Monday, March 31, 2008

Schering-Plough (NYSE:SGP): Current valuation could represent the floor - Goldman Sachs

Goldman Sachs notes the ENHANCE data were presented this weekend and were not surprising. The big surprise was the professional commentary, which spoke to limiting the use of the drug (until after other cholesterol-lowering medicines have failed) unless it is proved in an outcomes trial (expected to complete in 2012). Given the uncertainty around the franchise, the firm is downgrading Schering-Plough stock to Neutral. SGP shares are down 32.4% since being added to the Americas Buy List on November 26, 2007, while the S&P 500 has fallen 6.5% over the same period. Over the last 12 months SGP shares are down 22.1%, while the S&P 500 is down 7.2%.

Previously, GSCO had been below consensus, assuming that the US cholesterol business would fall 20% in 2008, and recover in 2010. They are now moving to a more prolonged fall, with US cholesterol sales down 24% in 2008, 20% in 2009, 10% in 2010, and 5% thereafter to 2012. They are lowering their estimates, with 2008-2012E EPS now $1.40, $1.46, $1.64, $1.80 and $2.11 from $1.37, $1.52, $1.77, $2.01, $2.39 (2008 rises slightly due to currency adjustments). This new set of estimates reflects modest reductions in SG&A to account for decreasing US promotion.

GSCO is lowering their 12-month price target to $23 (from $28), based on relative P/E and DCF methodology (70%/30% weighting). While they believe that Merck and Schering-Plough will work hard to support the product, the negative revision bias will remain high. Uncertainty around the IMS trends will likely leave the shares range-bound. In the mid- to high teens, they believe that the shares will have priced in the removal of Zetia and Vytorin from the model, and this valuation could represent a floor.

Notablecalls: At around $15 I rate SGP a Strong Buy. GSCO's dg is just make-up.

Schering-Plough (NYSE:SGP): Buying it down 20% in pre mkt

Couple of firms comment on Schering-Plough (NYSE:SGP) following the ENHANCE trial results:

- Deutsche Bank is lowering their tgt to $21.50 from $25.50 saying the ack of new insight from theENHANCE results was no surprise, but the tone of the panel "discussion", NEJM commentary and ensuing media coverage was more negative than anticipated. Additional trauma for the JV franchise, with immediate volatility in Rx demand and declines in market share is the likely near term outcome in firm's view.

Based upon the fallout from the NEJM ENHANCE publication, and two published editorials, they suspect a new round of RX declines, and a more negative impact on SGP's earnings outlook. Specifically, the firm expects that the JV, which represents 80% of SGP's net income, may fall 25%, back to its levels in '06. This equates to a decline in '08 estimate from $1.47 to $1.22. Firm has tried to be appropriate, and conservative in their assessment, but obviously, only the RX data over the next several weeks will tell the story.

SGP's EPS may decline 12% this year, while EPS may only recover to a level 4% higher in '09 than the EPS the comany achieved in 2007.

- Lehman: SGP (2-EW/1-Pos, $19.30, PT$20, $29b) A Butler - Downgrade 1-OW to 2-EW - ACC panel commentary neg; greater total Rx decline; uncertainty of mgd care formulary position; JV income from Zetia/Vytorin (~60% of ’09 EPS) materially impacted; cut ’08 $1.67 to $1.40 (v $1.52 cons), ’09 init $1.59 (v $1.73 cons); cut tgt $35 to $20.

- Goldman Sachs downgrades to Neutral from Buy.

Notablecalls: SGP is down 20% in pre mkt (trading at $15.80 as I write this). I've been buying around that level. Why?

- The stock has been cut in half, mainly bc of concerns regarding Vytorin/Zetia. Yes, sales and EPS will be hit but it's priced in here.

- I believe this is the moment smart money has been waiting for. Last time we had an opportunity to buy SGP was around 2002 when Hassan came in an cut the dividend. I remember buying the stock below $14 in pre mkt. This was the low.

- You gotta buy healthcare here. It's one of the safe havens.

Sunday, March 30, 2008

The Psychological Rally

The same hedgie contact that so brilliantly called the last down leg in financials (see March 24 post) pinged me again on Friday. This time he had this to say:

This is probably going to challenge alot of the academic folks... but lets face it.. at least in the short term... psychology is 80% of the market volatility.

First off, I refuse to sell any of my shorts… namely SKF, SRS, TWM… But unlike the past 6 months or so I am starting to put more cash to work AGAINST my shorts. Prior to last week I was mostly 40% - 50% cash at most times.

Here are my “psychological” reasons for turning “short term” term bullish:

First off. It is a known fact that markets always bottom BEFORE there is any real economic evidence of a turn. THUS, most investors will be (are currently) looking for any slight reason to turn bullish… They will look for any reason to rationalize and justify buying stocks to GET IN FRONT of the impending (pre-expansion) rally that will ensue BEFORE we officially emerge from the recession. And the media coverage will stroke their confidence. It is also a fact that most of the POST recession stock market rallys are largely OVER by the time we have OFFICIALLY emerged from recession.

That said… I think we have PLENTY of scant evidence all around us that bulls and the media will be able to hang onto to convince us all that we have bottomed and that “YOU NEED TO BUY STOCKS NOW”

1. people seem to want to buy stocks here… that is the sentiment since BSC
2. BSC was the catastrophic BOTTOM of the market
3. Tax refunds are going out
4. $600 stimulus check going out
5. TREMENDOUS liquidity coming from the fed
6. Election year
7. Everybody reads the same “Don’t Fight the Fed” textbook
8. GDP not too bad (yet)
9. payrolls number (will be reasoned that it is a trailing indicator)
10. foreclosure pipeline is growing… but many are still in early stages (bad news still few mos away)
11. a normal seasonal uptick in real estate will be mistaken for the REAL THING
12. the Early cyclical’s trade is already being put on

OF COURSE I think this rally (if we get it) will be proven to be false...and sometime this summer we will get hit on the other side of the head with another two-by-four and resume the downtrend to new low levels as it becomes apparent that this recession is longer and deeper that first thought. It is typical of markets to have false bottoms as everyone trys to game the END-Recession play. I see no reason to doubt that this time is different…. heck, we sure have all the ingredients for it.

Its hard to believe that all these bottom callers really think that we can exit a period of some of the most egregious lending in history… with one of the largest real estate bubbles in history, against an untested explosion of derivatives with a mere 3 month recession, and 14% peak to trough decline in the markets in less than 6 months. But that seems to be what I am hearing in the media these days.

Net net... i really don’t know... this is a veiled attempt by me to gauge sentiment and get out in front of it. it is very hard to get incrementally long in the absence of any positive economic data... but I think that sometimes the hardest trades are the best trades. As counterintuitive that this is... I think I need to be more long. Especially China which tends to track commodities…. Check out this chart:

We shall see but my guess is that by the early summer,late spring.. we begin to realize... that things are worsening... and the wheels will start to fall off the cart again... but in the mean time… I will be getting in position for the HOPE rally.

Friday, March 28, 2008

Research in Motion (NASDAQ:RIMM): Two firms out positive

Two firms out positive on Research in Motion (NASDAQ:RIMM) this AM:

- RBC Capital is raising their tgt to $150 from $140 saying they are expecting inline Q4, with Q1 guidance expected materially above street on strong momentum.

Global checks indicate strong Q1 momentum, suggesting guidance for $2.1-2.2B revenue (up 12-18% Q/Q) and $0.81- 0.86 EPS, above street at $1.98B and $0.74 EPS, with 2.2-2.4M sub adds (up 1%- 11% Q/Q). Pending Q1 product launches/announcements include EV-DO Curve and 3G/HSDPA 'Comet'.

March data from RBC's Technology Adoption Panel (3,600 Respondents) sees RIM posting strong share gains against Motorola and Palm, with 15% respondents planning to purchase BlackBerry (up from 12% Oct and 7% Jan/07). Motorola's recent struggles are expected to further assist RIM share gains.

F09 ests become $10.3B (up 72% Y/Y), $4.05 EPS (prior $9.8B, $3.74) and F10 ests become $14.5B (up 41%) and $5.83 (prior $13.0B, $5.10).

- Piper Jaffray notes they believe BlackBerry continues to gain share from Motorola and overall RIM fundamentals remain strong. March checks indicated strong sell-through of the BlackBerry Curve at AT&T, Pearl and Curve at T-Mobile, and BlackBerry Pearl and 8830 at Verizon and Sprint. Given RIM management raised its February quarter subscriber forecast 15-20% above its previous 1.82M guidance and only reiterated its February quarter guidance, they anticipate RIM will report at the high end of its guidance or in line with PJ estimates of $1.87B and $0.70.

Firm is also increasing their device sell-in estimates for the May quarter from 4.6M to 4.9M units.

Based on increased BlackBerry unit estimates, they are increasing their FY09 EPS estimate from $3.40 to $3.59 and FY10 estimate from $4.49 to $4.67.

Notablecalls: These are powerful calls. Especially the RBC one as the firm has been pretty much the axe in the stock. I expect nothing less than $115 level in pre mkt with the stock taking out the recent $118 high by Tuesday.

I think the bears were pressing their shorts in RIMM yesterday and will be proven wrong today. But it's not just short covering that's taking RIMM higher here. The death (!) of Motorola is also a strong contributor. Sorry Carl.

Thursday, March 27, 2008

Google (NASDAQ:GOOG): Buy Google here (for a bounce)

Banc of America is about the only firm defending Google (NASDAQ:GOOG) here following yesterday's comScore data.

Firm notes comScore's paid click report indicates GOOG's US paid clicks (core site) grew 3% Y/Y, from roughly flat and 25% Y/Y growth in Jan '08 and Q4, respectively. While GOOG's Feb paid click data does little to calm investor fears of a slowdown in GOOG's core business, they believe most of the deceleration is due to the continuing quality initiatives by the company itself, which should drive significant upside longer-term. Moreover, they caution investors against reading too much into comScore numbers as they have historically been a bit noisy (but directional nonetheless).

Paid clicks are a function of the number of searches, coverage (% of searches with an ad) and click-through rates (paid clicks per search with an ad). In Feb, GOOG witnessed healthy query growth of 30% Y/Y (vs. 39% in Jan).

While GOOG's ad coverage initiatives are painful in the near term, BofA believes they are necessary to drive sustained revenue growth over the long term.

Reits Buy and $700 tgt.

Notablecalls: BofA's Brian Pitz is right - GOOG's a buy. Guys, comScore data didn't bring any surprises. We had several firms (Piper, RBC - both influential analysts on GOOG) come out ahead of yday'd data saying it's likely going to be bad. Yet, we have the stock down almost 20pts pre mkt bc Mr. Amazon-to-$800 Blodget said the stock should be down.

The fact is the stock's already in bottoming process, down 40% from the highs. comScore data is partly worse than expected bc of GOOG's own doing.

Buy GOOG here. Buy it for the bounce.

Wednesday, March 26, 2008

NCN Telco: What a relief to see Sprint (NYSE:S) bounce today

NCN Telco pinged me this AM:

What a relief to see Sprint (NYSE:S) bounce today... I still don't like the fact that S is trying to deploy Wi-Max but if it.

Me: Think the tower operators move on this?

It might be slightly positive for the tower companies but remember S has a ton of radio towers inherited from Nextel and pre-merger Sprint. Also recall wi-max allows for wider propagation of radio signals than PCS in 1.9 GHz... so less radio towers are required... I would say barely positive to none for the tower companies... I think Sprint's thinking on Wi-Max is as follows...

Nationwide spectrum used for Wi-Max deployment was purchased for pennies way back in the 1990s... less than a few hundred million... vs. what VZ and ATT spent for 700MHz... so the savings amount to billions... So those billions saved could go towards buliding a nationwide wi-max infrastructure... now introduce suckers from cable and Intel to throw in the necessary capital... it's a win-win for Sprint... The only caveat is no other global carrier will be using wi-max besides Sprint... that is a no no...

Me: Who's gonna supply the tech? MOT? It's certainly not going to be ALVR.

I think Intel, Motorola, ... not too sure

The rest of the world will be on a WCDMA/HSDPA standard so why go with wi-max... that's sort of been the argument metioned by the analysts.

eBay (NASDAQ:EBAY): Qtr tracking well

We have two firms out with positive comments on eBay (NASDAQ:EBAY) saying qtr is tracking well:

- Citigroup saying that to date they have tracked 574MM Total Core listings consisting of 196MM U.S. listings and 378MM Int'l listings. Combined with the estimated 89MM store listings we have tracked QTD, they estimate Total listings growth improved to up 13% Y/Y, tracking ahead of Citi's Q1:08 estimate of 11% Y/Y.

- Jefferies notes eBay's February pricing tweaks are having positive effects on 1Q results, with 1Q listings pointing to a healthy 9% Y/Y growth and translating into results likely at the higher-end of expectations. Withthe stock's pullback, EBAY is the cheapest among large cap. Internets, providing an attractive risk/reward profile.

Based on their weekly tracking of eBay listings WW, they're estimating 630-650M listings for 1Q08 vs. our original projection of 602M (up 9% Y/Y at the mid-point). All else constant, this should result in upside to revenue, EBITDA and PEPS of $81M, $31M and $0.02 for 1Q. Jeffco is raising their estimates to $2.11B, $780.5M and $0.39, respectively. Consensus stands at revenues of $2.05B and PFEPS of $0.39. They are also raising FY08 revenue and PEPS estimates to $8.78B and $1.67 vs. consensus of $8.70B and $1.65.

Reits Buy and $40 tgt.

Notablecalls: That's certainly good news. With the dollar down vs. the euro since management guidance, there's some upside in store from there as well.

Tuesday, March 25, 2008

AMR (NYSE:AMR): Potential Relief Rally Ahead - Morgan Stanley

- Morgan Stanley is out with a superb positive call on Airlines:

Firm is revising their estimates and price targets lower for $105/bbl oil and Morgan Stanley’s most up to date economic forecasts. Looking forward, as their Bull/Bear/Base summary highlights, they expect significant volatility in airline equities. However, contrary to the consensus view, the firm would not initiate short positions at current prices. In fact, they believe airline equities are poised for a relief rally in the near-term and suggest that nimble investors position themselves accordingly across legacy airlines.They are still not recommending the space to long-term holders, but are on the lookout for a change in either 1) macro forecasts or 2) the potential for a “Tipping Point” catalyst.

They expect to see broad capacity cuts across carriers, specifically the legacy airlines, within the next month or two. Fundamentals are deteriorating, but if MSCo's EBITDAR estimates and expectation of multiple expansion is correct, the stocks have already priced in a relatively bearish outlook (base case).

Following the consensus view on airlines has historically been an unprofitable strategy. Over recent years, broad changes in consensus have led to the reverse outcomes in airline share performance. The recent numerous airline downgrades across the sell-side should pique the interest of investors looking for outsized returns.

Firm uses AMR as an example of this effect due to its relatively long price history which is uninterrupted by bankruptcy. This suggests that the next immediate absolute move in AMR is likely to be higher (as they expect it to be for the industry if they are correct about a relief rally);

Notablecalls: Wonderful call by MSCO's William Greene. I expect AMR (NYSE:AMR) to move up today following these positive comments.


- First, AMR showed me yesterday that it can move upward. We had a rumor on NCN yesterday that British Airways has sent a letter to AMR board with 3,2bln (about $13/ share) offer to acquire the airline. The stock made a swift 10% upward move intraday (I'm sure you can spot it on the chart). The path of least resistance is up!

- Secondly, my gut is telling me oil is coming down at least in the n-t. That should boost airlines.

I would also keep an eye on Southwest (NYSE:LUV), only Overweight rated Airline stock under MSCO's coverage.

Google (NASDAQ:GOOG): March qtr revenue tracking below Street expectations - Piper Jaffray

Piper Jaffray comments on Google (NASDAQ:GOOG) ahead of tonight's comScore data:

As a recap, comScore data for the month of January was tracking down 9% m/m. The Street is modeling for an 8% sequential increase in March quarter ad revenue. While Piper believes the second month of comScore data will suggest an improving trend in the quarter, they expect the data will likely continue to predict a slight revenue miss for Google. They believe the first two months of comScore data for the March quarter will suggest Google's revenue will be tracking flat to up five percent sequentially, which is below the Street's up 8% expectation

Notablecalls: Remember, Piper's Gene Munster is the most bullish analyst on GOOG. I expect his call regarding a possible rev miss to send the shares lower in the early going.

Google (NASDAQ:GOOG): Piper calling for a revenue miss

I'm hearing Piper Jaffray is calling for a revenue miss for Google (NASDAQ:GOOG).

Stay tuned.


Monday, March 24, 2008

Financials: Do or Die?

One of my smartest hedgie contacts just pinged me about the financials. According to him it seems to be getting pretty close to do or die for them:

# After hitting four-and-half-year low last Monday, the S&P 500 Financials index has staged a sharp rally on the back of the JPM/BSC deal, various Fed actions and the partial lifting of excess capital requirements on FNM and FRE. As of right now, we are up 16% from last Monday's trough.

# Since the current financial sector bear market started from the index's all-time high in February '07, there have been two major "bear market" rallies: the first was the late November/early December '07 move of 13% off the then-lows (red annotation in the chart below); the second was the 16% move in late January when the Fed surprised the market with the intra-meeting 75bp rate cut (green annotation). In both cases, the rally ran out of steam after hitting mid-teens gains, then we sold off to new lows

# The big question now is whether the latest rally of 17% fits the pattern of the previous two -- in which case we're close to hitting the limit of the current rally and would sell off sharply again -- or whether there is a better underpinning this time around, allowing the group to add more upside from here and hold the gains

# There are undeniable supports in place now (noted above -- the most important of which are the several aggressive Fed measures to add liquidity to the banking system) that were not there during the previous rallies and these have put in place a stronger basis for investor confidence. However, against these are several key negatives that for now are likely to act as a cap to a more durable rally: 1) credit deterioration is still worsening and revenue for banks and brokers is still slowing, leading our analysts to believe that earnings estimates are still too high; 2) housing price declines remain severe; 3) as noted by Scott Peng (Citigroup) in his comments this morning, fixed income market liquidity remains very poor despite the Fed measures; 4) also as per Scott, market risk seems to be transitioning, not receding completely, partially away from banks/dealers and more toward hedge funds as some very crowded trades from this cycle start to get unwound (see Rich Salditt's email wrap-up of Peng's comments) -- this carries potential major headline risk

# Bottom line: while there are reasons to be less negative, the issues cited above suggest it's too early to put on a big upside bet in financials on a one- to two-quarter view, especially considering the 16% move we've already seen off the bottom. Expect continued volatility, although probably less than we've seen the past couple of quarters, with a decent likelihood of a near-term retrenchment after the big moves of the past few days even if we don't necessarily revisit the March 17th low on S&P 500 Financials. A couple of names on the long side that seem well suited to the current environment: SCHW and GFIG, both of which have the potential to deliver stronger than expected earnings, have very limited exposure to current problem areas and have lagged recently in share price terms. Names that look vulnerable on the downside: FHN, WFC and JPM, all of which have rallied sharply and valuations look extended versus the earnings outlook.

Lehman (NYSE:LEH): Actionable downgrade from OpCo's Meredith Whitney

- Oppenheimer is out downgrading Lehman (NYSE:LEH) to Perform from Outperform based upon valuation in what they believe will be a protracted challenging capital markets environment. Since 1994, LEH's stock has traded as low as 0.6x book and as high as 2.2x book. Firm argues the low and high end of this range are clear outliers and that a 20% premium to book (which is where the stock currently trades) will likely be the stabilized valuation, give or take, until core fundamentals begin to improve, likely in early 2009 or slightly before.

While they do believe LEH will play a key role in the financial recaps set to take place throughout the remainder of the year, the core shift from "originate and sell" to "originate and hold" business simply puts a cap on returns for the industry and will argue for a lower valuation band for the group. After this downgrade, OpCo now has no Outperforms for the brokerage group, only 4 Performs and 3 Underperforms.

Firm's Y2008 and FY2009 EPS estimates remain at $5.00 and $6.40, respectively, slightly below consensus of $5.03 and $6.84.

Notablecalls: While on 1st glance this is just a valuation downgrade, a closer look confirms OpCo's Meredith Whitney is really hitting it out of the park here. She's damn right downgrading Lehman here. Business will never be as good again (at least for several yrs) & LEH stock does not deserve to trade so close to recent highs.

I also see couple of other bearish calls or pieces of news this morning:

- Punk Ziegel analyst Dick Bove says on CNBC he thinks BSC is worth nothing; says if JPM hikes bid to $10 people will sell JPM.

- BofA is out with a call saying Bear's demise suggests structurally lowers ROEs for the I-Banks.

Think I have never called a rating change Actionable. First time for everything. Actionable Trading Call alert. LEH should be trading closer to $40 level here.

Solars: Cowen & Co positive

Cowen & Co is out with a positive call on Solars saying most of the U.S. solar names look undervalued relative to growth and earnings, in teir view, reflecting four areas of investor concern: uncertainty about the next phase of subsidies in Spain, Germany and the U.S.; and the tension between silicon supply/cost and module ASP/demand. Each of these is likely to be clarified in the next two to six months, underpinning a group rally. Firm reiterates Outperform on ENER, ESLR, FSLR, HOKU, SPWR, STP, and TSL.

- Cowen believes a bill to extend tax credits for renewables may be introduced in the Senate on Earth Day, April 22nd. Details must still be worked out. However, they see improved chance of passage.

- Followed By Spain, Then Germany. Zapatero's Socialist Party retained control in the recent election, so support for renewable energy should continue. With new feed-in-tariff rates due to take effect in October, they believe legislation should be settled by July. And, the final bill is likely to be more favorable than the last draft, with a higher FIT (33-35c vs. 31c) and increased cap (perhaps 2GW vs. 1.2GW). While the new German FITs are likely to be in line with expectations (down about 9% in 2009, then 7% and 8% in 2010/11), this major market should also be more certain by Q3.

- Investors are skittish about potential supply disruptions, and there is a wide range of views regarding module ASPs in H2:08 and 2009. By the Q2 earnings cycle, the firm expects: more output from new poly plants, silicon prices to be past their peak, modules to be essentially sold out for H2 at firm prices, and much more confidence regarding 2009 ASPs.

Notablecalls: As you can remember SunTech (NYSE:STP) has been Cowen's favorite Solar play lately. They have good exposure (50%+) to Europe, especially Spain and the valuation is just so low here. I have been positive on STP around current levels and continue to be so.

I think Cowen's call is very buyable here. Would not be surprised to see STP around $35 in a week.

Be early.

Thursday, March 20, 2008

Bear Stearns (NYSE:BSC): Increased Conviction in $2 Price - MSCO

- Morgan Stanley is out with a call on Bear Stearns (NYSE:BSC) saying their conviction level that the $2 purchase price for BSC goes through has increased. They believe JPM has negotiated a strong deal, and has well thought out protections in place. Additionally, the merger agreement and an appendix with further information is expected to be out in the next few days.

Multiple Shareholder Votes Possible:

In the event that the deal is not approved at the first shareholder vote, Bear has the obligation to bring the matter back to shareholders continuously for a period of up to one year from the original acquisition date of March 16, 2008.

Fed Non-Recourse Assets: The Fed is buying up to $30B of the most risky assets from Bear and is taking the credit risk. Any new buyer would need to renegotiate with the Fed.

JPM Has Options: As protection in the event of a competing bid, JPM has the right to purchase of Bear’s headquarters. Additionally, the Wall St Journal is reporting that JPM has the option to
purchase up to 19.9% of BSC at $2/share.

Low Probability of Other Potential Buyers: At this stage MSCO sees low probability of a competing bid emerging.

Potential Risk: If the markets rally enough to entice someone else to bid even without the Fed guarantee. Since the effective pricing of the deal, on March 14, the AAA ABX is up between 1-3%.

Notablecalls: Not making a short call on BSC here...although tempted. Especially with the stock up this AM on chatter Lewis & co are talking to PE firms.

Crocs (NASDAQ:CROX): New Product Getting Traction; International Well Positioned - Baird

Baird is out positive on Crocs (NASDAQ:CROX) following meetings with management over the past couple of days. Firm notes CROX has spent a lot of time discussing its inventory and continues to do so. But short of reporting a sequential drop in inventory, which isn't likely until Q308, it doesn't seem like investors will be convinced that CROX doesn't have an inventory problem. One thing to note about its higher inventory level is that the company's fill rates have improved dramatically, and this has improved its customer satisfaction ratings as well.

According to the firm CROX acknowledges that the U.S. retail environment has gotten softer and this is adversely affecting its business, as it is many other companies. However, CROX still reports that its product is selling well, and that there is a broader assortment of its product at retail, with many of its newer styles getting good traction. Additionally, the company is optimistic about its back-half prospects, based largely on its fall prebook orders, namely on the strength of its Fuzz Collection.

International is a bigger part of the company's growth story than the U.S. CROX continues to see opportunity in Europe, Asia and developing markets such as China, Brazil and India. Additionally, the company's international accounts were underserved in FY07, as supply was concentrated on satisfying U.S. demand. For FY08, CROX is now in a better inventory position across the globe and more of its international accounts are being offered a broader assortment of product.

Baird's price target is $50, based on a high-teens multiple of one-year forward EPS estimate of $2.82. Maintains Outperform.

Notablecalls: Well, Baird's not the 1st one to defend the stock. As many of you (painfully) noticed, Piper Jaffray was positive on them already yesterday. The stock gapped higher but took a beating.

To my surprise, the stock is up considerably this AM, erasing almost all of yesterday's losses. The market surely works in mysterious ways. Reminds me of Hansen (NASDAQ:HANS) some weeks ago when Longbow was out with a superbly positive call but got no reaction (actually, the stock took a beating). The next day Goldman Sachs came out with their positive call (highlighting same stuff as Longbow the day before) and the stock ripped.

Think we're going to get similar action in CROX as well today.

Note CROX is currently trading 5.1x Baird's FY2009 EPS est.

Wednesday, March 19, 2008

Crocs (NASDAQ:CROX): Building For Long-Term Growth & Stability; Global Demand Hedges Risk; Buy - Piper Jaffray

- Piper Jaffray is positive on Crocs (NASDAQ:CROX) following two days of meetings with management. Crocs addressed concerns including near-term sales rates, inventory levels, distribution segmentation, pricing, and margin sustainability. While it is reasonable to assume that U.S. sales growth is moderating (as modeled) and international sales are accelerating, PJ thinks the company is taking steps to further balance production and inventory levels heading into its peak selling season. At the same time, the global infrastructure is being fine-tuned to best maximize efficiency and minimize cost in order to preserve margin during all economic cycles.

Firm is comfortable with their $225M (v. $230M Street) top-line estimate in FQ1, given evidence of more conservative inventory planning at the retail level. Crocs continues to work toward a higher pre-book rate near 40% (v. ~20% LY), with the balance of sales being derived from in-season deliveries.

Approximately 70% of current inventory on hand is aligned with the company's top seven selling styles where fashion risk is low and over time, future orders will be placed against existing inventory. By flexing and contracting capacity utilization based on sales, they think the company can sustain mid-50s gross margin long-term.

Depreciation in CROX shares of late, they believe, is a result of an exhausted shareholder base, lack of clarity around sales & inventory relationship, and anxiety with respect to fad speculation. As they revisit their model, the firm remains comfortable with current assumptions, believing that underlying demand remains firm and growth rates are reasonable.

Reits Buy and $67 tgt. CROX remains on Alpha List.

Notablecalls: I very much like this call. The stock has been destroyed lately but Piper does a good job explaining why/how things could be geting better. This is the type of note that will bring nice gradual buy interest. The focus is on the inventory/booking comments.

Short interest still stands at 30%+

I'm almost tempted to call this one Actionable.

Tuesday, March 18, 2008

Sprint Nextel (NYSE:S): Comments from a former telco analyst

On March 10th a NCN member I'm going to call NCN Telco sent me an email regarding Sprint Nextel (NYSE:S). NCN Telco is a former sell-side telco analyst and has more than 10 years of industry experience both in engineering and finance. He now works independently.

Anyway, I thought you would enjoy these:

Lots of Spint buyout rumors swirling around. I think these speculations are completely legit. Even before these stories hit the wire, I was reaching out to my telco contacts to see if Sprint would be a good pick-up. So far I haven’t had much luck and when I did get a hold of one very credible source, he would not elaborate much. It is entirely possible that dialogues have already begun since Sprint is not participating in the 700MHz spectrum auction.

Buying Sprint makes a lot of sense for any company. It's a cash cow with depressed value per sub. Sprint can offload about $7B of Nextel debt (as well as Nextel Partners) debt when it divests iDEN, leaving Sprint's CDMA with about $10B in net debt (factoring in $2B cash on hand). This is a much more manageable amount for a potential suitor. We should not also forget about the attractive LD assets that Sprint brings to the table. And potential merger synergies from decommissioning all those duplicative radio towers, equipment, call centers, etc. I smell billions of dollars.

It seems most telco analysts are downplaying the possibility that Sprint is an acquisition candidate and here is why I disagree. I will use VZ as an example. I believe VZ was considering its options with regard to ALLTEL last year but ultimately decided against it as it became too pricey (didn't want to compete vs. private equity money). It was a true blessing in disguise that VZ didn’t go after ALLTEL because for the same money it can now potentially get a national wireless company with 3x CDMA subs (ALLTEL’s market cap was about $19B vs. Sprint’s $20B as of Friday’s close). Attributing 2/3 (based on sub mix) of Sprint’s market cap to CDMA, Sprint’s CDMA is worth about $14B which is a steep discount to where ALLTEL stood a year ago. It would be crazy for VZ (or for that matter DT or Carlos Slim) to let this opportunity of a lifetime slip thru its fingers.

One big question that needs to be answered is will VOD want to partake in this potential acquisition or want out from its existing partnership with VZW to make a play for Sprint on its own. It might not be a bad deal for VZ to pay $20B to bring VOD’s 45% stake in-house. Either way, VZ stands to gain and Sprint will still be in play. I like the thought of DT, VOD and Carlos Slim duking it out with their strong currencies, don’t you?

Here are some additional comments NCN Telco submitted:

- I also liked how VZ CFO doreen toben tried to bash S by saying yesterday that VZ is seeing pockets of weakness in the midwest... midwest is mostly Qwest... Qwest uses Sprint network... that kind of comment seems to suggest Doreen wants to see even cheaper price on S shares... I love her... she is not flashy and everything she does is telegraphed... haha.

Notablecalls: Hope you enjoyed this as much as I did.

Apple (NASDAQ:AAPL): Expect upside - BofA

- Banc of America is out fairly positive on Apple (NASDAQ:AAPL) saying notebooks/desktops are the key to watch for potential EPS upside in F2Q08. While they recently lowered their F2008 and F2009 EPS estimates due to iPod and iPhone revisions, they also note a continued large discrepancy for notebooks/desktops between F2Q08 sales estimates and estimate of Apple's production - normally the discrepancy is fairly low. As a result, it is likely that F2Q08 PC unit estimate for Apple could prove conservative, although the firm will take a wait and see approach through the final weeks of the quarter. PC unit upside could come from new product build-out (refreshes and new MacBook Air), channel inventory replenishment, and strong demand.

Fir also notes their current F2Q08 gross margin estimate is 34.8% and could prove to be a worst case scenario (compares to F1Q08 of 34.9% and Apple's guidance of 32%). Gross margin upside could come from favorable mix (higher sales mix from PCs and software, even with a Q/Q
revenue decline in software). Gross margins typically increase Q/Q in March.

Sizing the potential EPS upside. BAC's F2Q08 EPS estimate of $1.07 could prove to be $0.08 conservative with only 200,000 PC units of upside, at current gross margin estimate. Gross margin upside of 100bps would add another $0.06 to EPS for F2Q08.

Maintains Buy rating. With the stock in the '$120's' and a lot of potential bad news priced in, they are buyers of the name given the potential upside opportunities.

Notablecalls: Think this reaffirms my positive stance on AAPL. Also note that the NPD data released late last night backs this view.

Not making a call on the stock here (s-t). GS, LEH and Mr. Helicopter make things somewhat unpredictable here. Just letting you know it's out there.

Monday, March 17, 2008

Comments on the Bear Stearns (NYSE:BSC) fall-out

Some interesting comments on the financials from two firms in light of the terrible Bear Stearns (NYSE:BSC) news:

- Deutsche Bank notes one reaction is shock that a company (Bear Stearns) that reaffirmed its book value at around $84 on Wed. can be worth $2 per share four days later on Sunday. Industry confidence erodes given uncertainty in the procedures used to value not only financial assets but entire firms. For this reason, it is not surprising that financial stocks in Asia have opened trading on Monday with declines of 8%-10%.

Yet, the issue is less about solvency and book value than about liquidity. Bear seems to have lost the trust of the markets to make good on its liabilities and did not have adequate liquidity during these abnormal stress times. The initial reaction is to assume that the same could happen to other wholesale funding firms, but this is where game theory takes hold since the Fed and government will likely resort to unusual measures to take actions to protect a system that is man-made and can be tinkered.

This is not to say that the Fed can quickly solve the big problems. Indeed, the demise of Bear reflects three themes, including our firm's expectations for $400B of global subprime related losses , firm's view that industry write-downs of $200B are about 2/3rds done but that the last 1/3rd can hurt the most, and the heightened risk of wholesale funded monoline firms during times of stress (as previously seen with firms such as Household, Countrywide (CFC), and Bankers Trust). The first two factors help to cause Bear's weakness, whereas the last one (liquidity as opposed to solvency) seemed to cause its sudden decline.

The concerns are ongoing. As mentioned by ex-Fed Chairman Alan Greenspan at DB conference on Friday, markets related to subprime and mortgages are likely to bottom only when there is visibility about the stability of collateral - i.e., home prices, meaning that the root cause of the industry's predicament is not likely to end soon (though he stressed that markets can speedily recover once they turn). Also, speakers mentioned that Sovereign funds may not be so quick to offer new funds given their recent investment losses, thereby reducing what has been on saving grace so far in the crises.

Nevertheless, they are leaving open the possibility that Bear's demise is closer to a near-term bottom. Also at firm's conference, speakers mentioned the benefit of failures (rid excess capacity) and that they occur closer to market bottoms. The demise of Bear is the type of watershed event that can help cause at least a temporary turning point. In other words, Bear's demise seems more like another tangible manifestation, albeit huge, of themes that have been discussed. The main reason not to try to "catch the falling knife" is the newer liquidity issue and a complete understanding as to why Bear's funding shut down so quickly in a matter of a few days. In any event, the main beneficiaries longer-term should be those financial firms which have the most capital, are more diverse (conglomerates), and/or have funding which is less dependent on wholesale markets.

- Oppenheimer's Meredith Whitney notes that while they believe BSC's case is unique, what will not be unique, in their view, is a resulting major negative revaluation of financials. For this reason, they provide a detailed examination and explanation of why they believe financial stocks have further downside of as much as 50% based upon 1990/1991 multiples of tangible book values.

- Goldman Sachs believes the group's initial stock reaction will be negative as investors are likely to be surprised by the purchase price. However, this proposed deal, and the Fed cutting the discount rate by 25 bp yesterday, may provide a boost to the credit markets. The current financial situation is a fluid one, so the credit markets' reaction to this deal, broker earnings, and additional Fed action will be crucial for any outperformance this week.

Investors are likely to flock to firms with stronger balance sheets While investor fears of a broker failure have essentially been realized, this transaction highlights the importance of a firm's liquidity position and the diversity of its funding sources. GSCO expects to see a continued flight to quality, particularly with respect to the firm's balance sheet. They believe JPM and MS have the strongest balance sheets at the present time.

Notablecalls: This is the end game, ladies and gentlemen. The Fed sent a pretty strong message to the markets, bailing out one of the worst players. With this they are telling the credit markets they are ready to bail out others as well if needed. Hell, they could have let the bank run on Bear take place. But they didn't.

Bailout is here.

Instead of being a panic seller, one has to step in and buy. Buy Goldman Sachs (NYSE:GS) down 10%. GSCO has proven their worth yet again. They saw the problems coming and hedged. They told the monos to go and screw themselves as they knew their insurance would prove to be worthless. They have played it well & will survive.

I smell a bounce in GS. Same with MS. Would stay away from Lehman (NYSE:LEH), though as these guys could very well end like Bear.

Anyway, GS will report tomorrow. Bet with the jews! Always a winning strategy.

Friday, March 14, 2008 (NASDAQ:AMZN): Growth at is actually accelerating - Citigroup

- Citigroup is out positive on (NASDAQ:AMZN) noting that despite recessionary conditions, they view AMZN as having one of the strongest fundamental outlooks in the Internet sector, and 5.2% '08 FCF yield provides long-term investors with an attractive entry/adding price. Key Elements Of The AMZN Long Thesis Remain Well Intact --

1. Still significant margin expansion potential;

2. Ongoing market share gains;

3. High levels of product innovation;

4) Material International exposure.

While overall U.S. January ecommerce data indicates modest deceleration, Amazon's U.S. traffic trends through February show acceleration - 14% Y/Y growth QTD vs. 13% in Q4. Int'l Growth Drivers - Amazon Prime (rolled out in Japan, Germany & UK in H2:07) and Category Expansion (Apparel, Sporting Goods, Jewelry/Watches & Health/Personal Care in '07) are underappreciated drivers of future International revenue growth & potential accelerators.

Int'l 3rd Party = Source Of EPS Growth - New proprietary analysis indicates that $100MM in incremental 3rd party sales boosts International gross margin by roughly 10 bps and generates $0.01 in incremental EPS.

Today, they are reiterating their Buy and providing four key updates to their AMZN Long Thesis. In this recessionary environment and in this tape, they have two choices: A) Publish an Internet Mattress Report or B) Continually re-test the Long theses. They choose the latter...

Tgt $97.

Notablecalls: Must say I was surprised by this call. I didn't know AMZN had so much going for it. Do read the full call if you have the chance. It's going to create buy interest this morning.

Thursday, March 13, 2008

Sigma Designs (NASDAQ:SIGM): Bounce?

Last night a very actively trading NCN (Notable Call Network) member pinged me in after hours saying he was buying Sigma Designs (NASDAQ:SIGM):

SIGM is a stock that I follow very closely and they reported earnings in after hours today.
The company beat revenue slightly. They missed EPS by 3 cents due to higher than expected tax rate.

The stock has been destroyed since it reported earnings 3 months ago. From 73 to 20s in AH today.

I think a lot of very bad news was priced in.
Short interest is 29 percent.

I listened to the whole conference call in after hours and actually got fairly excited. I bought 50k shares in my Scalp Account for a trade between 21.00 and 22.60 My average is 22.12

The company guided revenue lower for next Q to 60 million versus estimates of 77 million. They said the guide lower was a one time event. Company actually offered very nice revenue guidance for the following 3 Qs.

I feel the analysts are likely to vigorously defend the stock in the morning. Throw in how the stock has been killed the last 3 months and the 29 percent short interest and I think SIGM has an excellent chance to bounce nicely on Thusday. I actually think SIGM has a decent chance to roll green tomorrow. A great deal will depend on the analyst comments in the morning.

At this time I have no exit strategy on this trade, but will form one tomorrow morning. AH has low volume now and I would not suggest chasing it if any of you want to join me on this trade. It might offer a better entry in premarket tomorrow.

As I am writing this the last trade is 22.85

Happy Trading

Notablecalls: I do like SIGM here for a bounce. Although the analyst community isn't as positive on the stock as the trader expected them to be, I feel most of the bad stuff is priced in at current levels.

Here is a quick overview of comments:

- Piper Jaffray is definitely the most cautious firm out there lowering their tgt to $25 from $39 while maintaining Neutral rating. PJ notes the midpoint of management's FY09 revenue guidance implies $80M-$95M in quarterly revenue for the last three quarters of FY09. Whil they believe in the growth of the IPTV market (8M units in `07 and 14M units in `08) as well as the Blu-ray DVD player market (1M units in `07 and 5M units in `08), they believe the company would need to achieve nearly 95% market share and stable pricing in these markets to hit its $325M (midpoint) revenue target for FY09.

Many investors may argue that a $25 price target and assumed P/E multiple are too low. However,Sigma's consumer IC peer group trades with an 11x CY09 P/E multiple. As time passes, if they feel confident in Sigma's revenue recovering from Q1 FY09, and if they see little progress made by competitors, they may re-evaluate their stance.

- RBC Capital is maintaining their Outperform rating while lowering tgt to $30 from $35. Firm notes Motorola just bought too much product last quarter and it's evident in Sigma's inventories which increased 40% sequentially from $18.9M to $26.3M.

Demand overall, in their assessment looks healthy for IPTV and if anything total unit growth should display strong positive trends for the full year. The growth however will be lumpy and Sigma will often times have to do as STB makers request, who in turn are doing what the carriers demand. Sigma has almost $9 in cash/share.

- ThinkEquity says SIGM reported Q4 in-line, but guided for a 2008 that will be back-end loaded because MOT ordered too many set-tops for AT&T in recent months. This should correct itself in about a quarter, and the year's $300-350 mln guidance was in-line with firm's previous $329 mln est. Firm has made insignificant changes to their full-year ests, resulting in a mostly unchanged valuation. U.S.-centric political risk aside-which is significant, given the risk for higher taxes, more regulation, inflation, assault on free-trade principles, "soaking" the rich, an anti-business climate, etc. Firm believes SIGM will prove to be one of their very best investment ideas for the next 12 months.

- Goldman Sachs cautious.

- Baird neutral.

- UBS reits Buy.

Wednesday, March 12, 2008

Suntech (NYSE:STP): Actionable Trading Call

Cowen is out with a good call on Suntech (NYSE:STP) saying that trading around 12x 2009E EPS, they believe STP shares offer 50%+ upside vs. the market in 12 months. Investors may be puzzled by the timing of the convert offering, given current market conditions and the low share price. However, this is driven by the lead time to add polysilicon capacity, and it should give STP access to long-term, low-cost supply. While the deal is slightly dilutive this year, it could be offset by higher revenue in 2009. And, details of poly supply deals should provide triggers for the shares.

STP had over $600MM in cash and investments at year-end 2007, which should support capacity expansion and working capital. However, raw material remains the key constraint to growth, and it takes 18-24 months to add polysilicon capacity. Given the opportunity to invest in very attractive supply deals, the firm believes it made the right strategic decision.

Reits Outperform.

Notablecalls: I think this is a very significant call.

This is what NCN Solar told me yesterday morning:

'..I've been quite battered in the group, just wanted to mention to you, from trading perspective, if STP can get even on day, would signal sentiment changing, and would likely mean that funds were buying here. Also FSLR first time held strong in face of rumor, may mean its got good support there..'

Pull up a chart of STP and take a look - see the bottoming action yesterday? I suspect STP is done going down. Calling it Actionable Trading Call here.

Also, check out this:

PS: HUM's a buy right here. Strong buy. The thing has been cut in half in 3 days!

Tuesday, March 11, 2008

What I like this morning?

I like Aetna (NYSE:AET) long here. The stock is down considerably after WellPoint (NYSE:WLP) the largest US health insurer warned last night.

Yet, AET reaffirmed its guidance early this AM and we have the market very positive following good news from the FED (well, at least good on the sentiment side) plus some upgrades in the major financials.

Despite several industry downgrades this morning, some smart market watchers are telling me WLP problems are mostly company specific (despite management blaming economic conditions).



Monday, March 10, 2008

Melco (NASDAQ:MPEL): Deutsche Bank out with a significant intraday call on MPEL

- Deutsche Bank is out with a very significant call on Melco (NASDAQ:MPEL) saying that after their visit to Macau, they remain bullish on the phenomenal growth in Crown's VIP business. Channel checks suggest Crown rolled almost HK$50bn in Feb. Firm thinks MPEL will deliver a stellar performance in 1Q, based on solid rolling and a high hold in Jan-Feb. They are raising their 1Q08 EBITDA forecast by 43% to $70m, the highest on the Street.

Channel checks suggested that Crown rolled almost HK$50bn in Feb, or 23% of Macau's VIP play. This lifted Crown's overall market share from 16% in Jan to 18% in Feb.

City of Dreams looked on track to openPhase 1 by end of 1Q09, with the main podium superstructure works 95% complete. DB sees this as one of the best location on the Cotai Strip, being near the airport and ferry terminal, and directly across from the Venetian.

Given the strong trends in VIP rolling, they are raising our FY08 EBITDA estimate by 22% to $261m.

Reiterates Buy, $22 target on MPEL as a strong operator with market share gains.

Notablecalls: This looks like a very significant call for MPEL. I expect the call to generate meaningful buy interest in the stock over the next couple of days. It's not every day you see EBITDA ests upped by 43% to a new Street high.

Citigroup & Piper Jaffray comment on Solars

The solar & poly stocks are in for a wild ride this morning as we have two firms out with pretty significant comments (opposing views):

- Citigroup notes Spain is the world's second-largest solar market, and strong Spanish solar growth has been driven by generous solar feed-in tariffs from the Socialist-led government. Firm expects that reelection of the Socialist Party will result in more favorable solar tariff policies post the current policy's expiration on 30 September 2008. The new Spanish solar tariff and installation cap will be announced in May timeframe.

Given the significant share price declines of the solar sector in the last several weeks, they would not be surprised to see a relief rally for the group over coming sessions. Sees Suntech (NYSE:STP) and Yingli (NYSE:YGE) as main beneficiaries due to their exposure to Spanish mkt.

- Piper Jaffray notes a very damaging article (and pictures) appeared in the Washington Post on Sunday March 9 which highlighted one of the problems with poorly designed Chinese poly plants. Some plants in China, like Luoyang Zhonggui (a supplier to STP, LDK and CSIQ) cannot recycle the byproducts back into the process (toxic silicon tetrachloride) and the article claims the company has been dumping the unrecyclable chemicals back into the land.

Firm speculates it could poise some supply risk if the plant production is scaled back. They believe the primary customer of Luoyang is STP (over half of Luoyang output) and to a lesser extent LDK and CSIQ. We have confirmed that the local supplier to Yingli (Xinguang) is recycling its byproduct (thus it does not pollute) and additionally YGE relies on mostly foreign poly suppliers (Wacker and MEMC). JA Solar (JASO) does not rely on Chinese poly suppliers currently.

Notablecalls: Oh well, this sure is a complex situation. But let's analyze it for a minute:

- STP is the #1 player in the Spanish solar market & YGE gets around 50% of their revs from there. So the exposure is surely there.

- Take a look at the Washington Post article. It's ugly. There has been a lot of talk of chinese poly supply coming online in 2nd half of 2008, putting some downside pressure on pricing (good for solars). Some of the smartest solar watchers have expressed their doubts regarding the chinese supply, so the expectations may not be THAT high. More of a sentiment negative.

I think that following the initial knee-jerk in reaction to Washington Post article, both STP and YGE become nice bounce plays. Spain trumps China.

I also like MEMC (NYSE:WFR) for a trade here. As one of the major producers of poly, they would definitely benefit from increased demand in Spain. Also, problems at Chinese competitors is good news for the co.

Sunday, March 09, 2008

Notable Calls Network (NCN): Catching the bottom in Crocs (NASDAQ:CROX)

While probably not the most profitable but quite surely among the most elegant calls made on Notable Calls Network (NCN) last week was the Crocs (NASDAQ:CROX) one.

On Thursday March 6, around 12:38 PM a NCN member pinged me with the following heads up:

- My friend who has a huge CROX position and I am currently on the phone with as I write this just spoke to the CFO of CROX who says that Costco (NASDAQ:COST) will issue a statement today stating they misrepresented the facts about CROX on their call yesterday...if the market gets hammered then of course nothing will go up but I believe we will get a reaction when it's announced.

Well, since I've had CROX on my radar for quite some time, the information seemed interesting enough to do some further dd on it. I knew the stock was down close to 15% in two days, possibly on comments from COST. I was a bit hesitatant to immediately distribute the call to other NCN members as it was coming from a relatively new member that had yet to build the highly credible track record of many of the older members.

So, in order to get a sense of the validity of the call, I quickly did two things:

First, I went back and took a closer look at what the management at Costco had said regarding Crocs on their FQ2 conf call on March 5. It went something like this:

"... General merchandise, as I mentioned, is doing fine. Again, we should continue to benefit a little bit and I don’t think this is a big impact relative to the economy, but it’s certainly a tempering offset to it. I think the fact that we -- our non-food buyers are seeing more availability of what I will call branded non-food items where historically we couldn’t get our hands on and somebody just the other day mentioned huge availability in the apparel, things like name brand jeans and name brand women’s apparel and Crocs and the like. The impact -- and we are seeing some of that even on the furniture, the home furnishing side, getting those calls ..."

The comments hit wires around noon and likely contributed to CROX's free-fall over the next couple days.

Why were the comments considered a negative for CROX in the first place?

Costco isn't exactly famous for their shopping experience nor for the quality they offer. People go there because of the low prices. So, in CROX's case it seemed investors became worried that being added to Costco's merchandise mix would indicate problems with demand & destroy pricing. Note that inventory at CROX has been growing significantly over the past qtrs.

Secondly, I ran the call by some smart retail watchers. Must say most were pretty spektical noting it would be very difficult for an investor to get through to CROX's CFO.

Yet, I felt that with the stock down considerably, still huge 30% short interest and somewhat more reasonable valuation any positive news would pop the stock.

So, around 12:46 PM I distributed the call to all NCN members. It proved to be a good decision as the stock quickly bottomed bouncing 1/2 pts.

The thing that made the call really elegant was the fact that around 90 minutes later Crocs (NASDAQ:CROX) issued the following press release:

Crocs, Inc. Reiterates Retail Distribution Strategy

In the release the co reiterated that it had segmented its distribution strategy in order to maintain price integrity and enhance brand equity. The Company also reiterated that it did not, nor did it have plans to sell its Crocs branded merchandise to Costco Wholesale Corporation.

The press release caused the stock to spike another 1.3 pts, giving investors a nice 8-9% gain on the trade (depending on exit/entry).

This is definitely the kind of stuff that makes me proud to be running Notable Calls Network. Kudos goes to G for the heads up.

Hope you enjoyed it,


Want to be part of NCN?

It's easy. Just shoot me a brief email that includes a short description of yourself and your AOL nickname.

Please do note that contacts via IM are limited to people with:

- 3+ years of trading experience

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I will not accept contacts from purely technically oriented traders, penny stock fans or people who have less than 3 years of experience in the field.

Friday, March 07, 2008

Marvell Tech (NASDAQ:MRLV): Bounce?

Several firms are commenting on Marvell Tech (NASDAQ:MRLV) after the co released its Q4 results and guidance last night:

- Citigroup notes a much better-than-expected print left little for the Bears. However, once again the stock traded off post-close on the outlook's sequential growth (-8%) despite Street F1Q09 and F09 revenues which will reset HIGHER, and Street F09 EPS which should remain flat. They think MRVL's high-teens annual revenue growth and 700 bps of intra-year operating margin expansion are compelling catalysts which can pull the shares steadily higher through the year. A trough 15x multiple on ther C08E $0.72 EPS implies downside to $11.0 versus upside of 74% to $19 target, compelling risk/reward. Reits Buy.

- Deutsche Bank believes that MRVL is poised to experience a strong C08 driven by multiple product cycles in enterprise & mobile storage ICs, 802.11n WLAN ramps in enterprise, retail & notebooks, combo WLAN+Bluetooth products in embedded applications, & 3G Cellular for RIMM. Given 3 quarters in a row of revenue upside and 5 quarters in a row of operating margin expansion, they believe that the stock could perform well even in a slow demand environment. Reits Buy and $16 tgt.

Notablecalls: I continue to like MRVL here and believe the stock is bound to bounce this AM.

Thursday, March 06, 2008

Annaly (NYSE:NLY), Capstead (NYSE:CMO), Anworth (NYSE:ANH) - Bounce?

A very knowledgeable NCN member focusing mainly on financials had some interesting comments this AM:

I know I keep talking about this but heres the difference between Thornburg (NYSE:TMA)... and the Annaly (NYSE:NLY), Capstead (NYSE:CMO), Anworth (NYSE:ANH),.. they are 99% that same animal.... use mortgage bonds/loans as collateral to lever themselves up and play the carry trade.

The only difference (and its a HUGE one) is that NLY,CMO,ANH are 100% FNM/FRE AGENCY mbs bonds... while TMA is 100% private sector mbs.

TMA is getting margin called to death on their aaa portfolio b/c their underlying collateral has vaporized and at 18:1 leverage... it don't take much to get your credit lines pulled.

Aan the other hand NLY, CMO, ANH only own Fannie Freddie debt which is super liquid and not seeing price erosion AT ALL. Thus...NLY, CMO, ANH running their 10:1 leverage are no where near margin calls.... but the lemmings selling these names are probably clueless to the difference between the 2 business models .

I think it's probably worth picking up a few sharres near the open for an intraday pop. I bet the smart money comes in within the first 15 min of trading and takes NLY up a point off the lows.

If u do it... just buy in increments as they are dropping... just so you dont get too heavy if some big blocks come in to knockem down further.

Check out Monday mornings open... NLY opend horribly and bounced back over 1.50 when the smart $$ came in.

The only other reason I can see for the assinine selling of these names is that folks that own TMA may also own NLY and are thus getting margin called themselves.

Notablecalls: Love the comments. This comes from a guy who got short Thorn (NYSE:TMA) when things got ugly. Watch NLY, CMO & ANH.

PS: I'm hearing some pretty loud chatter saying one tier-1 house has 7-figure amount of NLY to sell this morn. Should be enough to knock it down early on.

Taser (NASDAQ:TASR): A Deeper Dive into Story - Jefferies

Jefferies is out positive on Taser (NASDAQ:TASR) saying evidence from deployments continues to mount that Tasers save lives, reduce the cost of law enforcement, and lower injuries to officers and suspects. These forces should drive continued adoption by worldwide law enforcement and correction agencies, as well as the military, private security firms and consumers.

The company has the potential to grow its top line 30+% each of the next five years. The initial wave of growth is driven by penetration of the potentially 100 million worldwide users of the technology. As penetration increases, the company benefits from an annuity-like revenue stream from its installed base for cartridges, increasing predictability. Currently, the annual recurring revenue per existing customer is about $85, excluding replacement units. The second wave of growth likely comes in 3+ years when the company launches an upgrade to its X26 unit.

With over 12,400 law enforcement agencies buying Tasers in 45 countries, as well as growing penetration of the military, private security and consumer markets, Taser has developed a broad and stable customer base.

Reits Buy and $20 tgt on TASR

Notablecalls: The stock may be ready for a next leg up here.

Tessera (NASDAQ:TSRA): Actionable Call Alert - Cowen

- Cowen & Co is out with a superb call on Tessera (NASDAQ:TSRA) saying that given the preliminary nature of the ongoing patent review process, they have been shocked by brutal negative reaction in TSRA's stock price in reaction to the recent ITC decision to stay TSRA's infringement case against a slew of "wireless defendants".

Judging from the reaction in the stock, in Cowen's view the market is now discounting a very, very, very, very unlikely scenario where not only TSRA patents are ultimately overturned but that existing licensees( both DRAM and Wireless) breach contracts and for some reason push back and decide not to pay TSRA. They do not believe there is any basis for this. Licensees are quite knowledgeable on patent issues and surely know that we're not even close to any
patents being overturned.

Interestingly, but not surprisingly given their initial objection to the "stay" order, the ITC's own staff attorneys filed a petion for review of the stay order which they continue to assert was incorrectly and unfairly granted by the ALJ. Note that the ITC ALJ is new to the ITC, was assigned to the TSRA case late last year and has no/little patent experience.

The ongoing patent reviews are far from final. While investors read the initial ITC decision to stay and concluded that the patent reviews were going negatively for TSRA and would be concluded soon, the firm does believe this is the case.

Thinks that the stock has been unfairly and unjustifiably sold off. Reits Outperform.

Notablecalls: So, ITC's own staff has filed a petition for review of the stay order? ITC's own staff is against this stupid order imposed by Judge Essex! This judge was assigned to the case back in Oct 2007 and seems somewhat clueless. This makes it VERY likely the stay will be lifted.

This means the stock is way oversold. There is NO reason TSRA shouldn't be a $20 stock!

Buy it today & buy early.

Actionable Call by Cowen's Raj Seth.

Apple (NASDAQ:AAPL): Halo Effect Take 2? - Morgan Stanley

- Morgan Stanley is out with an interesting call in Apple (NASDAQ:AAPL) saying it's increasingly clear that Apple is focused on penetrating enterprise accounts with its Mac and iPhone products. If successful, they view this as a second halo effect that will boost revenue growth and margins beyond what is currently incorporated in consensus models. Firm sees the possibility of both software/security solutions as well as new customer wins at today's iPhone announcement (scheduled for 10am PST at Apple's headquarters), that will help validate the company's enterprise strategy.

Firm hosted Peter Oppenheimer, Apple's CFO, at Morgan Stanley's Technology conferenceyesterday. They view Apple's comments on Enterprise and International investments as the most relevant incremental data points that help support the company's growth story.

Beyond today's enterprise-related iPhone announcements, the firm highlights that Apple is investing in both US and International commercial sales people (170 sales people today); is now willing to discuss industry-vertical wins (Oil and Gas, Government etc); and views boot camp and industry-leading mobile products as drivers of potential success in the commercial PC market.

Reits Overweight and $185 tgt.

Notablecalls: So, the next leg up in AAPL will be coming from the corporate side. The bottom looks to be in. Buy AAPL today.

Paperstand (IDCC)

The WSJ’s “Heard on the Street” column out saying that it doesn't have a sexy brand name, and its HQs are far from Silicon Valley. But InterDigital (IDCC) might be a winner in the cellular-telephone industry's move to multimedia phones. The co owns an array of patents on wireless technology that it contends are essential to making the high-speed-data phones that let ppl watch videos and surf the Web. Among co’s to license its patents are Apple (AAPL) and RIM (RIMM). But industry giants Nokia (NOK) and Samsung have resisted. From this month through Nov, the US ITC is set to issue a series of opinions and rulings on whether Nokia and Samsung have infringed InterDigital's patents. If InterDigital wins, and a court decision in the UK augurs in its favor, Nokia and Samsung would come under new pressure to sign licensing deals. Fees from those deals might double InterDigital's rev over the next few yrs.

Wednesday, March 05, 2008

RUMOUR MILL: Sprint Nextel Corp (NYSE:S)

A curious rumour surfaced today couple of hours before the close saying Sprint Nextel Corp (NYSE:S) has hired Morgan Stanley and initiated director Ralph V. Whitworth's plan to spin-off Nextel. According to the rumour it could and must be viewed as huge positive for S. Spin-off announcement 'expected' in 2-4 weeks.

Considering Sprint Nextel (NYSE:S) has been subject to various chatter (both pos & neg), I wanted to highlight some very insightful feedback from a NCN member.

He notes:

Both iDEN and CDMA subscriber losses have been huge... this was a stupid deal in the first place and unwinding Nextel now at a depressed price makes no sense. I think they should hold on until the market condition improves and the company shows solid subscriber growth.Not sure if this is a concession that the Q-chat feature on Rev-A (QCOM product) is not viable technologically. Either way, this is not going to solve CDMA business of Sprint at all. Sprint should have just spend billions on improving coverage like VZW did in the late 1990s/early 2000s. It's paying huge dividend. Sprint is scr*w*d for sure.

Notablecalls: Couldn't agree more.

Sears Holdings (NASDAQ:SHLD): Downside to $75? - Morgan Stanley

- Morgan Stanley is cautious on Sears Holdings (NASDAQ:SHLD) reiterating their Underweight rating noting margins have now fallen for three quarters, and that is despite drops in both depreciation and ad spending. Sum-of-parts support near $90 a share remains theoretical and stretched, in their view, and less likely to find a bid in a more constrained credit and retail environment. Valuation has downside to $75 vs peer group on FCF yield, even lower on P/E.

Buybacks continued in 4Q, but with cash down to $1.66bn (roughly half in Canada), ESL's meetings with investors will be important. Original ESL fund investors are still up at least 4x from the original Kmart bond before bankruptcy investment. Some investors may want liquidity. Firm believes any signs of redemptions or sell-down of ESL stake in SHLD would be a significant negative to the share price

At $95, they believe the market is failing to account for not only risks but likely outcomes. The 90bps drop in SHLD margins equals the average we assume for WMT, TGT, HD, LOW, M, JCP, JWN, and KSS.

Notablecalls: Don't shoot the messenger but I think SHLD may have some downside in it. There were some Icahn stake rumors yesterday (10% chance of being true, imo), so there could be some weak hands around.

Not a huge convicion call by any means. Just letting you know it's out there.

Tuesday, March 04, 2008

Marvell Tech (NASDAQ:MRVL): Buy ahead of earnings - Jeffco

- Jefferies is out with a solid call on Marvell Tech (NASDAQ:MRVL) saying they expect CQ4 revenue to be above their and St. estimate of ~$782MM (+3% Q/Q). Firm believes Storage likely increased to $360MM (+8% Q/Q) and above their estimate of $345MM (+3% Q/Q) as strength in Mobile likely more than offset some weakness in Consumer. They also believe Mobile was likely up 20-25% Q/Q (higher than est. of up ~10%) as they estimate HDD shipments by Marvell's Mobile (2.5") HDD customers (Toshiba, Fujitsu, Samsung, and Western Digital) were up ~20% Q/Q in CQ4.

Also, Comm increased slightly to ~$435MM (+3% Q/Q), largely due to continued strength in PXA (+7% Q/Q) driven by RIMM.

Regarding guidance they believe Marvell will guide CQ1 revenue inline to above their and St. estimate of ~$765MM (-2% Q/Q). Firm expects implied EPS guidance to be inline to slightly ahead of their estimate and St. of $0.13 driven by slightly better revenue and gross margin guidance.

Reits Buy and $21 PT is based on 20x (vs. peers at 15x) CY09 EPS. Think MRVL is well positioned to regain profitability and revenue growth in CY08 as it benefits from multiple product cycles and drives operational leverage within its acquired assets (PXA, Avago, QLogic).

Notablecalls: So we have Jeffco out saying MRVL may indeed come ahead of ests when they report on Thursday. Note that STX reaffirmed this AM and WDC actually upped their guidance last week. This all points to a healthy qtr for MRVL.

MRVL is a beaten down player and I think good results may propel the shares way (10-15%) higher from here.

I'm also hearing Deutsche Bank is out positive on MRVL this morning saying the stock's a buy ahead of earnings.

I think the stock's a buy here, especially with weak open.

Royal Caribbean (NYSE:RCL): Added to Conviction Buy List at Goldman Sachs

Goldman Sachs is adding Royal (NYSE:RCL) to the Conviction Buy List given the relative appeal compared to our other sectors/companies. Royal has easy comps and is near trough valuation and margins whereas lodging and gaming show more extended valuation and likely a more difficult earnings outlook. Firm's CL designation is based on less downside risk for Royal versus other sectors. The stock is down 18% YTD and even with recent bad news (higher oil, downward revisions) it seems to have found a bottom. Any signs of good news on the consumer front could send this stock higher. GSCO's $45 12-month Royal price target is based on blended PE/DCF analysis.

This is follow on to firm's late January note (01/27/08) when they highlighted Royal as an early stage consumer rebound stock. Since then, the company reported 4Q2007 net yield growth well
above expectations (11% vs 9% estimate) repeating a string of stabilizing/solid demand trends that we saw from Carnival and Norwegian. Firm still expects net yield expectations to be met as, 1) they are against easy comparisons, and 2) the mix shift towards higher priced Europe/Alaska and bigger ships creates pricing momentum.

GSCO notes that their 2008 EPS forecast is below consensus ($3.00 vs $3.27) as theirs incorporates higher fuel forecasts. However, given the visibility of higher fuel they suspect downward revisions are already in the stock.

Notablecalls: It certainly looks like Goldman is the early bird in RCL. I certainly like it. Expect to see buy interest today.

The sector is beaten down and out-of-fav & now we have the ultimate tier-1 firm out very pos. on the best name. Watch CCL as well when RCL gets going.

Early Morning Tidbits:

- Goldman Sachs is adding Royal Carribbean Cruises (NYSE:RCL) to their Conviction Buy List with a $45 tgt. (more on this later - should be a good mover).

- Most firms are out defending Intel (NASDAQ:INTC) this morning. I'm still kicking myself for not highlighting that cautious heads up call from BofA yesterday morning saying Intel's NAND business may cause some EPS headwinds. Must say I don't see this as a warning at all. More of a reaffirm that CPU business is doing fine.

- BofA is out with call saying the next meaningful date in the Microsoft/Yahoo! saga will be March 14th, which is MSFT's deadline to nominate a slate of directors. While they believe Microsoft will likely nominate directors on this date, they ultimately expect MSFT to try and resolve the deal through a friendly negotiation, with a deal in the low $30 range the most likely outcome.

Monday, March 03, 2008

Inverness Medical (NYSE:IMA): Actionable Call Alert - Jeffco

- Jefferies is out with a wonderful call on Inverness Medical (NYSE:IMA) following a recent investor conference call with CEO Ron Zwanziger and CFO David Teitel.

Firm notes there was active participation from accounts and questions primarily focused around the pending acquisition of Matria, IMA's strategy in disease management, 4Q results, and the discrepancy in 'Street' estimates for 2008 and beyond.

Jeffco notes that based on management's lack of providing guidance the 'Street' now has EPS estimates for 2008 and 2009 that range from $1.56-$2.01 and $2.20-$3.32, respectively. Furthermore, many Sell side analysts have asserted that they have vetted their estimates with management (with a wide range of forecasts) and therefore they believe that management needs to provide directional guidance to subdue investor's concerns over what IMA's true earnings power is for 2008 and beyond (expects guidance to be provided in an 8-K this week). Firm maintains belief that their 2008 and 2009 estimates of $1,373.9MM and $2.51 and $1,557.6MM and $3.32 are still conservative and echo comments made my IMA management on their conf call about their disappointment with other analyst's estimates.

We believe that IMA has become very attractive to potential acquirers at these levels. On the conference call, Mr. Zwanziger stated that IMA does not have a poison pill in place and that IMA's board would be amenable to entertaining take out offers and management has even considered doing an LBO at these levels. Jeffo notes that in 2007 Dade Behring was purchased at a multiple of ~4.1x trailing twelve month (TTM) sales and 15.0x TTM EBITDA, Biosite was taken out at 5.1x TTM sales and 13.0x TTM EBITDA, and Ventana was acquired at ~11.3x TTM sales and ~26.0x TTM EBITDA. They believe that based on any of these prementioned metrics, IMA is grossly undervalued at current levels.

They believe that there are numerous upcoming catalyst for IMA. First, providing 2008 guidance expected in the next week or two, second, CMS' national coverage determination to expand reimbursement for home INR testing to include atrial fibrillation and venous thrombosis patients should be finalized in March 2008.

Reits Buy and $70 tgt.

Notablecalls: What a beautiful call. IMA has been absolutely destroyed and I think this is the call that will make it bounce in the n-t. The call has it all:

- Positive management comments
- Catalysts (guidance, CMS)
- Destroyed stock.

Buy IMA today. It's going higher now. Actionable Call Alert!

Early Morning Tidbits:

- Piper Jaffray is positive on Research in Motion (NASDAQ:RIMM) saying February channel checks indicated strong demand for smartphones and data-oriented devices across all four major U.S. carriers. Firm believes RIM has lowered channel inventory and should guide to sequential May quarter growth despite tough February comparisons and North American economic concerns. Reits Neutral and $112.

- OpCo's Meredith Whitney is out negative on brokers (GS, MER, BSC, MS) saying the finality of fiscal Q108 causes the firm to take yet another whack at ests.

- Morgan Stanley is positive on Leap Wireless (NASDAQ:LEAP).

Apple (NASDAQ:AAPL): Comments from BofA & RBC

We have couple of firms out on Apple (NASDAQ:AAPL) this morning:

- BofA is lowering their tgt to $160 from $180 noting that given recent production data points from Asia, continued U.S. consumer weakness, and as a follow-up to their February 1st note (first discussed iPod production units), they are lowering iPod and iPhone unit estimates.They also lower their F2008 and F2009 EPS estimates.

Firm is lowering their F2Q08 iPod sales estimate to 9.97 million units (-5% Y/Y) from 11.08 million units (5% Y/Y) and iPhone sales estimate to 1.2 million units from 1.6 million units, due to continued production weakness. That said, gross margin upside near term could offset some of the unit weakness.

F2008 EPS estimates goes to $5.01 (consensus is $5.14) from $5.05 and F2009 goes to $5.97 (consensus is $6.29) from $6.17.

Maintains Buy.

- RBC Capital is out commenting on AAPL's 10M CY08 iPhone goal noting that estimated pending contributions from Smartphone market expansion, new iPhone versions (incl 3G), 3rd party applications, expanded global distribution, enterprise server integration, unlocked phones, in their view, will contribute to Apple shipping 11M iPhones CY08.

Mid-Q2/F08 checks and proprietary data from RBC's Tech Adopter Panel (3,600) point to healthy iPhone shipments (est 2.3M units) and strong Q2 Mac sales (est 2.2M). High-end iPods appear stable, with overall iPod sales (on low-end deceleration) expected at 10.8M, inline with street/seasonality (-51% Q/Q, 2% Y/Y). For Q2, they expect $7.2B revenue (up 37% Y/Y) and $1.08 EPS, above street at $7.0B and $1.05.

Reiterating Outperform and trimming target to $175 (from $200) on multiple revaluation.

Notablecalls: I think this serves to reaffirm my prev. view that at around current levels, the expected iPod (low end) deceleration, uncertainty regarding iPhone growth & general multiple revaluation is all priced in.

My gut tells me we MAY see a test of recent lows but this should be considered a buying oppy. Shorting AAPL here may be just a quick scalp trade (not going to take it).

Saturday, March 01, 2008

Notable Calls Network (NCN): Brilliant trading opportunity in ELN/BIIB

While risking being overly promotional, I wanted to highlight a brilliant trading opportunity that was presented to Notable Call Network (NCN) members this week.

On February 27 just before noon, a NCN member sent me a very good heads up on Elan (NYSE:ELN) and Biogen-Idec (NASDAQ:BIIB) noting that:

- Tysabri linked to 'significant liver injury'.

Apparently the FDA has posted a so called 'Dear Doctor' letter on their website informing physicians of a hepatotoxicity warning and new precautions. The letter warned that Tysabri may cause liver injury and should be discontinued if Jaundice or evidence of other significant liver injury result.

Having been around when the Tysabri concerns surfaced back in 2005, I immediately suspected this would have at least some impact on both ELN and BIIB stock prices so, I distributed the heads-up to other NCN members.

Must say the reaction that followed surprised me.

Both ELN and BIIB took significant hits in a short time frame, falling 2.5 pts (-10%) and 4 pts (-6%), respectively.

The best part is that NCN members had ample time to short both stocks. Even in size, if one had enough conviction.

Once the news hit Bloomberg & CNBC, hell broke loose as you can see from the charts below:

Quite surprisingly, it took the analyst community several hours to respond. While BIIB recovered most of the loss fairly quickly as Tysabri is not considered their main growth generator (as opposed to 2005 when hopes ran high), ELN continued to languish until about 2:00 PM when I got word that Banc of America was out in defense saying the liver news was actually OLD.

According to the firm Tysabri-related liver injury had been previously reported, and were already considered within their valuation. Reports of liver injury were first reported in the addendum to the FDA briefing documents for the July 31st, 2007 Gastrointestinal Drugs Advisory Committee Panel regarding Tysabri for Crohn's Disease.

I couldn't believe my eyes - the stock was still down 8-9%. BIIB was down only 2.5% and now we had a tier-1 firm out saying the news was indeed OLD!

So I disted the defense to other NCN members as quickly as I could.

It took another 5-6(!) minutes before the stock started slowly creeping higher. Must say I performed several sanity-checks on myself during these minutes: Went back and re-read the BofA note over and over again thinking I had missed something. But there it was - old news!

The stock slowly moved higher over the next 10 minutes (60-80c) or so and once the FDA's spokesperson confirmed via Reuters that the news was indeed old, the stock shot up another 1.5 pts giving us a nice gain of 2+ pts.

I think this continues to show how valuable tool Notable Calls Network (NCN) has become in a relatively short period of time. Trading is all about flow and we sure get some good flow.

Currently, about 1/3 of the 40+ NCN members actively share flow with the rest acting as the silent majority. I would hereby like to encourage the other 2/3 to more actively share their flow as well. I know many of you are privy to great info. Remember, NCN is all about synergy!

Together we can make NCN a true market force.

Want to be part of NCN?

It's easy. Just shoot me a brief email that includes a short description of yourself and your AOL nickname.

Please do note that contacts via IM are limited to people with:

- 3+ years of trading experience

- Access to quality research/analyst commentary

- Ability to generate and share (intraday) trading calls

I will not accept contacts from purely technically oriented traders, penny stock fans or people who have less than 3 years of experience in the field.

PS: Some of my calls over the past weeks have been for sh*t. I have gotten some negative feedback from NC readers lately and I must say most of it is justified. I don't know why but I have been somewhat out of touch with the market lately.

I've been in this game for a long time and so have many of the high profile traders I talk to. Most agree with me - things have gotten way tougher over the past months. One person I talk to daily that has been trading for 20+ yrs told me this is the toughest market he has seen. Think this says a lot.

Anyway, I will continue trying my best.