Archive for February 8th, 2008
Filed under: Earnings reports, Microsoft (MSFT), Sony Corp ADR (SNE), Electronic Arts (ERTS), Activision Inc (ATVI)
 Activision (NASDAQ: ATVI) really rocked the house with its latest earnings report. Yeah, you knew I was going to fit the word “rock” in there somewhere. Can’t help it — the Guitar Hero franchise is really something, and it’s helping drive incredible revenues for the software publisher.
The top line heeded the call to duty and simply exploded to the upside during the fiscal third quarter, increasing an amazing 80% to $1.48 billion. On an adjusted basis, earnings were 90 cents per share; in the previous year’s quarter, Activision booked 48 cents, so this is great growth. Besides Guitar Hero 3, the company counts on the Call of Duty, Spider-Man, and Tony Hawk franchises to drive performance. Soon, it’ll be leaning on online phenomenon World of Warcraft to do some damage in the marketplace, as it is merging with Vivendi Games.
Activision is taking full advantage of the new console cycle, and is really doing well with its franchises; compare this to THQ (NASDAQ: THQI), which had a terrible quarter. I continue to like the Activision story, and I continue to hold the stock. Along with Take-Two (NASDAQ: TTWO) and Electronic Arts (NASDAQ: ERTS), Activision is poised to benefit from further increases in the installed user base of the new consoles from Sony (NYSE: SNE), Microsoft (NASDAQ: MSFT), and Nintendo.
Disclosure: Steven Mallas owns Activision and Take-Two, and is looking at Microsoft and Nintendo as possible buys after this post.
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Filed under: Comcast Cl’A’ (CMCSA), Analyst initiations, Time Warner Cable (TWC)
.gif) MOST NOTEWORTHY: The Cable and Satellite Pay TV industry and FPIC Insurance were today’s noteworthy initiations:
OTHER INITIATIONS:
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Filed under: Television, Rants and raves, Pfizer (PFE), Marketing and advertising, Merck and Co (MRK), Politics
 Talk about your tempest in a teapot, here’s a good one for you. It seems that a congressional committee has taken up arms against Dr. Robert Jarvik, inventor of the artificial heart, because he didn’t row his own boat in his recent appearance in a Lipitor television advertisement. The concern is over whether the doctor should be represented as rowing a boat when the person in the boat pictures isn’t actually him. Next, Congress will be exposing the fact that M & M’s don’t really talk to Santa Claus. Dang it, I hate when that happens.
Further noise is being made because the good doctor is apparently not licensed to practice medicine. That makes some people question his worthiness to crow for Lipitor. That’s funny, I don’t remember him claiming that he’d prescribed the stuff to anyone himself. Does it really matter in the final analysis if the man isn’t licensed to work in a hospital? Not to me. He’s a doctor who knows hearts and he wants people to know how they might better care for their own. He apparently uses the product, it works for him, and he’s willing to talk about it. That’s kind of the basics of simple endorsement, isn’t it?
I’ll tell you what I think this is all about. I think some of those good old boys in the halls of Congress probably sold short on Pfizer Inc. (NYSE: PFE) , and they’re probably mad because Dr. Jarvik’s endorsement isn’t allowing Lipitor to be crushed by Zocor, its cheaper generic competition. You can almost see their smug bipartisan grins as you read the whole story from Stephanie Saul in The New York Times. I think they want to muddy the waters just long enough for their short bets to come in, regardless of the cost to Dr. Jarvik’s reputation. Those Washington stuffed shirts sure got their committees all whipped up in a big hurry on this one, didn’t they. That’s kind of telling, isn’t it.
I suppose next they’ll be telling us that geckos don’t really talk about car insurance. Could that even be possible?
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Filed under: Analyst upgrades and downgrades, Bad news, Limited Brands (LTD), Level 3 Communications (LVLT)
MOST NOTEWORTHY: Level 3 Communications, BT Group and Limited Brands were today’s noteworthy downgrades:
- Merriman downgraded shares of Level 3 Communications Inc (NASDAQ: LVLT) to Neutral from Buy, as they believe the risks outweigh the rewards until the company can complete its integration and turn FCF positive.
- BT Group Plc (NYSE: BT) was downgraded to Equal Weight from Overweight at Lehman to reflect the company’s slowing revenue growth.
- Bear downgraded Limited Brands Inc (NYSE: LTD) to Peer Perform from Outperform, citing the unfavorable macro backdrop, execution issues and management turnover.
OTHER DOWNGRADES:
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Filed under: Other issues, Scandals, McGraw-Hill Companies (MHP), Recession
 Standard & Poors, a division of McGraw-Hill (NYSE: MHP), has joined Moody’s (NYSE: MCO) and Fitch in announcing reforms in the wake of the criticism for their role in the subprime fiasco.
S&P says it will hire an ombudsman to investigate conflicts of interest and bring in an outside firm to look at compliance and ethics-related issues. Lead analysts will be rotated from time to time and the company will consider a slew of new factors: liquidity, volatility, correlation and recovery, and “worst-case scenarios.”
But New York Attorney General Andrew Cuomo isn’t buying it: “The supposed reforms announced today by Standard & Poor’s and by Moody’s on Tuesday are too little, too late. Both S.&P. and Moody’s are attempting to make piecemeal change that seem more like public relations window-dressing than systemic reform.”
From an investor’s standpoint, I’m inclined to agree with Mr. Cuomo. Moody’s carries a market cap of nearly $10 billion, but its entire business depends on the willingness of investors to take its ratings and analysis seriously.
But over the past year or so, the “work” of the ratings agencies has been exposed as pretty much a joke. It will take a lot more than this to recover the company’s reputation.
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Filed under: Analyst upgrades and downgrades, Good news, Coca-Cola (KO), Urban Outfitters (URBN)
MOST NOTEWORTHY: Coca-Cola, Novo Nordisk and Equinix were today’s noteworthy upgrades:
- Bear Stearns upgraded The Coca-Cola Company (NYSE: KO) to Outperform from Peer Perform, as they expect it to post solid earnings short-term with potential upside, and over the long-term due to its upgraded business model.
- Bernstein raised its rating on Novo Nordisk AS (NYSE: NVO) to Outperform from Market Perform, as they believe consensus estimates do not reflect the company’s growth potential.
- Merriman upgraded shares of Equinix Inc (NASDAQ: EQIX) to Buy from Neutral on valuation following the recent sell-off. The firm expects strong Q4 results.
OTHER UPGRADES:
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Filed under: Analyst reports, Options
 MGM Mirage (NYSE: MGM) is recently trading at $68.73 in pre-open trading, below its close of $71.81 Thursday.
Goldman says: “MGM pre-released 4Q2007-results appear below expectations.” MGM provided a construction update on MGM’s CityCenter saying “we expect the construction costs of CityCenter to be $300 million to $600 million higher than our previous estimates of $7.8 billion.”
MGM overall option implied volatility of 43 is near its 26-week average of 42 according to Track Data, suggesting non-directional movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
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Filed under: Earnings reports, Deals, Bad news, Management, Sears Holdings (SHLD)
Eddie Lambert may have to loan Sears Holdings (NYSE: SHLD) some money. Cash at the company be getting very tight. According to the Wall Street Journal, “some analysts wonder whether falling sales, slimmer profit margins and other woes are causing cash flows to decline to a level that could hinder a turnaround.”
The last cash balance that Sears announced was lower than most analysts expected. If the company needs to spend money to improve its stores or increase inventory in products it thinks will sell well, it could draw down the cash level even further.
For Lampert, the bad news keeps getting worse. Sears stock has staged a mini-rally over the last two weeks, moving from below $85 to $103. News about cash problems could push the shares back down.
Lampert made the classic error of thinking that with Sears and K-Mart 1+1=3. In reality, he took two weak companies and saved some money in a merger. The problem was that the companies got even weaker.
Who says that hedge fund managers don’t make good corporate chiefs?
Douglas A. McIntyre is an editor at 247wallst.com.
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Filed under: Analyst upgrades and downgrades, Options
PetsMart (NASDAQ: PETM), the operator of more than 993 pet stores, closed at $23.04 Thursday.
PETM is scheduled to report Q4 EPS on March 5.
Goldman says: “We are upgrading PETM to Buy from Neutral. We expect PETM to embark on a classic transition from a struggling growth retailer in the “productivity ceiling” phase of our retailing cycle to a more returns-focused origination.”
PETM overall option implied volatility of 50 is above its 26-week average of 35 according to Track Data, indicating larger movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
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Filed under: Yahoo! (YHOO), McDonald’s (MCD), Walt Disney (DIS), Money and Finance Today, Tiffany and Co (TIF), Alcatel-LucentADS (ALU), Limited Brands (LTD)
In the News:
Credit on the Edge
The once-vaunted FICO credit scoring system is now being blamed for failing to flag risky home-loan borrowers. The FICO score, last overhauled in 1989, is based on a complex formula using many variables –and yet it can be manipulated fairly easily by ordinary people. In the past few years a group of “credit doctors” and mortgage brokers began devising tricks, some illegal, to help borrowers juice their FICO scores to qualify for credit cards and mortgages on homes they couldn’t afford. Will an overhaul be enough to appease angry lenders? Credit Scores: Not-So-Magic Numbers - BusinessWeek
Making Sense of Your Credit Score
Do you know your credit score? If so, you’re probably well aware of how important it is to your finances. Unfortunately 70% of consumers don’t know their score. It pays to know your number — and how to boost it. Test your credit-score savvy with our QUIZ.
Discount Retailers More Fashionable
Macy’s, The Limited and Ann Taylor Loft are out and T.J. Maxx, Marshalls and Ross Dress for Less are in.
The weaker the economy gets, it seems, the more some discounters benefit and the bleaker the outlook for their higher-priced competitors. The trend could carry long-term implications for all the retailers. People who try - and like - stores in shaky economic times are more likely to stick with them after the economy rebounds.
Continue reading Credit on the edge, 10 generic drugs to soothe your budget & 8 retirement mistakes to avoid - Today in Money 2/8
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