Daily Archives: December 18, 2007

Stocks Which Could Drop 50% In 2008

It actually is not very unusual for a stock to lose half its value, especially if it is in the right sector. Shares in Countrywide Financial (CFC) are down over 75% in 2007. Several newspaper company stocks have dropped by more than half. Advanced Micro Devices (AMD) has gone from $22 to $8.

Usually a stock is affected because its industry is being pushed underwater, as has happened with the mortgage fiasco, or because of several bad decisions by management which simply do so much damage that shareholders hit the exits

We have listed ten companies which could fall by more than half next year. For each one we have given specific reasons. These are the issues that Wall St. has to debate when it considers whether these firms will face significant sell-offs.

Citigroup (C). It would be nice to think that Citi has already taken as much of a beating as it can. The stock has fallen from $57 to $31 this year. Now, could it go to $15? Moody’s recently downgraded Citi saying that it believed that the bank could post more net losses next year. The firm still has a $200 billion mortgage book. Citi might also have to cut its dividend to raise cash. That could make it a much less attractive investment, at least short-term. A deep recession or more trouble in the mortgage-backed securities market could halve Citi’s shares.It has happedned to the bank before three times in the last 35 years, most recently in 1990.

Baidu (BIDU) The Chinese search engine is well ahead of its top rival, Google (GOOG) in the world’s most populated country. That may be why the company’s shares have jumped from under $100 in April to $356. But, Baidu trades at 62 times sales. Google trades at 14 times. Baidu is so high because Wall St. expects online search to become the next big thing in China. But, right now that is not the case. Baidu’s revenue in the third quarter was $66 million. That was double the year before, but is still a tiny number. The Chinese company faces two challenges. One is that Google is going to do whatever it can to take share from Baidu. The US company can’t afford to be a distant second in a market as large as China Baidu has been helped by the fact that the Shanghai Composite is up almost 120% in the last year. If there is a big sell-off in China stocks, Baidu will get pulled down as well.

Journal Register (JRC) This company is probably weaker than most other newspaper chains. It trades at $2.25, down from its 52-week high of $7.76. The company’s operating income is shrinking because of the fall-off of newspaper advertising. In the last quarter, Journal Register had operating income of $17.6 million and interest expense of $10.7 million. Based on newspaper industry trends, the company’s revenue could drop another 8% next year. That means debt service could become a problem.

Ford (F) Ford is a turnaround which almost happened. The company brought in a new CEO and he was able to cut costs. The latest UAW contract should pare Ford’s annual costs by as much as $2 billion. This takes $23 billion in liabilities off Ford’s books. And, the company will pay $13.2 billion into the new UAW benefits fund. Ford’s problem is that it keeps losing sales. The company’s domestic unit sales dropped 12 consecutive months through October and made a small recovery in November. Ford now has about 15% share in the US market. Aside from the fact that Ford’s piece of the pie could keep shrinking, forecasters predict that US car and light truck sales could fall from just over 16 million units this year to 15.5 million next year. In a deep recession, that number could go below 15 million which would take about $25 billion in revenue out of total domestic vehicle sales. Ford’s shares are at $6.79, near a 52-week low, and the company only has a market cap of $14.3 billion.

VMWare (VMW) Almost everyone expects that VMWare shares will be up next year. The company owns the virtualization solutions market which can help servers run much more efficiently, saving enterprises substantial sums of money. After its IPO. the stock moved from $51.50 and peaked at $125.25. It trades at just over $86 now, which indicates that it already may be vulnerable to selling pressure. With a forward P/E of 74, maybe it should be. The market for VMW’s products could slow, but that is unlikely. One securities analyst recently pointed out that VMWare sells software licenses which involve large upfront purchases. That might hurt revenue in future years. And, Microsoft (MSFT) is coming to market with its own virtualization technology, which it calles Hyper-V. The product could be a bust, but Redmond does have a huge foot in the server door with it Windows platform.

Countrywide Financial (CFC) The shares are already down to $9 from a 52-week high of $45.26. This is the most visible casualty of the mortgage mess. The housing market could still sink the company. Nearly half of the firm’s portfolio is backed by California property. If foreclosures continue to spike and the values in the housing market plummet further, Countrywide simply does not have the capital to weather another full year in this climate. Just count the defaults. If they get too high, CFC may not make it. Zacks and Citigroup recently issued negative research comments about the company.

Bidz.com (BIDZ) The company has been in a running fight with research firm Citron. The fight includes claims that that the company’s inventory levels are rising at least 300% higher than the company’s revenue run rate. The company recently reported a good third quarter with net revenue of $40.1 million, a 48% increase compared with $27.1 million reported for the third quarter of 2006. Barron’s has pointed out that short sellers are going after the company and will do whatever they can, within the boundaries of fair play, to keep the shares moving lower. Wall St. is clearly worried. The stock had a 52-week high of $22.50 and now trades at $8.56. There is a lot of evidence that online spending has not been as good as expected this holiday season. Audience research firm Alexa actually shows Bidz traffic falling from early November to mid-December.

Micron Technology (MU) The company has already lost close to half its value in the last year, with the stock going from a 52-week high of $14.31 to $7.82. The firm’s core business in memory chips is being seriously affected by sharply falling prices. Jefferies & Co recently made negative comments on MU and revised revenue down and losses up. The price cutting in the NAND and DRAM markets is furious now. MU needs reasonable operating income to fund R&D. That may not happen. With product pricing in some of its key markets down 40%, 2008 could be a very poor year.

LDK Solar (LDK) A former employee reported that the company had inventory problems. This crashed the shares and they moved from $74 in September to $27 in late November. An audit determined that there was no inventory problem and the shares moved back over $68. Several analysts think the news is a little too good. Goldman Sachs has a "sell" on the stock with a price target of $33. The investment house thinks that the company is giving away a lot of margin to get long-term contracts. CIBC also has a "sell" rating on the shares. LDK has additional market risk. Its shares are up, to some extent, because of the huge increases in the prices of most Chinese stocks. If there is a sell-off in Shanghai or Hong Kong, odds are that the stock goes out with the tide

PMC-Sierra (PMCS) The designer and marketer of communications semiconductors has not been doing well. Shares have dropped from a 52-week high of $9.83 to the current $6.76. Banc of America Securities recently rated the stock as a "sell". Short interest in the company rose sharply at the end of November. When the company released its third quarter results, the CEO announced that he would be leaving. In that quarter, revenue was flat at just over $117 million. Net income was a negative $5.9 million. PMC’s great risk is that spending in the telecom industry is slowing. If build-outs of new technology like 3G wireless continue to decelerate into 2008, the company can do little to find new revenue. With other struggling companies like Conexant (CNXT) in the same market, price cutting is a part of the business.

Douglas A. McIntyre

Posted on: December 18, 2007 – 10:36 pm in HI/LOW, , , , , , , , , , , ,

Cramer’s Telecom Build-Out Play, With After-Hours Weakness (ADCT)

On tonight’s MAD MONEY on CNBC, Jim Cramer already hosted Verizon’s CEO Seidenberg and discussed the bandwidth build-outs and the great things going on in wireless and their FiOS digital TV offering.  Cramer wanted to use his pin action trade analysis and he went back to one of the old tech stocks from the 1990’s:

  • ADC Telecom (NASDAQ:ADCT) is a stock that is winning from the fiber and wireless build-out of Verizon.  This is also part of AT&T’s long-distance build-out that is going.  It also bought a frame connectivity company in China and made another wireless acquisition.  ADCT also trades 14.6-times next year’s earnings.  Cramer thinks this one is back in the sweet spot and he said it can be held for a multi-year period.

What is a pure coincidence is that shortly before Cramer started MAD MONEY tonight, ADCT came out and announced a proposed subordinated convertible note offering to the tune of $400 million split evenly between 2015 and 2017 maturity dates.  Its market cap before the dilution was listed as almost $2.1 Billion.

ADC said it intends to use approximately $200 million of the net proceeds of this offering to repurchase prior to maturity or repay at maturity in June 2008 the outstanding $200 million aggregate principal amount of its 1% Convertible Subordinated Notes due 2008.  The remainder is set aside for general corporate purposes and strategic opportunities.  ADCT will use Credit Suisse and Morgan Stanley as joint book-running managers for the offering and co-managers are listed as J.P. Morgan and Bear Stearns & Co.

Shares would have likely been higher after the Cramer tout, but because of the stock offering the stock is trading down almost 5% in after-hours trading at $16.89 on what appears to be more than 400,000 shares in after-hours activity.  The 52-week trading range is $14.04 to $21.06. 

This stock conducted a 1 for 7 reverse stock split back in May 2005 after its shares had been perpetually stuck around $1.00 to $2.00 on an "old stock price" on an unadjusted split price.  Shares were then between $18.00 to $21.00 and are currently under that.  If you go back to the bubble days in 2000 on an adjusted basis this traded back over $200.00 during the fiber optics craze.

Jon C. Ogg
December 18, 2007

Posted on: December 18, 2007 – 6:37 pm in Cramer, Technology Companies, Telecom, ,

Ameritrade Shows Its Wings (AMTD, SCHW, ETFC)

TD Ameritrade (NASDAQ:AMTD) has issued favorable metrics and upside guidance:

  • As of November 30, 2007, client assets totaled approximately $301 billion. Also, average investable assets amounted to $30.9 billion and average fee-based investment balances amounted to $58.1 Billion.
  • The online broker now currently expects its earnings per share to be approximately $0.39, well above the $0.27-$0.33 guidance range for the December quarter from the October guidance it offered.

Both TD Ameritrade and Charles Schwab (NASDAQ:SCHW) earlier posted gains in November trades per day:

  • Ameritrade posted 339,000 trades per day, up almost 37%;
  • Schwab posted 344,400 trades per day, up almost 36%.

So the question remains:  TD Ameritrade has an $11.55 Billion market cap, and Charles Schwab has a $27 Billion market cap.  Which one will buy the rest of E*Trade (NASDAQ:ETFC) for its millions of online trading accounts first?

Shares of all three discount brokers are up marginally in after-hours trading.  E*Trade now regularly appears in our "10 Stocks Under $10" weekly newsletter and also is routinely screened for our Special Situation Investing newsletter.

Sign up here to join our open email distribution list.

Jon C. Ogg
December 18, 2007

Posted on: December 18, 2007 – 6:06 pm in Brokerage Firms, Internet, , ,

ETF LAUNCH: Claymore/AlphaShares China Real Estate ETF (TAO)

The NYSE today launched the Claymore/AlphaShares China Real Estate ETF on NYSE Arca under the ticker symbol “TAO”.  This is the first of its kind as an ETF that is set up to track the performance of the AlphaShares China Real Estate Index. 

The index is designed to measure and monitor the performance of the investable universe of publicly-traded companies and real estate investment trusts deriving a majority of their revenues from the development, management and/or ownership of property in China or the Special Administrative Regions of China (Hong Kong and Macau).

You can see a full list of holdings on the Claymore site here.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 5:35 pm in China, ETF, , ,

Cramer Hosts Verizon’s Seidenberg, Our Top CEO of 2007 (VZ, T, TWC, CMCSA, CMCSK)

Jim Cramer is set to host the CEO of Verizon (NYSE: VZ) Ivan Seidenberg on tonight’s MAD MONEY on CNBC.  If you are wondering why we are previewing a preview for Cramer it’s a simple answer: 247WallSt.com reviewed many great CEO’s and many that weren’t so great, and Ivan Seidenberg was the CEO that we named as our "2007 CEO of the Year."  You can read our full logic behind it and why he won over other nimble and able telecom and industrial CEO’s whose stocks showed a strong year.

Jim Cramer has been a Verizon & AT&T (NYSE:T) backer for some time, and if you have looked at cable stocks lately you’d know why Telecom is kicking you what.  Comcast (NASDAQ:CMCSA) (NASDAQ:CMCSK) has already admitted many problems and how it has started seeing more pressure, and Time Warner Cable (NYSE:TWC) is also trading a few percentage points above its 52-week lows.

Cramer said today readily prefers Verizon over Comcast now.  A reason he prefers Verizon over Comcast (or telecom over cable) is that the market is just too volatile to not have that dividend (nearly 4% today).  That’s on top of the fact that telecoms are winning back cable subscribers now with the fiber-to-the-home initiatives that allow them to offer better high-speed data than before along with digital television packages.

It would probably take a lot for Cramer not to be outright positive on Verizon (NYS:VZ) tonight, as we are pretty sure that there won’t be that much negative happening besides the credit quality of customers being less than it had been before.  After the company announced it would open up its network to outside phones, the platform neutral model looks like a winner.

You can join our own open email distribution list to receive updates once or twice per week to receive information about spin-offs, restructurings, merger-arb spreads, recapitalizations, and back door plays into upcoming IPO’s.

Jon C. Ogg
December 18, 2007

Posted on: December 18, 2007 – 5:02 pm in Cramer, Telecom, , , , , , ,

Palm Slaps Itself (PALM)

Palm Inc. (NASDAQ:PALM) just can’t seem to get it right, even after it already warned.  The shares have just been battered and tattered after multiple problems and now it’s balance sheet is leveraged to boot.

We recently noted that its new management team from Apple and from Elevation Partners is not incapable at all, and they might be able to turn 2008 into a year where its shares could double under the right circumstance.  But the earnings and guidance put that ‘doubling status" further out of sight and it takes the name of Dr. Pangloss to find forgiveness.

Palm posted a net nine-cent loss and a non-GAAP loss at -$0.07 EPS versus and non-GAAP loss estimate of -$0.08 from First Call.  Revenues were $349.6 million compared to a rough estimate of $350 million.  But here is the kicker.  Its sell-through rates for smartphones were up 11% to 686,000.  Analysts were looking for somewhere between 700,000 and 750,000 depending on whom you talk to.  Based on the recent warning we would already expect that to be lower than the estimate, but it is still ugly. 

To pour salt on the wound Palm is guiding earnings per share to -$0.14 to -$0.16 EPS, and estimates were -$0.04 to -$0.08 depending on which source you use and which update is deemed more current.  Same goes for the $310 to $320 million in revenues.

Here is one way to hide the bad news and turn traders against you: The company will suspend specific financial guidance in future quarters, but will continue to provide general business guidance and comments on industry trends.

Right after the report, Palm shares were down 4% after hours.  But now then they traded down about 8% to $5.93 before coming back a bit.  There was a mid-day spike up and Palm closed up almost 5% on some hopes that Elevation partners would just take it private to avoid the problems.  If they loved it in the teens, they gotta love it down close to $5.00.  Maybe musicians don’t need to be the main backers of public companies.  Frankly we would have expected much to some of this to be factored in already, but it seems that the market just doesn’t want to trust underperforming and under-delivering companies in a time of market turmoil like we have been seeing.

In the last "10 Stocks Under $10" Weekly Newsletter, we noted how it appears that Palm shares are toast for the time being.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 4:28 pm in Consumer Electronics, Earnings, Earnings Warning, Wireless,

The 52-Week Low Club (MSO)(TUES)

First Marblehead (FMD) Provides products for private education lending markets. Problems at SLM are not helping. Down to $11.69 from 52-week high of $57.56.

Martha Stewart Living  (MSO) A lot of bad news in print advertising today. Shares move down to $9.38 from 52-week high of $23.21.

Tuesday Morning (TUES) Retailer warns on profits. Falls to $4.41 from 5-week high of $18.50.

Coherent  (COHR) Company taken out of the S&P SmallCap 600. Drops to $24.85 from 52-week high of $33.38.

Douglas A. McIntyre

Posted on: December 18, 2007 – 3:38 pm in HI/LOW, , , ,

Cost Plus, Pier 1, & Tuesday Morning Different Paths (CPWM, PIR, TUES, BIG, SHLD)

When we see a blow-up at Tuesday Morning (NASDAQ:TUES) to the tune of this much, we look at other stores.  The truth is that Tuesday Morning is still a clearance center stock like a Big Lots (NYSE:BIG), although we have noted when we said Big Lots Chart Uglier Than Its Stores that Big Lots is on the lower-end of that quality spectrum.  Big Lots shares are down almost 3% at $16.30 at a new 52-week low in sympathy, although the drop in Tuesday Morning (NASDAQ:TUES) is now over 25% to $4.76 and well under its 52-week trading range of $6.44 to $18.50.
But there are two retail stores that are trading better today. Pier 1 Imports (NYSE: PIR) is seeing shares up some 16% at $3.82 today after competitor Cost Plus (NASDAQ: CPWM) made two consecutive runs.  Shares of Cost Plus Inc. (NASDAQ: CPWM) were just covered by us pre-market Monday in our "10 Stocks Under $10" that we noted favorably.  It isn’t just that we trust the guidance and management saying they are still trying to turn this around and it isn’t that we feel the company will have no exposure to its credit card portfolio.  It is that this trades at enough of a discount to its tangible book value that we feel this stock could continue its recovery.  We were going to list this as one of our turnaround stocks that hasn’t turned around, but it has run more than 20% since Friday’s close.  Maybe this will keep running and maybe it won’t from our $4.39 closing price Friday (although the lowest it traded during market hours on Monday was really $4.41 at the open and it closed at $5.10). This is not without risk and it has traded this far under $10 for a deserving reason.  We’d wait after the big pop of the last two days, but the worst part of the business may be behind it.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 3:31 pm in Earnings, Retail, , , , ,

Google’s (GOOG) Microsoft (MSFT) Challenge Looks Weak

Research group NPD reported that 73% of Americans have never heard of Google (GOOG) Docs, the online tools that are meant to challenge Microsoft (MSFT) in the word processing and spreadsheet businesses. The survey was based on responses from 600 PC users.

TechCrunch reports that "perhaps worst still only 0.5% of respondents have abandoned desktop office applications for an online alternative. 94% of Americans have never tried a web based productivity suite."

The Google server-based applications are meant to compete with Windows which runs using the PCs own processor and memory.

It looks like the Microsoft "desk-top" based applications are safe for the time being.

Douglas A. McIntyre

Posted on: December 18, 2007 – 12:51 pm in Software, ,

Turnarounds That Haven’t Turned Around: Bearingpoint (BE)

Bearingpoint, Inc. (NYSE:BE) is another provider of IT services whose stock has changed its name to "the good, the bad, and the ugly."  It is in the same boat as Unisys which we just covered, although it doesn’t have as long of an operating history as an independent player and Bearingpoint has never really had any great hay-day in the sun.  This is the old KPMG Consulting that was spun off from KPMG and named Bearingpoint.

It offers a variety of IT consulting services to large and medium-sized businesses, as well as to government agencies and other enterprises.  Harry You was recently replaced as CEO (from 2005) just a couple weeks ago, although Ed Harbach is the replacement and he was already President & COO.  This may just be a consolidation of the leadership and some are obviously not going along with the notion that major changes are coming. 

But this is a possible turnaround stock now that has never turned around, particularly since it has a quasi-new head.  At the Value Investing Congress we noted how one key fund manager noted this still being one of her value picks in the space, although she was frank about the call being a loss so far and that there is a lot more work that has to be done here.

Bearingpoint has a $534 million market cap and it also trades at paltry valuation multiples compared to its more profitable peers for more than obvious reasons.  At $2.57 it is only 1% or 2% off of 52-week lows.  The 52-week trading range is $2.53 to $8.56, and this traded over $20.00 when it first came public in early 2001.  In September 2002 this became a single-digit priced stock and that has been the case for almost the entire time since.

We see its inverted balance sheet when using tangible assets to liabilities as a problem and at some point you have to wonder how solid and strong its government contracts are because of its financial position (although we openly admit that is just conjecture and observation).  Analysts are looking for a huge loss this year but looking for a break-even next year with a huge range above and below for next year.  So we are treating 2008 as a total wild card and aren’t even using the estimates because of the broad range.  Since the company posted a much wider loss than expected last quarter, analysts and investors threw in the towel.  Citigroup had this one on a tech buyout candidate list earlier this year, although that may behind it now.

This IT-outsourcing is not a temporary event, it is secular. Unfortunately, this new CEO is going to have to make some tough decisions to get this one back in the black.  That is what solid turnaround managers are supposed to do.   

This one has been too tough to cover with any great objectivity but it has been routinely screened for special situation newsletters and also for the "10 Stocks Under $10" weekly newsletter.

Jon C. Ogg
December 18, 2007

Join our open email distribution list.  Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.

Posted on: December 18, 2007 – 10:30 am in Turnarounds, Value Investing, , ,

Turnarounds That Haven’t Turned Around: Unisys (UIS)

Unisys Corp. (NYSE:UIS) is a company that if you look at the chart you might just consider dead rather than a pure turnaround.  Revenues have stayed around $5.7 to $5.8 Billion for the last 3-years and the official estimates for 2008 aren’t calling for much more (see below for company projections). 

This one saw its hay-day in the mid to late 1980’s and then again in the late 1990’s.  Shares are not quite at an all-time low, but they might as well be.  Maybe the obvious industry trend of IT-outsourcing is partly to blame, but that trend may be secular rather than a temporary convenience or a temporary opportunity.  It could go acquire an IT-outsourcing company if its books were stronger.  The market cap for Unisys is $1.6 Billion and it trades at paltry valuations compared to its more profitable peers.  Interestingly enough, the company posted an operating profit of $43.6 million in the last quarter, although revenues were down 1% (after a 3% positive currency impact).

With the last earnings release, President/CEO Joseph McGrath said, "We are laying the foundation for improved revenue trends in 2008. We are focused on continuing to enhance our profitability in the fourth quarter and we continue to drive toward our goal of an 8-10 percent operating profit margin, excluding retirement expense."  If you trust the comments, this one sounds good.  If you are a skeptic and look only at a chart you’d question this statement.  The company needs a plan to curb employee retirement costs, although anyone can ask an auto company how easy that is to pull off.

The company is not alone in the service and technology sector as there are many others in the same spot that are either losing money or are not consistently profitable.  But after a multi-decade operating history you’d expect companies to know how to operate at profitability.

Wall Street analysts rarely make any major calls on this one and we don’t have mush recent to go on.  When you backdate the news and look at the history of the company you’d think that the turn may have already started.  But shares are barely above 52-week lows and are barely off of multi-year lows too. 

This and others routinely get screened for special situation newsletters and also for the "10 Stocks Under $10" weekly newsletter.

Jon C. Ogg
December 18, 2007

Join our open email distribution list.  Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.

Posted on: December 18, 2007 – 10:00 am in Turnarounds, Value Investing, ,

Why Sprint’s (S) New CEO Makes No Difference

Sprint (S) appointed a new CEO today. He seems to be perfect for the job. The new man, Dan Hesse, comes from the top spot at Embarq (EQ) and used to work at Sprint. He won’t need any time to learn the ropes.

But, the stock is barely up on the news.

Sprint’s problems can’t be fixed in a quarter. It may take a year or two years. It may be that they can’t be fixed at all. That is a depressing comment to make about a company, but some issues become so malignant that they are beyond curing.

Many of Sprint’s customers don’t like the company. It has to maintain two networks. One is for the Nextel customers which the company picked up in the merger. The other is the old Sprint network. The company is thinking about building a third system of fourth generation WiMax high speed wireless. Putting that together is probably a $5 billion investment which will take two years or more.

In the meantime, Sprint is up against AT&T (T) Wireless and Verizon Wireless which is owned by Verizon (VZ) and Vodafone (VOD). Each of the larger companies is adding new customers. Sprint is not. To many people leave Sprint each quarter. There is no reason for the competition to help them with that problem.

Sprint hired the right guy, but he has a very tall mountain to climb in a very short period of time.

Douglas A. McIntyre

Posted on: December 18, 2007 – 9:48 am in Telecom, , , , ,

Medarex Gets A Small Handout From Amgen (MEDX, AMGN)

Medarex, Inc. (NASDAQ: MEDX) has announced that it will receive a milestone payment from Amgen (NASDAQ: AMGN).  Unfortunately, Medarex said the amount is for an undisclosed sum for advancing an antibody into human clinical trials. Our experience in these is that if it is a giant sum that it is gladly discussed.

The antibody was developed using Medarex’s UltiMAb® technology and is the fifth UltiMAb-derived antibody in clinical development by Amgen, including two UltiMAb antibodies in Phase II clinical studies.  Medarex said that it may also receive future milestone payments and royalties should this product candidate progress through clinical development and to the market.

As the company didn’t disclose the sum it will receive, traders aren’t giving the company any real boost from this. Shares are indicated up 0.5% or so, but the company is still feeling the loss of its metastatic melanoma drug failing to reach the primary endpoint.  We have commented on the huge options trading before on this one, but since the metastatic melanoma drug failed the options activity has diminished significantly.

You can also see where its short interest has fallen along with some other active biotech stocks.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 9:06 am in Biotech, ,

Goldman Sachs Looks Like Golden Slacks (GS)

Goldman Sachs (NYSE: GS) has managed to post $7.01 EPS in its fourth quarter report.  First Call had estimates of $6.61 EPS and we had a whisper number somewhere in the $7.00 neighborhood.  Annualized return on equity was 34.6% for the fourth quarter of 2007. Book value per common share increased 25% to $90.43 in 2007.  Assets under management rose $868 billion.

The following are the individual metrics inside the company for the quarter:

  • Net revenues in Investment Banking were $1.97 billion, 47% higher than the fourth quarter of 2006 and 8% lower than a particularly strong third quarter of 2007.  Net revenues in Trading and Principal Investments were $6.93 billion, 4% higher than the fourth quarter of 2006 and 16% lower than the third quarter of 2007. Net revenues in Asset Management and Securities Services were $1.84 billion, 29% higher than the fourth quarter of 2006 and 6% lower than the third quarter of 2007. Non-compensation expenses were $2.41 billion, 26% higher than the fourth quarter of 2006 and 12% higher than the third quarter of 2007.

Shares are up almost 2% at $212.90 in pre-market trading.  Its 52-week trading range is $157.38 to $250.70.  This one has managed to dodge the big bullet in the sub-prime mess as it had been hedged.  Maybe it really should change its name to Golden Slacks.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 8:39 am in Brokerage Firms, Earnings, Financial Stocks,

Best Buy Emulates Its Name (BBY)

Best Buy (NYSE: BBY) has posted $0.53 EPS versus $0.41 estimates from First Call and posted $9.92 Billion revenues versus a $9.45 Billion revenue estimate from First Call.  The company has also raised its full year guidance to $3.10 to $3.20 versus a prior target of $3.00 to $3.15 EPS, although estimates are roughly $3.12 on last look. It also forecast roughly $40 Billion in annual revenues with a same store sales growth pegged at 4%.

For the quarter, Best Buy’s same store sales rose 6.7% and its Operating income as % of revenue rose to 3.5% from 2.3% in the November quarter of 2006.

One area analysts could harp on is that the merchandise inventory increased 22% year over year. Best Buy says this reflects new store growth and an increased availability of products such as video gaming, flat-panel TVs and notebook computers.  It also reflects the impact of the calendar shift, as the quarter ended one week further into the holiday shopping season.  So if you are a skeptic you can harp on it having too much inventory, and if you are a bull you can easily justify this surge in inventory.

Best Buy shares are up 1% at $51.75 in pre-market trading, although shares were up 4% initially.  Its 52-week trading range has been $41.85 to $53.90.

Jon C. Ogg
December 18, 2007

Posted on: December 18, 2007 – 8:28 am in Earnings, Retail,

Pre-Market Stock News (December 18, 2007)

Below is the top news that 247WallSt.com is focusing on that is impacting stocks in pre-market trading activity:

  • Adobe Systems (ADBE) traded down 2% after beating earnings and slightly raised guidance.
  • ATS Medical (ATSI) received FDA approval for AP360 mechanical heart valve.
  • Best Buy (BBY) $0.53 EPS vs $0.41 est. and $9.92 Billion revenues vs. $9.45 Billion est.; shares traded up 4%.
  • Borg Warner (BWA) trades ex-split to reflect a 2 for 1 stock split today.
  • Cherokee (CHKE) retained Goldman, Sachs & Co. to explore strategic alternatives including possible sale of the company.
  • Dollar Financial (DLLR) raised fiscal 2008 guidance after formally closing its previously announced acquisition of 82 Florida financial-services stores.
  • Eli Lilly (LLY) announced that CEO Sidney Taurel will retire in March 2008.
  • First Solar (FSLR) noted as a stock pick with 5-years earnings visibility by Cramer on MAD MONEY.
  • Forest Labs (FRX) won FDA approval for its new high blood pressure beta blocker along with Maylan Labs.
  • Goldman Sachs (GS) set to report earnings with $6.61 EPS estimate (whisper of $7.00 and higher).
  • Natus Medical (BABY) put Q1 guidance $0.09-0.10 vs $0.12 estimate; sees 2008 EPS $0.68 to $0.70 vs. $0.63 estimate.
  • MedcoHealth Solutions (MHS) noted as a stock pick with 5-years earnings visibility by Cramer on MAD MONEY.
  • Mylan Labs (MYL) won FDA approval for its new high blood pressure beta blocker along with Forest Labs.
  • Range Resources (RRC) to replace Tribune in S&P 500 Index on Thursday after close.
  • Salix Pharmaceuticals (SLXP) will replace Coherent Inc. (COHR) in the S&P SmallCap 600 after the close TODAY.
  • Synovus (SNV) lowered its guidance.
  • Thornburg (TMO) reinstated dividend with $0.25 payment, says mortgage uncertainties continue.
  • Transocean (RIG) noted as a stock pick with 5-years earnings visibility by Cramer on MAD MONEY.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 8:15 am in Pre-Market Activity, , , , , , , , , , , , , , , , , , ,

Top Oil & Gas Analyst Calls (December 18, 2007)

These are the top analyst research noted that 247WallSt.com has seen in the oil, gas, and energy sector early this morning:

  • Approach Resources (AREX) started as Overweight at J.P.Morgan.
  • Atwood Oceanics (ATW) raised to Buy at Banc of America.
  • Cal Drive (DVR) started as Buy at Banc of America.
  • Diamond Offshore (DO) started as Buy at Banc of America.
  • Ensco (ESV) started as Neutral at Banc of America.
  • Grant Prideco (GRP) downgraded to Hold at Citigroup.
  • Gulfmark Offshore (GLF) raised to Buy at Banc of America.
  • Hornbeck Offshore (HOS) started as Buy at Banc of America.
  • Noble Energy (NE) started as Buy at Banc of America.
  • Occidental Petroleum (OXY) raised to Market Perform at FBR.
  • Pride International (PDE) started as neutral at Banc of America.
  • Transocean (RIG) started as Buy at Banc of America; Jim Cramer also noted this one as being one of his top 5-year stocks with earnings visibility.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 8:05 am in Analyst Calls, Oil & Gas, , , , , , , , , , , ,

Top 10 Pre-Market Analyst Calls (ADBE, CRUS, DVA, EEQ, EQR, IP, LNCR, RGLD, WIN, BRL, MFLX, MYL, TEVA, WPI)

These are not the only analyst impact calls, but these are the top research notes that 247WallSt.com is focusing on:

  • Adobe Systems (ADBE) raised to Buy at Deutsche Bank.
  • Cirrus Logic (CRUS) raised to Buy at Jefferies.
  • DaVita (DVA) raised to Buy at Oppenheimer.
  • Embarq (EQ) raised to Overweight at J.P.Morgan.
  • Equity Residential (EQR) raised to Overweight at Lehman.
  • International Paper (IP) raised to Outperform at Credit Suisse.
  • Lincare (LNCR) downgraded to Neutral at Oppenheimer.
  • Royal Gold (RGLD) raised to Overweight at HSBC.
  • Windstream (WIN) downgraded to Underweight at J.P.Morgan.
  • BANC OF AMERICA ON DRUGS: Barr Pharma (BRL) started as Buy; Multi-Fineline (MFLX) started as Buy; Mylan Labs (MYL) started as Buy; Teva Pharma (TEVA) started as Buy; Watson Pharma (WPI) started as neutral; ZymoGenetics (ZGEN) downgraded to Neutral.

Jon C. Ogg
December 18, 2007

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

Posted on: December 18, 2007 – 7:59 am in Analyst Calls, , , , , , , , , , , , , ,

US Telecom: Requiem For The Landline (T)(VZ)(Q)

For the better part of 100 years, the landline was the primary means of telephonic communication between consumers and between businesses. It helped create everything from the answering machine to the fax. Add telephone marketing to that list.The landline phone was so important that Congress made sure that even farmers had access to one.

This year, for the first time, household spending on cellular service will pass landline expenditures. According to The Associated Press "the most recent government data show that households spent $524, on average, on cell phone bills in 2006, compared with $542 for residential and pay-phone services. By now, though, consumers almost certainly spend more on their cell phone bills, several telecom industry analysts and officials said."

That news is not as good as it might seem for the cellular companies. That is because they are also the largest providers of landlines. AT&T (T) and Verizon (VZ) have posted impressive returns on their wireless businesses over the last five years, but there are now 250 million cellphone in a country with 300 million people. Investors can assume the the population under five years old and over 100 probably do not use the devices. In other words, cellular adoption is probably close to the saturation point.

AT&T and Verizon are likely to continue to watch landline revenue fall. They can take some comfort in their wireless revenue. They can also hope that their fiber-to-the-home broadband and TV services will take enough customers from cable so that these services become big money makers.

The entire evolution of telecoms does leave Qwest (Q) out in the cold. It has no real cell carrier operation. It is planning to do modest upgrades of its network with fiber. But, landline attrition is likely to become an increasing problem.

The landline may be dying off, but with cellular service revenue growth likely to slow, the telecoms may not be as well off as they seem. AT&T and Verizon trade near multi-year highs. But, maybe not forever.

Douglas A. McIntyre

Posted on: December 18, 2007 – 6:44 am in Telecom, , ,

Europe Markets 12/18/2007

Markets in Europe were modestly higher at 6.10 AM New York time.

The FTSE was up .7% to 6,319. Northern Rock was up 4.1% to 95.1. Prudential (PUK) was up 2.6% to 673.

The DAXX was trading higher by .6% to 7,875. BMW was up 2% to 41.23. Siemens (SI) was up 1.9% to 104.55.

The CAC 40 was rising .8% to 5,559. Alcatel-Lucent (ALU) was up 1.6% to 5.24. Societe Generale was up 1.1% to 99.5

Data from Reuters

Douglas A. McIntyre

Posted on: December 18, 2007 – 6:12 am in International Markets, , ,