This weekend’s edition of the Unusual Suspects would have probably been all about earnings, earnings, earnings. Friday’s SEC-Goldman news changed that. Our cast of characters for this coming week’s Unusual Suspects include AeroVironment, Inc. (NASDAQ: AVAV), Apple Inc. (NASDAQ: AAPL), Boston Scientific Corporation (NYSE: BSX), Citigroup, Inc. (NYSE: C), General Growth Properties Inc. (NYSE: GGP), Goldman Sachs Group Inc. (NYSE: GS), Hospira Inc. (NYSE: HSP), Lululemon Athletica Inc. (NASDAQ: LULU), and Palm, Inc. (NASDAQ: PALM). In the world of ETF investing, we have big alerts in SPDR Gold Shares (NYSE: GLD), Direxion Daily Financial Bear 3X Shares (NYSE: FAZ), and Direxion Daily Financial Bull 3X Shares (NYSE: FAS).
We have given details on each, with relevant price data, historic reference, an outlook, and in some cases an expectation and options call.
AeroVironment, Inc. (NASDAQ: AVAV) is the “Tech Trader” feature in Barron’s this weekend as a winner in war and peace. Barron’s mentioned that while it is known for unmanned aerial surveillance systems called the Raven drones, it has something that will be huge down the road called PosiCharge… a charging system for electric cars. Barron’s said it could rise another 20% this year from the $25.11 close Friday. The issue is that the 52-week range is $21.64 to $35.38 and the average analyst target is $27.85 and one analyst target is $35.00. We would expect a 2% to 3.5% move on Monday, at least on a market neutral basis.
Apple Inc. (NASDAQ: AAPL) went over $250.00 on Friday before the SEC-Goldman news killed the market. It reports earnings on Tuesday afternoon and Thomson Reuters has estimates of $2.44 EPS and $12.06 billion in revenues, although the WhisperNumber.com figure is $2.45 EPS and we would want to see an even higher figure than that to keep the upward momentum rolling. It is worth noting that speculators are actually going to options strike prices all the way up to $300 in Calls and as low as $220 in the Puts with the May expiration. For whatever it is worth, writing/selling a $250 straddle would bring in over $19.00 of premium. That may not seem much considering how much Apple’s iPad hype and iPhone hype helped this rise from $210 at the end of 2009 to $250 Friday. Apple’s last earnings report date was January 25, and the stock moved up only $2.87 to $205.94 after its accounting standard changes; a full analyst-by-analyst breakdown was given at Fortune..
Boston Scientific Corporation (NYSE: BSX) may be back in favor, if the stock market will cooperate. The company gained 2.8% to $7.34 on Friday after it reported that the FDA approved certain changes in the manufacturing of its Cognis defibrillators and Teligen defibrillators. This would have traded up higher (as it went as high as $7.54) had the stock market not been so weak on Friday. Its 52-week range is $6.31 to $11.77, so the risk-reward profile on any good news is above normal. It traded 91 million shares, the highest volume since its product woes came out in mid-March. Keep this on your radar as the stock fell from $7.78 to $6.80 when it had to halt shipments in March. Maybe this perpetual turnaround stock can finally turn around.
Citigroup, Inc. (NYSE: C) is on deck with earnings Monday. Estimates are $0.00 EPS and supposedly $20.77 billion in revenues, although frankly estimates are all over and trader gossip is even more than all over the place. Goldman Sachs news just boinked this one Friday for a 5.2% loss, so enough said. The earnings season bias just took a turn for the worse.
General Growth Properties Inc. (NYSE: GGP) is one to watch in M&A. It is reportedly open to a higher bid from Brookfield, but shares were hit on Friday as the Simon Property bid includes the help of Paulson & Co. Anything tied to Paulson took a huge hit Friday because of the Goldman-Paulson connection. The drop was 3.9% to $15.38, but the low on Friday was listed as $14.40 but looks closer to $15.00 if you back out the plunge price mid-day. Brookfield’s ‘sweeter bid’ may not have to be a lot sweeter now. A May-2010 $15 straddle cost $2.35 here, too expensive to play after a run it has already seen.
Goldman Sachs Group Inc. (NYSE: GS) is almost too long to even write about. You know the news, SEC civil fraud charges. There are so many angles and so many takes that you can pick your poison, and this is the front story on just about every website and publication. ProPublica wrote about many other banks doing the exact same thing, and that was back on April 9. Earnings are due on Tuesday; Goldman issues a quick retort and then a detailed retort on Friday after the close. At $160.70 as a close, a MAY-2010 $160 Straddle cost roughly $18.00, an indication that options spread betters feel the stock does not move up or down another 10% over the next 34 days. Barron’s says not to write the firm off. This violated both the 200-day ($167.41) and 50-day ($166.96) moving averages on Friday.
Hospira Inc. (NYSE: HSP) fell about 1% in the after-hours session on Friday on news that it had received a FDA warning letter after two manufacturing site inspections cited particulate in emulsion products and a failure to adequately validate manufacturing processes. While it is not required to stop all shipments, Hospira said it was now withholding shipments of certain products. Shares had hit a new 52-week high just on Friday and the 52-week range is $30.52 to $58.13.
Lululemon Athletica Inc. (NASDAQ: LULU) is one that appeared to be running out of gas on the chart, but that did not come to pass. We noted earlier in the week, “If it does not go out another $1.00 or more above the $43.66 level of last Friday, IBD won’t have it as the #1 stock.” Well, it went out at $44.62 even after a 1% drop on Friday, and IBD has this listed as being the #1 stock in the IBD 100. It looked like it was peaking, but either way I cannot recall any recent instances where the #1 stock on the IBD 100 was the same for 4 weeks in a row. It seems that Downward-Dog just doesn’t want to come to this stock.
Palm, Inc. (NASDAQ: PALM) may be the ugliest duckling of all the smartphone makers, but the buyout rumors not only won’t die but continue to grow. The Friday bets for a Merger Monday had this one up 3.5% at $5.59 on a bad ticker-tape day with a daily high of $5.75. Shares were as high as $6.29 last Friday but fully diluted market cap analysis took out some steam here. An analyst call on Friday showed a better than 50/50 chance of a deal with an upside target of $10 to $14 as fair market value. Oddly enough, the May and August $6.00 CALLS do not reflect an expected share price north of $7.00 (on a static snapshot basis, not considering any other factors).
SPDR Gold Shares (NYSE: GLD) has to be watched. Our affiliate Adam Hewison of INO gave a new audio-video presentation on a solid benchmark pivot to watch as $1,150.30 on spot gold.
It did not look like gold would go under that, but then the Paulson & Co. ties to the fund and to a huge gold bet (dedicated gold fund) kicked gold right between the legs. After a $22.00 drop to $1,136.40, Adam’s pivot may now be a near-term ceiling for all the reasons he outlined in detail.
On a side note, Direxion may be the one winner in the Goldman and bank mess. Its triple-leverage ETFs finally saw a huge resurgence of trading on Friday, and we noted at VSInvestor.com that the Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) and Direxion Daily Financial Bull 3X Shares (NYSE: FAS) had their busiest combined day of 2010 in trading volume; the FAS saw the second most active day of the year. The triple-bull closed down 10.47% and the triple-bear closed up 10.33%.
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JON C. OGG