Monday, June 30, 2008

Early Morning Tidbits:

- Citigroup adds Google (NASDAQ:GOOG) to Top Picks Live list based on what presents itself as a highly favorable Risk-Reward outlook. Based on extensive channel checks, they believe that GOOG's Q2 results are well on track to meet their estimates ($3.82B revenue/$4.73 EPS), despite recessionary headwinds.

- JP Morgan reits Overweight on Research in Motion (NASDAQ:RIMM), with conviction.

Notablecalls: Both look like good bounce plays here.

Friday, June 27, 2008

Bounce time?

Very little to report today. I generally feel the market is due for a bounce here. I see some hot shot market commentators throwing in the towel this AM, which leads me to believe we are pretty close to a bottom.

- PetroBras (NYSE:PBR) is getting positive comments from Deutsche Bank this morning with the firm upping their tgt to $95. The stock is also being added to Morgan Stanley's Model Portfolio. Worth a look.

- Research in Motion (NASDAQ:RIMM) is trading down again, now hovering just below $120 level in pre mkt trading. CSFB was out with a init call on RIMM last night (Underperform; 100 tgt). I hear it's a boring 66pg read. RIMM now looks like a solid bounce play here.

- I also like General Elec (NYSE:GE), Boeing (NYSE:BA) and Rokwell (NYSE:ROK) here as bounce plays. The last one has been absolutely destroyed here on a rather expected profit warning. I feel we may get some valuation based upgrades soon.



Thursday, June 26, 2008

What's up with Sprint (NYSE:S) today?

Apart from the usual T-Mobile takeover chatter (prolly bogus), I'm hearing:

- Clearwire CEO tipped the market that it is talking with EU counterparts on Wi-Max venture.

- Samsung's Instinct phone has been huge in the first month of sales. It's reported some Sprint stores are out of stock already.

That's what's driving the shares today.


Research in Motion (NASDAQ:RIMM): Colour on quarter

I wanted to highlight couple of broker comments on Research in Motion (NASDAQ:RIMM) following results out last night:

- RBC Capital notes that on product momentum (Curve, Bold) offsetting seasonality, Q2 guidance for $2.55-2.65B (86-93% Y/Y) was $100-150M above street. However, Q2 EPS guidance ($0.84-0.89) missed street ($0.90) on higher than expected investments (op ex up 26-28% Q/Q), RIM's first guidance miss after beating street EPS for 5 qtrs. GM guidance was 50.5%, slightly below RBC at 51%.

With the Smartphone market at inflection point and the company best positioned in history, RIM (at the cost of interim margins) is materially increasing investment (S&M, R&D) to achieve dominant global handset status. RIM expects its 'strongest back half in history', affirming firm's expectations for a broad consumer assault 2H08, including new handsets (Touchscreen, Flip, Slider, 3G Pearl, others). Notes historically (e.g. 2005, 2007) RIM made similar investments to address larger opportunities, which subsequently paid off handsomely for investors.

If management executes its strategy successfully and expands its addressable market, they expect rising investor sentiment as investors look past interim margin pressure and recalibrate around RIM's full market opportunity. Maintains Outperform & $165 tgt.

- Goldman Sachs is lowering their FY09/10/11 EPS estimates to $3.62/$5.11/$5.86 from
$3.85/$5.29/$5.95, and 12-month price target to $156 from $163, but maintain a Buy rating on the stock. While the firm is comfortable adding to positions with the guide-down out of the way (consistent with preview), they prefer to wait before becoming more aggressive until they gain comfort that 1) market expectations are more realistic, and 2) the company is executing well toward its August-September product launches.

Goldman now thinks RIM's EPS growth will be based on higher sales and lower margins relative to their prior expectations, as the company takes aggressive actions to respond to the iPhone's lower price points and Nokia's move of the Symbian OS to an open-source, royalty-free model.

Notablecalls: RBC Capital's Mike Abramsky sure hit the bullseye with his RIMM comments yesterday. I have no real feel for the stock here around $130. On one hand, it's still one of the few high growth tech plays but with GSCO comments regarding lower margins (due to competition), I'm not entirely sure its a bounce play here. Could go either way.

Wednesday, June 25, 2008

Hoku Sci (NASDAQ:HOKU): See 80%+ upside in HOKU - Cowen & Co

HOKU: Cowen out saying they see 80%+ upside in HOKU. Firm says they do not believe the ongoing equity distribution deal should stall the shares, because the boundary conditions are known. Trading at just 6x Cowen's C2010E EPS of $0.96. Reits Outperform.

Notablecalls: Could see some buy interest following Cowen's call.

Research in Motion (NASDAQ:RIMM): RBC Capital cuts Q2 ests on Bold delay

RBC Capital is out with a somewhat cautious call on Research in Motion (NASDAQ:RIMM) saying new data points suggest AT&T may launch the 3G Blackberry Bold mid-Aug, a 2-3 week delay to their prior launch estimate, as it continues to stabilize the device on its HSPA network. Rogers appears on track for July launch, and other carriers (Vodafone, DoCoMo, TIM, O2, others) are still expected later in August.

Revised Q2 Guidance. As discussed in their Q1 preview, Q2 guidance is highly sensitive to Bold launch timing; RBC est Q2 guidance becomes $2.5-$2.6B rev and $0.91-0.94 EPS (vs. prior est for $2.6-2.7B and $0.94-0.97).

According to RBC this development mirrors early stability issues RIM faced with UMTS, EV-DO, EDGE networks, including a Nov 2005 delay with the Blackberry 8700 on AT&T, subsequently resolved by RIM to maintain its hallmark battery life user/experience. 3G is significantly more power consumptive than 2.5G (higher processing demands); and the Bold also uses a new Operating System (v4.6) and a new Marvell 624MHz processor/chipset.

Given street expectations for a late July/early Aug Bold launch, and with valuation at 36x conc. FTM P/E, news of the delay may offer near-term valuation volatility; firm's view any interim price weakness as an opportunity for longer-term investors to accumulate the shares. This delay does not affect their longer-term thesis.

Notablecalls: Expect to see weakness in RIMM today in reaction to RBC's estimate cut. The stock simply can't afford even a slightest miss here. Think we will see RIMM sub-$140 today.

Kudos goes to RBC Capital's Mike Abramsky for continued excellent coverage on RIMM. He's really the Axe in the space.

Tuesday, June 24, 2008

Nokia (NYSE:NOK): Tero Kuittinen turning positive here - Actionable Call Alert!

Telco uber-analyst Tero Kuittinen from Global Crown Capital Equity Research just pinged me saying he is turning positive on Nokia (NYSE:NOK) here. This comes at a time when the market is turning very negative on the handset industry in general.

To recall, Tero went negative on Nokia back in January being about the only analyst spotting the market share erosion in Nokia’s European heartland. You can find his comments here.

Tero is out with a call titled 'Nokia: It is Time to Buy the Stock; Bad News Likely Priced in' noting the co has just started shipping new, radically improved 70 euro and 90 euro models, which should help Nokia extend its low-end market share leadership this summer.

He believes Nokia's strength in developing markets is now being ignored by investors who are now overly focused on the company's troubles in the high end.

Tero also believes Nokia should deliver sterling performance from its portfolio of sub-100 euro models in Q2, and the ongoing, major, low-end product revamp should also help in Q3 and Q4.

He notes he does not want to deemphasize the high end problems Nokia could face in the second half of 2008, but believes that the steep stock price decline now discounts unrealistic margin decline and market share erosion. At this point, he believes Nokia is highly likely to deliver a positive Q2 surprise.

Notablecalls: No one, I mean no one knows Nokia better than Tero. I can say that as I have followed his calls for years. He went negative on NOK when it was trading in the high $30's back in Jan and has turned positive here. I think NOK's a buy here. Can't bet against Tero when it comes to Telco.

Calling it Medium-Term Actionable here.

Bunge (NYSE:BG): Davenport raises tgt to $160 - new Street high

Davenport is out raising Bunge (NYSE:BG) tgt to $160 from $140 and adding to Value Chain. Firm notes this transaction supports their belief that we will continue to see consolidation across the Ag space as companies seek to capture strong presence in different commodity segments.

The combination of BG and CPO will create a larger,more diversified and competitive global provider of agribusiness and food products and will give BG an established global presence in the corn value chain. By adding CPO's value-added sweeteners, starches, and other ingredients to BG's portfolio of agribusiness, fertilizer, edible oil and milling products, the combined company will have an enhanced, more balanced product portfolio. The combination will also combine both companies' strong core geographies, as well as high growth geographies such as Asia and Latin America, among others.

Notablecalls: Davenport's $160 tgt is the new Street high tgt for BG. This confirms my view BG is a bounce candidate here. Will likely see $113-$114 today.

Bunge (NYSE:BG): Bounce candidate?

- Deutsche Bank is out positive on Bunge (NYSE:BG) following the acquisition of Corn Products noting the steep drop in Bunge's stock yesterday, despite a 31% increase in guidance, was an obvious sign that investors generally do not favor the deal.

Firm reiterates their Buy rating and $143 tgt on the shares saying they believe the acquired business will benefit from Bunge's origination, risk management and logistics capabilities, particularly in the current era of high and volatile commodity prices. Bunge will be able to leverage its fixed cost logistics network by running more products through the system. Firm estimates the acquired business will contribute approximately 13% to the combined company's EBIT in 2009E.

Deutsche also believes the Corn Products' South American business (about 30% of Corn Products' profits) is a strong fit for Bunge. This division holds about 70% market share in South America selling a variety of sweeteners, starches, animal feed and corn oil. Corn Products' business in South America is done on a pass through basis, as opposed to the annual contracting done in the U.S. and Canada.

While the rationale for Bunge acquiring Corn Products may be unclear to the market at this time, the firm believes the product line diversification has strategic value, similar to the investments the co has made in the past.

Deutsche is raising their 2008E EPS estimate from $7.51 to $9.56 on higher fertilizer gross profit/ton and higher assumed oilseed processing margins. For 2009E, they raise their core Bunge estimate to $10.65 on continued strength in fertilizer.

- Morgan Stanley maintains their Overweight rating and is raising their 2008 Base Case Bunge EPS estimate from $8.50 to $10 (i.e., previous Bull Case estimate) and introducing a new 2008 Bull Case EPS estimate of $11.50.

Notablecalls: I suspect a lot of shorts were pressing their bets on Bunge yesterday with the market giving little credit to co's upward guidance. To me, buying CPO seems like a fairly smart bet, especially as BG is using its own stock as the currency. The global shortage of food is not going away any time soon and large agri players like Bunge will benefit for many years to come.

Yesterday's sell-off will be nothing more than a blip on the chart.

BG goes on the bounce list here.

Monday, June 23, 2008 (NASDAQ:SOHU): Bounce candidate

Two tier-1 firms are out defending (NASDAQ:SOHU) this morning:

- Citigroup notes Friday's sell-off was sparked by a Reuters article confirming what almost everyone already knew: Sohu will face challenging YoY comps on its brand adv side due to a post-Olympics "hangover" effect. However, the firm believes online gaming will continue to power rev and earnings growth in 2009. They were modeling +18% YoY for 2009 adv revs, so the company's expectations of "+20-30% YoY" is actually stronger than their estimates. Finally, they note that online gaming is highly immune from growing inflationary pressures in China, another positive. Accordingly, the firm raises their 2009E estimate, increases tgt to $90 (from $80), and reiterates Buy rating.

2Q tracking ahead of plan; 3Q looks excellent - Citi believes both Adv & Gaming are having a strong quarter, and should come in above company guidance. 3Q is also set to be very strong, especially with Olympics adv, which should benefit from Sohu recently being granted the rights to show live streaming video of all events. Sohu is easily one of the, if not the, fundamentally best positioned names for at least the next 2 quarters.

- Merrill Lynch reits Buy & $95 tgt on SOHU after a massive sell-off on Friday triggered by a report by Reuters on growth of Sohu’s online ad, 40% of revenues in 1Q08, to slow down to 20-30% YoY in 09. Even given a significant US market correction on Friday, they see overreaction to the article. Firm also sees Sina as another victim.

MLCO believes the company has been communicating the same message (slowdown in ad growth in 09) for a few months. They also believe the range is inline, if notbetter, than most analysts’ estimates. For example, they are looking at 22% growth in online ad only and Bloomberg consensus shows a 23% growth in sales (including games and wireless services).

Firm believes the focus should be on Sohu’s potential margin expansion in 2009, despite lower topline growth. They expect Sohu to obtain a high-tech status and thus a 15% tax rate for 2009. They are also modeling material operating leverage as they expect the reduction in Olympic-related spending next year, est. to be US$15-20m, to be able to offset most of the increase in operating expenses to support organic growth. They therefore expect net margins to improve to 35% in 09.

Notablecalls: I was quite surprised to see SOHU down over 10 pts on Friday following the Reuters story. With two tier-1 firms out defending and one of them actually raising their ests for Q2, the stock is a very strong bounce candidate. There are clearly a lot of shorts in the name from Friday and I smell blood.

Buy it early & aggressively. I see it trading up several points today.

Friday, June 20, 2008

Energy Conversion Devices (NASDAQ:ENER): See 50%+ upside potential - Cowen & Co

Cowen is out with a very positive call on Energy Conversion Devices (NASDAQ:ENER) saying they see 50%+ upside potential in the ENER share price vs. the market in 12 months and reiterate their Outperform rating.

Raising F09/10E EPS To $1.95/$3.70, Vs. Prior $1.85/$3.50. Given the apparent strong demand for the offering and recent stock performance, firm's model assumes the shoe. As it will likely take some time to deploy proceeds for the next expansion, interest on higher cash balances looks accretive in F09.

Next Expansion Could Boost Projected Revenue. Cowen has modeled $500MM in additional capex for F09/10, assuming a further 300MW facility is added in F10, with revenue beginning in Q1:11. However, there may be sufficient lead time to drive incremental revenue in H2:10. The additional capital should strengthen ENER's hand in negotiations for government investment incentives. As they expect NOLs to be extinguished by F11, a tax-advantaged location in Asia may be most attractive.

Plenty Of Triggers To Lift The Shares. Sales agreements are in place for 94% of expected 2009
production and 48% of 2010, with contracts totaling 600MW through 2013, an increase of about 200MW since the Q3 call. Firm expects more new contracts, including deals signed at Intersolar, to add to backlog and visibility on forward ASPs. This, along with details of the next factory, margin expansion, and likely EPS upside, should support 50% upside vs. the market in the next 12 months.

Notablecalls: This should propel the shares towards the $80 level today.

Thursday, June 19, 2008

Early Morning Tidbits

RBC Capital is upping Potash (NYSE:POT) tgt to $340 from $300.

Firm also ups Agrium's (NYSE:AGU) tgt to $140.

Update: Looks like CSFB takes AGU to Neutral from Outperform.

Notablecalls: Looks like the market is due for a breather. Pinch of salt included as always.

Wednesday, June 18, 2008 (NASDAQ:PCLN): Expect Share Gains to Continue; Adding as an Internet Top Pick - Piper Jaffray

- Piper Jaffray is adding (NASDAQ:PCLN) as their Internet Top Pick with a $175 tgt after hosting CFO, Bob Mylod, for two days of marketing.

PJ continues to have a very positive outlook on PCLN's European growth prospects (estimates Europe accounts for over 70% of PCLN's operating profits). Priceline is aggressively hiring personnel, expanding into new markets, and generally feels good about its unit sales. Also, they believe the European hotel market will be much more resilient than that of the U.S. market given higher priority Europeans put on leisure travel and the lower costs of getting to destinations in Europe (i.e. discount airlines).

In Q1, Priceline experienced 50% bookings growth in the U.S., its fastest level of growth in the last several years PCLN is clearly benefiting from its no-booking fee airline promotion which drove 83% y/y growth in airline tickets. PCLN also believes the no-booking fee offering is driving increased site traffic and increased hotel and car rental bookings – as an example, rental car booking days increased 30% y/y in 1Q vs. 14% in 2Q07. Firm believes PCLN's recent Chop-A-Thon promotion (reduces booking fees on hotels) also has potential to drive increased traffic share for PCLN.

Sees valuation as attractive at 18x '09 PF EPS vs. expected 25% plus LT EPS growth.

Notablecalls: One to watch today.

Tuesday, June 17, 2008 (NASDAQ:AMZN): Three supporting reasons why AMZN can speedily double revenues - Goldman Sachs

Goldman Sachs is out positive on (NASDAQ:AMZN) outlining three supporting reasons why AMZN can speedily double revenues.

Coincident with the publication of their sixth annual internet usage survey report, they expand on why they believe that Amazon can sustain 20%-30% per year revenue growth for several years, despite maturing industry benefits from broadband penetration, and the law of large numbers. Goldman models Amazon doubling its revenue over 3-4 years based on their forecast users, units per user, and revenue per unit:

1) Amazon's market share of e-commerce activity is around 3.5%, while its share of incremental e-commerce activity is around 7.0%, so over time its portion of an expanding market may effectively double.

2) Excluding automobiles, Amazon's GMV per customer is around half of eBay's, despite an arguably higher income customer mix; firm believes that Prime narrows this gap by encouraging Amazon customers to shop cross-category.

3) The Kindle digital reader should sustain growth in Amazon's most mature category, books.

Trading at around 20X 2009E free cash flow, Goldman believes Amazon stock can outperform on rising revenue if margins are only flat; rapid revenue growth assists free cash flow because Amazon uses its improving category share to negotiate longer payables to suppliers in categories such as books.

Reits Buy and 6-month tgt of $98.

Notablecalls: So Goldman is calling for AMZN to speedily double its revenues. It's a buy! Worth at least 1-1.5 pts of upside.

Monday, June 16, 2008

Apple (NASDAQ:AAPL): Expect massive iPhone Q4/F08 shipments - RBC

Couple of firms are out with positive comments on Apple (NASDAQ:AAPL):

- RBC Capital says they expect massive iPhone Q4/F08 shipments of 5.1M, up 356% Y/Y, 629% Q/Q (including est. 1.5M unit sell in to 22 countries) and 6.5M Q1/F09, up 181% Y/Y (sellthrough, channel fill to 70 countries). Q3 iPhone expected 700k (no revenue) and Q4/Q1 iPhone rev/EPS expected at $700M/$0.10 EPS and $1.1B/$0.15 (24 mo acctng).

Rising Investor Sentiment Expected. Along with rising street iPhone estimates, the firm expects Q4/Q1 iPhone results to boost investor sentiment over rising visibility to Apple's global iPhone dominance and market share. They continue to forecast 14M iPhones CY08 rising to 24M CY09, with iPhone's TAM (Total Addressable Market) handset share expected to rise from 0.3% CY07 to 1.7% CY09.

Near-term valuation pressures are expected to dissipate, as investors recalibrate around global iPhone market share gains and EPS upside. Reits Outperform and $220 tgt.

- Morgan Stanley notes that based on their recent trip to Taiwan, they believe order cuts are now complete in the notebook market whereas downside risk remains for handsets and other consumer products. Firm expects to see a solid seasonal bump in notebook shipments as battery cell supply improves and Montevina availability stimulates new product introductions this summer. They believe AAPL (notebooks 25% of profits), DELL (20% ofprofits) and STX (15% of profits) are best positioned to capture this trend in 2H08.

Notablecalls: It looks like AAPL make a s-t bottom on Friday and will enjoy some buy interest in the near term.

Friday, June 13, 2008

Saks (NYSE:SKS): Increased confidence in takeover - Citi

Citigroup is out positive on Saks (NYSE:SKS) noting that as reported in Baugur's 13 D/A filing (6/11/08), Baugur has further consolidated and/or rolled over its previously disclosed forward contracts for SKS shares into new forward contracts maturing on 7/30/08. The consolidated forward contract prices now range from $12.1796 to $23.1078 per share. Firm views this news as an incremental positive for their investment thesis for SKS as it increases their confidence that there is a probability of a takeout deal in SKS's future.

Citi reiterates Buy rating and $20 target price for SKS.

Notablecalls: Baugur and Landmark (Dubai based retailing group) currently own about 10% of SKS' outstanding common. The price range in Baugur's case surely points to a healthy upside currently not appreciate by the market. I think SKS stock can move higher from here.

Thursday, June 12, 2008

Las Vegas Sands (NYSE:LVS): Actionable Call Alert!

- Deutsche Bank is out with a wonderful (and Actionable) call on Casino stocks noting the sector has been hit hard as of late, with large cap names such as LVS, MGM, and WYNN down 25% on average since oil prices spiked ~3.5 months ago. A confluence of factors has worked in concert to drive casino stocks lower primarily stemming from an inflection in oil prices (underscoring concerns about the cost of transport to casinos and spend per visit).

Firm's conclusion is that the market is seemingly over-discounting the risk, especially when looking at recent Vegas data, which is down less than anticipated (YTD gaming revs -2.6%).

The most battered of the three stocks they are examining today, LVS shares are down over 35% since March. DB had previously lowered their LVS Las Vegas 2009 EBITDA estimates, resulting in their consolidated EBITDA estimate down over 5%. With the stock down 35% and consolidated EBITDA estimate revised only 5%, could this mean the Street expects another negative revision of 30% to consolidated EBITDA estimates? If so, to achieve a 30% negative revision in their LVS consolidated EBITDA estimates, implicit Vegas EBITDA would need to be revised downward by nearly 100% for DB's conclusion to be that all of the weakness is attributable to oil-related issues (and of course it is not). This tells us that shares of LVS are seemingly well oversold.

April Las Vegas Strip gaming revenues were reported yesterday to be down 1.3%, or down about 2.6% on a YTD basis. Clearly, gaming revenue performance hasn't been as bad as the Street appears to be discounting. Further, based on channel checks and anecdotal evidence, Deutsche thinks gaming revenues could inflect positively in May (helped by hold), rather than continuing a negative trend as seen YTD. Again, while backward looking, they would view this as incremental evidence that the Street has oversold shares of the aforementioned gaming stocks and that a series of positive economic / oil / Vegas news could lead to a sharp rally, most notably in LVS followed by MGM and WYNN.

Notablecalls: I'm calling this one Short Term Actionable as I think LVS will bounce significantly from current oversold levels. The stock has become a household short of late and Deutsche's comments will put some fire under this one.

I note DB has never been the biggest bull in town when it comes to Casinos & I think other (more bullish) firms will follow.

I see LVS trading up 2-3 pts on this call. Some of the bounce will surely occur today.

Wednesday, June 11, 2008

State Street (NYSE:STT): Added to Conviction Buy List at Goldman Sachs

Goldman Sachs is adding State Street (NYSE:STT) to their Conviction Buy list this morning as:

1) tangible common equity may exceed 5% at the end of 2Q, which will go a long way to reassuring investors that State Street has enough capital.

2) 2Q earnings are likely to be in line to better than expected which will look good on an absolute basis and great on a relative basis compared to the rest of the banks and brokers.

3) valuation is compelling at just 13.3X GSCO's 2008E and 12.6X 2009E versus a historical range of 15X-20X; simply getting back to the low end on 2009E would represent 20% upside. Firm's 12- month target is $83, which would imply a 2009 P/E of 15.4X.

Capital has clearly been the biggest concern at State Street and Goldman believes 2Q results in mid-July will go a long way toward reassuring investors. In their previous note on STT, they noted that the company’s capital raise brought pro-forma tangible common equity to 4.6%. This is as of 1Q-end, and does not include the green shoe which was exercised. Adding in another quarter of retained earnings (40bp), and the green shoe (15bp), the ratio should rise to 5.15%. They believe unrealized losses have been relatively stable in 2Q to date while 2Q earnings should be buffered by big securities lending results. Consequently, the firm has raised their 2Q estimate slightly to $1.34 and on 2008 estimate to $5.15. 2009-2010 estimates are unchanged at $5.40 and $6.00.

Notablecalls: I know some pretty smart operators that have been buying STT in light of recent weakness. I think STT will be a $70+ stock today.

Tuesday, June 10, 2008

Focus Media (NASDAQ:FMCN): Actionable Call from Goldman Sachs

- Goldman Sachs is out with an Actionable Call on Focus Media (NASDAQ:FMCN) saying that in their view poor free cash flow generation has to some extent undermined P/E-based valuations for Focus stock, with investing cash outflows generally exceeding operating cash inflows since 4Q2006. Following a discussion with management, they believe 2Q2008 could be the first of several quarters of substantial free cash flow generation, as Focus has already made its 2008 payment for CGEN in 1Q2008 and as receivable days outstanding should improve due to seasonality.

Focus is trading at 29X 2009E free cash flow estimate and 13X 2010E, assuming lower earn-outs in 2010E. After reviewing Focus' treatment of amortization and stock based compensation (SBC), they raise GAAP earnings estimates by 33% for 2008E, 16% for 2009E, and 13% for 2010E, partly reversing excessive reductions they made post 1Q2008 results.

Goldman notes they are frustrated by Focus' recent accounting complexities (such as extra amortization) and guidance, but believe that in this specific instance of cutting guidance due to the earthquake after-effects, investors have penalized Focus for foregone revenue of $40 mn by reducing its market capitalization by close to $1 bn.

Reits Buy and $58 tgt saying they believe a quarter of positive free cash flow and the prospect of more to follow should calm market concerns about Focus' accounting and ability to grow organically.

Notablecalls: What can I say, this is an Actionable Call from Goldman Sachs. The stock got trashed despite several bullish defenses over the past couple of days but I think Goldman's Mitchell Haol will stop the fall. He went out and spoke to management, getting extra (actionable) details. That's what every analyst out there should be doing. Watch & learn!

I expect FMCN to trade higher today and in the coming days.

Monday, June 09, 2008

Sigma Designs (NASDAQ:SIGM): Sigma has lost one more tier-one Blu-ray customer - Baird

Baird is out with a very negative call on Sigma Designs (NASDAQ:SIGM) saying their recent checks indicate Sigma Designs has lost one more tier-one Blu-ray customer recently and has likely lost its top two customers in this segment, leading them to believe the company's market share of the Blu-ray DVD player market could be well below 50% by year-end.

Additionally, checks indicate continued weakness in digital TVs for Sigma, a segment which had previously looked promising for this year. Baird does not expect year-over-year growth for Sigma's digital TV revenues in the July quarter as a result. They believe weakness is predicated
on lack of a strong integrated deinterlacing solution.

Despite their expectation for Sigma Designs to ramp at France Telecom in the second half of this
year (which they estimate is a $20 million revenue opportunity), the firm would remain cautious on Sigma's near-term prospects.

Cutting estimates and reducing price target to $20 from $22. Reiterating Neutral rating on SIGM shares.

Notablecalls: I suspect SIGM is going to get whacked today. We may be near capitulation but I just don't see SIGM hitting consensus estimates. Consensus needs to come down big time (so will the stock).

Friday, June 06, 2008

Focus Media (NASDAQ:FMCN): Bounce?

Several firms are out in defense of Focus Media (NASDAQ:FMCN) this AM:

- Goldman Sachs notes Focus cut its 2008 non-GAAP net income guidance by 7% and they assume the stock may initially fall by a similar amount as investors debate whether the guidance revision was purely one-time or part of a broader picture of Focus' growth slowing in response to fewer and smaller acquisitions. However they believe the stock had traded down on market talk of the possibility of weak guidance over the past two weeks, which may limit further declines. GSCO lowers EPS estimates for 2008E/09E/10E by 45%/20%/17% to US$0.53/$1.78/$2.32.

Maintains Buy and lowers tgt to $58 from $66.

- Citigroup notes Focus lowered FY08 rev guidance by US$40m and profits by US$20m, attributing most of the cuts to effects of the Sichuan earthquakes. While it is, of course, understandable that Focus would be impacted, as indeed many Chinese companies have been, they feel the bigger issue, at least near-term, is that most investors expected, notwithstanding the earthquakes, for Focus to at least maintain its full year guidance. Some investors no doubt will be disappointed.

But consider this: 1) Focus slightly beat 1Q results, notwithstanding not being able to book US$11.3m of Mobile Adv revs in 1Q due to GAAP rules (if they could have booked the Mobile Adv revs, the 1Q beat would have been significant); and 2) 2Q guidance is for +20% QoQ growth after taking out US$20m for the earthquakes. But for the earthquakes, 2Q guidance would likely have been a very strong - +30-33% QoQ - well ahead of Street estimates. So, once again, we are left with a very strong (albeit temporarily impacted) fundamental business, but with a mismatch vis-a-vis Street expectations. Stock will likely trade down near-term off the missed expectations, but should ultimately trade off the fundamentals. Many investors will rightly be frustrated (as are they), but theynonetheless maintain their fundamental outlook, and hence, Buy rating ($80 tgt)

- Piper Jaffray says Focus Media reported a mixed quarter with strong top line performance from the Commercial and Framedia segments which was somewhat overshadowed by the perceived lower top line number and lower 2008 guidance. They would note that while total revenue came in slightly below their estimate, Focus Media only recognized $0.2M in revenue from the wireless business in Q1 compared with firm's expectation of $12.9M of wireless revenue in Q1. If the discontinued wireless revenues were included, total revs would have been $173M, 7% above their estimate.

While the $40M total impact in 2008 of the earthquake is larger than they anticipated, they believe the impact of the earthquake is a near term event and they continue to have a favorable long term outlook of the Chinese out-of-home advertising market. PJ highlights that the Commercial and Poster Frame networks each had very strong quarters in Q1. They believe the current valuation of 20x/15x 08/09 PF remains compelling. Maintains Buy rating and lowers PT from $68 to $63 (25x 2009 PF EPS) on lowered estimates.

Notablecalls: I think FMCN represents an interesting bounce candidate today.

Thursday, June 05, 2008

Research in Motion (NASDAQ:RIMM): Stock to see headwinds - Citigroup

Citigroup is out cautious on Research in Motion (NASDAQ:RIMM) this morning saying that while they expect strong results, the stock will likely see headwinds before the Apple Worldwide Developers Conference (June 9th through the 13th) as they expect the iPhone SDK to enter full commercial release and anticipate a financial and technology media love-fest for the iPhone around this event. Citi believes investors should use this anticipated weakness to either add to existing RIM positions or initiate new positions. RIM is expected to report May quarter results after the close on Wednesday, June 25th and they think the stock should see positive performance heading into the report.

Notablecalls: I expect RIMM to trade closer to the $130 level in the near term. Not sure there is any correlation but TIBCO's (NASDAQ:TIBX) warning from yesterday may be a sign the financial industry is paring back the expenses. Note that TIBX has large financial exposure. So does RIMM.

Apple's WDC serves merely as a trigger here.

Wednesday, June 04, 2008

Identifying a Bottom for Financials - Morgan Stanley

Morgan Stanley is out saying they have consistently argued that the problem for equities originated with the financials and that a sustained improvement in equity prices required, at the least, a stabilization in the performance of the financials. Firm's negative outlook on financials has been a key reason for their negative outlook on equities overall.

However, a combination of significant Fed action, a steepening in the yield curve, and substantial capital raising help limit downside risk from here. With the BKX index now back at cycle lows, the firm asks at what level they would turn more positive. From here, they believe the downside range for the BKX index is between 60 to 70 points.

A reading of 60 represents MSCO's most bearish case outcome. This would put the BKX index on a 12x P/E multiple on cyclically low earnings generated off a depressed ROE. This is not a level that they believe will be breached. On the other hand, 70 equates to the index trading down to book value. They think this is more realistic and is similar to previous periods when valuations have bottomed. This suggests that sub 70 on the BKX index, financials are probably a buy.


There are some more positive tidbits out there this AM:

- WSJ reporting Lehman (NYSE:LEH) was buying back shares yesterday. Do note there was desk chatter out there saying saying David Einhorn's fund was covering his Lehman short position.

- Kuwait Sovereign Wealth Fund KIA is quoted saying they are looking at investments into global financial industry. KIA is said to be examining bigger stakes in Citi (NYSE:C) and Merrill (NYSE:MER) "If there's a good opportunity"

- Wachovia is upgrading Morgan Stanley (NYSE:MS) to Outperform this AM.

Tuesday, June 03, 2008

XL Capital (NYSE:XL): SCA resolution could lead to significant upside to the stock - BofA

Banc of America is out with a strong call on XL Capital (NYSE:XL) saying a resolution to settle XL Capital's guaranties on the pre-IPO liabilities of SCA Capital could be looming and could lead to significant upside to the stock. Reits Buy and $67 tgt offering 100%+ upside.

In firm's view, the new XL Capital CEO Michael McGavick wants to leave the company's SCA issues behind him and focus on the core business. Thus, they believe that the two companies and regulators could be working diligently to provide SCA with much-needed capital, in exchange for extinguishing XL's guarantees on SCA's pre-IPO liabilities. The resolution of the pre-IPO guaranties would be a significant catalyst for the stock, but the question is at what cost?

Negative impacts from a potential settlement could be mitigated. In February 2009, XL Capital will receive $745 million in capital likely issued at $65 (or 11.5 million shares) from equity units issued a couple of years ago. Unless the resolution is significantly more costly than that, the EPS dilution and book value per share impact of any settlement or capital raised could be significantly less than expected.

XL currently trades at a trough multiple of 0.6x book value per share. BofA believes XL's ultimate losses related to its exposure to SCA will be significantly less than market expectations. XL remains high reward/high risk pick. Reits Buy and $67 tgt.

Notablecalls: I expect to see 3-5% of upside in XL stock today.

Research In Motion (NASDAQ:RIMM): Goldman Sachs incrementally more cautious

Goldman Sachs is raising their tgt on Research in Motion (NASDAQ:RIMM) to $163 from $148 but there are actually some cautious tones in the note.

They are incrementally more cautious into the FY1Q earnings rpt, expect august qtr guidance to be slightly below consensus expectations.

Notablecalls: While RIMM is trading up in the pre mkt in reaction to reporting the call as positive, it's actually a short here.

Monday, June 02, 2008

First Marblehead (NYSE:FMD): Actionable Call alert!

FMD: Kaufman is out with a major call on First Marblehead (NYSE:FMD), UNCL & SLM saying that while the securitization market for most asset-backed securities has been dead for some time in response to credit concerns they believe it is beginning to open up a bit, as longer-term investors, including insurance companies and banks, search for longer duration, higher yields than those available in the Treasury markets. These higher yields, in turn, are attracting buyers back to this segment of the ABS market because it is longer duration paper at higher yields.

Notablecalls: FMD is still trading below the levels it reached following the FBR upgrade last week. The tone of Kaufman's call is surprisingly positive and I expect the stock to produce a nice upside move in the very n-t, possibly surpassing the $3.99 high from last week.

Actionable Call.

AMAG Pharma (NASDAQ:AMAG): Actionable Call Alert!

- Jefferies is with a big call on AMAG Pharma (NASDAQ:AMAG) saying they insights provided by 2 key nephrology consultants, they feel confident that: 1) the FDA does not require chronic dosing studies for approval of new IV irons; and 2) ferumoxytol is well positioned for first-pass approval. Recent sell-off has created a buying opportunity. Reit Buy and $99 PT.

Consultant #1 met with FDA just 5 weeks ago to solicit advice on the appropriate clinical development program for a new IV iron. Importantly, he met with members of the division of Hematology and Medical Imaging, the same division currently reviewing the ferumoxytol NDA (PDUFA is October 19th). According to the consultant, the FDA reiterated its long-standing historical position that chronic exposure studies are not required for approval of IV irons. The FDA continues to view IV iron as a "repletion therapy for a deficiency state," which only requires a short course of treatment, and not as a long-term chronic therapy in the traditional sense.

Consultant #2 attended two meetings between AMAG and FDA to get advice on the design of the ferumoxytol clinical trial program. Our consultant noted that the FDA guidance provided to AMAG was "crystal clear," with "no room for misinterpretation." Firm continues to believe AMAG carefully followed the advice provided by the FDA.

Both consultants called speculation that AMAG will need to do additional long-term ferumoxytol studies "overblown." Both also predicted first-pass approval for both dialysis and non-dialysis CKD.

Notablecalls: I'm going to call this one Actionable here. The main problem in AMAG is tied to fears the FDA will ask for more data (meaning more trials & longer time-to-market) on its ferumoxytol drug.

Now, Jeffco is out with a call (backed by two consultants w/ at least one having first-hand experience w/ the FDA regarding this matter) saying the FDA will likely not ask for any more data.

AMAG stock has been doing the dying swan act (see Lord Tennyson) for quite some time. The chart looks good for a bounce and I would not be surprised to see the stock hit $42 as soon as today. It's certainly ready to squeeze some bear crotch.

Mastercard (NYSE:MA): SunTrust ups 2008/2009 EPS to new Street High

SunTrust is out with a nice call on Mastercard (NYSE:MA) raising their 2008 and 2009 EPS estimates to the Street high. While the proximate cause of their more aggressive view is the company's higher long-term EPS growth guidance, issued at last week?s investor day, it is some of the more nascent growth opportunities cited and the discussion of relatively strong non-US volume growth which augment firm's confidence.

Firm is raising their price target from $350 to $390 and are again moving 2008 and 2009 EPS estimates to the Street high. New 2008 and 2009 EPS estimates are $8.94 and $12.17, respectively, compared with prior 2008 and 2009 EPS estimates of $8.68 and $11.08.

MasterCard seems ideally positioned to continue capitalizing on the global secular shift to electronic payments. While they believe this is well understood, the power of this growth driver is only now coming into focus as the company enjoys above-trendline volume growth despite deceleration in the US, its largest single market.

They are also encouraged by management's goal of 300-500 basis points of annual operating margin improvement. It is their opinion that MasterCard will outperform this target over the next few years as it scales its processing infrastructure and rationalizes is operating expenses. Even longer term operating leverage of this magnitude suggests sustainable EPS growth of at least 20%, making MA one of the best growth names in firm's universe.

Notablecalls: SunTrust's pretty much the axe in both MA & V. They have been ahead of the pack for quite some time and it seems they are doing it again. With the stock technically so strong I would expect ample upside today. Be early and be agressive.

I feel for the shorts. Truly do. MA has been a short buster lately.

Note that SunTrust's $390 tgt is also the new Street high.

Solar may be under attack again today

Solar may be under attack again today... Bloomberg reporting First Solar (NASDAQ FSLR) 2nd man warned sales could slow... Chinese poly wafer producers LDK and SOL downgraded. It is noteworthy that Morgan Stanley underwrote LDK's convert offering and upgraded LDK at the same time. MS seems to come clean finally that LDK is not a buy.

Time to short FSLR too... I've noticed that Ahearn sold nearly 1/2 of his position since it started to trade in the high $200s. How could that not be bearish for the stock when the firm's founder dumps his shares like thin film is going out of fashion.

I believe smart money will rotate out of solar/wind into healthcare (down about 50% YTD).

Btw, oil is down as I suspected... Time to short oil big time... Net long positions fell by nearly 80% since june 2007... hedge funds are reportedly pulling out their investment as the gov't is getting ready to crack down on speculators.

Notablecalls: These comments coming from a close Solar watcher