Daily Archives: May 20, 2008

Things Are Getting Better On Wall St.? Lehman (LEH) To Cut 5% Of People

Against a back-drop of several Wall St. analysts saying the credit crisis will damage bank earnings into 2009, Lehman Bros. (LEH) will cut 5% of its work force, according to Reuters. The brokerage has already let 5,000 people go over the last year.

The news hits as Oppenheimer made comments today that banks may produce another $170 billlion of write-downs over the next year.

Citigroup (C) dropped almost 4% today to $22.11 but still trades well above its 52-week low of $17.99. JP Morgan (JPM) was down almost 5% to $43.70, but still sits above its 52-week low of $36.01.

Those lows will be tested again.

Douglas A. McIntyre

Posted on: May 20, 2008 – 3:35 pm in Brokerage Firms, , ,

Is Nanotechnology the Next Asbestos? (PXN)

Nanotechnology is one of those industries that has advocates lining up for it and against it.  The theoretical possibilities are endless.  These could be in micro-computing, arterial plaque attacks, tissue repair, cleaning surfaces, cancer fighting, and on and on and on.

But nanotechnology also has many critics, particularly those who are concerned that nano-bots or nano particles could be used against people.  In a report published in advance from NATURE NANOTECHNOLOGY, the new fear is that nanotechnology’s carbon nanotubes injected into mice showed similarities to asbestos.

The pilot study in a small number of mice shows that long multiwalled carbon nanotubes introduced into the abdominal cavity can cause asbestos-like pathogenic behavior. The results suggest the need for further research and caution before introducing nanotube products into the market.

Mesothelioma is a death sentence.  If nanotech generates even the same fears, this technology may be crushed before even the simple applications can get off the ground  It sounds like they need a nano-drug now, one to fight nanothelioma.

The nanotech ETF, the PowerShares Lux Nanotech (AMEX: PXN) was down 2% at $14.51, although it was on thin volume when the market itself was soft.

Jon C. Ogg
May 20, 2008

Posted on: May 20, 2008 – 2:53 pm in Nanotech, , , , ,

The 52-Week Low Club (AIG, GAIA, HANS, LORL, PLA, RCL, SCUR)

Today was a larger day on the wall of shame in the 52-week low club.  There were some new names and some old familiar names.

American International Group (NYSE: AIG) was down almost 2% at $38.20 late in the day.  Some funding deals in the billions just aren’t that well received.  This had managed to get just back above the low part of the range of $38.15 to $72.96.

Gaiam Inc. (NASDAQ: GAIA) was down 4% at $14.59 late in the day, which was slightly above the prior 52-week low; range of $14.49 to $30.73.  Not all green lifestyle media stocks are created equally; better get the spin-off soon.

Hansen Natural (NASDAQ: HANS) was down almost another 2% late in the day at $28.00, prior low was $28.20 and high was $68.40.

Loral Space (NASDAQ: LORL) was down over 9% at $19.90 late in the day, prior range was $20.04 to $51.56.  This isn’t regularly on the wall of shame, but the company posted a wider loss Monday.

Playboy (NYSE: PLA) better get the Heff’s doing something.  This one keeps getting worse and shares were at $5.58 late in the day; under the $5.84 to $12.00 range.  How much is that L.A. mansion worth?

Royal Caribbean (NYSE: RCL) was down 6% at $29.31 late in the day; prior range was $30.04 to $45.17.  So much for borrowing against the house to take a cruise.  At least the people can choose who they have dinner with now.

Secure Computing (NASDAQ: SCUR) was down 4% at $4.94 late in the day, not so secure it sounds like.  Prior range $5.05 to $10.54.

Jon C. Ogg
May 20, 2008

Posted on: May 20, 2008 – 2:41 pm in HI/LOW, , , , , , ,

GM (GM) Sells Off As Market Wakes Up To Troubles

It did not take a story in The Wall Street Journal to let Wall St. know that it would be a hard year for GM (GM) and its peers in the US. Perhaps the piece did crystallize the situation.

GM sold off almost 5% today, moving well below $20. Word is that many analysts now expect domestic vehicle sales to be well below 15 million this year, perhaps dropping to 14.5 million. In 2007, the figure was 16.1 million.

GM and Ford (F) are now likely to have to raise money. GM still has problems with its former parts unit, Delphi, which is coming out of bankruptcy, someday, maybe. GMAC, which is now majority owned by troubled hedge fund Cerberus, has difficulties with its real estate portfolio and it car lending business is not likely to weather the current credit period well.

At the top of the list of problems is the fact that GM’s robust overseas operations cannot out-run the disintegration of its business in the US. It is like trying to out-distance your shadow.

GM may be able to cut deeper into costs in its American business, but the time will come when it will lose its capacity to keep its market share above 25%. It simply won’t have the production ability.

Sad as it may seem, GM could become a large niche manufacturer in its domestic business.

Douglas A. McIntyre

Posted on: May 20, 2008 – 2:25 pm in Autos, ,

IPO FILING: Synthesis Energy Systems, Inc.

Synthesis Energy Systems, Inc. has filed to come public today via an initial public offering, and it will take the proposed ticker of "SYMX" on NASDAQ.  The two underwriters listed in an offering for up to $100 million are listed as JPMorgan and Deutsche Bank Securities.

The company builds, owns and operates coal gasification plants that utilize the company’s own proprietary U-GAS® fluidized bed gasification technology to convert low rank coal and coal wastes into higher value energy products.  This is for transportation fuels and ammonia.

The company is Houston-based as far as corporate headquarters and it has US-operations under development in West Virginia.  In China, it has headquarters in Shanghai, and has operation in Zaoahuang City now and under development in the Henan Province.  It also has operations being constructed in Inner Mongolia.  You will want to read the prospectus if you are interested in this one because its operations are mainly operating interests in ventures.

As much of the current gasification projects are under development, its revenues for the 9-months ended March 31, 2008 were $39.879 million and the development and pre-operational costs have this one in the red as far as profits are concerned.

You can join our open email distribution list to hear about other IPO’s, secondaries, financings, spin-offs, and mergers.

Jon C. Ogg
May 20, 2008

Posted on: May 20, 2008 – 1:30 pm in Alternative Energy, China, IPOs, Oil & Gas, ,

Satyam Broadens GE Pact In Alliance (SAY, GE)

Satyam Computer Services Ltd. (NYSE: SAY) has partnered with General Electric Co. (NYSE: GE) unit GE Healthcare to support customers deploying healthcare IT solutions based on GE Centricity Enterprise software.

The companies will jointly plan, design, and implement infrastructures for global healthcare providers of all sizes, from small clinics to large hospitals, and they will perform
application integration and tailor solutions for providers.

Satyam will be the first global systems integrator to start enrolling consultants in new GE Healthcare certification exam programs for Centricity Enterprise Software in the fourth quarter of 2008. 

Satyam is one of the largest India-based outsource operations for global consulting and information technology services.  Normally, single contracts and ventures are one-off items for companies the size of Satyam.  But scoring GE Healthcare when it wants to expand its reach is likely a larger deal than most.  The companies have already worked with each other in the Middle East and India.

As far as wondering the size of Satyam now, it lists 51,127 people as its professionals.  On a weak day like today, Satyam shares are still down over 1.8% at $25.86; its 52-week trading range is $20.02 to $30.89.

Unfortunately, it doesn’t look financial terms of this alliance were not disclosed.

Jon C. Ogg
May 20, 2008

Posted on: May 20, 2008 – 1:08 pm in Healthcare, ,

New Apple (AAPL) iPhone Rumor: June 9 Launch

Perhaps the reason those Apple (AAPL) 2.5G iPhones are so hard to come by is that the launch date for the 3G versions is set for June 9. Why have a lot of inventory of the old stuff that no one will want?

According to Gizmodo, "Apple will announce their new model at the WWDC Keynote on June 9th. The second-generation iPhone will be available worldwide right after the launch."

The news can’t be good for RIM (RIMM), which is coming out with its iPhone-killer in the third quarter. If Apple gets a four or five month lead, interest in the new Blackberry-brother is likely to be very, very modest.

Being first into the market with a high-end 3G product is a strategic move that will give Apple an edge, particularly if it can sell a couple of million phones worldwide in the first month.

Douglas A. McIntyre

Posted on: May 20, 2008 – 12:04 pm in Consumer Electronics, ,

Investors Await Intuit’s Key Quarter (INTU)

Intuit Inc. (NASDAQ: INTU) reports earnings after the close of trading today.  The tax and business software provider is expected to post $1.33 EPS on $1.29 Billion in revenues.  As this is the quarter that had all the Turbo Tax revenues, this is the quarter of importance similar to Christmas for retailers.

First Call has estimates for this next quarter, a total throw away quarter, at -$0.04 EPS on $471.68 million in revenues.  That will also be the fiscal year-end.  If the company offers any long-term guidance, First Call has estimates for fiscal July-2009 at $$1.80 EPS and $3.3 Billion in revenues (up 13% on EPS and up 9% on revenues from 2008 to 2009).

While Intuit has been trying diversify itself away from being a tax software company into a personal finance and business software company, the company hasn’t really performed that well over the last two and a half years.  With shares basically flat at $27.45, shares are only about 10% off the 52-week lows; its 52-week trading range is $25.08 to $33.10.  In late 2006 shares were briefly as high as $35.00.

While it isn’t as widely followed as one might expect, the analysts that cover Intuit have an average target price of $35.00.  Over the last 60 days, Credit Suisse started coverage with an Outperform rating.

It is obvious that Wall Street isn’t expecting much from today’s numbers.  As far as valuations go and as long as the company hits its targets for fiscal July-2008, the company trades with a current year implied P/E ratio of 17.26 and trades at 3-times revenues.  As long as no serious threats arise to its dominance in tax software and as long as the company can keep making strategic  acquisitions that fit within its business plan then shares are marginally cheap by most metrics and fairly valued according to other metrics.

Jon C. Ogg
May 20, 2008

Posted on: May 20, 2008 – 9:41 am in Earnings, Software,

Oppenheimer Won’t Lay Off Bad News On Banks (C)(BAC)

Oppenheimer now puts out a negative report on banks stocks every other day, like clock work.

Today’s reports says that money center financial firms "may write off more than $170 billion of additional reserves by the end of 2009," according to Bloomberg.

If that is the case, several banks stocks which have recovered over 50% from their lows, are overvalued.

Assuming that Oppenheimer is right, and it has been before, banks could retest their lows from earlier this year. That means that Citigroup (C) could move back toward $18 and Bank of America back to $33.

Douglas A. McIntyre

Posted on: May 20, 2008 – 8:10 am in Banking, ,

Target Sails By Estimates (TGT, JPM, WMT)

Target Corporation (NYSE:TGT) has reported its Q1 net income of $602 million, down from $651
million in the same quarter in 2007.  It saw a 1.4% drop in earnings per share to $0.74 EPS on store sales of $14.3 Billion; total revenues after credit card receivables of $500 million were listed as $14.802 Billion.  First Call had estimates lowered over the last quarter and estimates for today were $0.71 EPS and $14.92 Billion.

The company’s new stores contributed to make a 5% total sales growth, which offset its -0.6% decline in same store sales.  Target also noted that it repurchased 30.5 million shares at an average of $51.55 per share, which came to roughly $1.6 Billion spent.  Its margin rates fell by 0.7%.

Target also said it did sell an undivided interest in about 47% of its credit card receivables to JPMorgan Chase (NYSE: JPM) for cash proceeds of about $3.6 Billion.  That was completed yesterday and should provide Target with liquidity to implement its capital investments and share buybacks without needing to access term debt markets.

So far shares are un-phased despite no real guidance.  Shares are up almost 0.5% at $55.19 in pre-market trading.  If there are no real major drops to the guidance and no major negative surprises, then that switch out of shares of Wal-Mart Stores Inc. (NYSE: WMT) into Target shares looks like it may be the right trade if you don’t expect the economy to drop off a cliff or if you expect a recovery to begin taking shape in early 2009.

Jon C. Ogg
May 20, 2008

Jon Ogg produces and edits the "10 Stocks Under $10" weekly newsletter and he does not own securities in the companies he covers.

Posted on: May 20, 2008 – 7:48 am in Earnings, Retail, , ,

T. Boone Pickens: $150 Oil (EP, SD, XCO, CLNE, YHOO)

CNBC just hosted oil magnate T. Boone Pickens this morning in a sit down interview with Becky Quick.  Now that his $125 target on oil has been hit, he’s making a new prediction on oil prices.  He said oil prices are continuing to go up as 85 million barrels per day is as good as supply can get and 87 million barrels per day is the demand.  He also said the president wasted his time going to Saudi Arabia asking for more oil.

Pickens just said he thinks oil could and will likely go to $150 per barrel this year, and that will translate to a deficit spending in the U.S. of $900 Billion rather than $600 Billion at $100 oil.  As far as the old joke of $80 before he’s 80, he did joke about $160 before he’s 160 years old.

Pickens said natural gas is the one oil replacement we have and he also noted that ethanol is a joke and can only max out at about 6%.  He noted that these oil and gas exploration companies have made significant finds in natural gas:

  • El Paso Corp. (NYSE: EP)
  • SandRidge Energy, Inc. (NYSE: SD)
  • EXCO Resources Inc. (NYSE: XCO)

Of course he also noted wind energy, but noted solar too.  Becky asked him about his Clean Energy (NASDAQ: CLNE) company and he even dismissed that noting this was much bigger than his company.

This was a totally off-oil topic piece, but may be of interest as well.  As far as his opinion on Carl Icahn going into Yahoo! Inc. (NASDAQ: YHOO), he said he followed him into the stock and he owns 10 Million shares of Yahoo! now too.

Elsewhere in the oil patch:

Jon C. Ogg
May 20, 2008

Jon Ogg produces and edits the "10 Stocks Under $10" newsletter and he does not own securities in the companies he covers.

Posted on: May 20, 2008 – 7:16 am in Oil & Gas, , , , ,

Goldman Sachs Drops Specialty Apparel Names (COLM, NKE, UA, LULU, FL, GCO, FINL, KSWS)

Goldman Sachs has noted that an analyst named Brad Cragin has left the firm, and his former targets and ratings in specialty apparel names are no longer in effect.  These are some of the specialty apparel names that have been dropped from coverage:

  • Columbia Sportswear Co. (NASDAQ: COLM),
  • Nike Inc. (NYSE: NKE),
  • Under Armour (NYSE: UA),
  • lululemon athletica inc. (NASDAQ: LULU),

There were also many names in footwear and shoe retailing that were dropped:

  • Foot Locker (NYSE: FL)
  • Genesco (NYSE: GCO)
  • Finish Line (NASDAQ: FINL)
  • K-Swiss Inc. (NASDAQ: KSWS).

As a reminder, these are not true downgrades.  This coverage was dropped as the analyst has left the firm and it appears to be in a rapid enough manner that Goldman Sachs was not able to transition coverage away to another analyst.

Jon C. Ogg
May 20, 2008

Jon Ogg produces and edits the "10 Stocks Under $10" weekly newsletter and he does not own securities in the companies he covers.

Posted on: May 20, 2008 – 6:49 am in Analyst Calls, Apparel, , , , , , , ,

Lehman Trims European I-Bankers (UBS, CS, DB)

In a call overseas earlier this morning, Lehman Brothers decided to cut its target prices on some select European investment banks.  Here are three of the investment bankers that are traded in the U.S.:

  • UBS (NYSE: UBS) target cut 6% to 31CHF.
  • Credit Suisse (NYSE: CS) target cut almost 2% to 64CHF.
  • Deutsche Bank (NYSE: DB) target cut about 5% to 66EURO.

What is interesting here is that Lehman noted that the worst for these may be over as far as credit losses and writedowns from subprime loan exposure.  Lehman still believes that additional losses from from markdowns and weak trading numbers will continue to weigh on the companies this quarter.

Jon C. Ogg
May 20, 2008

Posted on: May 20, 2008 – 6:34 am in Analyst Calls, Brokerage Firms, , ,

Top 10 Pre-Market Analyst Calls (ASMI, ATAI, CCI, EMC, GNA, NFLX, NRG, PDS, TER, WGOV)

These are not the only analyst calls out there, but these are ten calls affecting stocks this Tuesday morning:

  • ASM Intl NV (NASDAQ: ASMI) started as Underperform at Jefferies.
  • ATA Inc. (NASDAQ: ATAI) started as Outperform at Oppenheimer.
  • Crown Castle (NYSE: CCI) started as Buy at Merriman Curhan Ford.
  • EMC (NYSE: EMC) Cut To Market Perform from Outperform at Bernstein; stock indicated down 2%.
  • Gerdau AmeriSteel (NYSE: GNA) started as Buy at Citigroup.
  • Netflix (NASDAQ: NFLX) Raised to Overweight at Lehman Brothers; stock indicated up 2%.
  • NRG Energy (NYSE: NRG) cut to Neutral at Credit Suisse; stock indicated down 1%.
  • Precision Drilling (NYSE: PDS) raised to Outperform at RBC Capital.
  • Teradyne (NYSE: TER) started as Neutral at Piper Jaffray.
  • Woodward Governor (NASDAQ: WGOV) cut to Neutral at Robert W. Baird; shares down 1.5%.

Jon C. Ogg
May 20, 2008

Jon Ogg produces and edits the "10 Stocks Under $10" weekly newsletter and he does not own securities in the companies he covers.

Posted on: May 20, 2008 – 6:23 am in Analyst Calls, , , , , , , , , ,

Home Depot (HD) Gets Dragged Beneath The Waves

It was impossible for Home Depot (HD) to post good earnings. It relies too much on the troubled housing industry.

But, its earnings were cut by a huge amount, a signal that home building and upgrading may be much worse than thought and that the downturn in those business could be longer and harder than imagined.

HD said that had fiscal 2008 first quarter net earnings of $356 million, or $0.21 per diluted share, compared with $1.0 billion in the same quarter last year. Revenues for the first quarter totaled $17.9 billion, a 3.4 percent decrease from the first quarter of fiscal 2007.

The big retailer repeated that it would cut stores locations and drop plans for some new stores.

HD is something of a canary in a coal mine. If its is doing so poorly, housing is doing as bad or worse. If housing is not recovering, the rate of mortgage defaults is likely to rise. There will also be a further decreases in consumer spending because home values have fallen so far.

If mortgage issues are still growing, then big banks and brokerages could be facing larger write-downs in securities tied to mortgages.

Home Depot. For want of a nail, the kingdom was lost.

Douglas A. McIntyre

Posted on: May 20, 2008 – 5:29 am in Earnings,

GE (GE)’s Asia Play Moves Off Track

Part of the long-term thinking at GE (GE) has been that, as the US economy slowed, emerging markets in Asia would drive double-digit returns. GE’s international business would more than make up for any trouble in its home market.

The idea was good until it wasn’t. As the global economy gets hit with slower growth, the one big earnings lever that GE hoped would work has fallen on relatively hard times. Business in China and India are starting to fray. According to the FT. "Nani Beccalli, head of GE International, forecast economic growth would slow in the two Asian countries."

GE’s stock price is already near a multi-year low. The company showed trouble in its financial unit last quarter. Its industrial unit also did poorly. The conglomerate is trying to sell its appliance operation, but it is only 4% of GE’s revenue.

GE earnings have been driven by its huge infrastructure business. Much of that operation relies on building large projects in emerging markets. And, GE is saying those markets are not going to produce as forecast.

GE is admitting that its problems just got worse.

Douglas A. McIntyre

Posted on: May 20, 2008 – 5:20 am in Consumer Electronics,

Netflix (NFLX): On More Box For The Top Of The TV

In many homes, the TV is topped by a cable box, a DVR, a satellite box, a PC, a Slingbox, and an Unbox from Amazon (AMZN). Netflix (NFLX) thinks that television can hold the weight of one more gadget.

But, it is a pretty good one. The movie rental firm is offering a $99 device which will give consumers instant access to thousand of movies in the Netflix (NFLX) library. The best part of the deal is that current Netflix subscribers don’t have to pay more for the service.

Netflix has one big advantage over many of its competitors in the video-on-demand business. It already has 8.2 million customers who have been amassed over years and at the cost of hundreds of million of dollars. Now Netflix wants some additional yield out of those people.

The genius of the Netflix product is that it leverages the company’s current content and customer base without any additional investment. Whatever money the rental operation brings in should go right to the bottom line.

The move is as clever as it is simple.

Douglas A. McIntyre

Posted on: May 20, 2008 – 5:08 am in Consumer Electronics, ,

Banks: Brother Turns Against Brother (C)(WB)

Banks are supposed to be one another’s friends. The all have the same problems now. They are all lobbying for the same relief. They often share customers. When they compete, the Marguess of Queensbury rules are always observed.

But, money is money, especially when one firm loses a lot. Citigroup (C) is being sued by Wachovia (WB) and Fifth Third Bank due to hedge fund losses. According to The Wall Street Journal "The problems stem from Citigroup’s Falcon Strategies hedge fund, a fixed-income vehicle whose value has plunged more than 75%."

The smaller banks say that they were told that the Falcon fund was relatively safe. Some firms bought shares in the fund for the insurance programs for their own bank employees.

The suit may look good but its merits miss the critical point that when a bank sells another bank a financial instrument, all parties should be sophisticated enough to know what is going on. Reading the fine print.

The current banking turmoil has cause a number of suits, but almost all of them turn on one issue. How can a firm be duped by a peer? Banks are responsible for their own due diligence for their employees, their customers, and their shareholders. If they don’t bother to examine what they are buying, who is ultimately at fault?

Douglas A. McIntyre

Posted on: May 20, 2008 – 4:59 am in Banking, ,

New Survey: Airline Passengers Hate Airlines

Sometimes surveys are unnecessary. The results are foregone and obvious. Saying that airline passengers hate the carriers that take them around for business and pleasure is plain to anyone who has boarded a plane in the last couple of years.

Reuters writes that The University of Michigan’s American Customer Satisfaction Index found that "customer satisfaction with airlines in the United States has fallen to its lowest level since 2001."

The survey says lack of competition on many routes has allowed service to get worse.

Not mentioned in the poll were the problems of no free food, smaller seats, bathrooms that don’t work, and dirty planes. Otherwise, things are fine.

Douglas A. McIntyre

Posted on: May 20, 2008 – 4:46 am in Airlines

US Government Low-Balls Food Inflation Numbers

The US government now says that food prices will rise 5.5% this year. The previous forecast was 4.5%. According to The Wall Street Journal "The forecast released Monday by the Agriculture Department is the third consecutive month the agency has raised its food-inflation forecast."

The numbers are almost certainly too low. The last figures available showed food costs rising at a .9% rate in the most recently measured month. That was the largest increase in almost two decades.

The litany of reasons that food is moving up is almost too long to number. Global need for food is rising as the population grows and as farmers in places like Africa are put off their land. Ethanol demand is increasing. In China the supply dislocation for good is moving costs up almost 20% per month.

Perhaps the Feds don’t want to sow too much bad news at one time. What they are not passing along to the general public is that there is now a "triple play" set up against the US consumer. He has to pay more, much more, for food. Fuel prices are soaring. And, banks will not pass out loans for home mortgages, cars or credit cards. If anything lenders are raising rates to mitigate risk.

Food prices may be bad, but in concert with other problems the consumer faces a terrible net of news.

Douglas A. McIntyre

Posted on: May 20, 2008 – 4:40 am in Agriculture