Daily Archives: January 4, 2008

Warner (TWX) Goes With Sony (SNE) Blu-ray

Warner, the studio wing of Time Warner (TWX) will throw its weight behind the Sony (SNE) Blu-ray high definition format. The new is a blow to the rival Toshiba HD-DVD initiative.

Speaking with the studio, the FT was told “The window of opportunity for high-definition DVD could be missed if format confusion continues to linger,” said Barry Meyer, Warner’s chairman. “We believe that exclusively distributing in Blu-ray will further the potential for mass market success and ultimately benefit retailers, producers, and most importantly, consumers.”

Douglas A. McIntyre

Posted on: January 4, 2008 – 6:22 pm in Consumer Electronics, ,

Radio Shack: Julian Day Hardly Matters (RSH)

When it comes to second tier electronics sellers, 2007 was not the greatest year and 2008 has these all hitting 52-week lows as well.  Today shares of Radio Shack (NYSE: RSH) are getting crushed by more than 5% down to  $15.15, and the 52-week trading had been $16.03 to $35.00.  Yep $35.00.

If you will go back to summer of 2006 you will see that in the 18-months prior period that this slid from the $30’s down to $15.00 and briefly under.  Then it hired turnaround expert Julian Day as Chairman & CEO and the shares barely saw a $15.00 handle on the stock after that.  He came in and worked his magic and shares were back up to $20.00 before the end of 2006.  Then shares came back down a bit but shares climbed rapidly during 2007 back up to $35.00 before selling off in the summer.

It’s been an ugly situation since then.  In fact it has been so ugly that shares are back on 52-week lows and here they are challenging $15.00 yet again.  The shares are back to where they were before Day took the helm, just like he didn’t matter.  We don’t agree with this thesis at all, but money-flows in and out of stocks talk much louder than one opinion.

Analysts had been downgrading this stock throughout the year based upon valuations.  The last two upgrades were only covering essentially what were sell ratings: raised to Market Perform at BMO Capital Markets this morning and raised to Neutral at Banc of America on December 20.  Analyst price targets are only about $20 or slightly higher, so it appears the turnaround juice has been squeezed out of it.  At least that is what Wall Street thinks.

The stock is now cheap on a forward earnings multiple of 10 or under.  But when you see the retail picture the way we are seeing it then you have to question how much farther down the estimates will have to come.  A recession is starting to be priced into stocks, and retail and credit aren’t expected to improve tomorrow.  In fact, if you look at stock charts then the market participants are acting like things are about to get much worse.

If we owned a retailer in trouble we’d love to hire Julian Day.  Wall Street isn’t giving him the same vote today.

Jon C. Ogg
January 4, 2008

Posted on: January 4, 2008 – 3:47 pm in HI/LOW, Retail, Turnarounds, ,

Biotechs and Related Hitting 52-Week Lows Too (BBH, AMGN, AMLN, ARNA, GERN, INGN, PGNX, SUPG)

Today has been a rough day with more 52-week lows than we can recall in quite some time.  The biotechs haven’t been immune.  You can even see that the Biotech HOLDRs (BBH) at $160+ are only about 2% above the 52-week lows of $157.95, while the iShares Nasdaq Biotechnology (IBB) ETF at $80.29 is only about half-way in its 52-week trading range of $72.37 to $89.00.  The difference is because of the composition.

Here are BIOTECH STOCKS hitting 52-week lows today:

  • Amgen (AMGN)
  • Amylin Pharma (AMLN)
  • Arena Pharma (ARNA)
  • Cleveland Biolabs (CBLI)
  • Geron (GERN)
  • Introgen (INGN)
  • Progenics Pharma (PGNX)
  • Somaxon Pharma (SOMX)
  • Spectrum Pharma (SPPI)
  • Supergen (SUPG)

If you wantto see how bad today is look at the master list of 52-week lows we compiled two hours ago with financials, restaurants, retail, REIT, property, tech and more.  It’s a huge list.

Jon C. Ogg
January 4, 2008

Posted on: January 4, 2008 – 3:22 pm in Biotech, HI/LOW, , , , , , , ,

52-Week Low Club (Jan 4, 2007) Led By Financials, Restaurants, Retail, REIT, Property & Tech

At 11:00 AM EST the NASDAQ was down 73 points and the S&P was was down some 25 points…. an hour later we had word of some $30 Billion in Fed liquidity that was being made available to banks rather than the $20 Billion originally set.  So just after Noon EST we now have the NASDAQ down 59.01 at 2,543.67 and the S&P is down 19.32 at 1,427.84.  Even after a slight bump you’ll see how bad it is with today’s 52-week low club.

The reason is simple with a jobs number showing the higher and higher chance of a recession.  We’d like to just let the cat out of the bag and declare that for all practical purposes we ARE in a recession.  The numbers might show a narrow escape from the R-WORD, but unemployment has to hold up to avoid a recession.  Today’s jobs data doesn’t signal that employment is holding up.

Unfortunately today was a sea of red on the trading tape with the 52-week lows having almost the same usual suspects in transports, retail/restaurants, financials, REIT’s/property and tech/chips….. Plus we threw in a bit more:

  • Transports: AAI, ABFS, AMR, CAL, DAL, CXP, DHT, DTG, F, GM, GWR, HOG, HZO, JBLU, LPX, LUV, MESA, NWA, OSK, RYAAY, TM, UPS, WERN, WGO, XJT, YRCW,
  • Retail & Restaurants (and related): AEO, ANN, AN, BAMM, BBBY, BGFV, BIG, BGP, BONT, CACH, CAB, CAKE, CBK, CC, CEC, CHS, CMRG, COH, COLM, CONN, CPKI, CWTR, CTO, DBRN, DDS, DENN, DLTR, DPZ, DRI, DSW, EAT, EBHI, ETH, FBN, FDO, FRED, GPI, GYMB, HAS, MAT, HD, HOTT, JAS, JBX, JCP, JNY, KCP, KSS, LF, LIZ, LNY, LOW, LTD, LUB, M, MRT, MOV, MW, NDN, OMX, PERY, PETM, PFCB, PNRA, PSUN, PVH, PZZA, RAD, RCKY, RL, ROST, RNT, RRGB, RSH, RT, RUBO, RUTH, SBUX, SKX, SNS, TGT, TLB, TUES, TXRH, VFC, WAG, WEN, WSM, ZLC, ZUMZ
  • Financials: ACAS, ADVNA, BAC, BBT, BEN, BKUNA, BSC, C, CBSH, CFR, CNB, CNO, CYN, DFG, DFS, DSL, EFX, FIC, FCFS, FIG, FIS, FITB, FNB, HBAN, HBC, HIG, HRB, JEF, JTX, MBI, MCO, MER, MET, MGI, MHP, MI, MTB, NCC, NNI, OCN, PNC, PRAA, PRSP, RF, SAFC, SBP, SCA, SLM, STI, STU, SWS, TCB, TWPG, UB, WB, WBS, WFC, WL, WRLD, ZION
  • REIT’s and Property: AEC, AIV, APO, AVB, BDN, BEE, BPO, BKD, BRE, BRT, BXP, BYD, BZH, CHH, CPT, CUZ, DDR, DCT, DRE, DRH, EDR, ELS, ESS, FCH, FPO, FR, GBX, GGP, GRT, HME, HOT, HOV, HPT, HRP, HST, HT, IRC, KIM, KRC, KRG, LHO, LRY, LXP, MAA, MTH, MSW, O, OFC, PHHM, PSB, PPS, REG, SHO, SLG, SPG, SSS, SUI, TCO, TOL, URE, VNO, WOLF, WRi, WYN, YSI,
  • Tech & Semiconductors: ADI, ALU, AMD, AMAT, AMKR, ATML, BBND, BE, CSC, CYMI, ELX, FCS, FEIC, FFIV, IMOS, JAVA, KLAC, KLIC, LLNW, LRCX, LSI, LSCC, LXK, MCRL, MIPS, MRVL, MTSN, MU, MVSN, NSM, NT, NVLS, PER, PKTR, PMCS, RACK, SIFY, SIMG, SNDK, SONS, SPSN, STM, SYMC, TLAB, UIS, VECO, VIGN, VLTR, WIND, XLNX,
  • Others…. ADP, AMGN, AMLN, AZN, BDK, BJS, BT, BVF, CAH, CAI, CBS, CMCSA, DBD, DOW, EK, EYE, LAMR, MNI, MNST, MSO, OSTK, PAYX, PHH, TWX, TZOO, WMI

The good news is that this last bit of liquidity infusion or availability from the Fed seems to be helping.  Not all of these look like they are closing on 52-week lows, so many will have recovered before the close.  Or so it seems now.  This is the absolute ugliest list of 52-week lows we have seen in quite some time.

Jon C. Ogg
January 4, 2008

Posted on: January 4, 2008 – 12:22 pm in HI/LOW

Ford (F) Drops Below Where It Traded During Chapter 11 Talk

In April 2006, Bill Ford, then CEO of the company which carries his name, say that Ford (F) would not file for bankruptcy. His comments were a reaction to credit agencies and research firms that thought the car firm would not make it. Ford shares traded at $7 then, and dropped to $6.17 three months later.

Now, Ford’s shares are below that level. Today they dipped to $6. There appears to be almost no chance that the company is in the imminent danger that it was in 2006, but Wall St. clearly doesn’t like Ford’s long-term prospects.

Ford’s poor product line-up, especially its heavy mix of pick-ups and SUVs, combined with an extremely soft US car market have investors thinking that Ford may not make money for the next two or three years. If the savings that the company got from cutting costs and a new UAW contract are not enough, Ford could have to go back to the capital markets for cash. During a credit crunch whatever money it has to raise will come at a very, very dear price.

In other words, a lot of dilution.

Seeing the value of Ford’s common stock move closer to zero may not be the same as bankruptcy, but the difference could end up being subtle.

Douglas A. McIntyre

Posted on: January 4, 2008 – 11:38 am in Autos,

Tech: The Weak Get Weaker (AMD)(MOT)

The tech sell-off is accelerating. It may be that Intel (INTC) got downgraded or that Motorola (MOT) may have had a weak Q4.

But, the problem is probably worse than that. Tech was supposed to be the market’s Hans Brinker, the boy who saved Holland by putting his finger in the dike.

The stocks in tech firms that have had poor results recently are taking the worst of it. They can’t handle much exposure to a bad economy. That is driving down AMD (AMD) 6.5% to a new low of $6.26. Motorola (MOT) is off almost 7% near its 52-week low at $14.91. News around Wall St. is that the big handset company only sold 40 million units in the fourth quarter.

Microsoft (MSFT), Cisco (CSCO), Apple (AAPL) and Oracle (ORCL) are at least fighting back. They are trading off 2% to 3%, but are closer to their 52-week highs than most shares.

The stragglers are getting picked off one at a time.

Douglas A. McIntyre

Posted on: January 4, 2008 – 11:13 am in Technology Companies, , , , , ,

Turnarounds That Haven’t Turned Around: UTStarcom (UTSI)

UTStarcom Inc. (NASDAQ:UTSI) is one of the former high fliers that crashed and burned, despite its US-based operations with what was huge leverage in China.  In the past it had grown and grown but then when it had massive accounting irregularities and restatements the gig was up.  For quite some time it was also unable to complete its SEC filings. That is now in the past, or so it seems, and the company is NASDAQ compliant now.  But the company’s stock hasn’t been able to turn around into something resembling a growth tech stock. 

The problems surfaced in 2004 and became massive in 2005.  Since the big drop in early 2005 these shares have seen $10 prints briefly but the stock was unable to hold.  At the end of 2003 this was a $40+ stock and before that had spent most of 2001 and 2002 in a $15 to $35 range.  TODAY the stock is about 10% off its 52-week lows of $2.43, but almost 75% down from the $10.32 high of the last 52-weeks.

This was a steady decliner for the first half 2007 after briefly hitting $10 and then it really hit skid row in late summer before trying to mount a recovery back to $5.00.  That also failed.  But the good news is that on a linear support line these lows here within that 10% downside from here have held over and over.  In this wacky market it is impossible to say all the bad news is priced in, but if you are a pure chartist you will see this too.

If you like to find heavy short interest stocks you need to look no further.  The bets are massive here with some 28.89 million shares short as of the last data in December.  That is over 29% of the float, although down about 2 million shares from the prior reading.

Read More »

Posted on: January 4, 2008 – 10:46 am in Turnarounds,

SPAC IPO FILING: China Energy Partners Inc.

There was another SPAC IPO filing last night.  A company called China Energy Partners Inc. has filed to sell units for stock and warrants for up to $402.5 million total, although the initial filing is for some $200 million.  This is a blank check company or SPAC, special purpose acquisition company.

Here is the company’s target as it describes itself in the prospectus: "While our efforts in identifying a prospective target business will not be limited to a particular industry or location, we intend to focus our efforts in identifying prospective target businesses to the energy industry (and closely related industries) in China. To date, our efforts have been limited to organizational activities as well as activities related to this offering. We do not have any specific business combination under consideration and we have not, nor has anyone on our behalf, contacted any potential target business or had any substantive discussions, formal or otherwise, with respect to such a transaction. Additionally, we have not engaged or retained any agent or other representative to identify or locate any suitable acquisition candidate, to conduct any research or take any measures, directly or indirectly, to locate or contact a target business."

Ferris Baker Watts is the only listed underwriter for this offering.  No ticker has been assigned by AMEX.

Jon C. Ogg
January 4, 2008

Posted on: January 4, 2008 – 9:29 am in China, IPOs

Citigroup (C) Write-Downs To Hit $15.3 Billion

KBW analyst Diane Merdian now estimates Citigroup (C) will take $15.3 billion in writedowns in the fourth quarter tied to mortgage-backed debt and collateralized debt obligations, instead of the $11 billion previously estimated, according to a report from The Associated Press.

Citi shares are down 1.2% to $28.52 which will put them at a new 52-week low.

Douglas A. McIntyre

Posted on: January 4, 2008 – 9:16 am in Banking,

With Crummy Jobs Report, The R-Word Is Far Closer

Non-farm Payrolls increased a mere 18,000 jobs versus an expected 50,000 and the unemployment rate rose to 5.0% from 4.7% in November.  Hourly earnings rose 0.4%. It also looks like the the total number of people working fell 436,000 in December.  The November non-farm payrolls were actually revised higher to 115,000 from 94,000.

This follows suit with that Monster online reading yesterday.  If the labor market doesn’t hold strong then the economy isn’t going to be able to avoid the dreaded "R WORD" if this continues.  It isn’t like retail or credit is starting to show an help, and in fact they are getting worse and worse.

The DJIA futures were up slightly before this release, and after the release they fell almost 100 points.  The FOMC will now have to look harder at a 50-basis point cut whether it wants to or not, or so goes the trader mentality.

Jon C. Ogg
January 4, 2008

Posted on: January 4, 2008 – 8:39 am in Economy

Goldman Sachs Raises Apple & Microsoft Estimates (AAPL, MSFT)

Goldman Sachs is raising estimates on both Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) today:

On Microsoft (MSFT), Goldman Sachs has noted how the company "kicked itself out of the doldrums and outperformed" with an 11% gain (vs. -4% at S&P 500).  Even after the lift Goldman Sachs sees MSFT attractive with a BUY RATING due to product cycle upgrades, broad international exposure, and an above expectations PC Unit Growth.  Goldman Sachs raised Q2 and Fiscal 2008to match the hardware team’s raising of PC growth forecasts in calendar 2008.  Firm also notes strong holiday season in EDD division with better than expected console sales and a strong currency beneficiary.  If you will recall, the last time we noted a key upgrade on Microsoft from Goldman Sachs shortly before earnings we thought that the brokerage analyst had learned something not widely known because of the timing of the call.

Goldman Sachs has raised estimates on Apple (AAPL) this morning and maintained its BUY RATING.  This fiscal year at Apple is being raised to $5.03 EPS from $4.88 (consensus for Fiscal 9/08 is $5.07) and next fiscal year is being raised to $6.25 EPS vs. $5.71 (consensus for Fiscal 9/09 is $6.36).  So when you compare the Goldman Sachs estimate raise it is still under that of Wall Street.  This appears to be more of a catching-up call than anything groundbreaking.

Jon C. Ogg
January 4, 2008

Posted on: January 4, 2008 – 8:21 am in Analyst Calls, PC Companies, Software, Technology Companies, ,

Top 10 Pre-Market Analyst Calls (ALL, GLW, DISH, GM, INTC, ITG, JNJ, PNM, RESP, UPL)

These are not the only top analyst calls impacting share prices this morning, but these are the main calls that 247WallSt.com is focusing on in pre-market trading this Friday morning:

  • Allstate (ALL) raised to Outperform at FBR.
  • Corning (GLW) started as Buy at Jefferies.
  • Echostar (DISH) raised to Market Perform from Underperform at Bernstein.
  • General Motors (GM) removed from JPMorgan Focus List.
  • Intel (INTC) downgraded to Neutral from Overweight at JPMorgan.
  • Investment Technology (ITG) raised to Buy from Neutral at Banc of America.
  • Johnson & Johnson (JNJ) started as Buy at UBS.
  • PNM Resources (PNM) raised to Buy from Hold at Jefferies.
  • Respironics (RESP) downgraded to Neutral from Buy at Banc of America.
  • Ultra Petroleum (UPL) started as Neutral at Sun Trust Robinson Humphrey; just noted last night by Cramer on MAD MONEY as his natural gas stock of 2008.

Jon C. Ogg
January 4, 2008

Posted on: January 4, 2008 – 7:57 am in Analyst Calls, , , , , , , , , ,

For The Economy, The Primaries Don’t Matter

The Iowa voting is over and the upsets are recorded. But, with the primaries about to begin in earnest and with the winners to be chosen before mid-year, it hardly matters to the economy who wins.

The recession has begun to flower in the US. The December jobs report was OK. The Fed may not be able to drop rates as much as it would like because of ongoing concerns about inflation. Oil is likely to stay high. The housing, financial, auto, and retail sectors will almost certainly be weak all year.

All of this means that the downturn in the US economy has begun with the primary season. By the time the two nominees lock horns and a new president reaches office, it will be next January. At that point there is a chance that the fall-off in GDP will have come and, perhaps, have gone. If not, the problems will be so deep and wide that a new administration may need several quarters to try to fix them. If there is any gridlock in Congress that process may take until the end of 2009.

It may matter who gets nominated and it may matter more who gets elected. But, for the economy, the results are barely of any interest at all.

Douglas A. McIntyre

Posted on: January 4, 2008 – 7:07 am in Economy

Europe Markets 1/4/2008

Markets in Europe were mixed at 6.50 AM New York time.

The FTSE was up .7% to 6,525. BP (BP) was up 1.5% to 645. BHP Billiton (BHP) was up 2.9% to 1644.

The DAXX fell .3% to 7,885. Daimler was down 3% to 61.01. MAN was down 2.5% to 103.5.

The CAC 40 was up .1% to 5,552. France Telecom (FTE) was up 2.5% to 24.83.

Data from Reuters

Douglas A. McIntyre

Posted on: January 4, 2008 – 6:52 am in International Markets, , ,

GM’s (GM) Mad Forecast

The people at the GM (GM) headquarters must have had too much to drink over the holidays. According to Reuters GM "expects overall 2008 U.S. auto sales to be about the same as the depressed levels of 2007". That would be about 16.1 million cars and light trucks, and it won’t happen.

Most of the issues that hurt car sales in the US came around about mid-year. Oil started its run-up to $100. The housing market fell apart. The consumer reached a level of despair. The economy began to falter.

So, the first half of the year was not a bad environment for selling cars. That will not be true for 2008. The entire year could be awful. The idea that car sales in the US can hold 2007 levels is folly. Some industry experts say that sales could drop to 15 million units.

There was a silver lining in the GM announcement. Global sales for the industry may hit 75 million. That will be driven by markets like China, India, and Russia. But, it won’t make up for a crippled US sales environment. GM’s shares are likely to stay around their 52-week lows.

Douglas A. McIntyre

Posted on: January 4, 2008 – 6:30 am in Autos,

Digital Music Downloads Move Up 45% In 2007

Score another one for Apple (AAPL) and its iTune service which some experts say has 70% of the digital music download market.

According to The Wall Street Journal "the number of digital tracks sold jumped 45% to 844.2 million."

The total number of albums bought on physical formats like CDs dropped from 588 million in 2006 to 500 million in 2007.

It is only a matter of time before Apple owns the entire music industry.

Douglas A. McIntyre

Posted on: January 4, 2008 – 6:15 am in Media,

A Big Quarter For The Xbox, But Why Is Microsoft (MSFT) In The Business?

Microsoft (MSFT) sold 4.3 million Xbox 360s in Q4. The company’s "Halo 3" game helped that. Reuters reports that the company was pleased with itself: "Holiday 2007 was a blockbuster season for the gaming industry," Microsoft said, adding that the Xbox 360 has kept its lead over rivals in terms of total dollars spent on hardware and software.

The gang from Redmond also reported that their online download system for the Xbox was broken for part of last month. That made online gaming hard and Microsoft will offer free games to make up for the glitch.

The is not the first technical problem that the Xbox has had. Earlier in 2007, some of the consoles were overheating. Microsoft took a $1 billion plus charge for warranty liabilities.

It is not hard to argue that the Xbox is not core to Microsoft’s business. It is also not hard to argue that the problems with the system hurt the overall company image at a time when it is trying to roll out Vista. The new PC OS has some problems of its own. The public relations around the firm get hurt when the name Microsoft is attached to things that don’t work well.

The company’s device division only made $134 million in the last quarter. That is next to nothing for Microsoft especially given the aggravation that the Xbox has caused.

With the Xbox bringing in so many problems and so little operating income, Microsoft should sell the operation to Sony (SNE) or Nintendo where they really are in the video game business.

Douglas A. McIntyre

Posted on: January 4, 2008 – 6:08 am in Consumer Electronics, ,

Sirius (SIRI) Gets More Subscribers, But Can It Stay In Business?

Sirius (SIRI) announced that it ended the year with 8.3 million subscribers, a 38% increase. What it did not mention is that it also exited the year with about $1.3 billion in debt and $2.2 billion in total liabilities.

The Sirius merger with XM Satellite (XMSR) has also been sitting with the federal government for almost a year. The two companies believe that the merger will allow them to cut costs and handle their substantial debt loads.

But, a 38% increase in subscribers may be too slow. Sirius lost another $120 million in Q3. Music publishers and artists want more money for the content that the company broadcasts. Big talent like Howard Stern may ask for more compensation when their programs are being heard on the two merged networks.

Sirius may not see costs drop much right after a merger. It will have to operate two networks because it is not on the same system as XM. Consumer electronics devices like the Apple (AAPL) iPod are being used to provide entertainment in cars. That means satellite radio may have to increase marketing to stay in the game.

Sirius has a long way to go to become viable.

Douglas A. McIntyre

Posted on: January 4, 2008 – 5:56 am in Consumer Electronics, , ,

PC Companies Go After Apple (AAPL) Mac

PC companies are going after the Apple (AAPL) Mac. Hewlett-Packard (HPQ) and Dell (DELL) are building new laptops with more colorful housings, better processors, and nicer screens. The sales of the Mac are growing and some figures put its US sales market share at near 8% in December.

The trouble is that the PC companies probably can’t compete with the Mac. Apple has a certain "cool" factor because of the iPod and iPhone. It also has the Mac Leopard OS which has become popular with consumers and is giving Microsoft (MSFT) Vista a run for its money.

With the economy slowing, the Mac’s biggest enemy is its high price. A laptop with decent features starts at $1,400. That is a dear price to pay for a PC.

The PC manufacturers may have to cut prices in addition to improving features. If consumer spending slows, it may be their best weapon for keeping share. It could bring down their margins for a couple of quarters, but that is better than having the Mac get 15% of the market.

Douglas A. McIntyre

Posted on: January 4, 2008 – 5:48 am in PC Companies, , ,

Fox Business Network (NWS); Dead On Arrival

No on watches Fox Business. Perhaps a few agoraphobics and people who are unemployed.

According to The New York Times, the average number of people watching Fox Business on weekdays is 6,300. The figures are based on Nielsen measurements for each weekday from Oct. 15 through Dec. 14. CNBC had a comparable number of 283,000 viewers.

Taking into account the huge number of dollars spent on promoting the network, the viewership is a disaster. Fox, a part of News Corp (NWS) had hoped to mount a credible threat to GE’s (GE) market leader CNBC. Industry numbers show that the older business channel is highly profitable.

Fox Business now has to hope its can build numbers that are not totally embarrassing by using its new affiliation with The Wall Street Journal which News Corp recently purchased. But, is certainly will be harder to get guests to go on a network that has fewer viewers than most community colleges have students.

Douglas A. McIntyre

Posted on: January 4, 2008 – 5:00 am in Media, ,