Daily Archives: October 22, 2007

Cramer’s Cheap Expensive Stocks (GOOG, ISRG, BIDU)

On tonight’s MAD MONEY on CNBC, Jim Cramer was touting growth stocks he deems cheap, even though the prices sound high.

Google (NASDAQ:GOOG) is Cramer’s first cheap growth stock.  With 34% long-term growth, and some fund managers paying 50-times earnings for that growth rate, his assumption to get to $750 is only 37-times 2008 and he thinks it is cheap and headed higher.  Cramer thought he’d have seen $675 if the market wasn’t so bad Friday.  It’s also a window dressing stock, similar to the list we recently gave.  We also gave our recent  "How long until $1,000" question in relation to higher and higher analyst targets.

His second stock that is still cheap is Intuitive Surgical (NASDAQ:ISRG) even at $285 per share.  We noted "Bionic Man Earnings" on this one last week. The stock held up on Friday and the momentum investors think it may be over, but they are wrong.  He loves the robotic surgery da Vinci device that allows for open heart procedures to be done with micro-incisions and that shortens hospital stays drastically.  He also likes the 40% recurring sales after the da Vinci system sales are made for disposable parts and only 17 systems sold overseas last quarter.  If you use forward earnings estimates its PEG ratio is about 1.5, and that is cheap for the growth here according to Cramer.

On a call-in, Cramer said that despite the multiples, Baidu.com (NASDAQ:BIDU) shares are heading higher.  You’ll have to chase that one on your own.  The Alibaba IPO may draw more attention to the Chinese web space, but we noted previous lessons from the dot.com bubble here previously and noted how the stock was fighting to hold $300 recently.  This company will have to do much more than just beat its forward earnings.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 5:41 pm in Cramer, , , , , , ,

Ultra Clean (UCTT)… Not Really

Ultra Clean Holdings, Inc. (NASDAQ:UCTT) is getting to find out tonight that in-line guidance at the lower end doesn’t cut it.  Its press release says "Ultra Clean Technology Reports Third Quarter Revenue and Earnings in Line With Guidance" but the shares are getting a wrestling smack down in after-hours trading.

Revenue for the third quarter of 2007 totaled $95.5 million (compared to $104.7 million in the second quarter ended June 29, 2007, a decrease of 8.8% from the June quarter and an 8.2% decrease year over year). The company recorded net income of $3.5 million, or $0.16 EPS (down from $0.23 the prior quarter and down from $0.25 year over year. Gross margin for the third quarter of 2007 was 14.0% (compared to 15.1% the prior quarter and 14.8% for the same period a year ago).

First Call had revenue expectations at $99.5 million and EPS targeted at $0.20.  Shares closed down close to 2% today, but shares in after-hours are trading down another 12% at $13.51 in after-hours trading.  Its 52-week trading range is $11.20 to $19.99.  You can keep reading if you choose, but it just gets worse ahead.

Read More »

Posted on: October 22, 2007 – 5:05 pm in Earnings, Earnings Warning, Semiconductor, ,

The 52-Week Low Club

Noah Education (NED) New China IPO, gets pulled down by drop in region’s stocks. Drops to $16.50 from recent high of $23.70.

Moneygram (MGI) Fitch cuts rating. Falls to $17.67 from 52-week high of $35.18.

MGIC Investment (MTG) Analyst puts "underweight" rating on mortgage lender. Down to $20.09 from 52-week high of $70.10.

Angiotech Pharmaceuticals (ANPI) Cuts guidance and get downgrade. Down to $4.18 from 52-week high of $9.67.

Douglas A. McIntyre

Posted on: October 22, 2007 – 4:41 pm in HI/LOW, , , ,

Target Sales Update, Slightly Off Target (TGT)

Target Corp. (NYSE:TGT) is slightly lowering its comparable sales targets for October, no pun intended.  The company previously forecast a 3% to 5% gain for October sales, but now it said in its dial-up conference call recording that it sees sales coming in at a range of 2% to 4%.  The blame: "Greater than normal daily volatility and continued diappointing sales results…."

On September 11 it reported comparable sales of 1.2% gains for September and it said it believed that full year guidance would come in under $3.60 on an EPS basis.  Shares closed up 1.28% today, but shares are down 0.25% at $61.40 in after hours trading after initially indicating down almost 1%. 

It seems that Wall Street isn’t punishing slightly lower numbers from retailers as long as the numbers aren’t atrocious.  What is obvious is that many are still betting that Joe Q. Consumer won’t be quite as dead as the public always worries about.

Here was what 24/7 Wall St. thinks about Barron’s commentary on Sears Holdings (NASDAQ:SHLD) this weekend, and how we think it ties into Target Corp.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 4:27 pm in Retail, ,

Texas Instruments, Messy (TXN)

Texas Instruments Inc. (NYSE:TXN) has posted its earnings at $0.52 EPS on revenues of $3.66 Billion; First Call had estimates pegged at $0.50 EPS and $3.66 Billion in revenues.  Unfortunately, the results included a gain of $0.02 from the sale of the company’s semiconductor product line for broadband DSL customer-premises equipment that was included in the company’s most recent business outlook issued September 11, 2007.  So this looks right in-line with the month-ago levels indicated.  Guidance is also tame: EPS guidance is $0.48 to $0.54 and Revenue guidance was put at $3.4 to $3.68 Billion for the next quarter, and First Call has estimates of $0.50 and $3.71 Billion.  That number might not generate much excitement, at best.

The company did live up to that monster stock buyback plan.  Rich Templeton, president and CEO stated, "Our growth allows us to continue to increase our return to shareholders. In the third quarter, we repurchased $1.4 billion of our stock. In September, our Board authorized an additional $5 billion in repurchases, and we announced a 25 percent increase in the dividend."

TI orders were $3.55 billion. This was an increase of $103 million from the prior quarter as higher demand for semiconductor products more than offset a seasonal decline in orders for graphing calculator products. Orders were up $125 million from the year-ago quarter due to higher demand for semiconductor products.

Cash flow from operations was $1.53 billion. Total cash and equivalents was $3.67 billion at the end of the third quarter.   The total buyback was 41.41 Billion in the quarter for 40 million shares of stock.  Since the end of the year-ago quarter, the company has used $4.14 billion to repurchase 127 million shares of common stock and paid $346 million in dividends.  Accounts receivable were $2.02 billion at the end of the quarter; and days sales outstanding were 50 at the end of the third quarter, unchanged from the end of the prior quarter and the year-ago quarter.

Inventory was $1.45 billion at the end of the third quarter. This was an increase of $26 million from the prior quarter. Compared with a year ago, inventory decreased $41 million. Days of inventory at the end of the third quarter were 78, unchanged from the end of the prior quarter and up from 73 a year ago.

Shares closed up 1% at $34.27 on the day but shares are down almost 3% in after-hours at $33.25.  The 52-week trading range is $28.24 to $39.63.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 3:57 pm in Earnings, Semiconductor, ,

Apple’s Sweet Core

Apple Inc. (NASDAQ:AAPL) posted earnings of $1.01 EPS on revenues of $6.22 Billion; Wall Street was expecting $0.86 EPS and $6.07 Billion in revenues. 

The company’s guidance is always deemed overly conservative, but they expect revenue of about $9.2 billion and earnings per diluted share of about $1.42. The estimates for next quarter are $1.39 EPS and $8.6 Billion in revenues, so this guidance is above when the company usually guides softer.  Gross margin was 33.6 percent, up from 29.2 percent in the year-ago quarter. International sales accounted for 40 percent of the quarter’s revenue.

The product numbers are stellar:

  • 10.2 million iPods sold
  • 1.119 million iPhones, above plan.
  • 2.164 million Macs sold.

Apple ended the fiscal year with $15.4 billion in cash and no debt.  Apple shares rose another 2.3% again to over $174.00 in regular trading, but shares are trading up to over $180 in after-hours trading.  Options traders were expecting a move of up to $12.00 to $13.50 range in either direction this morning and there were over 100,000 contracts listed in the open interest in the closest strike prices for November.

Apple was also listed as one of our key window dressing stocks and here was the 24/7 Wall St. full earnings preview.  Jim Cramer has it as one of his "New Four Horsemen of Tech," although recently he noted how some of these may see some expected profit taking.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 3:39 pm in Consumer Electronics, Earnings, PC Companies, Technology Companies,

A Nice Quarter For American Express (AXP)

American Express (AXP) had a nice enough quarter. But, it was not stellar and the stock did not get out of hand after hours.

Revenue net of interest expense rose 11% to $6.945 billion. Net income was up 10% to $1.067 billion.

The market thought that was fine. The stock traded up a fraction at $56.90, not far from its 52-week low of $53.91. Wall St. still believes that the consumer is marching toward the grave.

Douglas A. McIntyre

Posted on: October 22, 2007 – 3:21 pm in Earnings,

Netflix (NFLX) Results: Investors Dance In Streets

Wall St. could tell right away that it was a huge quarter. Within seconds of the earnings release, Netflix (NFLX) shares were up 18% to almost $27.20

Revenue for the third quarter of 2007 was $294.0 million, representing 15 percent year-over-year growth from $256.0 million for the third quarter of 2006

GAAP net income for the third quarter of 2007 was $15.7 million, or $0.23 per diluted share, compared to GAAP net income of $12.8 million, or $0.18 per diluted share, for the third quarter of 2006.

Free cash flow for the third quarter of 2007 was $36.1 million, compared to $22.3 million in the third quarter of 2006.

Netflix ended the third quarter of 2007 with approximately 7,028,000 total subscribers, representing 24 percent year-over-year growth from 5,662,000 total subscribers at the end of the third quarter of 2006 and 4 percent sequential growth from 6,742,000 subscribers at the end of the second quarter of 2007.

The company raised guidance. For the full year NFLX should finish with subscribers of 7.3 million to 7.5 million, up from 6.8 million to 7.3 million previously forecast. Revenue of $1.2 billion to $1.205 billion, up from $1.17 billion to $1.185 billion, the old guidance.

The crowd went wild.

Douglas A. McIntyre

Posted on: October 22, 2007 – 3:15 pm in Earnings,

If Jeff Immelt Is Buying GE Shares, Should You Follow? (GE)

If a CEO is out buying stock in his company, it usually gets noticed.  When it is General Electric (NYSE:GE) and when it is open market share purchases it should get even more notice.  Here is the full SEC Filing with the details of the transactions.

Jeff Immelt, CEO & Chairman of GE, has purchased roughly 83,000 shares today in the open market broken down in 11 separate transactions dated today for what appears to be slightly more than $3.3 million.   This was in various transaction between $40.03 and $40.13 and this takes Immelt’s direct share beneficial ownership to 1,071,653.

General Electric is such a large and vast company that actions of a single person alone might not move the meter.  But a $3.3 million vote of confidence from the likes of Jeff Immelt is hard not to pay attention to.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 2:40 pm in Conglomerates, Corporate Governance, Insider Activity, ,

UAW And Chrysler Get Ugly, Damage To Ford (F)

According to Reuters "ratification of the tentative labor contract between the United Auto Workers union and Chrysler LLC was thrown into jeopardy on Monday after workers at four of the eight assembly plants that must vote on the deal rejected it."

While Cerberus, Chrysler’s deep pocket new owner may be able to weather a strike or give a little on the UAW terms, cross-town rival Ford (F) cannot. It has watched its sales drop 20% each of the last two months. Without the kind of concessions that GM (GM) got from the union, the future of Ford’s North American operations will be in real trouble.

Ford’s fate is in someone else’s hands for now, and that has to be a brutal blow.

Douglas A. McIntyre

Posted on: October 22, 2007 – 12:50 pm in Autos, ,

Apple Earnings Preview (AAPL)

Apple Inc. (NASDAQ:AAPL) reports earnings today after the close and Wall Street is expecting $0.86 EPS and $6.07 Billion in revenues.  The company’s guidance usually comes at or under certain targets and is deemed overly conservative.  The estimates for next quarter are $1.39 EPS and $8.6 Billion in revenues.  If you have been inside an Apple store you’ll know why everyone expects a blowout quarter.

Apple shares were indicated higher by about 0.7% pre-market, despite the sell off seen in overseas markets and in U.S. futures this morning.  After the open, shares are now up almost 1.5% at $172.90.  Apple shares closed down $3.08 on Friday to $170.42, which was better than the overall market fared.  Shares did hit new intraday highs of $174.63 on Friday.

Since shares were hitting new highs on Friday, you can imagine what the chart says.  During the August market malaise Apple shares closed as low as $117.05, so shares are up over 40% from those levels.  Options do not expire until November 16 after Friday’s expiration, but it appears that option traders are expecting a move of up to a $12.00 to $13.50 range in either direction today.  Speculators are obviously using options as a "cheaper" way of trading the stock, because there are over 100,000 contracts listed in the open interest in the closest strike prices for November.

We just noted this morning how Strategy Analytics was predicting that Apple and AT&T would deliver 1.1 million iPhones in Q3, bringing sales to 1.325 million units.  You have to wonder when Steve Jobs is going to split this stock.  As a reminder, we are less than 5-days out from its new Mac OS X Leopard launch as well.

We recently covered how Apple was growing its worldwide computer shipments, and Gartner said that last quarter’s Mac shipments rise 37% to roughly 1.3 million units.  If that is accurate, Apple’s computer market share is now 8.1%.  Apple was also listed as one of our key window dressing stocks and Jim Cramer has it as one of his "New Four Horsemen of Tech," although recently he noted how some of these may see some expected profit taking.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 9:25 am in Earnings, , ,

Citrix Systems, Officially a Virtualization Play (CTXS, VMW)

Citrix Systems Inc. (NASDAQ:CTXS) has officially become a "virtualization stock" as it announced this morning that it has closed upon the $500 million purchase of XenSource, which was announced in August.  The company now claims that Citrix is now the only company to offer organizations an end-to-end virtualization infrastructure that includes application, desktop and server virtualization solutions.   The company has many other announcements and demonstrations this morning at its App Delivery Expo in Las Vegas:

  • Citrix EasyCall allows organizations to communication-enable any application delivered via Citrix Presentation Server or Citrix NetScaler;
  • Organizations using Citrix Presentation Server can now record and play-back any user application session with Citrix SmartAuditor;
  • Citrix and HP team to offer a unique new PowerSmart capability designed to help customers reduce datacenter power consumption as a core property of their application delivery infrastructure.

Citrix is also seeing shares trade up on an analyst upgrade.  Deutsche Bank raised its Hold rating to a "Buy" rating based on its conviction that XenSource is a legitimate vendor in the virtualization market behind VMWare (VMW).  Deutsche Bank also noted that XenSource could contribute more than expected to the company’s fourth quarter.

As a reminder, Citrix saw shares down briefly about as much as 10% after its earnings report last week.  Shares are up 1.5% at $40.24 in pre-market trading.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 7:57 am in Software, , , , ,

Pre-Market Stock News (October 22, 2007)

(AAPL) Apple reports earnings after the close.
(ASTE) Astec $0.51 EPS vs $0.70 est; stock down 7%.
(ATG) AGL Resources lowered guidance.
(BOH) Bank of Hawaii $0.96 EPS vs $0.95 est.
(BSC) Bear Stearns and CITIC in China to form a $1 Billion cross-partnership in new capital markets joint venture.
(CEN) Ceridian $0.31 EPS as expected.
(CHKP) Checkpoint Software $0.41 EPS vs $0.38 est; stock indicated up 2%.
(HAL) Halliburton $0.66 EPS vs $0.64 est.
(HAR) Harman International received an amended $400 million investment from KKR & Goldman Sachs in 1.25% senior convertible notes with a $104 convertible price.
(HAS) $0.78 vs $0.72 est.
(JAKK) JAKKS PAcific $1.45 EPS vs $1.30 est.
(LDK) LDK signed a 3-yr contract to supply multicrystalline solar wafers to Canadian Solar (CSIQ).
(MINI) Mobile Mini sees next quarter $0.34-0.35 vs $0.40 est.
(MRK) Merck $0.75 EPS vs $0.69; R$6.1 B vs $6.03B est; stock indicated up marginally.
(MSFT) Microsoft has begun trimming royalties for rivals and handing over more information to open the source code, according to the EU.
(OSIP) OSI and Roche won Tarceva approval in Japan for lung cancer patients.
(PLUG) Plug Power received its largest fuel cell order from Wal-Mart Stores for use in lift trucks at one of the co’s distribution centers; stock up 5%.
(PTA) Penn Treaty announced a new chairman of the board.
(PVTB) Private Bancorp $0.42 EPS as expected.
(RGS) Regis $0.46 EPS vs $0.47 est.
(SGP) Schering-Plough $0.28 EPS vs $0.30 est.
(SHLD) Sears noted as undervalued in Barron’s; stock indicated up 1%.
(TEVA) Teva Pharmaceuticals announced that Adenoscan patent lawsuits have been settled with King Pharma and Astellas.
(THRX) Theravance received an FDA "Approvable Letter" for Telavancin for the treatment of complicated skin and skin structure infections subject to revised labeling or re-analyses of clinical data or additional clinical data; stock down 5%.
(TPTX) TorreyPines Therapeutics says tezampanel met its primary endpoint in Phase IIb clinical trial in acute migraine headache.
(TXN) Texas Instruments reports earnings after the close.
(WMT)  Wal-Mart announces tender offer for full ownership of Seiyu in Japan.
(ZBRA) Zebra Tech $0.43 EPS vs $0.38 est; stock indicated down 1%.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 7:19 am in Analyst Calls

Microsoft (MSFT) Has Reached Agreement With The EU

According to The Wall Street Journal, Microsoft (MSFT) has reached an agreement in its long battle with the EU over antitrust matters.

The paper writes that the key components of the deal are: "First, competitor software developers will be able to access and use Microsoft’s interoperability information. Second, the royalties to be paid for this information will be reduced to a "nominal one-off payment" of €10,000 ($14,348)."

"And third, the royalties Microsoft charges for a world-wide license to use its product, including patents, will be reduced to 0.4% from 5.95% — less than 7% of the royalty originally claimed."

Douglas A. McIntyre

Posted on: October 22, 2007 – 7:07 am in Law,

Pre-Market Analyst Calls (October 22, 2007)

AAUK cut to Hold at Citigroup.
ANPI cut to Sector PErform at both RBC & CIBC.
APPB cut to Underperform at Wachovia.
ASH cut to Underperform at Credit Suisse.
AXP cut to Equal Weight at Lehman.
BHP cut to Hold at Citigroup.
CFC cut to Underweight at Lehman.
COF cut to Equal Weight at Lehman.
CTXS raised to Buy at Deutsche Bank.
CLWR raised to Buy at Jefferies.

Read More »

Posted on: October 22, 2007 – 6:54 am in Analyst Calls, , , , , , , , , , , , ,

Merck (MRK) Comes Through

Merck (MRK) announced third-quarter 2007 earnings per share of $0.75, excluding restructuring charges, and third-quarter reported EPS of $0.70. Worldwide sales were $6.1 billion for the quarter, an increase of 12 percent from the third quarter of 2006. Net income for the third quarter of 2007 was $1,525.5 million compared with $940.6 million in the third quarter of 2006.

Merck raises full-year 2007 EPS guidance and now anticipates EPS range of $3.08 to $3.14, excluding the restructuring charges related to site closures and position eliminations. Merck anticipates reported full-year 2007 EPS of $2.87 to $2.93.

That guidance was enough to send the shares up 1.3% before the bell.

Douglas A. McIntyre

Posted on: October 22, 2007 – 6:49 am in Earnings,

Plug Power…Fuel Cells to Wal-Mart, Sort Of (PLUG, WMT)

Plug Power Inc. (NASDAQ:PLUG) has announced that its wholly owned subsidiary Cellex Power Products, Inc. received a purchase order for its GenDrive(TM) fuel cell power units from Wal-Mart Stores, Inc. (NYSE:WMT).  The order is for use in lift trucks at one of the company’s distribution centers.  Plug Power said this was its largest single GenDrive order to date, although the financial terms were not disclosed.

The order follows a successful beta trial at two Wal-Mart distribution centers in Ohio in late 2006.  The new units will power pallet trucks used at Wal-Mart’s food distribution center in Washington Court House, Ohio, replacing the lead- acid batteries that are traditionally used in such applications.  The purchase of these fuel cell power units is equivalent to removing approximately 60 cars from the highway in southeastern Ohio in terms of CO2 and greenhouse gas emissions.

This is only at one distribution center, so it’s quite far away from being a company-wide event and still a ways off from being a major financial event for Pluf Power.  Plug Power generated about $4 Million in revenues last quarter.

Jon C. Ogg
October 22, 2007

Posted on: October 22, 2007 – 6:43 am in Alternative Energy, , ,

The Poor Folks At Toyota (TM)

Toyota (TM) recently had to recall several hundred thousand cars in it native Japan. It lost its top sport in the Consumer Reports reliability survey. Its shares trade near a 52-week low.

According to Bloomberg, the list of bad things going on at the Japanese company has grown as "GM (GM) sold 7.06 million vehicles through September, taking a lead of 10,000 units over Toyota’s 7.05 million."

GM has down well in South America for some time and has stated that it expects rapid growth in that market to continue. It is the leading seller of vehicles in China, trading places in the top sport with VW from time to time.

But, now Toyota has to contend with GM’s lower cost base due to its new UAW contract. To make matters worse GM’s new crossovers and small sedans are selling well in the US and the big US firm is not losing sales each month as it did for a couple of years.

This may just be the start of a down period for Toyota.

Douglas A. McIntyre

Posted on: October 22, 2007 – 6:00 am in Autos, ,

Sandisk’s (SNDK) Harebrained New Product

Sandisk (SNDK) has its own solution for moving content from the PC to the TV. Companies from Intel (INTC) to Microsoft (MSFT) have been working on this problems for years. Apple (AAPL) TV is an attempt to solve the problem of "home networking". But, its sales appear to be minuscule.

Now the disk storage company has come up with something completely different.

According to The Wall Street Journal Sandisk "will begin selling Sansa TakeTV, a small device that stores digital video so it can be physically moved between a personal computer and television set. The idea is to avoid the need to use a home network or a specialized device." It will also offer content that will run, at least most of it, free and supported by ads.

Sandisk has several big problems. The first is that no one watching TV at home has ever heard of the company. So the branding of the company and the product could cost tens of millions of dollars and take years. In other words, Sandisk is not Apple.

The other major problem is that there is no evidence that consumers want to move video using something that "plugs the device into a USB port on their PCs, loads it with video files and allows them to physically shuttle the device to the TV."

Like Unboxs and Apple TVs and TIVOs, the device is a burden on TV viewers who do not want to watch video from a PC. Satellite TV and cable already give them 900 channels and pay-per-view. What more do they want?

Douglas A. McIntyre

Posted on: October 22, 2007 – 5:50 am in Consumer Goods, , , ,

Wal-Mart (WMT) Goes To Japan

Wal-Mart (WMT) is buying out the minority shareholders in Japanese supermarket unit Seiyu Ltd. Wal-Mart owns 51% of the company and it is offering a 61% premium, or $878 million, to get the rest. Wal-Mart has never made money in its Japan unit which has had five straight years of losses. By some accounts the world’s largest retailer has put over $1 billion into the enterprise.

According to Reuters "cracking Japan’s retail market, the world’s second-largest, has proved a challenge for foreign companies, due to fickle shoppers and tough competition."

So, why would Wal-Mart do something so wild and expensive? Because its growth in the US is behind it and during the last quarter it was more clear than ever that international operations are the company’s only real growth area.

Wal-Mart’s strongest market is Mexico. China is probably next, but the government there has already put in a union and a branch of the communist party. So, it is hard to predict how stable WMT’s business may be in the world’s most populated country.

WMT has already pulled out of West Germany and Korea due to lack of ability to pick up significant market share and to make a profit.

Why pay a huge premium for a minority interest in its Japan operation? Because Wal-Mart is running out of big markets.

Douglas A. McIntyre

Posted on: October 22, 2007 – 5:36 am in Retail,