Daily Archives: September 24, 2007

Halo’s Next Generation (or Halo 4) Already Guarded (MSFT, GME, BBY)

The lines are out.  The costumes are on.  Halo 3 is on imminent release.  10 minutes for the east coast.  Halo 4, or the next version/series of Halo, is already under development.  Have I been told so? NO.  Have I been told the opposite?  YES.  Do I believe this is the end? Hell No!

Predicting sequels and predicting the outcome of a mega-hit series is pretty easy if you merely follow the money.  I have no idea of the outcome of Halo 3 beyond the reviews….. Yet.  But I can follow the money, and that is simple.  There will be more Halo "money" for Microsoft (NASDAQ:MSFT).  GameStop (NYSE:GME) and Best Buy (NYSE:BBY) will be banking on it.

I have no clue if Master Chief or the Arbiter make it out of this "last" episode alive.  I would predict the Arbiter bites the dust and takes it for the home team, and Master Chief either lives or is questionable.  But….. IT DOESN’T MATTER……. This is Sci-Fi and way out into the future.  As long as some remnant of DNA exists these soldiers can be brought back.  And even then, more powerful foes and entirely unknown foes of yet can surface.

This was supposed to be Microsoft’s foray into profitability in the entire Xbox franchise. They aren’t about to permanently kill off the ticket in the bread line.

Maybe it’s the Master Chief.  Maybe it’s the Arbiter.  Hell, Maybe they both die.  It doesn’t really matter.  Follow the money!!!!!

Regardless, "Finish The Fight" can not be finished yet.

OK, I have to go get my copy of the game.

Jon C. Ogg
September 25, 2007

Posted on: September 24, 2007 – 11:02 pm in Video Games, , , , , , , , ,

Cramer’s Weak US Consumer Play (BBY, CC, LOW)

On tonight’s MAD MONEY on CNBC, Jim Cramer said some companies fail for many reasons.  If you have to have to US consumer spending, the rate cuts might not help.  Cramer has two companies that won’t have to make excuses because of the US consumer.

Best Buy (NYSE:BBY) has left competition like Circuit City (NYSE:CC) in the dust.  The company decided to sell more electronics farther away from the U.S.  The company does not have more exposure internationally than the U.S. but ambitions will go there to be 50/50 by 2010.  Cramer slammed Circuit City, just like we did last week.  Circuit City also hit today’s 52-week lows.  Best Buy still has $2.9 Billion left for share buybacks and is expanding in the U.K. and China.  The earnings warning on Lowe’s (NYSE:LOW) is going to pull this down tomorrow.

Jon C. Ogg
September 24, 2007

Posted on: September 24, 2007 – 5:29 pm in Cramer, , , , ,

Cramer Ready For Profit Taking (AAPL, RIMM, GOOG, AMZN)

On tonight’s MAD MONEY on CNBC, Jim Cramer said he expects a correction soon from an expected 1% to 2% pullback.  He wanted to review his FOUR HORSEMEN OF TECH, and says you want to buy these on pullbacks.

The portfolio is up 31% since he created this just in May.  These companies have pricing power.  Maybe if you are a trader you can take some off the table a to lock in some gains and then nibble these back after a pullback. 

  • Apple (AAPL) has been underestimated too much, and the iMac is massive.
  • R-I-M (RIMM) is up over 70% and you should take some profits even though it is going higher to $120.00.
  • Google (GOOG) is up the least of the group but they are going to blow out the numbers; target $650.00.
  • Amazon.com (AMZN) is a winner because of high oil and energy costs, plus because of no state sales taxes; target was $100.00 but now $120.00.

If you read a brief review of his video segments this morning, this sounds a bit more cautious than he was just this morning when he made the first reviews.  Here are some other fairly recent key calls:

Jon C. Ogg
September 24, 2007

Posted on: September 24, 2007 – 5:13 pm in Cramer, , , , , ,

Lowe’s (LOW) Cuts Forecasts To The Bone

Lowe’s (LOW) management must not have wanted the Target (TGT) people to feel all alone when they cut their same-store sales forecasts.

Lowe’s chopped its earnings estimate after the market closed. The AP writes that the home-improvement company on Monday said it now projects fiscal-year earnings at the low end or slightly below its prior forecast, citing lower-than-expected sales trends.

Reuters reports that Lowe’s said it now expects profit for the year ending in February to be at the low end or below a forecast of $1.97 to $2.01 a share it gave in August.

Lowe’s shares are off 6% in after hours trading.

If the Target and Lowe’s news turns into an industry trend, it is going to be a rough Fall.

Douglas A. McIntyre

Posted on: September 24, 2007 – 4:43 pm in Retail, ,

Target (TGT) Cuts Way Back

Target’s (TGT) forecasts for September were off, way off. Instead of a 4% to 6% increase in same store sales, the big retailer is giving out a number of 1.5% to 2.0%.

According to Reuters on a recorded message, Target said it expects same-store sales to rise between 1.5 percent and 2.5 percent for the five weeks ending Oct. 6.

Douglas A. McIntyre

Posted on: September 24, 2007 – 4:38 pm in Retail,

Is Facebook Worth Half as Much As Yahoo! ?

The Wall Street Journal writes that Microsoft (MSFT) is in talks to buy 5% of social network website Facebook, putting a valuation on the whole company of $10 billion. Alley Insider makes the point that if Google (GOOG) gets involved in the bidding that the price tag for the company could go higher. Maybe it will. A price of $15 billion seems out of the question, but, in a competition between GOOG and Redmond, it could happen.

Internet Outside put together a revenue forecast for Facebook. For 2007, the analysis put revenue at $150 million, rising to $750 million in 2008 and $1.5 billion in 2009. Given the size of the Facebook audience, those numbers are plausible. Over 40 million people have set up their own "Facebook" pages. The site had 33.8 million unique visitors in the US last month.

World Microsoft or Google be paying too much? Yahoo! (YHOO) has a market cap of about $34 billion. Its revenue should hit $6.6 billion this year. Operating income should be about $750 million. Given Facebook’s size, it might not be worth $15 billion unless it shows that it can make its 2008 numbers and grow at 100% beyond that.

And, that is the key to it. Facebook is growing and Yahoo! is not. That gives an irrational aspect to its valuation.

Over at News Corp. old Rupert Murdoch must be a fairly happy fellow. He paid $560 million for MySpace, the largest social network site. A $15 billion valuation for Facebook would probably make his site worth say $25 billion. That would be more than a third of News Corp’s market cap.

Douglas A. McIntyre

Posted on: September 24, 2007 – 4:20 pm in Internet, , ,

Lennar Earnings Will Throw Out The Kitchen Sink Too (LEN, SPF, XHB)

Lennar Corp. (NYSE:LEN) is set to report earnings on Tuesday, September 25, 2007.  If you can find any great positive calls ahead of this it is only from an analyst named Pangloss. 

If the actual earnings estimates even matter, the official numbers from First Call are -$0.55 EPS and $2.39 Billion.  We already know of the continued losses, credit crunch, cancelled contracts, unapproved buyers, property option losses and even the mortgage financing tricks and incentives.  Everything is expected to look bad in the report.  It will just boil down to whether or BAD will lead to fears of insolvency and/or how long the company says it can ride the current trends.  This will be a true kitchen sink quarter, no pun intended.

Lennar has exposure to good markets and bad markets alike: Florida, Maryland, New Jersey, Virginia, Arizona, Colorado, Texas, California, Nevada, Illinois, Minnesota, New York, North Carolina, and South Carolina.

Lennar closed down at $24.18, under the prior $24.45 52-week low.  The 52-week high is $56.64.  BY a measure of market cap of common stock, Lennar is one of the top in homebuilders.  Standard Pacific (NYSE:SPF) was knocked down to 52-week lows after it said it was eliminating its dividend to pay down debt.  This also crushed the housing ETF: The SPDR S&P Homebuilders ETF (AMEX:XHB).

Jon C. Ogg
September 24, 2007

Posted on: September 24, 2007 – 3:30 pm in Earnings, Housing, , , ,

CMGI Earnings Expectations (CMGI, SFE, ICGE)

CMGI (NASDAQ:CMGI) is set to report earnings after the market close on Tuesday, September 25, 2007.  As a reminder, one of the recent quarter earnings did actually come out ahead of the market close.  So this will be one to watch on Tuesday from about 2:00 PM EST on.

This is going to boil down to the results from ModusLink, its logistics operations.  If you want to trust the one stated estimate it is $0.02 EPS on $256.6 million.  Here was what the company offered for guidance at its last conference call.

There is always a chance that Wall Street will look at the alternative energy investments, but right now it seems that the focus will be on the actual results if other companies are a decent bogey here.  We recently noted its new launch in Europe with more geographies promised.

Sometimes the obvious is all that matters, and that seems to be the case going into this earnings report.  In the past there have been many similar ties to Safeguard Scientifics (NYSE:SFE) and to Internet Capital Group (NASDAQ:ICGE), although there have been very indirect ties on news and relative price moves over the last year.

Other articles of Interest:

Shares closed down $0.03 at $1.59 today on only 5.465 million shares, and the 52-week trading range is $1.03 to $2.60.  Average trading volume is back down to well under 10 million shares, far short of when the buzz machine was surrounding this every day.

Jon C. Ogg
September 24, 2007

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

Posted on: September 24, 2007 – 3:09 pm in Earnings, , , , , ,

The 52-Week Low Club

Circuit City (CC) After announcing weak financials, can’t get off the list. Down to $8.07 from 52-week high of $29.31.

Standard Pacific (SPF) California homebuilder said it would stop paying a quarterly dividend and instead use the estimated $10 million a year to pay down debt. Drops to $6.86 from 52-week high of $30.52.

Lennar Corporation (LEN) Another housing stock. Down to $24.05 from 52-week high of $56.54.

McClatchy Newspapers (MNI) Newspaper chains continue move down. Drops to $20.01 from 52-week high of $44.95.

Nortel Networks (NT) Recent analyst report says no turnaround soon. Shares down to $15.80 from 52-week high of $31.79.

Sonus (SNUS) Drug trial fails. Drops to $.65 from 52-week high of $6.32.

Pacific Ethanol (PEIX)  Ethanol prices are down about a third over the last few months. Shares fall to $8.94 from 52-week high of $19.80.

Posted on: September 24, 2007 – 3:02 pm in HI/LOW, , , , , , ,

Is Facebook Worth More to Microsoft Than Others? (MSFT, GOOG, YHOO)

The WSJ (wsj.com) (subscription required for full access) has reported that Microsoft (NASDAQ:MSFT) may be making an investment into Facebook that would supposedly value Facebook at $10 Billion.  That doesn’t mean this is a $10 Billion buyout nor that $10 Billion is what Microsoft will pony up for the company.  Google is also reported as being interested, althogh this situation has been covered from almost every single angle out there in recent months.

But it would put a substantial valuation on this social networking site.  After the success of News Corp’s (NYSE:NWS) MySpace and after the ramp of Google’s (NASDAQ:GOOG) YouTube, everyone has catching up to do.  The space is not wide open, but it isn’t yet closed.

Jon C. Ogg
September 24, 2007

Posted on: September 24, 2007 – 1:59 pm in Internet, , , , , ,

Cramer Re-Reviews ‘New Four Horsemen Of Tech’ (AMZN, GOOG, AAPL, RIMM)

On today’s video segments of TheStreet.com, Jim Cramer was going back over his "NEW FOUR HORSEMEN OF TECH" and was still positive on all of them.  We have only included a couple comments on the last video here and some links through if you want to watch their entire video segments.  Here is their full video covering Google and Amazon.com.

  • On Google (NASDAQ:GOOG) the CFO changing may actually bring some spending down.  The stock is cheap. If you think of it like a $56 stock rather than a $560 stock it isn’t a big number.  He thinks they will also blow-out their quarter. (more comments on video)
  • Amazon.com (NASDAQ:AMZN) is not cheap right now as it is the most expensive stock in the FOUR HORSEMEN.  But the model has leverage and this is the quarter where the companies using Amazon.com’s fulfillment going into place is going to make this a monster Christmas. (more comments on video)
  • Here you can watch the full video on what Cramer said in the prior segment on Apple (NASDAQ:AAPL) and Research-in-Motion (NASDAQ:RIMM). 

Here are some top segments that Cramer is often still covering frequently:

Jon C. Ogg
September 24, 2007

Posted on: September 24, 2007 – 1:23 pm in Cramer, , , , , ,

The Business Day In Global Warming (AEP, ARSC, SPLS, AKNS, JNPR, PWER, MCEL, YGE)

We noted ourselves today how some of these ethanol stocks are trading at new 52-week lows again.  Some of these are hitting new stock lows each day.  Some Ethanol Names Drowning In Their Own Tanks (USBE, PEIX, VSE, AVR)

American Electric Power (NYSE: AEP) subsidiary Appalachian Power Co. has signed a long-term power purchase agreement for renewable wind energy with Camp Grove Wind Farm LLC, a wind project majority owned by Orion Energy Group LLC.

American Security Resources Corporation (OTCBB:ARSC) subsidiary, American Hydrogen Corporation (“AHC”), has shipped samples of its proprietary ammonia catalytic electrolyzer (ACE) to a European company specializing in catalysts for the fuel cell industry.

Read More »

Posted on: September 24, 2007 – 12:43 pm in Alternative Energy, , , , , , , , , , , , , ,

Some Ethanol Names Drowning In Their Own Tanks (USBE, PEIX, VSE, AVR)

Some of these ethanol stocks are almost becoming permanent members on the list of 52-week lows.  Some of these were major hi-flyers that went to flying under the radar to merely being hitchhikers.

Pacific Ethanol (NASDAQ:PEIX) is trading down 6% at $9.30, well under the $9.73 close.

US BioEnergy (NASDAQ:USBE) hit $9.09, under the old $9.14 lows but stock is currently just above old low.

Verasun Energy (NYSE:VSE) hit $10.95 today, under the old $11.00 low but stock has recovered almost 2%.  Shares are still down close to 3%.

The issue here is not the relative cost to oil with oil over $80.00 per barrel.  We are not alone in this assessment, obviously with these hitting 52-week lows almost more frequently than they don’t, but there are some serious questions about the validity of ethanol as a business in the manner it is being done today.  Ethanol itself is not bad, but without the government subsidy these companies might not be viable.  In fact, there are some that even argue that ethanol in a "purely on its own" model is not even worth the "pollution savings" because of the energy that has to be used to make it and to transport it.  That is even before the corrosive arguments com into play.

When these how up daily on the 52-week lows it begins to feel like they are being overly picked on.  But 2008 is an election year, and ethanol is arguably somewhat of a political issue.

Jon C. Ogg
September 24, 2007

Posted on: September 24, 2007 – 12:17 pm in Alternative Energy, , , , , ,

A Motorola (MOT) Rally

Motorola’s (MOT) shares are up almost 10% since late last month. RBS recently upgraded the shares due to a strengthening handset market and improved products, according to Barron’s. Cowen upgraded the stock last week.

Most of the improvement in the share price is based on two theories.

The first is that the overall demand for handsets is rising. But, Motorola may be getting no benefit from this, Its market share dropped from a high of 22% over a year ago to a current level of under 15%. Samsung and Sony Ericsson have taken a great deal of that business. And, Nokia’s (NOK) piece of the market is still growing, approaching 40%.

Even in a rising market, MOT’s market share may be continuing to fall.

The second line of thinking is that new models will replace the dying RAZR and help draw new customers. It may be a worthy theory, but that is all it is. Motorola has not proven that it can launch another wildly populare model.

Some analysts may be right. Motorola may have worked its way through an inventory backlog, which would be good news. But, it is not a sign of sustained recovery.

Douglas A. McIntrye

Posted on: September 24, 2007 – 12:16 pm in Consumer Electronics, ,

UAW On Strike According To CNBC

According to CNBC, the UAW has struck GM (GM) after failing to reach an agreement with the big automaker before an 11 AM dealine.

Douglas A. McIntyre

Posted on: September 24, 2007 – 10:12 am in Uncategorized

OPEC Catches Up To American Airlines

AMR (AMR), the parent of American Airlines, is off almost 12% today and trading at $21.44.

Last last week the company announced that passenger unit revenue would rise between 4% and 5% in the third quarter from a year ago. It added that fuel prices are likely to average $2.21 a gallon, lower than the $2.24 forecast in July, according to MarketWatch.

That was not enough to satisfy research firm Soleil Securities which said that the numbers pointed to higher than expected costs and lower revenue. The firm cut the price target on the airline from $33 to $24.

With oil prices likely to stay around $80, and perhaps move higher, AMR and its carrier brethren may have a long winter.

Douglas A. McIntyre

Posted on: September 24, 2007 – 10:03 am in Uncategorized,

Sonus (SNUS) Gets Slaughtered

Sonus Pharmaceuticals (SNUS) said that its drug candidate Tocosol Paclitaxel failed in a late-stage study aimed at treating breast cancer, according to AP.

The company was trashed by investors, who moved it down 85% at the open to $.65. The stock has a 52-week high of $6.32.

The company has always been a long shot. Last quarter, it lost $6.6 million on revenue of $3.3 million. But, the company had a market cap well over $200 million.

Not anymore.

Douglas A. McIntyre

Read More »

Posted on: September 24, 2007 – 8:37 am in Pharmaceuticals,

How Investors Are Looking at Halo 3 (MSFT, GME, ATVI, TTWO, BBY)

By now, everyone on earth knows of the launch of Halo 3.  Microsoft’s (NASDAQ:MSFT) Bungie Studios is launching this at Midnight tonight.  This should pretty easily surpass the $125 million in first-day sales from the predecessor Halo 2 title.  But Microsoft is too large of a stock to focus on a video game.  The good news for Microsoft is that this is the event that should help the entire Xbox venture a profitable foray for the company.

The Halo 3 retail sellers are where you have to look from the investor side, and that leaves just one pure-play: GameStop.  On August 17 GameStop (NYSE:GME) stock was at a mere $40.00-ish price with many share price closes being $39 to $41 during the market malaise.  But now shares sit at $55.28 as of Friday’s close, and are up another 1.3% pre-market Monday at $56.00.  This represents over a 30% gain, and we all know the major culprit: Halo 3.

Read More »

Posted on: September 24, 2007 – 8:21 am in Video Games, , , , , , , , , ,

Ford Sticks To Profit Forecast, Maybe

Alan Mulally of Ford (F) is sticking to his forecast that the company will be profitable in 2009. But, according to Reuters, he admits that the mortgage crisis and economic slowdown could hurt that.

"The world economy will continue to grow, but at a slower pace," he said.

Ford may simply be dreaming. While the company has made considerable cost cuts and the new UAW contract may help improve that, its market share in the US is heading well below 15%. Toyota (TM) now outsells Ford most months, and there is little reason to believe the buyers will continue to move away from Ford products.

Ford’s stock has rallied a bit over the last month. But, if September and October domestic sales figures are weak, all of that could go away.

Douglas A. McIntyre

Posted on: September 24, 2007 – 8:20 am in Autos, ,

Harman Sets Up To Battle KKR

Harman International (HAR) released fiscal 2008 guidance this AM.

It is no coincidence that the company issued them after Goldman Sachs (GS) and KKR walked on a deal to take the company private. That news hit late Friday.

Harman said it expects operating income and diluted EPS before merger related costs to equal or exceed last year’s record performance. In 2007, operating income was $397 million and diluted EPS were $4.14 adjusted for non-recurring restructuring charges, merger costs and tax items.

The company added "In light of increases in material costs and faster ramp-up of R&D resources to work on new business awards, equaling the record operating performance of fiscal 2007 is an achievement. The benefits of common platform synergy and scalability will be realized in fiscal 2009 and beyond. Those benefits will strengthen our operating profits."

Harman’s shares have dropped from almost $124 per share when the deal was announced to $85 last week when it became clear the deal was in trouble.

The market either does not like the guidance or assumes that it means a legal fight with KKR. The shares are off another nearly 8% to $78.43.

Douglas A. McIntyre

Posted on: September 24, 2007 – 8:03 am in Mergers and Buy Outs, ,