stock-option backdating case the SEC has brought against Apple’s (AAPL) former general counsel Nancy Heinen.  Jobs’ lawyers will no doubt brush this news aside as immaterial, but it’s a dangerous situation for him (and, thereby, Apple shareholders).  continued…

Posted on: September 20, 2007 – 3:55 pm in Uncategorized

Oracle Hits Recent Highs, But Guidance Still Pending (ORCL)

Oracle Corp. (NASDAQ:ORCL) posted earnings that Wall Street will have to wait for guidance before reaching a verdict.  Ellison & Co.’s first-quarter profit grew to roughly $840 million, roughly 25% growth compared to Q1 2007.  Oracle’s non-GAAP EPS came in at $0.22 EPS and its GAAP EPS was $0.16 EPS, and estimates were $0.21 on a non-GAAP basis.  Revenue rose to $4.53 billion (from $3.59 billion last year) and estimates were closer to $4.34 billion in revenue.

Oracle shares are up about 1.5% after-hours trading at $21.35, but unfortunately this is still essentially an "Open Item" until the forward guidance is issued.  The key is that the $21.13 was the 52-week and more than 5-year high, so anyone that bought shares over the last 5 years up to today’s close should be in-the-money.

Tomorrow is also options expiration date.  Here was the full earnings preview for comparisons. So far its acquisition path seems to be working.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 3:27 pm in Earnings, Software, , ,

The 52-Week Low Club

Circuit City (CC) Poor earnings and almost certainly more to come. Down to $8.46 from 52-week high of $29.31.

Enterra Energy (ENT) Still falling after cutting dividend. Drops to $1.33 from 52-week high of $10.30.

Time Warner Cable (TWC) Cable companies under pressure because of competition from big telecommunications companies. Down to $31.96 from 52-week high of $44.

Korn Ferry (KFY) Head hunting business must be particularly rough. Drops to $16.68 from 52-week high of $27.13.

ACI Worldwide (ACIW) Providesr of software for electronic payment systems cuts guidance. Falls to $20.65 from 52-week high of $38.72.

Douglas A. McIntyre

Posted on: September 20, 2007 – 3:06 pm in HI/LOW, , , , ,

Almost 100% IPO Gainer (ATHN)

How long has it been that we saw a fairly small cap IPO more than double on the opening day?  Don’t count the greatest virtualization play out there, because last month it instantly became a large cap stock.

This morning’s IPO, athenahealth, Inc. (NASDAQ:ATHN), came public and shares have roughly doubled today.  The price range was $14.00 to $16.00, but the demand for the deal was a premium and it priced 6.286 million shares at $18.00.  With 10-minutes to the close this was up 90% at $35.60 on more than 8.7 million shares.

This may be the sort of thing the IPO markets have been waiting for, particularly as we have hardly had any real IPO’s over the last month or so.  Here was our brief preview.  After a little ‘lulu’ IPO maybe these companies with all lower case letters in the name are the big trend………

If you are interested in other upcoming IPO’s:
RiskMetrics Group filed for its IPO last night.
MAKO Surgical may be a good fix for the knees.
Turner Investments has filed as an asset manager.
EXCO’s XP is coming out as an oil and gas MLP, great dividend.
Pogo Jet is flying out on its way too, former AMR head runs it.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 2:59 pm in IPOs, , ,

Charter (CHTR): Bad News For Cable Catches Up

Recent comments from Comcast (CMCSA)t about the emerging strength of high speed fiber products being sold by Verizon (VZ) and AT&T (T) has pushed the shares of the largest US cable company down. According to Barron’s the market may "have concerns about loss of basic cable subscribers, and some worries about a more aggressive challenge from the Bells on broadband." So, a battle has broken out among research firms who cover Comcast about whether the stock is cheap. Can the telecoms take a lot of the cable broadband and video customers or not?

One cable company that is almost certainly going to suffer a great deal more than Comcast is Charter (CHTR). The company’s huge debt load gives it very little capital to upgrade its own systems to keep the telecom and satellite TV companies at bay. It balance sheet weakness make it unusually vulnerable against an operation like AT&T which has almost endless access to cable, and can bundle cellular service with cable, home phone, and broadband offerings.

Concerns about Charter show in the stock. It is off 6% to $2.68. And, if numbers show that Verizon and AT&T are picking up hundreds of thousands of new broadband customers per quarter, that price is likely to drop a great deal more.

Charter’s operating income in the last quarter was $200 million. But, the company has well over $19  billion in debt. That does not leave much to dry powder.

Douglas A. McIntyre

Posted on: September 20, 2007 – 1:59 pm in Cable Companies, , , ,

Oracle: Almost Multi-Year Highs Into Earnings (ORCL)

Shortly after today’s close we will see earnings from the king of enterprise-wide software leader Oracle Corp. (NASDAQ:ORCL).  This will be one of the key results to watch, and with shares over $20.00 its market cap is over the $100 Billion mark.

Ellison & Co. are expected to have the following results, according to First Call:
AUG-07 Qtr. $0.21 EPS & $4.34 Billion revenues
NOV-07 Qtr. $0.26 EPS & $4.88 Billion revenues
MAY-08 FY   $1.18 EPS & $20.9 Billion revenues.
MAY-09 FY   $1.34 EPS & $23.05 Billion revenues 

Options expire tomorrow and now that the strike prices are in $2.50 increments these are difficult to peg for any real expectations.  September Put & Call options expire for stocks tomorrow as well.  There are over 100,000 contracts listed in the open interest for the closest September call strikes alone, and that represents 10 million shares on a leveraged basis.

The Wall Street analysts with recent calls are still positive now that Oracle has acquired most smaller players in the sector.  It looks like the average price target is just above $23.00.  At $21.00, this trades at 17.8-times Fiscal May 2008 projected earnings and trades at 15.7-times Fiscal May 2009 earnings.  With a $107 Billion market cap this also trades at  5.1-times current year revenue estimates and 4.65-times fiscal 2009 (May) revenues.

The chart on Oracle has actually held up quite well and you might not even know the market was in trouble just 30 to 45 days ago if you looked at Oracle alone. 

It will be interesting to hear tonight how Larry Ellison C& Co. will discuss the impact of virtualization, since this is the next ‘next thing.’

With this one up almost 1% today at $21.00 and the multi-year high being $21.13, this one is going to be tough to call ahead of time.  If this gaps up much at all in after-hours trading and/or tomorrow, literally any holder who has purchased the stock since 2001 to 2002 will be profitable.

Here is our preview from the prior quarter for comparison.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 1:54 pm in Earnings, Software, , , , ,

Motorola (MOT) And Nokia (NOK): A Mobile Phone Shortage

Barron’s is reporting that Cowen says there will be a shortage of mobile handsets in the US “the millions of units.” The research firm indicates that this is good news for Motorola (MOT) and Nokia (NOK).

The would be a simple way to look at it. The analysis raises the question of which models are being sold out and which are not. Samsung and Sony Ericsson also have significant US handset market share as well.

But, the market appears to buy Cowen’s theory. MOT is up 2.7% today to $17.80. NOK is up 1.4% and hit a 52-week high at $37.13.

Maybe Motorola will get lucky and demand will start to pull its sales out of the mud.

Douglas A. McIntyre

Posted on: September 20, 2007 – 9:45 am in Wireless, ,

Circuit City, Wishing They Could Go Back In Time (CC, BBY)

Circuit City Stores, Inc. (NYSE:CC) is feeling the wrath of the trading gods today.  At $9.05 it’s also putting in a new 52-week low under the prior $9.43 low, and this is actually a lowest price since the end of 2003 or start of 2004. 

The company lost $62.8 million in the quarter, or -$0.38 EPS.  That was under the $0.06 reported last year.  Revenues were also down 6% to $2.64 Billion, and same-store-sales fell about 8%.  First Call had estimates at -$0.12 EPS and $2.78 Billion in revenues.

This was one we added to a "watch list" for a Bait Shop (buyout candidate) at the end of 2006 when cracks really started taking hold in the stock around $19.50 (new year low at that time too), and we revisited the "watch list" status again in April.  We were trying to see if there was going to be an implied floor since private equity was still on a buying binge, but we couldn’t get past the Circuit City woes.  But because of how the company killed its own business model we couldn’t find any reason whatsoever to be positive on this.  We still can’t.  In fact, Circuit City might even need to move its "Goodwill" from the asset side of its books to a new "ill-will" under the liabilities side of the books.

The problem is that Circuit City wrecked what was already somewhat a flawed or at least a tier-2 model.  This has never been a cool shopping spot, at least not in recent years, and it hasn’t had the buzz of a Best Buy (NYSE:BBY) store in longer than memory serves.  Go inside the stores back to back for a comparison and you’ll understand.  But then the company killed its only advantage: it fired its more tech-savvy floor workers to go for the cheaper per-hour flat rate worker.  Management thought salespeople were just numbers.  This will end up being a good university business school case study in the future about what not to do when you aren’t number one. 

Why it had the open and simple return policy for its flat screen LCD and Plasma TV’s is anyone’s guess, but it was another poor move.  Could you imagine car dealers taking a perfectly fine car back a couple months after they sold it?

If you will recall the company received a private equity bid at $17.00 per share in cash from Highfields Capital Management LP back on February 11, 2005.  That was back before private equity firms started buying companies as though they were playing a tycoon board game where everything down to the corner deli and the laundromat was deemed as attractive.  Circuit City ultimately rejected the bid as inadequate.

Even if Highfields or another private equity group were to get interested again, they’d be dealing with a poor business model compared to early 2005.  This company has gone from decent, to marginal, to bad, to a disaster.  A classic private equity firm wouldn’t be interested.  Now it would be a complete and total turnaround or bailout firm, and they’d be fighting a major battle from the lower ground.

We still review this from time to time to see if we can make the justification that someone would be interested in turning this around.  We haven’t changed our name to Dr. Pangloss yet.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 9:12 am in Uncategorized, , , , ,

IPO Premium Pricing: athenahealth (ATHN)

athenahealth Inc. (NASDAQ:ATHN) has priced its IPO at $18.00, which is above the $14.00 to $16.00 proposed range.  The IPO of 6.286 million shares has 5 million shares being sold by the company and the balance being sold by shareholders. 

The selling stockholders have granted the underwriters a 30-day option to purchase up to an additional 943,023 shares at the initial public offering price.  Goldman Sachs and Merrill Lynch were the joint book-runners, and Piper Jaffray and Jefferies are the listed co-managers.

athenahealth in short is a web-based doctor and medical practice revenue cycle management solution.  In other words, it aims to increase collections, receive payments faster, and gain visibility into claims.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 8:13 am in Uncategorized, ,

As Talk Of Union-Run Pension Fails GM Strike More Likely

According to several media reports, the UAW has walked away from a GM (GM) proposal to put money into a health care fund covering employees and managed by the union. GM wanted the deal to get the liability off of its balance sheet, but the UAW wanted too rich a deal for the amount that it would receive.

The talks now move to other issues, but GM had a tremendous stake in off-loading the liability. It will likely bargain harder for cuts its pension and labor costs. There is even suggestion that GM would begin to move its manufacturing jobs out of the US, something the union cannot abide.

With GM likely upset that it is not getting what it wants and with a need to push for concessions to get its North American operations profitable, it is much more likely that the union will see its role diminishing and call a strike.

Douglas A. McIntyre

Posted on: September 20, 2007 – 7:59 am in Autos,

Goldman Sachs Shows Bear Stearns Who Daddy Is (GS, BSC)

Last night we put out an alert where traders were clearly making a bet that Goldman Sachs (NYSE:GS) was going to be an earnings winner compared to its smaller and more troubled Bear Stearns (NYSE:BSC).  This morning that looks to be the case and then some. 

Goldman Sachs reported earnings at $6.13, but that looks to have items, and it had gains from being short mortgages and posted major loan losses like other brokerages.  Shares are up another 2% pre-market back over $210.00 after rising each day.

Bear Stearns isn’t feeling the same brotherly love this morning.  Its shares are down 1.6% pre-market at $113.75 after reporting $1.16 EPS.  This was perhaps the most leveraged to mortgages and CDO’s.

Here was what we noted yesterday that showed the performance of all major brokerages into today’s earnings and after the FOMC 50/50 rate cut.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 7:57 am in Brokerage Firms, Earnings, , , , ,

Pre-Market Stock News (September 20, 2007)

(ATHN) Athenahealth IPO priced at $18, above the $14 to $16 range.
(BCRX) BioCryst Pharma shares down over 30% after flu studies failed to show significant improvements.
(BRLC) Syntax-Brillian announced it has already named a CFO replacement.
(BSC) Bear Stearns reporting earnings.
(CAG) ConAgra $0.34 EPS vs $0.29 est.
(CBRL) CBRL group boosted dividend and approved 1 million shares for a buyback plan.
(COT) Cott lowered guidance.
(CRA) Celera announced a $33 million acquisition of Atria Genetics.
(FDX) FedEx $1.58 EPS vs $1.54 est.; sees next quarter $1.60 to $1.75 vs. $1.97 est.; Sees fiscal year $6.70 to $7.10 vs. $7.19 estimate (4% lower).
(GS) Goldman Sachs trading up over 1% after earnings posted at $6.13 (on items);noted gain in mortgage shorts, but major loan losses.
(IMCL) ImClone Systems announced that National Cancer Institute has selected 10 of its proposals for Phase I/II trials of its monoclonal antibody.
(ISIS) ISIS Pharma announces $4.2 million in Government contracts awarded for biodefense applications development.
(LKQX) LKQ announced its 12 million share secondary offering priced at $31.00 per share.
(MHGC) Morgans Hotel Group announced the resignation of its CEO.
(MNRO) Monroe Muffler lowered guidance.
(NDAQ) NASDAQ acquired OMX; selling 28% LSE stake to Borse Dubai..
(NTCT) NetScout slightly raised guidance.
(PIR) Pier 1 Imports -$0.49 EPS vs -$0.44 est.
(PKE) Park Electrochem $0.42 EPS vs $0.29 est.
(PRGS) Progress Software $0.44 EPS vs $0.44 est.; guides next quarter $0.51 to $0.53 vs $0.52 estimate.
(SCHL) Scholastic Corp. -$0.07 vs -$0.47 estimate; unsure if comparable.
(SLM) SLM purchase is in jeopardy according to New York Times; like that wasn’t known.
(SNE) Sony delayed virtual world service ‘Home" for PS3.
(T) AT&T is Cramer’s growth and dividend stock he liked last night and interviewed the CFO.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 7:17 am in Pre-Market Activity

Pre-Market Analyst Calls (September 20, 2007)

AKAM cut to Sell at Kaufman.
AUDC raised to Buy at Cantor Fitzgerald.
AVR cut to Underperform at FBR.
BPL raised to Buy at Deutsche Bank.
BGH cut to Hold at Deutsche Bank.
CKEC started as Overweight at JPMorgan.
CLC cut to Peer Perform at Bear Stearns.
CNK started as Overweight at JPMorgan.
FARO cut to Neutral at Baird.
GIS raised to Outperform at Credit Suisse.
GLUU started as Buy at Cantor Fitzgerald.
GLW started as Buy at Deutsche Bank.
IOM started as Buy at Cantor Fitzgerald.
JCOM cut to Mkt Perform at FBR.
KIM started as Outperform at Credit Suisse.
KYPH cut to Neutral at B of A.
LYV started as Overweight at JPMorgan.
NAPS started as Buy at Cantor Fitzgerald.
OMTR cut to Mkt Perform at JMP Securities.
PEIX cut to Underperform at FBR.
RGC started as Neutral at JPMorgan.
SHOR started as Overweight at JPMorgan.
VSE cut to Mkt Perform at FBR.
WYNN cut to Hold at Jefferies.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 7:09 am in Analyst Calls, , , , , , , , , , , , , ,

Ethanol Stocks Get Another Downgrade (AVR, PEIX, VSE)

If you have been following our posts for 52-week lows at the end of the day, one of the groups that keeps having some of its components hitting this list is the ETHANOL Stocks.  With oil over $80.00 it will make you wonder.  This morning FBR Capital Markets, of Friedman, Billings, Ramsey has downgraded some of the ethanol stocks today:

Aventine Renewable Energy (NYSE:AVR) was cut to Underperform. Closed at $11.68; 52-week range $10.61 to $26.49.
Pacific Ethanol (NASDAQ:PEIX) was cut to Underperform. Closed at $11.17; 52-week range $10.29 to $19.80.
Verasun Energy (NYSE:VSE) was cut to Mkt Perform. Closed at $12.02; 52-week range $11.00 to $26.90.

This follows another sector downgrade from Soleil just on Monday September 17.  We have maintained that Ethanol in the manner the current system is set up is not all that economical and not as green on a net-net basis as it is intended to be, and this business got more crowded than it might have because of government subsidies.  This is also a political issue and 2008 may be another volatile year for ethanol.

Jon C. Ogg
September 20, 2007

Posted on: September 20, 2007 – 6:54 am in Alternative Energy, Analyst Calls, , , , , , , ,