Archive for January 16th, 2008
Filed under: Analyst upgrades and downgrades, Boston Scientific (BSX), Qwest Communications Intl (Q)
.gif) MOST NOTEWORTHY: British Airways, ADC Telecomm and Qwest were today’s noteworthy upgrades:
- Goldman upgraded shares of British Airways (OTC: BAIRY) to Buy from Neutral on valuation, and believes the company is the “jewel in the crown” in European aviation.
- Morgan Keegan expects ADC Telecomm (NASDAQ: ADCT) to benefit from carrier upgrade activity and views expectations as conservative. The firm raised shares to Outperform from Market Perform.
- Qwest (NYSE: Q) was raised to Buy from Hold at Soleil on valuation and yield support.
OTHER UPGRADES:
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Filed under: Major movement, Products and services, Launches, Apple Inc (AAPL), Options, Technical Analysis
 Apple Inc. (NASDAQ: AAPL) stock is falling this morning as speculators and even some investors were disappointed with CEO Steve Jobs’ keynote address yesterday at the MacWorld conference. Jobs introduced the iTunes movie rental service as well as the MacBook Air laptop. He could not live up to the expectations he built after the introduction of the iPhone at last year’s conference, as well as many of the iterations of the iPod which also debuted at MacWorld. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AAPL.
After hitting a one-year low of $82.86 in February, the stock hit a one-year high of $202.96 in December. This morning, AAPL opened at $165.11. So far today the stock has hit a low of $160.68 and a high of $169.01. As of 10:35, AAPL is trading at $161.89, down $7.15 (-4.2%). The chart for AAPL looks bearish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
Continue reading Apple falls as Jobs fails to impress
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Filed under: Bad news, Wal-Mart (WMT)
 Wal-Mart, which was called a stock to hold onto this morning by Goldman Sachs, also made another list. Try this one on for size: The Motley Fool called Wal-Mart the worst stock to own in 2008. Wow — those are two different viewpoints!
Wal-Mart shares are pretty much where they were in 1999 — in the $45 to $50 range. Does that mean it’s the worst stock to own in 2008? For Wal-Mart to grow revenues in the double digits, the figure must be in the tens of billions of dollars. Based on its sheer revenue size alone, Wal-Mart should be growing in the low single digits, right? Does the market recognize this when pitting it against retailer competitors who have higher growth rates? I suspect that it does not.
In its analysis, the Fool looked at statistics like revenue per employee, quarterly revenue growth and P/E ratio between Wal-Mart, Target Corp. (NYSE: TGT) and Costco Wholesale (NYSE: COST) and found Wal-Mart’s numbers weren’t the most impressive of the bunch. Hence, it’s the worst stock to own in 2008. So, although a probable recession may cause more customers to enter Wal-Mart stores, as Goldman argues, the cost of Chinese-made products (a mainstay in Wal-Mart stores) may rise and cause the company to experience margin shortfalls or actually raise customer prices (something I’ve referred to in the past).
Will Wal-Mart stock rise or fall in 2008? You make the call. If it ends up at $47.23 (where it is this morning) a year from now, you can always stuff that cash under a mattress in 2009 to get the same return.
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Filed under: Consumer experience, Wal-Mart (WMT), Costco Wholesale (COST)
 Goldman Sachs indicated yesterday that a “mild” recession may be coming to the U.S. in the middle of 2008. The recession will cause a consumer spending slowdown that will drive more customer traffic to low-price stalwarts like Wal-Mart Stores, Inc. (NYSE: WMT) and Costco Wholesale (NASDAQ: COST).
Goldman Sachs analyst Adrianne Shapira noted that a “second-half margin recovery could be at risk if retailers do not plan prudently enough.” So the question is this: will consumers flock to the safe haven of low prices as a defense against higher inflation and a recession? Of course they will. As reported this morning, 2007’s inflation rate was the highest in 17 years.
Shapira went on to say that sales and margins at department stores will be the hardest hit, with EPS declines to the tune of 23% in some cases. Should this cause you to dump shares of JC Penney Co. (NYSE: JCP), Kohl’s Corp. (NYSE: KSS) and Dillards, Inc. (NYSE: DDS)? For long-termers, no. But be prepared for a bumpy ride as consumers flock to the cheapest of the cheap retailers.
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Filed under: Bad news, Boeing Co (BA)
 Boeing has delayed the delivery of the first 787 Dreamliner until early 2009 instead of late 2008, saying the rate at which jobs are being completed has not improved sufficiently to maintain the current schedule.
It’s the second delay for the commercial aviation giant, which previously had delayed the introduction of the next-generation plane by six months. The 787’s maiden flight will now occur near the end of Q2. The company underscored that the fundamental design and technologies for the 787 remain sound.
Investors early Wednesday took Boeing’s delay announcement in stride. Boeing’s (NYSE: BA) shares rose 16 cents to $78.02 in Wednesday morning trading.
The 787 Dreamliner program has encountered several bottlenecks due to parts shortages and assembly delays. Boeing has 817 orders for the plane, which is considered critical to its early 21st century commercial aviation strategy as it battles with rival Airbus.
Continue reading Boeing delays 787 Dreamliner delivery until 2009, citing parts shortage
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Filed under: Options
 The Volatility Index for S&P 500 Options is up six cents to $23.41. The 10-day moving average is $23.65 as the markets speculate if recession will be mild, moderate or deep.
Talbots Inc. (NYSE: TLB) volatility suggests large risk as shares near record 14-year low. TLB is recently down 10 cents to $7.12. TLB February option implied volatility of 92 is above its 52-week average of 39 according to Track Data, suggesting large risk.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
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Filed under: Forecasts, Bad news, Analyst initiations
 Shares of bond insurer Ambac Financial Group Inc. (NYSE: ABK) have been plunging in early morning trading after the company announced it would cut its dividend by 67% to 7 cents a share from 21 cents. Ambac also revealed its plans to raise capital by issuing at least $1 billion of equity and securities. The move is designed to maintain its “AAA” financial strength rating.
The second-largest bond insurer said it would replace its chief executive Robert Genader with board member Michael Callen, who will become chairman and interim CEO. The company cited its dissatisfaction with Genader’s management, which brought the first-ever loss for the company last quarter.
The bond insurer’s concerns came after Fitch Ratings warned it would cut its rating on Ambac if it was unable to increase its capital by at least $1 billion to cover potential future losses. Higher delinquencies and defaults among mortgages over the past few months increased ratings agencies’ concerns over a possible surge in bond insurance claims.
Continue reading Ambac (ABK) cuts dividend, replaces CEO
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Filed under: Options, SanDisk Corp (SNDK)
Sandisk (NASDAQ: SNDK), a supplier of flash data storage card products, closed at $29.08, near its two-year low.
SNDK is expected to report Q4 EPS on January 28th.
SNDK February option implied volatility of 69 is above its 26-week average of 47 according to Track Data, suggesting larger near term price risks.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
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Filed under: Deals, Microsoft (MSFT), Sun Microsystems (JAVA)
 Sun Microsystems, Inc. (NASDAQ: JAVA) will be buying open-source database software company MySQL AB for about $1 billion, both companies announced this morning. MySQL, based in Sweden, makes a very popular database application used by global nameplates we all recognize such as Google (NASDAQ: GOOG), Nokia Corp. (NYSE: NOK) and Facebook, Inc.
The deal includes an $800 million cash payment by Sun and $200 million in options to arrive at the billion-dollar total. MySQL CEO Marten Mickos said “Sun’s culture and business model complements MySQL’s own by sharing the same ideals that we have had since our foundation — software freedom, online innovation and community and partner participation.”
Sun’s movement into the open-source software universe recently has signaled a huge shift in its strategy under current CEO Jonathan Schwartz.
Continue reading Sun Microsystems buys MySQL database developer
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Filed under: Deals, Oracle Corp (ORCL)
 Oracle Corp. (NASDAQ: ORCL) will be buying competitor BEA Systems, Inc. (NASDAQ: BEAS) in a deal worth about $7.85 billion, both companies announced early this morning. BEA makes software that connects Oracle’s market-leading database software to the vast array of business software applications that millions of workers use daily.
Although there had been some dispute over the value of BEA in recent months, the $8.5 billion deal does give a 24% share premium to Tuesday’s closing price of $15.58 for BEA common shares. This morning, however, BEAS is up more than 18% at $18.45 on the takeover news. Activist investor Carl Icahn even blessed the merger by saying he would vote his 13% BEA stake in favor of the combination: “This transaction is an excellent example of the great results that can be achieved for all constituencies when the shareholder activist is able to work cooperatively with management.”
Oracle, the world’s second largest software maker after Microsoft Corp. (NASDAQ: MSFT), was interested in BEA back in October of last year, but the company rejected its offer of $17 per share (total value: $6.7 billion). The latest offer from Oracle, which is pegged at $19.375 per share, won unanimous approval from BEA’s board of directors. Oracle’s continuation of billion-dollar acquisitions of late have added some pretty decent heft to its offerings. The company has acquired competitors PeopleSoft, Siebel Systems and Hyperion Solutions — and now, BEA.
[The author holds a long position in MSFT]
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