The unofficial closing bells put the DJIA down about 11 points to 12,705.41 (-0.09%), the NASDAQ rose more than 11 points (0.4%) to 2,859.68, and the S&P 500 rose 0.11% or nearly 1.5 points to 1,325.54.

There were several analyst upgrades and downgrades today, including Dell Inc. (NASDAQ: DELL) raised to ‘overweight’ at JPMorgan; Edwards Lifesciences Corp. (NYSE: EW) cut to ‘neutral’ at Credit Suisse; AK Steel Holding Corp. (NYSE: AKS) cut to ‘underperform’ at BofA/Merrill Lynch; Steel Dynamics Inc. (NASDAQ: STLD) cut to ‘neutral’ at BofA/Merrill Lynch; and Broadcom Corp. (NASDAQ: BRCM) started as ‘buy’ at Canaccord Genuity.

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is up nearly 24% at $66.30; Education Management Corp. (NASDAQ: EDMC) is down -17% at $21.19; Nasdaq OMX Group Inc. (NASDAQ: NDAQ) is down -0.6% at $24.62; Qualcomm Inc. (NASDAQ: QCOM) is up 2.2% at $60.88 after posting a new 52-week high of $61.93 earlier today; Beazer Homes USA Inc. (NYSE: BZH) is up 3.2% at $3.27; Boston Scientific Corp. (NYSE: BSX) is down -3.9% at $5.85; Brinks Co. (NYSE: BCO) is down -17.5% at $24.43; Diamond Offshore Drilling Inc. (NYSE: DO) is up 0.35% at $63.29; Lear Corp. (NYSE: LEA) is down -1.2% at $42.48; Merck & Co. (NYSE: MRK) is down -0.3% at $38.51; Take-Two Interactive Software Inc. (NASDAQ: TTWO) is down -0.3% at $15.71; and Viacom Inc. (NASDAQ: VIAB) is down -0.9% at $46.53.

Other standouts from today include the following stocks:

Zynga Inc. (NASDAQ: ZNGA) is up nearly 18% at $12.49 after posting a new post-IPO high of $12.91 earlier today. The social games company got a big boost from Facebook’s IPO filing. Our coverage is here.

MediciNova Inc. (NASDAQ: MNOV) is up nearly 31% at $2.47. The company received a favorable patent notice for a multiple sclerosis treatment device.

Response Genetics Inc. (NASDAQ: RGDX) is up more than 27% at $1.50. The drug maker announced the private placement of about 5.3 million shares at $1.50/share, about 28% higher than last night’s closing price.

BioScrip Inc. (NASDAQ: BIOS) is up more than 15% at $6.73. The pharmacy services provider has sold a portion of its assets to Walgreen Co. (NYSE: WAG) for $225 million.

Ur-Energy Inc. (AMEX: URG) is down more than -13% at $1.22. The uranium miner has issued 1.5 million shares of new stock to agents who will attempt to sell at CDN$1.00.

Stay tuned for Friday. We have noted the following events on the schedule (all times Eastern):

• 8:30 a.m. – Non-farm payroll report
• 10:00 a.m. – Factory orders
• 10:00 a.m. – ISM non-manufacturing (services) index

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Paul Ausick

Competition from other console makers like Microsoft Corp. (NASDAQ: MSFT) and Nintendo Corp. (OTC: NTDOY) and a huge hacking scandal have combined to weigh on Sony’s sales of the Playstation. This could be more bad news for game designers like Activision Blizzard Inc. (NASDAQ: ATVI) and Take-Two Interactive Software, Inc. (NASDAQ: TTWO), both of which have seen customers move from packaged software to downloadable games. Game makers are selling more downloadable games, but revenue is lower than for packaged games although margins are higher.

The real culprits are smartphones from Apple Inc. (NASDAQ: AAPL), Nokia Corp. (NYSE: NOK), Motorola Mobility Holdings Inc. (NYSE: MMI) soon to be a division of Google Inc. (NASDAQ: GOOG), Samsung Electronics (OTC: SSNLF), and HTC Corp. We noted the continuing shift to smartphone games in our review of earnings from Activision’s earnings earlier this month.

Nintendo has already dropped the price of its 3DS handheld console from $249.99 to $169.99 in an effort to attract more buyers. After one week of sales in Japan, Nintendo’s efforts appear to have paid off with sales jumping to more than 214,000 from just over 32,000 in the week before the price cut.

Nintendo’s latest earnings were down by about 50% from the previous quarter and the company has lowered its sales target for its Wii console and lowered its profit target by more than 80%.

Sony would like to avoid that, but the debacle over the hacking attack and the lack of enthusiasm for the Playstation 3 from the beginning are going to be too much to overcome.

Combined with the continuing incursion from the smartphone makers, Sony may have waited too long to get on the latest train to leave the station. Sort of reminds us of how the company and its Walkman were blindsided by MP3 players. This won’t be the last price drop for the Playstation 3.

Paul Ausick

The Swiss franc hits a record against the euro. (Reuters)

Bank of America (NYSE: BAC) sued by AIG (NYSE: AIG) for “massive fraud” in sales of mortgage-backed paper. Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS) may also face legal action. (Reuters)

Hackers hit Oracle (NASDAQ: ORCL). (Reuters)

The ITC may consider Apple’s (NASDAQ: AAPL) accusations against HTC. (Reuters)

A fire in London may hurt delivery of some Sony (NYSE: SNE) products. (Reuters)

HSBC (NYSE: HBC) may sell its U.S. credit card business. (Reuters)

A strike by unions against Verizon (NYSE: VZ) escalates into harsh words. (WSJ)

The ECB purchase of Italy and Spanish bonds push their yields down further. (WSJ)

Companies which rely on U.S. contracts may need to tighten expenses. (WSJ)

Tokyo Electric Power lost $7.4 billion in the last quarter. (WSJ)

Transatlantic Holdings may sell to Berkshire Hathaway (NYSE: BRK) if the Buffett firm offers a higher price. (WSJ)

The price of corn is now higher than wheat, an unusual circumstance. (WSJ)

Take-Two Interactive (NASDAQ: TTWO) posts an unexpected loss. (WSJ)

Oil futures hit their highest level in 9 months. (WSJ)

Exxon Mobil (NYSE: XOM) will sell some natural gas rights in Indonesia because of human rights issues there. (WSJ)

Treasury yields drop after the S&P downgrade of the U.S. to AA+. (WSJ)

Worries about sovereign debt move to France. (WSJ)

MGM Resorts (NYSE: MGM) results improve as Las Vegas posted a modest recovery. (WSJ)

Hedge funds have aggressively sold company equities and debt. (WSJ)

Freddie Mac posts a $2.1 billion loss during the second quarter, an improvement from last year. (WSJ)

The stock market drop could kill consumer confidence. (NYT)

BookStats says e-book sales have helped revive the industry. (NYT)

The committee at S&P that decides sovereign rate grades is know for lack of transparency. (NYT)

Oil price may bring down gasoline and improve consumer confidence. (NYT)

Emerging markets hurt as investors flee risk. (FT)

The Federal Reserve may start a new stimulus package. (FT)

German exports fall, another sign of slowdown. (Bloomberg)

Global bonds add $132 billion in assets as stocks fall. (Bloomberg)

The value of Yahoo! (NASDAQ: YHOO) is so low that the portal business is worth next to nothing when the firm’s Asia assets are backed out. (Bloomberg)

Douglas A. McIntyre

Game makers have finally gotten the message that packaged software sales are not likely to recover in the face of competition from digital sales. Activision reported second-quarter earnings yesterday, and adjusted EPS rose to $0.10, double the expected $0.05. Revenue also came in higher that the expected $602 million, at $699 million. Digital sales accounted for 60% of Activision’s revenue in the quarter.

Activision also raised its revenue guidance for 2011 from $4.05 billion to $4.18 billion and forecast an EPS boost from $0.61 to $0.68.

None of the traditional video game-makers is about to give up on packaged retail sales. The industry currently garners about 75% of its revenue from packaged sales, although some industry leaders expect that to drop to just 50% within the next five years.

For some game-makers that will mean a change in revenue mix, but a change in total revenues because digitally-distributed games generally don’t cost as much though margins are usually better. Revenue growth could be a problem unless game companies can figure out ways to get buyers to spend more on tokens and add-ons for the games they play.

Another thing that may have to change is the $40 price for a packaged game. That is considered by many gamers to be too high. If the game-makers are forced to drop their prices for packaged games and are, at the same time, seeing total revenues fall, they could find it difficult to convince investors of their value.

The other major shift is away from hand-held devices like Nintendo’s DS and 3DS and toward smartphones from Apple or companies using the Android operating system from Google Inc. (NASDAQ: GOOG). Even the pre-teen market, the largest for hand-helds, is perfectly happy to play games on an iPhone or other smartphone.

Nintendo and Sony have not fared nearly as well as Microsoft in the console/game market, primarily because Microsoft beat them to the punch with digital downloads and online gaming from the Xbox and Xbox Live. Nintendo expects to expand its digital offerings over the next three years. The company has already dropped the price of its 3DS in an effort to boost sales. It’s trying to avoid the same mistake that Sony made with its introduction of the PlayStation 3, when the $600 console kept buyers away in droves.

Avoiding past mistakes and adjusting to new distribution and revenue models is not going to be easy for game-makers. One thing that may make it easy to adapt is consolidation in the industry. That may be on the horizon sooner rather than later.

Paul Ausick

For the quarter ended in December, Activision posted an EPS loss of -$0.20 on revenues of $1.43 billion. On a non-GAAP basis, the company posted EPS of $0.53 on revenue of $2.55 billion. Analysts were expecting EPS of $0.51 on $2.35 billion in revenue. Smaller competitors like Take-Two Interactive Software Inc. (NASDAQ: TTWO) and THQ Inc. (NASDAQ: THQI) handily beat expectations for the December quarter, while Electronic Arts Inc. (NASDAQ: ERTS) came in with a beat similar to Activision’s.

Like EA, Activision is getting a larger share of its revenue from high-margin digital distribution. As if to emphasize that point, the company announced that it was killing the once wildly popular Guitar Hero. On the conference call, the company said that “demand for peripheral-based music games has declined at a dramatic pace.”

At the same time, Activision expects the installed base of online-enabled game consoles like the Xbox from Microsoft Corp. (NASDAQ: MSFT) and the PS3 from Sony Corp. (NYSE: SNE) to grow by 24% in 2011, to 92 million units.

For the current quarter, Activision expects non-GAAP net revenue of $640 million and non-GAAP EPS of $0.07. Analysts had been expecting EPS of $0.10 on revenue of about $735 million. For the full-year, the company expects non-GAAP EPS of $0.70 and non-GAAP net revenue of $3.9 billion. Analysts had been looking forward to non-GAAP EPS of $0.78 on revenue of $4.69 billion.

Activision clearly expects its distribution of packaged sales to fall. In addition to snuffing Guitar Hero, the company is stopping development of another game, and will not issue a new skateboarding game in 2011. And the company’s Blizzard division, makers of “World of Warcraft,” will not release a new game in 2011, but would issue two Blizzard games in 2012.

Activision said essentially nothing about developing games for mobile devices. Unlike EA, which has developed games for smartphones from both Apple Inc. (NASDAQ: AAPL) and Research in Motion Ltd. (NASDAQ: RIMM), Activision hasn’t made a serious move into the mobile space, perhaps because there’s not a lot of money there, as we noted in our piece about EA’s earnings.

To sweeten the bitterness of its earnings report, Activision announced a new stock buyback program of up to $1.5 billion. The company purchased $966 million of its own stock under a $1 billion buyback program that ended in December. Activision also increased its dividend by 10%, to $0.165 for the March quarter.

Activision’s shares are off nearly -10% this morning, to $10.58, on very heavy volume.

Paul Ausick

Atmel Corporation (NASDAQ: ATML) is up 6.5% on moderate trading to %15.60, approaching the top of its 52-week range of $4.29-$15.13.

Motricity, Inc. (NASDAQ: MOTR) is down 19% to $17.99 on heavy volume, relative to a 52-week range of $6.55-$31.95. RBC Capital recently downgraded the wireless company from outperform to underperform.

Photronics, Inc. (NASDAQ: PLAB) is down 14.5% on light volume to $7.70, relative to a 52-week range of $3.60-$7.25. The semiconductor components improved Q1 guidance after hours.

Take-Two Interactive Software (NASDAQ: TTWO) is up 6.5% on moderate volume to $15.49, relative to a 52-week range of $7.98-$14.54. The game company posted improved fourth quarter guidance.

Smith Micro (NASDAQ: SMSI) is 34% premarket to $8.70, relative to a 52-week range of $7.50-$17.03. The software company reported Q1 guidance well below expectations.

Sienna Wireless (NASDAQ: SWIR) is down 25% to $11.50, relative to a 52-week range of $6.54-$16.50. Shares of SWIR were cut to underweight at JP Morgan.

Apple Inc. (NASDAQ: AAPL) Raised to Outperform as the Bull of the Day at Zacks Investment Research.
Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) Cut to Hold at Deutsche Bank.
Banco Santander, S.A. (NYSE: STD) Cut to Hold at Deutsche Bank.
CAI International Inc. (NYSE: CAP) Started as Outperform with $24 target at Credit Suisse.
Con-way Inc. (NYSE: CNW) Raised to Outperform and $39 target at Credit Suisse.
Dynegy Inc. (NYSE: DYN) Cut to Neutral at JPMorgan.
Intuit Inc. (NASDAQ: INTU) Started as Buy at Citigroup.
KeyCorp (NYSE: KEY) Cut to Hold at S&P Equity Research (late-Tuesday call).
Leap Wireless International, Inc. (NASDAQ: LEAP) Cut to Market Perform at Bernstein.
Old Dominion Freight Line Inc. (NASDAQ: ODFL) Raised to Neutral and $32 target at Credit Suisse.
Plexus Corporation (NASDAQ: PLXS) Cut to Underperform and named the Bear of the Day at Zacks Investment Research.
Sierra Wireless Inc. (NASDAQ: SWIR) Cut to Underweight at JPMorgan.
Starbucks Corporation (NASDAQ: SBUX) Started as Outperform with $40 target at Williams Capital.
Synopsys Inc. (NASDAQ: SNPS) Reinstated as Buy at BofA/ML.
Take-Two Interactive (NASDAQ: TTWO) Raised to Buy at BofA/ML.
YUM! Brands Inc. (NYSE: YUM) Reiterated Buy with $58 target at Argus.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Our review for the best video game sector pick includes reviews of GameStop Corp. (NYSE: GME), ActiVision Blizzard, Inc. (NASDAQ: ATVI), Electronic Arts Inc. (NASDAQ: ERTS), THQ Inc. (NASDAQ: THQI), and Take-Two Interactive Software Inc. (NASDAQ: TTWO).  We have also had to focus on some key issues surrounding Microsoft Corporation (NASDAQ: MSFT) and Apple Inc. (NASDAQ: AAPL), along with Nintendo (NTDOY).

We have provided a basic table below.  After the table comes the company by company review, with our top video game pick of 2011.

We have compiled the news or events on each company here and we have offered color and handicapping figures on each if applicable for the week ahead or for longer-term developments in each.

Activision Blizzard, Inc. (NASDAQ: ATVI) has been stuck in a dead video game sector but it may have a new catalyst.  Rumors abound that its new World of Warcraft “Cataclysm” edition will be out in early December in time for the holidays.  Whether this will happen is unknown, but that might add a nice boost to end of year sales if it occurs.  For its part, the company is keeping quiet.  Speaking of video games, Barron’s called Take-Two Interactive Software Inc. (NASDAQ: TTWO) a ‘bargain in the sagging video game sector’ and at $10.25 its 52-week range is $7.00 to $12.57.

Amazon.com Inc. (NASDAQ: AMZN) could see additional pressure as earnings season gets closer because even after a 2.1% drop to $153.71 Friday,  shares are almost 30% since before its last earnings.  A pair of analysts voiced concerns on high valuations and a 25% run in the last month.  As a reminder, Amazon.com has signaled in its prior quarter that margin issues are present and the competition for the eReader space is tight.  The 52-week trading range is $88.27 to $161.78.

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) is about to enter its second week after disclosing its accounting issues and SEC inquiry, and the damage could have more room to come as the class action suits are starting to come up.  Shares closed down again on Friday with a 5.2% drop to $29.57.  The stock was just under $30.00 as recently as late-July and the stock was at an adjusted $23+ handle when its 3 for 1 split went into effect in May.  With a $19.87 to $37.97 range over the last year, there could still be more weakness as a bear raid continues to gain strength.  Jim Cramer also added it to the SELL BLOCK this last week.

Fidelity National Financial Inc. (NYSE: FNF) and First American Financial Corp. (NYSE: FAF) could face continued pressure as reports of bank foreclosure document errors could throw millions of property titles into question.  It will increase these firms’ operating costs to review each mortgage title and will bring down more scrutiny on their operations ahead.  FNF closed down over 4% Friday at $15.04 versus a 52-week range of $12.60 to $17.00 and FAF closed down 3.1% at $14.48 versus a 52-week range of $11.90 to $19.57.  Stewart Information Services Corp. (NYSE: STC), owner of Stewart Title, was only down 1.24% at $11.18.

• You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.
  
  Filed under: Banking, Business Services, Calendar, Conglomerates, Cult Stock, Earnings, Economy, Editor's Picks, Media, Rumors Tagged: AMZN, ATVI, FAF, FNF, GERN, GMCR, GYMB, JPM, MON, NBG, NFLX, SDTH, SIRI, TSLA, TTWO, UAL, UTX, WDR ]]> http://247wallst.com/2010/10/03/the-unusual-suspects-for-the-week-ahead-atvi-ttwo-amzn-gmcr-fnf-faf-gern-gymb-jpm-mon-nbg-nflx-sdth-siri-tsla-ual-utx-wdr/feed/ 0 AMZNATVIFAFFNFGERNGMCRGYMBJPMMONNBGNFLXSDTHSIRITSLATTWOUALUTXWDR Administrator bull-and-bear-image http://247wallst.com/2010/09/14/thqs-warning-worth-a-value-turnaround-look-thqi-gme-bby-amzn-erts-atvi-ttwo/ http://247wallst.com/2010/09/14/thqs-warning-worth-a-value-turnaround-look-thqi-gme-bby-amzn-erts-atvi-ttwo/#comments Tue, 14 Sep 2010 16:27:09 +0000 Administrator http://247wallst.com/?p=79830 ]]> THQ Inc. (NASDAQ: THQI) is still trying to get its ship turned around in the right direction and the company’s stock was under fire this morning, understandably if you are just a headline reader.  In its updated core games release schedule, the company announced that its Red Faction® ArmageddonTM is now slated for release in May 2011.  Despite that this pushes a turnaround story back is one thing, but THQ may actually be the best buy with the most upside of all peers in the video game sector.

  Based upon the delay the company now expects to report its fiscal-2011 revenues of $800 to $825 million and it expects a non-GAAP loss of -$0.10 to -$0.20 EPS.  Thomson Reuters had estimates already at a loss and the consensus was -$0.03 EPS and nearly $845.5 million in revenues.  The big wild card for many investors is how this will affect the Fiscal-2012 (March-end) where Thomson Reuters has estimates of $0.31 EPS and $923.7 million in revenues.

  THQ also gave its line-up for next year via its fiscal 2012 schedule: Warhammer® 40,000® Space Marine® in Summer-2011, MX vs. ATV® Alive™ in Spring-2011, the latest edition of Saints Row® in Fall-2011, a fighting game based on the World Wrestling Entertainment® in Fall-2011, and a fighting games based on the Ultimate Fighting Championship® in Winter-2012.

  THQ has suffered alongside an industry that was supposed to be at least a quasi-winner of the recession that ended up being a loser.  It turned out that laid-off couch potato video game addicts either did not buy more new titles or they opted for used games.  GameStop Corp. (NYSE: GME) trades at the lowest forward P/E ratios we have seen with a ratio of under 7-times blended 2011 and 2012 (Jan-end) estimates.  Best Buy Co. (NYSE: BBY) and Amazon.com Inc. (NASDAQ: AMZN) are large enough and now competing enough in the used-game markets that Wall Street is scared that GameStop could get gored.  And new game console sales are very slow, which in-turn generally limits demand for endless new game titles.

  Electronic Arts inc. (NASDAQ: ERTS) has been a dead stock since the end of 2008, in part because of its warnings that seem to come with each earnings release.  EA has also lost its pole-position as the largest video game seller is now Activision Blizzard, Inc. (NASDAQ: ATVI) with its World of WarCraft, Call of Duty, Guitar Hero, DJ Hero, and more.  Activision Blizzard has not exactly set any gang-buster stock performance, but it has ‘only’ lost about one-third of its value from the peak versus Electronic Arts which has lost more than two-thirds of its value from the peak.  As far as how THQ fits in on performance, this was a $35 stock in mid-2007.  Shares are now close to $3.70 and its 52-week trading range is $3.33 to $8.29.  Take-Two Interactive Software Inc. (NASDAQ: TTWO) recently managed to raise guidance as expectations were so low and Take-Two has been a takeover candidate itself before.  When THQ is back and delivering, it is feasible that the same scenario could come there.

  Is there at least some added disappointment in this morning’s warning from THQ?  Sure.  It is also mostly baked into the cake if you look through the books.  As noted, a loss was already expected.  Now the market cap is a mere $251 million, which means that if any video game sector consolidation comes back that THQ would likely find itself as prey rather than predator.  Its June 30 balance sheet listed more than $225 million in cash and short-term investments versus long-term debt of $100 million and $78.7 million in ‘other’ longer-term liabilities.  Shareholder equity was $292 million and even its net tangible assets came to $182.3 million.  In short, there is what could easily be an implied valuation floor in the stock.

  THQI is not one of those endless growth stocks.  The catalysts are not likely immediate other than the notion that it is a “cheap stock” if value investors want to consider video games, but its coming video game line-up, its low valuations, and even its new upcoming uDraw peripheral system for Nintendo’s Wii in time for the holiday season should all help offer share support here for those investors who can look beyond the headlines of just a few days or weeks.   The company did maintain that it expects to “grow net sales and generate significant earnings and cash flow in fiscal 2012.”  If today’s news was so bad, the drop of less than 1% at $3.70 would have likely taken shares closer to a 52-week low rather than just a marginal drop.

  JON C. OGG

  
  Filed under: Consumer Electronics, Earnings Warning, Entertainment, Media, Retail, Turnarounds, Value Investing, Video Games Tagged: AMZN, ATVI, BBY, ERTS, GME, THQI, TTWO ]]> http://247wallst.com/2010/09/14/thqs-warning-worth-a-value-turnaround-look-thqi-gme-bby-amzn-erts-atvi-ttwo/feed/ 0 AMZNATVIBBYERTSGMETHQITTWO Administrator THQI LOGO