Daily Archives: January 15, 2008

JPMorgan Can Learn Lessons From American Express & Citigroup (JPM, AXP, C)

JPMorgan Chase (NYSE: JPM) reports earnings on Wednesday morning.  Wall Street analysts are apparently looking for $0.93 EPS on revenues of $17 Billion according to First Call, although in this current environment it’s hard to imagine any bank or financial meeting or beating targets even if those targets have been lowered.  Analysts still expect a slight growth for 2008 and that just seems silly in the environment today.  But isn’t all bad at all banks and all financial institutions.

To say it is no secret that the financial sector is a wreck would be like saying you are an overpaid employee at the department of redundancy department.  Tuesday was a pain for JPMorgan shares as Deutsche Bank downgraded the rating from a Buy (with $56 target) down to a Hold (with a new $44 target) as the firm believes that even the famed and notorious JPMorgan Chase won’t be able to entirely escape the woes in the financial sector right now.  In fact, it fell worse than many other financials with a 5% drop down to $39.17 on nearly double volume and even slid to $38.50 in the after-hours session.

This particular report will be extra interesting, and it is actuallyfar more critical to the financial sector than others like Citigroup(NYSE: C).  The reason for this is that JPMorgan Chase is supposed tohave the strongest credit base in its client base.  It has a strongclient base like American Express (NYSE: AXP) does compared to manyVisa clearing member banks.  Regardless of this, you know there aregoing to be problems.  Chase’s delinquencies will certainly be upand it too will have charges, and if these analysts haven’t figured outthat it’s going to stay that way for a while then who knows what to sayabout them.  But Chase is also a survivor and deserves to be in abetter spot than the rest of the sector.  It’s also one of thepotential winners out of the Dogs of the Dow this year, as long as thissector can stabilize.  Unlike other banks and financials we havetelegraphed which others would cut their dividend, the JPMorgan Chase dividend is probably a safe one.

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Posted on: January 15, 2008 – 8:23 pm in Banking, Earnings, Financial Stocks, , ,

The Day In Biotech Stocks (January 15, 2008) (DNA, DNDN, GENZ, TTHI, LCBM, CEGE, GPCB, CGEN)

Today was a brutal day for risk stocks, and biotechs are often thought of as risky to stocks as Russian Roulette is to your head.  But Biotechs are also a source of safety IF they are winners, and you could in theory have a market down 30% and see a small biotech run up exponentially if it has a major development in a drug candidate.  In short, there’s always action in this sector.  It survives democrats and republicans, bull markets and bear markets, and growth versus defense (and vise versa).

Unfortunately, Genetech fell 1.44% to $69.62 after it beat earnings Monday and reiterated its 2008 guidance.  Unfortunately it also missed sales estimates on ALL of its top four drugs.

Dendreon (NASDAQ: DNDN) was a safety net, as we noted that the E.U. may come to its aid.  It was granted a method patent for its PROVENGE for prostate cancer (and another patent).  That is after a large gain yesterday too.  DNDN rose 4.2% to $6.73.

Genzyme (NASDAQ: GENZ) saw S&P actually Raise its corporate debtrating based on its solid operating performance, varied portfolio, and its strong pipeline.  S&P’s raised the rating to ‘BBB+’ from ‘BBB,’ and this is that much stronger in a "investment grade rating" for corporations.  GENZ fell 0.2% in regular trading and rose 0.2% to $78.68 after the news.

Transition Therapeutics Inc. (NASDAQ: TTHI) rose 10% to $12.10 on a whopping 49,582 shares, yet not official news was out.  We don’t even have any options data on it.

Lifecore Bio (NASDAQ: LCBM) rose a whopping 30% today to $16.76 because Warburg Pincus is acquiring the stock for $17.00 per share.  It traded some 3.4 million shares.

Cell Genesys (NASDAQ:CEGE) rose some 6% to $2.24 after it filed its financial report (on Edgar), but this is one day after its press release of "Interim Analysis Supports Continuation of Cell Genesys’ VITAL-1 Phase 3 Clinical Trial of GVAX Immunotherapy for Prostate Cancer" that was out yesterday.

GPC Biotech AG (NASDAQ: GPCB) fell by 16.9% down to $2.99, although we didn’t see any direct news on this biotech implosion.  Its trading range is (was) $3.25 to $37.79, ouch.

Compugen (NASDAQ: CGEN) rose $0.32 or almost 16% to $2.33, and it was up even further than that in after-hours trading.  The company didn’t have any news today of its own but yesterday morning it did announce a GPCR Ligand Discovery and License Option Agreement With Merck that had it up big yesterday.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 7:07 pm in Biotech, , , , , , , ,

Cramer’s Oversold Tech Value Stock (RVBD)

On tonight’s MAD MONEY on CNBC, Jim Cramer did come out with an oversold pick with value in the technology sector, although he’s still talking about protecting capital and being defensive for capital preservation.

  • Riverbed Technology, Inc. (NASDAQ: RVBD) is one he now likes and he’s been on it before. It has a wide area network optimization product to allow corporate networks run better and save money.  In October it was crushed when it had an in-line quarter. He thinks it has washed itself out and is discounting the worst on an oversold basis.  The estimates are so low that he thinks the company can beat earnings.  He thinks it is undervalued based on its coming growth versus its multiple with a new product.  Its market is still performing well despite a slowing economy.  He does say it can still go down. He noted a "down $3, up $10 or $15" scenario that he seems more than comfortable with.

Cramer said this is a vicious overreaction to the downside on Intel. Last night on MAD MONEY Cramer also came out and said he was evaluating EMC as his oversold and overlooked tech pick.  He also said he was bullish on Intel and other key tech stocks after their sell-offs and we gave hat full list of names he gave in tech-land to make previews for the other tech stocks he would make predictions in this week.  Here is a consolidated list of his 2007 calls that are still pertinent to his strategies in 2008.

RVBD shares fell some 8% today to $21.16, and shares are down 0.7% in after-hours trading at $21.00.  The 52-week trading band is (actually was) $21.63 to $52.81.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 6:33 pm in Cramer, Technology Companies, Value Investing,

Cramer’s Diagnostics Pick, Pet Blood & Urine… Really (IDXX)

On tonight’s MAD MONEY on CNBC, Jim Cramer came out calling for a move toward being ultra-defensive in what he said is a bear market and fed-mandated recession (here’s our own 2008 defensive stocks with a value mix, although these aren’t all stocks you can just buy and hold) in a brutal market where you main goal has to be capital preservation.  Cramer said this is a vicious overreaction to the downside on Intel in after-hours trading.

One sector that Cramer said is very defensive that can still work is a diagnostics company.  One company that has no government reimbursement risk is in pet care and was up today.  IDEXX Laboratories (NASDAQ:IDXX) is his pick.  He thinks you should wait for a pullback and not buy it tomorrow, but it is a buy according to him.  It also has coming catalysts as a replacement for its blood and urine testing and its sales seem stable.  It has come down from highs and he thinks there could be some estimate bump ups on the stock.  IDEXX Labs (IDXX) shares closed up 1.56% today at

Last night on MAD MONEY Cramer also came out and said he was evaluatingEMC Corp. (NYSE: EMC) as his oversold and overlooked tech pick.  Here was his 2007 active list that is still active for 2008 and still has relevance to his calls today.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 6:20 pm in Cramer, Medical,

Liz Claiborne Scores Key Designer, Isaac Mizrahi (LIZ, TGT, WMT)

Liz Clairborne Inc. (NYSE: LIZ) has made a key hire that might get some notice or kudos if it was a different environment.  It appears that Liz has poached away Isaac Mizrahi from Target Corp. (NYSE: TGT).  This line of Isaac Mizrahi will still be available at select target stores and target.com through the end of 2008.

Isaac Mizrahi is actually a trendy brand that has been quite popular, and it may have been one of a few dozen things that had helped Target make inroads in its war against Wal-Mart (NYSE: WMT) on the fashion side.  Speaking of which, they should have done the work to pursue him.

Normally we’d say this might be a great fit for Liz.  Actually we think it is a great fit considering how the performance has been over there.  There’s just one small problem.  We are already in a recession and now it seems that the only big question is how deep or how bad it will get. 

Also, as this clothing line is available at Target through the end of the year this will take some time to filter out for Liz.  As every other retailer is in the soup, it’s just hard to get excited about anything retail today.

Congratulations Liz, but we’ll throw you a party maybe later in the year.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 6:03 pm in Apparel, Retail, , ,

Intel Guidance Wrecks Last Bullish Hopes for Tech/PC’s (INTC, AMD, MSFT, DELL)

Intel Corp. (NASDAQ: INTC) has just posted earnings.  The processor and chip giant noted its EPS as $0.38 on revenues of $10.71 Billion.  First Call had this quarter at $0.40 EPS on revenues of roughly $10.84 Billion, but the initial notes indicated that there was a 2.5 Cent charge on EPS or $234 million for restructuring and asset impairments.  Gross margin for this last quarter was 58.1%.
As far as guidance it is offering the following:

  • Intel is guiding next quarter to $9.4 to $10.0 Billion, but next quarter estimates are $9.97 Billion in revenues;
  • Intel guides margins to 56% +/- 1%;
  • Intel puts its fiscal 2008 margin at 57% +/- a few points, puts R&D at $5.9 Billion; puts MG&A at $5.5 Billion and Cap-ex at $5.2 Billion +/- $200M.  Intel didn’t offer revenue or earnings guidance but the estimates are $1.51 EPS on roughly $41.7+ Billion.

Here was today’s earnings preview and here was Jim Cramer on CNBC’s MAD MONEY last night saying he liked it here after the sell-off.  We’ll see if this chart can recover from its woes in the near-term.  Last week AmTech said "We are a buyer of INTC, here and now."

Intel shares closed down 1.7% at $22.69 in normal trading on roughly 95 million shares on an unofficial count before the after-hours reaction.  Shares are now down 13% more at $19.60 in the post-earnings trades in after-hours.  Its 52-week trading range is $18.75 to $27.99, and most recently $22.00 acted as the last real support level after its slide during the first part of January.

Shares of Advanced Micro Devices (NYSE: AMD) are also feeling the pinch.  Those shares fell some 4.5% today to $6.12 and shares are down over 5% to $5.75 in after-hours.  Microsoft (NASDAQ: MSFT) shares are down over 3% in after-hours trading and Dell (NASDAQ: DELL) shares are down almost 6% in after-hours.  This will likely fall over into other tech stocks as well.  As noted, so much for the efficient market theory.   If Silicon Valley home prices didn’t play catch up with the rest of the major price drops seen in California, there’s a better they will now.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 4:28 pm in Earnings, Earnings Warning, Semiconductor, Technology Companies, , , ,

Suppliers Feel More Boeing 787 Delays (BA, SPR, BEAV, HON, COL, LMIA, TIE, PCP)

The Wall Street Journal has announced that there may be (actually it says "near announcing") some new delays out of Boeing (NYSE: BA) on its 787 Dreamiliner.  We first noted that the Boeing suppliers were likely to be under pressure back on OCTOBER 10, 2007 on word of the first real delays in the Dreamliner.

Here is a snapshot of some of the many suppliers for Boeing, with some price comparisons:

  • Spirit Aerosystems (NYSE:SPR) is the ex-Boeing unit, which makes fuselage parts: stock price on October 10 after the first Boeing delay: $36.50.  Share price today: $26.12 (-7%).
  • BE Aerospace (NASDAQ:BEAV) has cabin and seating contracts with Boeing; Stock price on October 10 after the first Boeing delay: $43.30. Share price today: $40.10 (-3%).
  • Honeywell (NYSE:HON) has the cockpit award; Stock price on October 10 after the first Boeing delay: $60.00.  Share price today: $56.69 (-1.9%).
  • Rockwell Collins (NYSE:COL) has information management pacts with Boeing; Stock price on October 10 after the first Boeing delay: $73.35.  Share price today: $65.10 (-2.4%).
  • LMI Aerospace (NASDAQ:LMIA) has Boeing as principal customer for structural components, assemblies, and kits; Stock price on October 10 after the first Boeing delay: $27.65.  Share price today: $22.97 (-1%).
  • Titanium Metals (NYSE:TIE) has long-term Boeing titanium/metals supply pacts; Stock price on October 10 after the first Boeing delay: $33.29.  Share price today: $23.45 (-4.7%).
  • Precision Castparts (NYSE:PCP) manufactures aerospace structural castings, aerospace airfoil castings, industrial gas turbine castings; Stock price on October 10 after the first Boeing delay: $146.75.  Share price today: $118.64 (-4.7%).

Shares of Boeing had been down in a weak market today, but shares rolled over on this announcement and are now down almost 3% to $79.27.  Its 52-week trading range is $77.81 to $107.83, and it closed at $98.33 back on October 10, 2007 when the first real delay came about.  The bulls look like they are going to have to hope the company refutes that delays will be anything significant.  Imagine if things get bad enough that some airlines start actually canceling or trimming orders.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 3:05 pm in Airlines, , , , , , , ,

Starbucks (SBUX) Loses “Founder Premium”

Sack the CEO and bring back the founder. The market likes it. And, it worked at Starbucks (SBUX) for all of four days. The shares have fallen as low as $18.92 in today’s trading.

The shares should not have moved up in the first place. Howard Schultz may be the best person to run the coffee chain, but the problems of a tarnished image and too many stores in the US may take a year or more to solve.

Schultz will have to contend with high milk prices and the fact that a recession will even hurt people with enough money to spend $4 on a cup of coffee.

Starbucks made the right move changing management, but it may not be reflected before 2009.

Douglas A. McIntyre

Posted on: January 15, 2008 – 1:28 pm in Food,

Crops & Ag Pulling Back; Buying Opportunity Or Just Starting? (MOS, POT, MON, BG, ADM, MOO)

When you see sectors that have been key leaders fall it’s often just another buying opportunity.  But when you start seeing an exodus you have to wonder if letting the good times roll is smart. In this market there are very few safe havens. That is particularly true if new valuation metrics being reevaluated come true.  Enter agriculture and fertilizer.  The charts on these are not indicating any major uptrend violations,although by now you know they never do until they already have (sorry for theredundant jab).

The potash sector has been hot until today.  Today, shares of Mosaic Co. (NYSE: MOS) is leading the sector lower with a 6% drop to under $103.00, up from a 52-week lows of under $20.00.  Potash Corp. of Saskatchewan, Inc. (NYSE: POT) is down over 3.7% at $144.50, although its 52-week low is $45.82.

Monsanto (NYSE: MON) is down almost 2% to $124.85, and its 52-week low is $50.01.  Share of Bunge Ltd. (NYSE:BG) are down 3.3% to $128.55, up from its 52-week low of 70.97.

Maybe with the DJIA trading down another 200 points there just aren’t any safe havens.  Even the core defensive go-to stocks have been trading lower today and we noted some higher valuations starting to look like a premium at the time.

Archer-Daniels-Midland (NYSE: ADM) is bucking today’s trend as it is down less than 0.4% at $45.00, up from a 52-week low of $30.46.  The fairly new ETF in the sector is the  Market Vectors Global Agribusiness ETF (AMEX: MOO), and it is down some 2.8% to $57.76.  Since coming public late in 2007 it has traded as low as $40.19 and as high as $59.49, so it isn’t exactly looking like hard troubles are setting in yet.

The ethanol competition for food is a real one and most of these fertilizer and potash companies have discussed major pricing power.  We’ll be keeping an eye on this sector as this has been perhaps the brightest spot in the market that traders have traditionally ignored.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 1:16 pm in Agriculture, , , , , ,

Word That Apple (AAPL) Sold Only Four Million iPhones Pushes Shares Down

During Steve Jobs presentation at Macworld he told the audience that Apple (AAPL) had sold only four million iPhones to date. The market seemed unhappy with that and drove shares down 5%

News that the company is starting an online film rental business seemed to give the shares a little lift

Douglas A. McIntyre

Posted on: January 15, 2008 – 1:09 pm in Consumer Electronics,

Intel Earnings Key For Entire Chip & PC Sectors (INTC, MSFT, DELL, HPQ, AMAT)

Today’s after-hours trading will be an interesting glimpse into shares of technology stocks at the NASDAQ and NYSE alike.  Intel (NASDAQ:INTC) is set to post earnings after the bell and this may be the de facto bogey or benchmark for all of tech kicking off this earnings season.  This may even be more of a tell than IBM (NYSE: IBM) after it raised guidance Monday.  It goes without saying that investors, traders, portfolio managers, analysts, and journalists will be trying to use the body language in the 5:30 PM EST conference call to gain any extra insight into how the recession or drastically slowing U.S. consumer and economy will affect the tech group for 2008.

Our three go-to stocks directly off of Intel are Microsoft (NASDAQ: MSFT) for software, and in PC-land we look at nothing more than Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL).  On the chip cap-ex side we go straight to Applied Materials (NASDAQ: AMAT), although the layoffs announced today might not show any great cap-ex in 2008 and it is becoming an indirect tie now that chip cap-ex has been soft.  The truth is that the entire cycle of tech pertaining to PC’s will key off of Intel today.  These are just our main direct tie-ins to the company, and we are leaving a tie to today’s Macworld or to AMD aside for now. 

Last night on CNBC’s MAD MONEY, Jim Cramer said he liked Intel here after the sell-off, and he’s reviewing battered tech stocks that offer solid value.  Previously, Cramer has noted how Q1 was a horrible time period for  much of the tech sector because of the spending cycles and seasonality on the calendar.

First Call has this quarter at $0.40 EPS on revenues of roughly $10.84 Billion, and this will also mark the year-end report for fiscal 2007.  Next quarter estimates are $0.34 EPS on $9.97 Billion in revenues.  If Intel goes out on the limb and offers fiscal-2008 guidance the estimates are $1.51 EPS on roughly $41.7+ Billion.  We will watch margins today since it gave a higher margin guidance of 57% +/- 1% for this quarter.

The average price target from analysts is still roughly $30.00.  The chart used $22.00-ish as support after the massive sell-off from the end of December and we’ve already noted how the chart became its enemy.  Shares were challenging $28.00 in Mid-December.  Options have very little time value as the expire this Friday.  But it appears that options pricing is braced for a move of roughly $0.80 to $0.93 depending on your read with shares (and the market) down almost 2% today.

The hardest part to determine today is NOT what the real numbers will be.  The hardest part is trying to gage a fickle Wall Street that has proven over and over that the efficient market theory is as accurate as "2+2=5."  It is obvious that the economy and the consumer are on the ropes and a cut-back in spending and a liquidity and borrowing crunch either makes for a solid recession right now or a slowdown that might as well be a recession. 

Based on the last round of downgrades we saw on Intel, the estimates, targets, and overall expectations for the processor and chip giant have come in.  We’d expect some softness ahead but Wall Street has abandoned its ability or desire to act as a discounting mechanism for the next one or two quarters out.  American Technology & Research has been somewhat cautious here on chip stocks, although we’d point to last week’s call of "We Are Buyers of INTC, Here and Now" as the most solid defense since those earlier downgrades from bulge bracket firms.  UBS also in the last 24-hours has reiterated its Buy and $32 target.

If this was a ride at a theme park, the way to describe going into today’s earnings would be nothing short of a "White Knuckler."

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 12:16 pm in Earnings, PC Companies, Semiconductor, Technology Companies, , , , ,

Will The E.U. Save Dendreon If The U.S. Won’t? (DNDN)

Dendreon Corp. (NASDAQ:DNDN) shares are trading up in early trading on a patent award, and that is after the fairly large gains yesterday.   Dendreon was granted a broad European patent covering what is still its lead product candidate PROVENGE, its investigational active cellular immunotherapy for the treatment of advanced prostate cancer.

This patent grant is in the E.U. rather than in the U.S. and has been granted European patent No. 0 870 022 B1.  The patent covers the composition of matter of PROVENGE as well as the company’s other active cellular immunotherapy product candidates, such as NEUVENGE(TM) (lapuleucel-T). The patent also covers methods of activating antigen presenting cells in vitro with certain fusion proteins developed by Dendreon, including the fusion protein that is used in PROVENGE.

As previously noted, the FDA will accept either a positive interim or positive final analysis of overall survival from the IMPACT study to amend the Biologics License Application (BLA) and support the efficacy claim for PROVENGE. Interim data from the fully-enrolled IMPACT study are expected in the second half of 2008.

A patent grant is far from an approval to commence sales.  But this is good news in that the E.U. now has a chance to become a market for PROVENGE even if the FDA sticks it to the company again in late 2008.  With Congress involved and looking into potential conflicts of interest from FDA panel members that gave PROVENGE the thumbs down, this might be one more ray of hope for the company, its shareholders, and for those with prostate cancer.

Dendreon shares were up as much as 5% in early trading, but shares sit up about 3% at $6.67 at 10:00 AM EST and we’ve already seen a full average daily volume after only 30 minutes.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 10:07 am in Biotech, ,

Clearwire Adding Google Apps (CLWR, GOOG)

Clearwire Corporation (NASDAQ: CLWR) has announced that it is teaming up with Google (NASDAQ: GOOG) to deliver the Google Apps communication suite to Clearwire customers.

Clearwire will begin migrating its current customers to Gmail and to Google Calendar in the first half of this year. Clearwire customers will also have access to Google Talk. Clearwire will use AdSense for Search to provide Google search capabilities on future Clearwire portal applications.

If you see Clearwire’s coverage map, you’ll note there is still quite a build out that is in the "pending" status.

Many of these applications are available already to anyone who wants to use them, so this appears to be more of a standardization and potentially a bandwidth initiative.

We don’t want to pan any gainers, but a 5% gain here may be more short covering than anything.  As of the last look, it appears that some 14.13 million shares are carried in the short interest.  That is just over 10% of the float and would represent roughly 13 days worth of trading volume. 

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 9:33 am in Internet, Wireless, ,

Pre-Market Stock Movers (January 15, 2008) (EDU, COIN, CWTR, DNDN, DNA, WSM, FRX, LCBM, NWY, STT, PVH, TMA)

Below is a snapshot of the key pre-market news that we are focusing on for early pre-market trading this Tuesday:

  • Apple (AAPL) has its Macworld today.
  • CECO Environmental (CECE) announced 14 new orders received totaling ~ $7.3 million.
  • Charles & Colvard (CTHR) lowered guidance and announced a strategic review.
  • Citigroup (C) was trading up but then went negative in early trading: -$1.99 EPS vs -$1.00 estimate, huge charges of $18.1 Billion, 4,200 layoffs included, review divestitures, cut $0.54 dividend down to $0.32.
  • Coldwater Creek (CWTR) lowered guidance, again, again. Shares down 15% to new low.
  • Converted Organics (COIN) announced its has secured a Rhode Island site for second organic fertilizer facility; stock down 6% pre-market.
  • Dendreon (DNDN) received a European patent covering Provenge and its ACI platform technology; shares up 5% pre-market after solid gains yesterday.
  • First American Financial (FAF) sees revenues of $1.9 Billion as expected but sees charges and writedowns.
  • Forest Labs (FRX) $0.96 EPS vs $0.75 estimate; Revenues $998.2 million versus $946+ million estimate. Raised 2008 guidance.
  • Genentech (DNA) trading down 2% pre-market after beating earnings but missing estimates on its top 4 drugs; sees 2008 EPS $3.30-3.45 vs. $3.37 estimate.
  • Kellwood (KWD) $21.00 tender from Sun Capital affiliate Cardinal Integrated commences.
  • Kosan (KOSN) initiated Phase II trials of alvespimycin, their second-generation inhibitor in patients with HER2-positive metastatic breast cancer.
  • Lifecore Biomedical (LCBM) trading up 29% after it agreed to be acquired by Warburg Pincus for $17.00 per share in cash.
  • Merrill Lynch (MER) confirmed that it has agreed to issue $6.6 Billion in preferred stock.
  • New Oriental Education & Technology (EDU) $0.10 EPS vs. $0.08 estimate.
  • New York & Co. (NWY) lowered guidance.
  • OSI Systems (OSIS) received a follow-on order from EDO Corporation for roughly $5.8 million.
  • Phillips-Van Heusen (PVH) guidance for Q4 EPS at least $0.53, previous guidance was $0.51 to 0.53 and $0.53 First Call; also reaffirmed FY08 EPS of $3.55 to 3.65 vs. $3.55 estimate.
  • State Street (STT) issued earnings and is indicated down 1% to 3% on thin volume after noting it sees 2008 at lower end of target.
  • Thornburg Mortgage (TMA) raised roughly $212 million in equity and convertible preferred securities sales; stock down 1% pre-market.
  • William Sonoma (WSM) lowered guidance; stock down 14% pre-market.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 8:50 am in Pre-Market Activity, , , , , , , , , , , ,

Economic Numbers Could Have Been Worse (January 15, 2008)

The markets were bracing for some horrible news on the economic front, and while these numbers are all bad they are not quite as bad as some of the trader chatter was expecting yesterday.

The PPI: producer prices came in -0.1% on the nominal front and were +0.2% on a core basis as measured on an ex-food and ex-energy basis along with anything else deemed volatile.  But on a year over year basis these numbers are still high with +7.2% on the nominal PPI came in at +6.3% (from 7.2% in November), and the core rate came in at +2%.  Expectations for PPI were roughly +0.2% on both the core and nominal PPI.

December retail sales also came in weak with a -0.4% reading, and were -0.4% on an ex-autos basis as well.  Expectations were 0.0% headline and -0.1% ex-autos, but that seemed like a poor estimate that wasn’t factoring in enough.

The New York Federal Reserve’s EMPIRE MANUFACTURING INDEX came in at 9.03.  Estimates were around 10.0.

These numbers may fuel the thought that FOMC has more room to cut rates without inflation spiking higher.  The rumors (more like hopes) of an inter-meeting rate cut were out yesterday, and Fed Fund Futures were showing chances were high for a 75-basis point cut by the end of February.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 8:41 am in Economy,

VMware, An Acquirer Again (VMW, EMC)

VMware (NYSE: VMW) is out with news that it is making another acquisition this morning.  The virtualization leader is acquiring desktop virtualization provider THINSTAL, which it calls a best of breed agentless application virtualization provider for desktop environments. 

Thinstall was founded in 1999 and is used by more than 600 customers in government and commercial industries. Thinstall customers have deployed thousands of virtualized applications to over a million desktops around the world, according to VMware’s note.  VMware said this deal is expected to close in this current quarter, but as THINSTALL is a private company it is not disclosing the financial terms of the acquisition.

Note that last night Jim Cramer came out on CNBC with the news that he was calling EMC Corp. (NYSE: EMC) as one of the overlooked and/or oversold tech stocks.  Part of the reason was the implied $26 Billion it still holds as majority owner of VMware.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 8:29 am in Mergers and Buy Outs, Software, Technology Companies, ,

Top 10 Pre-Market Analyst Calls (ABB, AMLN, ARNA, BP, EFII, MET, NVDA, LSI, NETL, XLNX, STO, TOT, WFC)

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

  • ABB Ltd. (NYSE: ABB) downgraded to SELL from Hold at Citigroup.
  • Amylin Pharma (NASDAQ:AMLN) started as Outperform at Robert Baird.
  • Arena Pharamaceuticals (NASDAQ:ARNA) raised to Buy from Neutral at Banc of America.
  • BP plc (NYSE: BP) downgraded to Underweight from Equal Weight at Lehman Brothers.
  • Electronics for Imaging (NASDAQ:EFII) downgraded to Neutral from Buy at Banc of America.
  • Metlife (NYSE: MET) raised to Outperform from Market Perform at Bernstein.
  • NVIDIA (NASDAQ:NVDA), LSI (NYSE: LSI), NetLogic (NASDAQ:NETL) and Xilinx (NASDAQ:XLNX) all downgraded to HOLD from Buy at Deutsche Bank.
  • StatoilHydro (NYSE: STO) raised to Outperform from neutral at Credit Suisse.
  • Total SA (NYSE: TOT) downgraded to Neutral from Outperform at Credits Suisse.
  • Wells Fargo (NYSE: WFC) downgraded to Underperform from Market Perform at FBR.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 7:36 am in Analyst Calls, , , , , , , , , , , , ,

Reliance Power, India’s Largest IPO Gobbled Up

Indian billionaire Anil Ambani’s Reliance Power raised roughly $3 billion in the country’s largest initial public offering.  The IPO was fully subscribed today as investors continue to commit capital in this key component of the international BRIC investments in emerging markets.  Most bids came in four to ten times oversubscribed, although this exact number is different from source to source.

Reliance Power currently has a portfolio of 13 medium and large-sized power projects under development and strategically located in various locations in India, according to the company itself.

It appears that the over-direct of necessary funds to bid ended up taking its toll on the entire market as the Sensex closed down about 476 points to 20,251 in a near 2% drop.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 7:22 am in IPOs, , ,

Citigroup, The Baby & The Bathwater (C)

Citigroup (NYSE: C) has come out with its highly awaited earnings.  The numbers and comments are all slightly different than prior media reports indicated, and some are not quite as aggressive as we expected.

  • The company’s net loss headline numbers is a loss of $9.83 Billion, or -1.99 per share (compared to -$1.00-ish consensus estimate from First Call). Results include $18.1 billion in pre-tax write-downs and credit costs on sub-prime related direct exposures in fixed income markets, and a $4.1 billion increase in credit costs in U.S. consumer primarily related to higher current and estimated losses on consumer loans.
  • Citigroup is raising $14.5 Billion, $12.5 Billion of which is via a private placement of convertible preferred securities and $2 Billion in a public sale of convertible preferred securities.
  • The $0.54 dividend is being cut down to $0.32, which isn’t as bad as the 50% guestimate that was going around yesterday.
  • It is continuing its divestiture of what will be deemed non-core assets. Its costs included 4,200 layoffs.
  • After the divestitures, Citi’s Tier One capital ratio would be approximately 8.2% and its TCE/RWMA capital ratio would be approximately 6.6%.  These are exceeding its previously announced targets.

You can go through the full releases if you choose, but these are tomes with explanations of each unit and in each global region.  If you want an opinion here, this looks, feels, and sounds like it is probably the first stage of a complete and full business review that doesn’t sound entirely complete.  It appears that the initial reaction to the numbers put shares up over 1%, but we caution that with more than 2 and a half hours to the open that these numbers are preliminary pre-market trades and might be grossly different than the trading by the time the market opens.

Jon C. Ogg
January 15, 2008

Posted on: January 15, 2008 – 7:00 am in Banking, Earnings, Financial Stocks, ,

Europe Markets 1/15/2008 (BP)(SAP)(ALU)

Markets in Europe were lower at 6.20 AM.

The FTSE fell 1.1% to 6,149. BP (BP) was down 1.9% to 585.5.

The DAXX was off .6% to 7,682. SAP (SAP) was off 1% to 33.37.

The CAC 40 fell .8% to 5,360. Alcatel-Lucent (ALU) was off 1.3% to 4.62.

Data from Reuters

Douglas A. McIntyre

Posted on: January 15, 2008 – 6:24 am in International Markets, , ,