24/7 Wall St. » CS

Credit Suisse Trims S&P Target: Another Sell in May and Go Away! (CS, SPY, PPH)

Administrator — Wed, 09 May 2012 12:45:12 +0000

Credit Suisse Group (NYSE: CS) is sort of taking the “Sell in May and go away!” approach. At least that is how it sounds, even if the overall call is still for equities to rise between now and the end of 2012. The macro-call is a reduction in the S&P 500 (AMEX: SPY) year-end target down to 1,450 from 1,470. The report basically notes that the chances of the Greek exit of the Euro is now at 15% rather than 5% probability. On an outright Euro break-up, Credit Suisse now sees a 10% chance of this happening rather than a 5% chance. The global equity strategy call notes that France now faces structural challenges.

Today’s quote is hard to take as positive considering that it says that the S&P could run down to 1,000 into a breakup of the Euro. The crux of the report noted, “Although most risk indicators are neutral (sentiment, risk appetite, insider buying) we think on a 3- to 12-month view equities still have the best risk-reward trade-off among the major asset classes – we stay overweight.”

As far as sectors, Credit Suisse calls on the ‘dollar earners’ and is overweight drugs and the key pharma ETF is Market Vectors Pharmaceutical ETF (AMEX: PPH) but that ETF was not mentioned in the Credit Suisse call.

JON C. OGG

Filed under: Analyst Calls, Economy, Index, International Markets, Research Tagged: CS, PPH, SPY

The Return of the Euro-Bank Fears (NBG, STD, BBVA, IRE, DB, UBS, CS, BCS, RBS)

Administrator — Wed, 02 May 2012 15:45:11 +0000

The U.S. stock markets have by and large been decoupled from the woes of Europe most of this year, as well as the slowing of growth in the key markets of China, India, and in many parts of South America. While “Sell in May and go away!” looks less evident this year, there are some new concerns brewing over the European Union and its banking sector.

S&P actually raised its rating on Greece this morning, but this was a technical upgrade rather than any real improvement. The fears elsewhere are outweighing the hopes right now as French and Dutch austerity measures are now being fought in the political scene. Even more fresh data from various purchasing managers readings from France, Germany, Spain, and elsewhere are only adding fuel to the fire that the recessionary climate in Europe is worse than many have hoped.

Greece saw something highly unusual today: A RATINGS AGENCY UPGRADE! After the distressed debt exchange, Standard & Poor’s removed the SD rating (selective default) up to a rating of “CCC” and said that the long-term outlook is STABLE. The short-term foreign and local currency sovereign credit rating was raised to “C” from the “SD” rating and the outlook is now STABLE as well. Unfortunately this is of no help to National Bank of Greece SA (NYSE: NBG) with its ADRs down 4% at $2.19 in New York trading.

More fears are coming up in Spain as the bank leverage is high. Banco Santander, S.A. (NYSE: STD) is down almost 6% at $6.01 in New York trading, and the prior 52-week trading range was $6.08 to $12.48. Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 5.5% at $6.45 and shares briefly dipped to a 52-week low today under the prior 52-week range of $6.43 to $12.96.

Can you leave Ireland out? No, and the ADRs of The Bank of Ireland (NYSE: IRE) are down 4.8% at $5.92 in low-volume trading mid-day in New York.

Deutsche Bank AG (NYSE: DB) is down 4.5% at $452.16 in New York trading of its ADRs.

As Switzerland is being considered a haven, there is a mixed reaction. UBS AG (NYSE: UBS) is up 1.3% at $12.84, while Credit Suisse Group (NYSE: CS) is down 4.2% at $22.51 in New York ADR trading.

England is certainly not in the Euro, but the banks there have deep ties to dealings in Europe. Barclays PLC (NYSE: BCS) is down 4.4% at $13.88 and Royal Bank of Scotland Group plc (NYSE: RBS) is down 2.4% at $8.02 in New York ADR trading.

JON C. OGG

Filed under: ADR, Banking, Economy, International Markets Tagged: BBVA, BCS, CS, DB, IRE, NBG, RBS, STD, UBS

Amylin Seeks a Buyer (AMLN, CS, GS, BMY, SNY, LLY, AZN, MRK)

Paul Ausick — Mon, 23 Apr 2012 11:59:20 +0000

Diabetes drug maker Amylin Pharmaceuticals Inc. (NASDAQ: AMLN) has hired bankers and lawyers to help the company find a buyer. In February Amylin turned down a $3.5 billion ($22/share) offer from Bristol-Meyers Squibb Co. (NYSE: BMY), and the company’s third-largest shareholder, Carl Icahn, has demanded that the company put itself up for sale and the right to nominate his own directors. Amylin has hired Credit Suisse (NYSE: CS) and Goldman Sachs Group Inc. (NYSE: GS) as financial advisers.

One potential buyer is Sanofi (NYSE: SNY), the Paris-based drug company that is developing a similar treatment for diabetes. Amylin ended a long relationship with Eli Lilly & Co. (NYSE: LLY) last November, but still owes Lilly payments of $1.2 billion over the next several years. AstraZeneca plc (NYSE: AZN) is another drug maker believed to be on the look-out for an acquisition as is Merck & Co. Inc. (NYSE: MRK).

Amylin’s diabetes drugs Byetta and Bydureon are both approved for use in the US. Byetta is a twice-weekly injection for Type 2 diabetes, while Bydureon, which was approved only in January, is a once-a-week injection for the disease. Diabetes affects some 300 million people worldwide and 26 million in the US alone. Drugs to combat the disease could be enormous sellers.

The market is very happy with the news from Amylin. Shares are up more than 10% in the pre-market this morning, at $25.15 in a 52-week range of $8.03.25.84.

Paul Ausick

Filed under: Drug companies, Mergers and Buy Outs, Pharmaceuticals Tagged: AMLN, AZN, BMY, CS, GS, LLY, MRK, SNY

Splunk Underwriters Did Huge Disservice (SPLK, MS, CS, JPM, BAC)

Administrator — Fri, 20 Apr 2012 10:35:58 +0000

Splunk Inc. (NASDAQ: SPLK) was touted as a hot IPO but became a sizzling hot IPO. The company priced 13.5 million shares at $17.00 per share, but this was a premium to the already-raised range of $11 to $13 per share after initially having been targeted at $8 to $10 per share. So, why did this one open up at $32.00 and why did it close at $35.48 with some 14+ million shares having traded?

The underwriting group just got this one very wrong and left millions upon millions of expansion capital on the table for Splunk to finance its growth. The book-runners of the offering were Morgan Stanley (NYSE: MS), Credit Suisse (NYSE: CS), JP Morgan Chase & Co. (NYSE: JPM) via JP Morgan Securities LLC, and Bank of America Corporation (NYSE: BAC) via BofA/Merrill Lynch. Other managers in the syndicate were UBS Investment Bank, Pacific Crest and Cowen and Co.

Splunk has a software platform that allows companies and large organizations to harness their data via real-time operational intelligence. The company has been growing rapidly and claims over 3,700 customers, which all pay license fees based on index capacity needs. Sales almost quadrupled from 2010 to 2012, with the most recent annual sales at $121.0 million. Even before the IPO came out the stock was given a boost by JMP Securities as it initiated coverage with a “Market Outperform” rating and with a $22.00 price target. The opening price was $10.00 above that! Shares rose another 2.9% to $35.79 on more than 130,000 shares in the after-hours session.

The leading underwriters could hardly argue that they did not do the company a huge disservice here. IPOs that double or come close to doubling on an opening price and that close up higher imply that the underwriters did not know what they were doing. Sure, it gives Splunk a market value of twice what it was told, but it also means that the company raised only half of what it could have raised. Companies come public so that they can finance their growth and to create a liquidity in the company (and a liquidity event for the backers).

Almost all of the shares were sold by the company: 12,507,278 shares were sold by Splunk, and 992,722 came from selling shareholders. To make matters worse, Splunk had granted the underwriters a 30-day option to purchase up to an additional 2,025,000 shares to cover over-allotments. You can bet your assets that the greenshoe option was exercised.

The reason that the 100% premium to the premium pricing is a huge disservice is because it means that money managers, hedge funds and mutual funds who were allowed to buy shares on the IPO suddenly have a double in price on their hands. They took none of the venture stage risk, and they did none of the work to get the company public other than look at the growth rates and say, “Sure, I would like to buy 10,000 to 100,000 shares.” And they double their money overnight.

When you see moves like this, it should really point out that the OpenIPO process from W.R. Hambrecht & Co. might be at least one better way. If this does not give Facebook an even stronger leg to stand on to demand that the underwriters take huge discounts and offer a strong pricing, then nothing else does.

When Splunk first filed for an IPO it was for up to $125 million. The company sold $229.5 million in total gross proceeds (including insider shares) and that is before considering the 2.02 million shares in the overallotment option, which you know have already been exercised by the underwriters. The total implication is that Splunk probably could have raised up to $300 million to $400 million, if you discount the huge opening and closing premiums on the first day.

In 2011, Splunk had the following expenses: R&D $23.56 million; Sales and marketing $74.78 million; and G&A $19.69 million. Had the underwriters priced this one correctly, Splunk could have raised another full year’s worth of operating expenses.

Imagine if you were selling a rent house property and your real estate agent left a full year’s worth of living expenses on the table. At some point in the future, companies coming public should be able to have at least a bit more control over the IPO process.

JON C. OGG

Filed under: Accounting, Activist Investor, Analyst Calls, Banking, Brokerage Firms, Business Services, Compensation, Corporate Governance, Editor's Picks, Exchange News, Internet, IPOs, Mutual Funds, Private Equity, Software, Technology Companies Tagged: BAC, CS, JPM, MS, SPLK

Fitch Booted from Credit Suisse Bond Rating (CS, MHP, MET)

Paul Ausick — Wed, 04 Apr 2012 18:21:51 +0000

Ratings agency Fitch Ratings didn’t like what it saw on a residential mortgage backed securities bond from Credit Suisse Group (NYSE: CS) and it said so. That led the bank to drop the agency’s rating in favor of two ‘AAA’ ratings assigned by Standard & Poor’s, a division of The McGraw Hill Companies Inc. (NYSE: MHP), and DBRS Ltd.

The Wall Street Journal reports that the bond was backed by $746 million in jumbo mortgage loans initiated by MetLife Inc. (NYSE: MET) and others. Fitch had been paid for its rating on the deal. The WSJ noted that Fitch published a report critical of S&P’s and DBRS’s rating.

Filed under: Banking, Bonds Tagged: CS, MET, MHP

Moody’s Bank Downgrade Warnings Look Very Staged (CS, MS, UBS, BCS, DB, GS, HBC, BAC, NMR, FAS)

Administrator — Thu, 16 Feb 2012 14:14:37 +0000

If you think ratings agencies do not quite matter any longer, today may be a reminder that they can still create at least some nervousness even if they are just late to the party. Moody’s has a downgrade warning on 17 banking and investment banking outfits. While this is a ‘warning’ rather than a downgrade, this certainly looks and feels staged to the point that the downgrades on most of the banks and investments seems assured on level or another. In short, this is being staged.

In the Moody’s warning, Credit Suisse Group (NYSE: CS), Morgan Stanley (NYSE: MS), and UBS AG (NYSE: UBS) were put on notice that their credit ratings could be downgraded potentially by as many as three notches. That is a very aggressive downgrade warning, and it now almost assures that a downgrade of one or two notches is almost certain.

Warnings of a two notch downgrade were handed out to Barclays PLC (NYSE: BCS), BNP Paribas, Credit Agricole, Deutsche Bank AG (NYSE: DB), Goldman Sachs Group Inc. (NYSE: GS) and HSBC Holdings PLC (NYSE: HBC). This seems to all but assure that at least a one notch downgrade could come on these.

Interestingly enough, Bank of America Corporation (NYSE: BAC) and Nomura Holdings, Inc. (NYSE: NMR) were “only” given warnings of a possible one notch downgrade.

Moody’s noted that these existing ratings just do not reflect the current market challenges. Here are the pre-market trading indications on each, in New York trading indications:

Credit Suisse Group (NYSE: CS) -0.7% at $25.36;
Morgan Stanley (NYSE: MS) -2% at $18.58;
UBS AG (NYSE: UBS) is down only $0.01 at $13.91;
Barclays PLC (NYSE: BCS) is down 0.4% at $14.97;
Deutsche Bank AG (NYSE: DB) is down 1.2% at $42.45;
Goldman Sachs Group Inc. (NYSE: GS) is down 0.5% at $112.55;
HSBC Holdings PLC (NYSE: HBC) is down 0.5% at $44.69;
Bank of America Corporation (NYSE: BAC) is down 0.8% at $7.72.

Even the triple-leveraged Direxion Financial Bull 3X Shares (NYSE: FAS) is down ‘only’ 0.7% at $86.30 in the pre-market.

What is interesting here is that the move lower this morning is on the heels of major moves higher since the first of the year. The downgrades seem assured on at least some level now, but the market is not really acting as though it is ready to panic.

JON C. OGG

Filed under: 24/7 Wall St. Wire, Analyst Calls, Banking, Financial Stocks Tagged: BAC, BCS, CS, DB, FAS, GS, HBC, MS, NMR, UBS

Media Digest (2/9/2012) Reuters, WSJ, NYT, Bloomberg

247wallst — Thu, 09 Feb 2012 11:37:36 +0000

Greek ministers will go to Brussels to meet with EU officials about restructuring of debt, but several details have not been resolved. (Reuters)

Groupon (NASDAQ: GRPN) posts earnings that trouble Wall St. and its shares fall by 10%. (Reuters)

A deal on mortgage data and foreclosures between five banks and state attorneys general is close to being done. The amount of the settlement will be about $25 billion. (Reuters)

Credit Suisse (NYSE: CS) posts a drop in Q4 results. (Reuters)

Rio Tinto (NYSE: RTP) posts poor results due to metal prices. (Reuters)

Levovo beats earnings forecasts as its market share rises, and it will produce a TV product for Chinese consumers. (Reuters)

Google (NASDAQ: GOOG) to launch a cloud storage product. (WSJ)

The House probably will approve a bill to regulate insider trading by members of Congress and their staffs. (WSJ)

China and Canada to increase official trade relations. (WSJ)

China’s CPI rises to 4.5% in January — up from 4.1% in December. (WSJ)

Some car companies press sales in Indonesia as the number of drivers there surges. (WSJ)

Chrysler may set a deal with banks for consumer and dealer loans that would replace its relationship with Ally. (WSJ)

Apple (NASDAQ: AAPL) tightens it approval process for apps used on the iPad and iPhone. (WSJ)

Petrobras (NYSE: PTR) estimates of its reserves and the P&L they may create could be too optimistic. (WSJ)

Goldman Sachs (NYSE: GS) buys much of AIG’s (NYSE: AIG) troubled bond portfolio, which dates back to 2008. (WSJ)

Two million homeowners could benefit from a $25 billion settlement over mortgages reached between five banks and the government. (NYT)

Car sales in China fall 24% in January. (NYT)

Young people are watching TV more and more on PCs. (NYT)

BP (NYSE: BP) is conversing with the U.S. government over claims from the Deepwater Horizon oil spill and may settle. (Bloomberg)

Sarkozy’s approval ratings in France are near all-time lows for a president. (Bloomberg)

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Press Digest Tagged: AAPL, AIG, BP, CS, GOOG, GRPN, GS, PTR, RTP

Media Digest (2/7/2012) Reuters, WSJ, FT, Bloomberg

247wallst — Tue, 07 Feb 2012 11:49:30 +0000

Glencore and Xtrata agree to a $90 billion merger. (Reuters)

Greek leaders face a deal for settling sovereign debt matters as workers strike. (Reuters)

Toyota (NYSE: TM) posts good third-quarter profits and says the U.S. will be a difficult market. (Reuters)

Boeing (NYSE: BA) may have trouble with its 787 deliveries after flaws were found in the body of the aircraft. (Reuters)

Verizon (NYSE: VZ) and Redbox set a deal to compete with Netflix (NASDAQ: NFLX). (Reuters)

Amazon.com (NASDAQ: AMZN) may open a physical store in Seattle. (Reuters)

House Republicans move to reopen debate on the Keystone XL pipeline. (Reuters)

Problems with regulators have made the Medco (NYSE: MHS) merger with Express Scripts (NASDAQ: ESRX) less likely. (Reuters)

The U.S. will create programs to help the troubled money market industry. (WSJ)

Barclays (NYSE: BCS), Credit Suisse (NYSE: CS), Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE: GS) and Royal Bank of Scotland (NYSE: RBS) will bid as the New York Fed auctions risky bonds it got as part of its AIG (NYSE: AIG) bailout. (WSJ)

Greece will cut 15,000 public sector jobs. (WSJ)

Motorola Mobility (NYSE: MMI) wants a 2.25% royalty on Apple (NASDAQ: AAPL) iPhone sales based on IP claims. (WSJ)

Walt Disney (NYSE: DIS) and Univision are in talks to create a 24-hour news channel. (WSJ)

India cuts its growth forecast to 6.9%. (WSJ)

Eugene Isenberg of Nabor Industries (NYSE: NBR) gives up a $100 million retirement payout. (WSJ)

The Obama budget will have $3 trillion in cuts over 10 years and $1.5 trillion in new taxes — mostly on the rich. (WSJ)

Japan wants to enter a large Asia-Pacific trade agreement, but the U.S. may object. (WSJ)

Satellite makers say that U.S. regulations make it difficult for them to compete overseas. (WSJ)

Republic Airways (NASDAQ: RJET) is about to sell Frontier. (WSJ)

New LeadershipIQ research breaks companies into four groups based on management style and systems to create results. (WSJ)

Walmart (NYSE: WMT) promotes a manager to be the new CEO of its China operations. (WSJ)

Some large European banks will not take European Central Bank loans because they fear it will make them appear weak. (WSJ)

BP (NYSE: BP) raises its dividend. (FT)

An escrow fund may be set to help Greece instead of all aid money going to the nation directly. (FT)

Farmers to plant the largest corn crop since 1984. (Bloomberg)

Walmart will lower fat, sodium and sugar in some foods. (Bloomberg)

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Press Digest Tagged: AAPL, AIG, AMZN, BA, BCS, BP, CS, DIS, ESRX, GS, MMI, MS, NBR, NFLX, RBS, RJET, TM, VZ, WMT

Media Digest (1/20/2012) Reuters, WSJ, NYT, FT, Bloomberg

247wallst — Fri, 20 Jan 2012 13:40:52 +0000

Google (NASDAQ: GOOG) misses earnings expectations, which pushes shares down as much as 10%. (Reuters)

IKEA posts a profit and grows in most regions of the world. (Reuters)

Greece and private creditors move closer to a debt deal. (Reuters)

Apple (NASDAQ: AAPL) says it will enter the digital textbook business. (Reuters)

IBM (NYSE: IBM) results show solid IT demand. (Reuters)

Angry Birds’ parent pushes back the date of its IPO. (Reuters)

The EC will decide whether to approve a Google buyout of Motorola Mobility (NYSE: MMI) by February 13. (Reuters)

Eastman Kodak’s (NYSE: EK) move into bankruptcy as a means to cut costs may not yield high value for its patents as well. (WSJ)

Credit Suisse (NYSE: CS) buys old AIG (NYSE: AIG) mortgage paper from the New York Federal Reserve. (WSJ)

AT&T’s (NYSE: T) new plan to raise data costs for subscribers may prompt some to switch to competitors. (WSJ)

HSBC’s (NYSE: HBC) Chinese PMI estimate shows slow manufacturing, with a 48.8 measurement compared to 48.7 in December. (WSJ)

Floods in Thailand do not dent Intel’s (NASDAQ: INTC) earnings much. (WSJ)

American homeowners finally begin to improve their property, according to IHS Global Insight. (WSJ)

China sets more deals with U.S. allies to strengthen its supply of oil. (WSJ)

The European Aviation Safety Agency says Airbus will do more safety inspections of its A380 superjumbo. (WSJ)

General Motors (NYSE: GM) says it is the largest car company in the world, but experts disagree on how to count affiliate sales. (WSJ)

The Energy Information Administration says exports of natural gas could drive U.S. prices up by 54% in 2018. (WSJ)

Google presses its effort in display ads, which could pressure Aol (NYSE: AOL) and Yahoo! (NASDAQ: YHOO). (WSJ)

General Electric (NYSE: GE) tries to improve its prospects, but its size and diversity may hurt that push. (WSJ)

Hedge fund investors pull more cash from the firms than they add in the last part of 2011. (WSJ)

Commerzbank, Banca Monte dei Paschi di Siena, and Spain’s Bankia must push to raise cash to meet regulations. (WSJ)

American Express (NYSE: AXP) and Capital One (NYSE: COF) earnings show consumers returning to the use of credit. (WSJ)

Dealogic says that companies have raised $44.2 billion this year — a record for the period. (WSJ)

Chris Dodd, the head of the Motion Picture Association of America, suggests that tech and content companies meet to explore their differences. (NYT)

Ireland says its economy will be troubled again this year as its tries to meet austerity goals. (NYT)

Italy’s banks borrow 50 billion euros from the European Central Bank. (FT)

International Monetary Fund’s Largarde warns that budget cuts linked to austerity could damage growth. (Bloomberg)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AAPL, AIG, AOL, AXP, CS, EK, GE, GM, GOOG, HBC, IBM, INTC, MMI, YHOO

Media Digest (1/18/2012) Reuters, WSJ, NYT, FT

247wallst — Wed, 18 Jan 2012 11:48:13 +0000

Yahoo! (NASDAQ: YHOO) founder and former CEO Jerry Yang leaves the company’s board. (Reuters)

The World Bank sharply cuts global growth forecasts. (Reuters)

Greece and private creditors race to settle on a deal to avoid a financially dangerous default. (Reuters)

Fallout from the Chinese housing bubble may hit GDP. (Reuters)

More Americans use savings to help during what remains a harsh economic climate. (Reuters)

Olympus says the potential of an equity partner would be delayed until new management receives appointments. (Reuters)

Kraft Foods (NYSE: KFT) plans to cut 1,600 people when it breaks into two companies. (Reuters)

Asia-based companies may buy Research In Motion (NASDAQ: RIMM); Samsung states it has no interest. (Reuters)

Calpers plans to sell much of its real estate portfolio. (WSJ)

A Harvard Business School project finds that graduates voice concerns about the tax code and political gridlock. (WSJ)

More companies buy Apple (NASDAQ: AAPL) Macs than in past years. (WSJ)

Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) report loan growth as they announce earnings. (WSJ)

More Chinese citizens now live in cities rather than rural areas. (WSJ)

Spain plans to cut debt within it major states. (WSJ)

The National Science Board says more R&D jobs have moved to Asia. (WSJ)

The National Automobile Dealers Association says new fuel economy rules would damage sales. (WSJ)

An Abu Dhabi-based fund puts money into struggling UniCredit. (WSJ)

The FDIC proposes bank stress tests. (WSJ)

The United States Conference of Mayors says few cities have added jobs since the recession. (NYT)

Prime Minister Lucas Papademos says many investors in Greek sovereign paper will take large losses. (NYT)

Factory growth in the U.S. beats that among all G7 nations. (FT)

The World Bank says developing nations should prepare for a poor economic environment. (FT)

Bank of America (NYSE: BAC), Barclays (NYSE: BCS), Credit Suisse (NYSE: CS) and Goldman Sachs (NYSE: GS) will all bid for AIG (NYSE: AIG) debt portfolios held by the U.S. government. (FT)

Central banks increase the gold they lend for the first time in a decade. (FT)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AAPL, AIG, BAC, BCS, C, CS, GS, KFT, RIMM, WFC, YHOO