Friday, November 28, 2008

Bank of America (NYSE:BAC): UBS lowers tgt to $15.50

UBS is out somewhat negative on Bank of America (NYSE:BAC) noting that they recently lowered target prices for many of our bank stocks (with BAC one of the few left unchanged). The lowering of BAC target price to $15.50 from $29 today reflects: 1) Firm's outlook for tighter credit availability, which will likely lead to higher credit losses for banks in general in 09 (incl at BAC); 2) Greater uncertainty over the near-term prospects of the MER deal—reflecting both concern over further writedowns at MER and downside bias to MER’s EPS power; and 3) risk of additional writedowns at BAC given recent widening of credit spreads (even after yesterday’s tightening)

Lower credit availability likely to lead to higher losses in 2009

In BAC's view, credit availability will likely remain tight into 2009 as banks focus on maintaining sufficient capital and liquidity levels given the current difficult operating environment. This will likely put further pressure on both consumers and commercial borrowers, leading to higher credit losses in 2009.

Concern over lower earnings power at combined BAC/MER

They think there is risk to MER’s earnings power given continued pressure on MER’s capital markets related businesses. Also, we think further writedowns at both MER and BAC are possible given recent widening of credit spreads.

$15 price target assumes 1.1x pro forma BAC/MER tangible common book per share estimate of $13.25

Notablecalls: Would have been all over this one 3 months ago. Today...not sure. So you know it's out there. Could very well be the Street low tgt for BAC.

Tuesday, November 25, 2008

Legg Mason (NYSE:LM): Downgraded to Underperform, $7 tgt at FBR (Actionable Call Alert)

Friedman is out with a pretty major downgrade on Legg Mason (NYSE:LM) to Underperform, while lowering their tgt to $7 from $11.

Firm notes they are increasingly concerned about the company's $3.9 billion of non-bank SIV exposure, as the expiration of support agreements begins as early as this month and asset values remain under pressure. This is especially concerning with regard to their operating estimates, which suggest that the company is on track to trip certain debt covenants, adding additional liquidity risk. While the firm believes there are several scenarios under which the company can avoid a complete liquidity crisis, they view LM shares as overvalued relative to peers, given its leveraged balance sheet and falling EBITDA, which create additional risks to shareholders' equity.

Compounding the liquidity problems caused by the SIVs are Legg Mason's debt covenants, which restrict Legg's ability to access additional borrowings and stipulate a required debt/EBITDA ratio below 2.5x. Given the falling assets under management, FBR believes the company is on a run-rate to exceed the 2.5x leverage ratio (based on a trailing 12-month basis), which would require the repayment of a $500 million revolver and $550 million term loan.

Adjusting for the impact of recent market performance an expectation of accelerating investor outflows from equity and bond funds, FBR is lowering their FY09 and FY10 earnings estimates, which do not reflect any additional SIV charges, by $0.05 and $0.19 to $0.04 and $2.46, respectively. More importantly, they estimate that, by the end of the December quarter, trailing 12-month EBITDA will be approximately $976 million, which, depending on the expected value of contingent payments to Permal, could potentially result in noncompliance with the 2.5x leverage covenant.

Notablecalls: This one reads badly for Legg Mason (NYSE:LM). It seems the co has very little in terms of positives on the horizon. Au contraire, there seems to be lots of bad news in store for them:

- Performance is going to deteriorate. Pressure on EPS.

- I suspect we're going to see Bill Miller leave (outsted) the co. The news could come as soon as this year.

- Covenant issues - the killer.

I feel this one will be a sub-$10 stock in the very near future.

Going to call this one an ACTIONABLE SHORT.

Google (NASDAQ:GOOG): Analyst chatter this AM

Seeing lots of positive/defensive commentary on Google (NASDAQ:GOOG) this morning:

Barclays says sell-off overdone. Still thinks GOOG consensus # are too high for 4Q08 (+5.2% Q/Q net revs) & 2009 ($22.25 PF EPS), but stock clearly anticipating much lower numbers. And there are some early signs from SEMs that conversion rates & search spending have picked up a bit over the last couple weeks.

Piper Jaffray reits Buy and $600 tgt saying October, total query volume on Google grew 7.4% m/m, which has been the strongest sequential showing since March

MLCO reits Buy and $468 tgt.

Google to cut contract workers - WSJ (this was rumored yesterday..probably main reason why it underperformed the mkt..also people were anticipating worse comScore data..which ended up being not that bad) - FYI Only

Thursday, November 20, 2008

Lincoln National (NYSE:LNC): Encouraging comments from Barclays - Bounce?

Barclays has some interesting comments on Lincoln National (NYSE:LNC) following yesterday's investor-day presentation. Note the stock was down over 40% yesterday - yet, Barclays' comments seem pretty encouraging. Firm reits their Overweight rating and whopping $60 tgt on the name.

Firm notes they like Lincoln, despite the drop in its stock price: It’s being direct and blunt with investors.

Their view, in short, is that Lincoln’s public-relations strategy – and that is exactly what it is and needs to be, a public-relations strategy – is both apparent and intelligent. It is to be the first insurer to report on the negative impact of fourth-quarter developments on the theory, presumably, that the company that reports bad news early will suffer less of a hit to its stock
price over the long run than the company that drags out the process. More than being about first, however, the strategy seems to be out laying out the facts about Lincoln as comprehensively and with the least possible positive varnish that Lincoln can use. Management’s thinking would appear to be that if Lincoln focuses on the right issues (capital, liquidity and investments), sticks to the facts and doesn’t try to sugarcoat the problem or somehow try to persuade investors that there isn’t
a problem, that Lincoln will end up far better off than if Lincoln were to try to divert investors’ attention.

Barclays couldn’t agree more with this strategy: Being straight up with investors is absolutely the best strategy, in firm's view, even if over the short term it is costing Lincoln further reductions in its stock price. In fact, they’d say that while lots of what Fred Crawford, Lincoln’s CFO, and other senior financial executives at Lincoln, had to say yesterday was new, none of it should have come as a surprise.

Make no mistake: Lincoln is sailing through a bad, bad storm. But it is the same storm that others are smack in the middle of too. Firm believes the fact that Lincoln is addressing head on and in technical detail how it plans to handle the swells should be commended. Indeed it is precisely because Lincoln has acknowledged the issues and is talking to the world about how it is managing through them that leaves them thinking it will be among the survivors.

Notablecalls: Sounds pretty encouraging. I suspect we will get a bounce in the names (LNC, HIG, PRU, MET) today as a lot of the bad news has been discounted here. Rhymes with my market call.

Citigroup (NYSE:C): Saudi Prince Alwaleed plans to boost Citi stake back to 5% - DJ

- he is saying they have raised 50B in private capital.

Notablecalls: This is huge news for C and the whole market. Remember what happened the last time Alwaleed bought Citi?

Wednesday, November 19, 2008

Research in Motion (NASDAQ:RIMM): Added to Conviction Buy List at Goldman Sachs

Goldman Sachs is adding Research in Motion (NASDAQ:RIMM) to Conviction Buy List with a $68 tgt, representing 44% upside.

RIMM is down 62% in the last 3 months compared to 51% for firm's coverage median and 32% for the S&P 500, on concerns of slowing demand and margin compression as a result of competitive offerings from Apple and others.

Goldman believes that following its sharp pullback, the stock already prices in the risk that FY10 (Feb) Street estimates will come down further, and they remain 20% below consensus at $3.62 vs. the Street at $4.55, reflecting just 4% YoY growth. However, with the stock trading at 13X below-consensus estimate, compared to the S&P500 at 11X and coverage median of 16X, they see the valuation as compelling, as they think RIM can grow its earnings in the high teens going forward past 2009 due to its increasing market share in the rapidly growing smartphone market. Firm sees 44% upside to their 12-month price target of $68, based on 19X P/E.

The catalyst?

Goldman thinks RIM will reach the low end of its F3Q (Nov) guidance for four reasons. First, as noted in their 11/16/08 report, checks reveal that sales of its recently introduced Bold device are off to a good start. Second, the fact that the launches of both the Bold and the upcoming (on Nov. 21) Storm fall within F3Q suggest reduced risk to numbers given the need to fill the channel. Third, despite acute investor concerns over the impact on RIM’s business from the market turmoil, our IT Survey taken in mid-October showed a relatively mild deterioration in US enterprise demand; for context, the financial services vertical drives around 12% of RIM’s sales. Fourth, firm's estimate of more than 500bps margin compression over five quarters may prove conservative due to 1) a stronger US$ which helps from an opex and component perspective, and 2) a possible slowdown in hiring and marketing spending in response to the deteriorating macro.

Notablecalls: Well, RIMM will trade up from here. The call is also a clear sentiment positive for the whole market. Think the stock can challenge the $50 level on this call.

PS: Spoke to a tier-1 trader this AM who said SP will hit 900 soon.

Monday, November 17, 2008

United Therapeutics (NASDAQ:UTHR) : JP Morgan defending

JP Morgan is out defending United Therapeutics (NASDAQ:UTHR) after the phase III FREEDOM-C trial did not meet the primary endpoint of improvement in exercise capacity, as measured by the 6 minute walk distance (6MWD) in PAH patients receiving oral Remodulin in combination with Tracleer or Revatio over those receiving Tracleer/Revatio alone.

Firm recalls that the FREEDOM-C protocol was amended to allow dose titration with smaller steps through the introduction of 0.5mg and 0.25mg doses, it is possible that together with a positive FREEDOM-M trial (which has a lower bar of needing to beat only placebo) and the new FREEDOM-DR study with all patients having a easier dose titration, oral Remodulin could still achieve regulatory and commercial success. United’s conf call is at 9 am (800 603 1777 US) and JPM is hosting a conference call today at 11am ET with Dr. Jeremy Feldman, KOL and FREEDOM-C investigator to discuss the implications of the results (dial in forthcoming). Firm maintains their Overweight rating and believes that IV/SQ and inhaled Remodulin support a valuation > $70-75/sh and based on today’s FREEDOM-C results, they still believe that oral Remodulin has a path to market.

FREEDOM-M looks more likely to succeed. Improving the standard of care (FREEDOM-C) is a much more difficult clinical achievement than merely showing activity against placebo. The growth opportunity for the Remodulin franchise is likely as oral monotherapy in Class 2-3 patients; hence JPM believes the 6MWD improvement in the FREEDOM-M trial is an important dataset.

They believe oral Remodulin could ultimately double the size of the PAH opportunity for United.

Notablecalls: UTHR looks interesting as a bounce candidate. Very fast moving stock so adjust your risk accordingly. Havent heard from other firms yet. - FYI

PS: Deutsche now out with a dg to Hold from Buy, $70 tgt.

PPS: Barclays out defending, reits Buy and $137 tgt.

Friday, November 14, 2008

Atlas Pipeline Holdings (NYSE:AHD): Rating lowered to Sell, $4 tgt - Citigroup

Citigoup is out with a pretty powerful negative call on Atlas Pipeline Holdings (NYSE:AHD) downgrading the shares to Sell from Hold while lowering tgt to $4.

Firm notes Atlas Pipeline Partners, L.P. (NYSE:APL) has debt covenants that call for maintaining a Debt/EBITDA ratio of no more than 5.25x and EBITDA/Interest coverage of no less than 2.75x. In view of continued weakness in commodity prices and current debt levels ($1.4 billion net debt), APL could potentially be in violation of its covenants as early as Q1:09. Firm is lowering their target price on APL to $9.00 from $14.50.

Impact on AHD Amplified — As with other general partners, changes at APL will be amplified at Atlas Pipeline Holdings, L.P. (AHD). A reduction in distributions to the minimum level would effectively eliminate all IDR cash flows that AHD currently receives (~$36 million annualized). Unless APL engages in combination with AHD, distributions at AHD may have to be lowered to ~$0.16/unit.

Amplified Effect on AHD: While the situation at APL appears dire, the situation at the general partner Atlas Pipeline Holdings, L.P. (AHD) could be even worse. General partners such as AHD do not have any operations of their own and their primary asset comprises of incentive distribution rights (IDRs) in the MLP that allows the general partner to collect an increasing percentage of the cash flows as distributions at the MLP increase. This leverage works both ways. A distribution cut at the MLP will have a much larger impact at the general partner. Therefore should APL cut distributions to the minimum level as Citi is anticipating, distributions at AHD may have to be cut by over 90% to ~$0.16/unit as AHD will no longer receive IDR payments which are currently running at ~$36 million annually.

Notablecalls: Citi's call sounds pretty much like a death sentence for AHD (and of course APL). I would not be surprised to se AHD down $1+ on this call.

Genworth Financial (NYSE:GNW): This is good news for GNW, Reit Buy, $16 tgt - UBS

UBS has some interesting positive comments on Genworth Financial (NYSE:GNW) after the co announced it borrowed $930M of its $1.7B available credit facilities to repay $1.1B of senior notes maturing in 2Q09—after which GNW has no long-term debt maturing until 2011. According to UBS, GNW may be able to purchase a significant amount of this debt in the open market at a discount to par. Liquidity also appears sufficient at life and mortgage insurance operating company levels.

Capital seems adequate for double-A S&P/AM Best ratings in near-term
GNW reported a 3Q08 RBC ratio of 360% (levels typically consistent w/ double-A ratings). In 4Q08, it freed $115M in capital and was working on another $500M in capital-relief efforts (half internal). If credit losses are similar to 3Q08’s $(321)M, the firm thinks GNW may avert further downgrades through at least another quarter.

Asset sales—if possible—would help GNW’s capital and liquidity position
GNW could reinsure run-off blocks of life insurance and annuities; divest of some or all of its international businesses (including lifestyle protection and mortgage insurance); or sell its smaller wealth mgmt businesses. However, buyer demand for these assets could be light. Most insurers appear capital constrained at this time.

Valuation: Adjusted 4Q08E BVPS
UBS $16 PT assumes ~(30)% discount to GNW’s 4Q08E BVPS (which factors in quarter-to-date fair value declines in its investment portfolio) to reflect the possibility of a book value dilutive capital raise.

This is good news for GNW—since some observers suggested that the credit facility would not be accessible, as was the case for AIG when it tried to draw on its bank credit lines on September 15. Even after the good news, some suggested that this appears to be a desperate move for an investment-grade rated company. But, make no mistake, these are unprecedented times. And, GNW is
doing the right things to protect its liquidity.

Notablecalls: I have a bet going on since yesterday - GNW will surpass the $2 level today or I will be making 30 push-ups.

I don't plan to lose that bet.

GNW has $3.8 bln in cash - sufficient to fund $3.7 billion in GIC and funding agreements that may be
coming due in the next 12 months.

The stock is still trading like a Chap-11 candidate, yet the news from yesterday pretty much migitated these concerns.

I suspect GNW will trade above the $2 level today.

Thursday, November 13, 2008

Bring it on, Rally Monkey!

I suspect now is the time to bring out the....


Was watching Bloomie TV last night as commentators went ga-ga over the 'terrible and way unexpected' warning from Intel (NASAQ:INTC).

The stock is down around 6% this morning.

They didn't say anything we didn't already hear from Best Buy (NYSE:BBY) yesterday. Demand has fallen off the cliff and inventory levels have grown. Notice how BBY bounced?

It was only matter of time when the Wall St. induced crisis hit the Main Street. It's here and the stocks have already discounted it.

Paulson put out the open flames at fin. institutions and is now moving on to support the consumer. While the markets yesterday took this as a negative signal, I do believe this is really the prudent step. You can't support the whole system from one end alone.

Oh and, btw - Goldman's Conviction Sell for Dell (NASDAQ:DELL) is just silly. This thing has $2 in EPS power in better times.

Bring it on, Rally Monkey!

Wednesday, November 12, 2008

Wyeth (NYSE:WYE) : Added to Conviction Buy List at Goldman Sachs

Goldman Sachs is adding Wyeth (NYSE:WYE) to their Conviction Buy list on the significant gap between the current share price and break-up value of $50.

Wyeth’s strength in biologicals and vaccines and the lack of extreme patent exposure make it one of the most attractive fundamental stories in Pharma. These assets are underappreciated due to the overhang of WYE’s core Pharma business. Recent biotech price-tags reflect the industry’s willingness to pay a premium for these assets. Management has recently signaled a commitment to its growth assets, de-emphasizing primary care research. Firm's 12-month price target is $46, yielding 39% potential upside.

Notablecalls: These things tend to move.

Las Vegas Sands (NYSE:LVS): LVS raises dilutive capital but eases balance sheet strain - Goldman Sachs

Goldman Sachs is out positive on Las Vegas Sands (NYSE:LVS) after the co announced an additional capital raise of $2.1bn.

Firm is maintaining their Buy rating on the shares but acknowledge that it will take time for full value to be realized and in the near term exogenous factors (visa restrictions loosened in Macau/broader global macro travel environment) and non core factors (condo sales in Macau) will drive operating results and share performance. The reason they are maintaining their constructive view is that at this point much of the bad news is in the stock and there is significant “option” value if trends recover and future growth opportunities (additional development in Macau) rematerialize.

Goldman is lowering their 12-month price target (based on sum-of-the-parts) to $9.50 from $25 based on lower estimates and to take into account the dilution from the capital raise.

Notablecalls: I suspect the stock is ready for a bounce here. It broke the $5.50 pricing yesterday in a hurry but given the fact they have avoided insolvency at least for the time being, big money operators will be looking to shake out the shorts.

PS: Note Jefferies is also out in defense of LVS saying they still believe in the co. LVS. The capital raise keeps LVS solvent in the near-term, and the long-term value is substantial with company forecasted 3.0x leverage in '12 (EBITDA $3.5bb). Firm's new target comes to $19 vs. $44, to reflect the dilution from yesterday's securities issuance and significant model revisions.

Tuesday, November 11, 2008 (NASDAQ:PCLN): Estimates cut below consensus at Morgan Stanley

Morgan Stanley is out rather cautious on (NASDAQ:PCLN) taking their estimates way down.

Firm notes they would remain on the sidelines as global economic conditions deteriorate. The consumer spending slowdown, higher gas prices over the past year, the hassle factor for flying, airline capacity cuts, airline price increases and possible airline consolidation, and the reversal of foreign exchange benefits may weigh on results for the foreseeable future. Their updated model trims estimates to reflect these macro forces. Morgan maintains Equal-weight rating and is removing their price target given the lack of visibility.

Priceline beat expectations across the board, demonstrating its ability to take market share as the value brand in a weakening global economy. PCLN’s share of gross bookings hit 20% among the major online providers vs. 15% a year ago. Management referred to global economic conditions that deteriorated near quarter’s end, however, and international weakness that became particularly pronounced in late September and October, caused in part by FX. As such, the company warned of greater variability ahead for financial results given “the velocity of economic change.”

For 4Q08, firm's gross bookings estimate drops to $1.3 billion from $1.7 billion on the weak travel environment. Their revenue estimate drops to $375 million from $440 million million, and EPS estimate to $0.59 from $0.89.

For 2009, revenue estimate drops to $1.9 billion from $2.3 billion, and our EPS estimate to $3.88 from $4.89.

Notablecalls: Compare MSCO's estimates to consensus and you will see the firm now stands way below. I suspect PCLN will get hit today on this and the fact MSCO has removed their price tgt on the name. This means they no idea how to value the co.

Monday, November 10, 2008

General Motors (NYSE:GM): Deutsche cuts to Sell, $0 (zero) price tgt

Deutsche Bank is out with a major call on General Motors (NYSE:GM) downgrading the shares to Sell from Hold, lowering tgt to $0 from $4.

At this point, without external government intervention, their work shows GM may not be able to fund its U.S. operations beyond December. Even if GM’s suppliers do not change the company’s commercial payment terms, GM’s U.S. cash position will likely decline to less than $5 bn by late December, and the firm believes that this level could be overwhelmed by payables coming due in early January.

A government bailout not likely to help shares; lowering GM to Sell (PT zero)
Even if GM succeeds in averting a bankruptcy, Deutsche believes that the company’s future path is likely to be bankruptcy-like. They believe that the U.S. may ultimately need to provide GM with at least $10 bn in loans to keep the company afloat through 2009/2010, and potentially as much as $25 bn to fund GM’s cash burn and restructuring. While they believe that that GM’s secured creditors may get a par recovery, unsecured creditors may get very low recovery. Equity shareholders are unlikely to get anything. Firm is lowering their target on GM equity to $0.

Notablecalls: $4 level will be broken today. If you can find shares to short, GM is prolly headed toward $2.5 in the n-t. It's THAT bad. End of an era.

Las Vegas Sands (NYSE:LVS): Tug of War

There will be a tug of war today in Las Vegas Sands (NYSE:LVS) as two pieces of news are out:

- Merrill Lynch is downgrading the stock to Underperform from Neutral while lowering their tgt to $7 from $15. LVS needs to raise capital to cure US covenants, which it expects to violate in 4Q, and to fund growth projects. In base case scenario – building only Cotai sites 5/6, Singapore, Four Seasons condos and a reduced PA casino – Merrill estimates LVS needs to raise $2.75bn ($750mn to maintain covenant compliance, $2bn to fund growth). Their $7 PO assumes a common equity offering at $5.62, a 20% discount to the 11/7/08 close.

Capital raise, growth pipeline curtailment necessary
Firm estimates LVS will need to raise $750mn to $3.5bn in the form of convertible bonds, common/preferred equity, PIPE, or subordinated debt. This range encompasses sufficient capital to maintain US covenant compliance and: 1) fund its full growth pipeline, 2) proceed only with Cotai Sites 5/6, Singapore, the FS condos, and a scaled down PA casino, or 3) cancel all projects. See pages 4, 5, and 6.

Covenant issue, not a maturity issue, but default risk high
If LVS fails to raise sufficient capital to regain covenant compliance, it would need to seek amendments/waivers to its US credit agreement. If LVS were unable to secure amendments/waivers, its US subsidiaries would be unable to draw down on any available borrowings and it would be in default on its US facilities, airplane financings, convertible senior notes and senior notes. In a worst case scenario, there is a risk of bankruptcy.

- On the other hand NYT Dealbook is out with the following:

Casino giant Las Vegas Sands will detail its plans to handle its debt crisis early next week, according to a person close to the company, a development that may ease bankruptcy worries and could include another capital infusion by billionaire founder Sheldon Adelson, The Associated Press reported, citing a person close to the company.

Notablecalls: I think MLCO is way late to the game here. Not saying LVS is a buy here but I suspect it's not going to be an easy short around the $7 level.

FYI - so you know its out there.

Friday, November 07, 2008

Wells Fargo (NYSE:WFC): Squeeze?

WFC: hearing two things:

- Barclays out saying S&P will have to buy 46.5 mill shares of wfc for a rebal today

- 75% of the 11b went to top 25 holders

Notablecalls: 46.5M shares is more than 10% of the offering size. 75% of the 11B going to big holders takes the flippers out of the equation.


Wells Fargo (NYSE:WFC): FBR reits Underperform, lowers tgt to $20

Friedman Billings Ramsey is reiterating their Underperform rating on Wells Fargo (NYSE:WFC) noting that following its $11 billion capital raise, WFC's tangible common equity to assets ratio is just 3.3%. Given this low level, and their expectation that WFC will have to come back to the market and raise more capital, they reduce their price target to $20 (from $25). Target equals to 2.0x 3Q08 tangible book value.

Why is tangible common equity important? It is the most important measure of a company's capital, as it is in a first loss position, and is a significant driver of a company's share price. If common equity is reduced by losses, book value shrinks and a stock will trade lower, regardless how much preferred equity is outstanding. FBR considers 3.3% tangible equity to assets a level of considerable leverage, particularly when faced with deteriorating credit quality, merger integration risk, economic weakness, and increased regulatory scrutiny. They also reduce 2009 operating EPS estimate to $1.70 (from $2.15), which largely reflects higher provision expense, based on WFC's guidance for approximately one-third of expected losses on Wachovia's loans to occur after the transaction closes. Firm initiates a 2010 operating EPS estimate of $2.65. Wells Fargo is clearly among the best depository franchises in the nation, and its position is only bolstered by its acquisition of Wachovia. While the acquisition makes strategic sense over the long run, they can't get comfortable with its near-term capital position or the shares' premium valuation.

Notablecalls: So now FBR slaps a $20 tgt on WFC. Can the shorts in WFC really have it this easy? I mean everyone was short the name yesterday in anticipation of a low pricing.

I don't think the shorts will wiggle out of this that easy.


Thursday, November 06, 2008

Notable Calls Network (NCN): Las Vegas Sands (NYSE:LVS)

We caught some nice moves in Las Vegas Sands (NYSE:LVS) on Notable Calls Network (NCN) today:

- Around 7:42 AM ET this morning a top NCN member pinged me with the following snippet from LVS' 8K filing:

'..If the capital raising program is unsuccessful and the Company does not have access to the available borrowings under the U.S. senior secured credit facility, the Company would need to immediately suspend portions, if not all, of its ongoing global development projects and consider other alternatives. These factors raise a substantial doubt about the Company's ability to continue as a going concern..'

Knowing how sensitive the the Casinos have become to negative credit comments, I immediately distributed the snipped to all available NCN members with an added comment - 'This could potentially kill the stock'

There was ample size to be had short above the $10 level.

The stock quickly started to decline in pre mkt trading as the news of the 8K filing spread among trading desks.

Les than 15 minutes later the stock was already trading sub-$9 level and then sub-$8 level 30 minutes later.

- Around 8:25 AM ET another very knowledgeable NCN member pinged me with the following:

'..LVS sounds horrible but being told this is standard language in the 8k for Sarbanes, and could see TIER 1 to defend big soon..'

The stock was trading around $8 (or lower) and was clearly starting to find some buyers. So I distributed the comment to other NCN members as fast as I could, adding only a 'FYI ONLY' to the comment , implying it would be a somewhat risky bet.

The comment did make some sense, so I felt a heads up was in order.

The stock continued to zig-zag around the $8 level (+/- $0.50) until open when indeed we got some defenses from tier-1 firms.

The stock shot up $1+ in the first 15 minutes of trading offering a nice exit for the brave ones who had taken some long in pre mkt.

- It didn't take long for the fear (and general market weakness) to set in. The stock got crushed again over the next hours breifly hitting the low of $6.5 around noon.

- Around 1:10 PM we got word that Jefferis & Co was out defending LVS:

'..Jeff out with strong defend on LVS - particularly attractive on the recent massive sell-off. Shorter-term, we remain confident as we expect additional funds to be raised soon and news allowing vacation..'

As you can see, around $1 worth of upside was up for taking on this call. Mind you, in my humble opinion, Jeffco has one of the worst track records in the space but the call did work (for some reason). Guess people tend to forget & forgive after all :)

This is how Notable Calls Network (NCN) works - sharing the flow. We catch them every day.

Not all calls are this good (we get many wrong as well) but NCN is for the pros. You decide which calls to take and which one's to leave.

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.

Wednesday, November 05, 2008

Auto Zone (NYSE:AZO): Downgraded to Underperform, $110 tgt at FBR

Friedman Billings Ramsey is out with a major downgrade on Auto Zone (NYSE:AZO) taking their rating to Underperform from Mkt Perform while lowering tgt to $110.

At a minimum, the firm does not think that AZO's stock price will be able to keep up with its peers, nor with the overall equity market. As with other retailers, sales have likely slowed for the sector since the end of AutoZone's fiscal year (August, 2008). When AZO had last reported, comp store sales were +0.6% and had been helped for that period by the tax stimulus. At Gabelli's after-market automotive conference yesterday in Las Vegas, the firm found most companies generally cautious about current sales trends. Therefore, they estimate that AZO's same-store sales are currently tracking at -2% for 1Q09E.

Separately, they are concerned that competitive pressures will accelerate for AZO, with AZO currently operating at hardline retail sector-high operating margins (EBIT) of 17.1% (LTM), which are up from 14.5% in 2002. Competitor O'Reilly Automotive (ORLY) vows to step up its investment in both inventory and price within its newly acquired CSK stores. This investment is also slated to take place in key markets for AZO (namely, the West Coast).

FBR has revised down their AZO earnings estimates;

Notablecalls: Talking to a especially well connected senior NCN member who thinks this one will kill the stock. He thinks a $10 haircut (towards $110-$112 level) may be in the cards here. - FYI

Southern Copper (NYSE:PCU): Downgraded to Sell, $10 tgt at Deutsche Bank

Deutsche Bank is out with a groovy downgrade on Southern Copper (NYSE:PCU) to Sell from Hold. According to the firm, the downgrade is based mainly on valuation and the stock's impressive rally - PCU has gained 70% in 6 trading days since hitting a low of US$9.84/share on October 27th compared with a gain of 18% for the S&P500 (and a 39% rally for competitor Freeport-McMoRan and a 14% move in LME copper prices). DB's Price Target of US$10/share continues to be based on 9x 2009E EPS of US$1.08 and, with PCU's stock at US$16.77/share, PCU trades at a rich 2009E PE of 15.5x, or ~2x the multiple of its peer group (7.3x).

Notablecalls: PCU has had a nice run since that Actionable call from Citigroup last week. I feel the stock needs a breather and DB's downgrade will bring just that. I see it coming back towards sub-$15 level in the n-t.

Microchip Tech (NASDAQ:MCHP) downgraded to Sell at Goldman Sachs

Goldman Sachs is out with a interesting downgrade to Sell on Microchip Tech (NASDAQ:MCHP) noting their checks indicate the market is starting to shift away from its core strengths, leading them to reevaluate the story. Firm says they have done extensive field work on the microcontroller market, prompted in part by Microchip’s proposal on October 2, 2008, to acquire Atmel’s MCU business. They have conducted more than a dozen meetings and calls with industry participants and contacts. They also spent two full days at the Embedded Systems conference in Boston on October 27-28, meeting with dozens of companies in the MCU ecosystem to garner insight into the state of the market. The slowdown in Microchip’s core growth and impact from increasing competition in MCUs is at the center of the downgrade to Sell from Neutral as well as a reduction in estimates and price target.

GSCO expects Microchip’s growth to be negatively affected by the following three points:

1) checks suggest an increasing pace of upgrades away from 8 bit to 16 and 32 bit, driven in part by ARM-based products;

2) Microchip is underexposed to fast-growing applications such as touch control and ultra low power;

3) Increasing competition, especially from large diversified companies (STM, TXN Freescale), which may lead to pricing and gross margin pressure in addition to slower growth. These factors, combined with what they view as an unwarranted 20% premium valuation in MCHP relative to its peers, lead the firm to a more negative stance on the stock. Firm adds that MCHP has outperformed the SOX by 20% in the past year and by 40% from the market low in 2002. They are lowering 6-month price target to $21 from $26.

Notablecalls: This is a pretty strong downgrade from Goldman. They went out and gathered new info. That's what every analyst should do. Goldman's tgt is way below current mkt price - I suspect the stock will get hit today.

How big of a hit?

Well, that depends on the market. If we are in a pull-back mode MCHP could see 7-8% downside today.

Tuesday, November 04, 2008

Nitrogen Expectations Reset, Upgrading AGU, CF and TRA to Buy - Citi

Citigroup is upgrading AGU, CF and TRA to Buys from Holds following the recent share price declines. Due to price volatility, their risk assessment is Speculative. While they lowered '09 estimates stand below consensus, which the market already views as too high, valuation on all three stocks seems attractive. Firm believes the majority of the fertilizer and corn price declines may be behind us and continue to prefer Top-Pick POT due to production discipline in potash.

Deep Recession Scenarios – While not base-case, Citi estimates that the '09 global grain stocks-to-use ratio could rise to 18.4% from 17.0% if corn use in ethanol remains flat YoY and could climb to 19.0% if feed demand also plateaus.

Stocks Discount $2.75 Corn – Revised '09 fertilizer price forecasts imply that the average retail cost to a US corn farmer would total $0.98 per bushel of corn grown, a historically high level, while the equities discount fertilizer cost falling to roughly $0.60/bu, which would be more consistent with a $2.75/bu corn price.

Ethanol Points to $4 Corn - Near-term, Citi sees corn prices continuing to track ethanol, since the marginal bushel of corn appears to be consumed in fuel production, with a high YTD correlation of 0.93. Firm estimates that ethanol plants can breakeven at $4.27/bu corn.

Cattle Points to $3 Corn - Longer term, the sustainability of $4/bu corn will depend on meat prices. Live cattle futures of $0.94/lb support $3.09/bu corn and they estimate cattle prices need to rise to $1.21/lb to support $4/bu corn.

Despite the strong bounce from the "bottom" over the past week, the North American fertilizer producers have still traded down by over 50% since nitrogen and phosphate prices began to decline in late September. While the equities never baked-in record spot prices and margins, the stocks suffered nonetheless, regardless of whether the company produces nitrogen, phosphate or potash, which have vastly different supply characteristics and margin structure.

Notablecalls: I really don't know how investors or traders should go about this call. Remember the morning Citi downgraded CF end of Sept? The stock took a 20pt+ dumper. Will we now see a 10-15pt rally in the name on heels of the upgrade? I just don't see it.

Give me some feedback.

Monday, November 03, 2008

Goldman Sachs (NYSE:GS): Ladenburg lowers to tgt $80 from $140

GS (SELL $80) NEW PRICE TARGET $80,, WAS $140..The problem in the short run is valuation. The company has as a policy the purchase of distressed assets. In the past this has proven to be a very successful strategy generating an estimated $10 billion in revenues. Today this strategy is falling under the new mark to market accounting rules. These rules are forcing write downs of the acquired assets and this may harm earnings.Additionally, the value of the Industrial and Commercial Bank of China holding may have been lowered by as much as 30%.

Notablecalls: Ladenburg's Dick Bove is among the Axes. Looks like GS is headed lower.

Goldman Sachs (NYSE:GS): Merrill Lynch calling for negative Q4 EPS

Merrill Lynch is out with a big slash on Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS):

GS 4QE (Nov) to -$0.49 from $2.98 and MS 4QE to $0.36 from $0.72. Key driver is terrible recent global equity market performance. Effect magnified at GS by significant exposure via prop, Pvt. Equity businesses, though equity rebound by 11/30 could change picture. Also, MS may have more comp. leverage given better 2H result, larger YTD accrual.

Trading volume surges on de-lev’g, but marks outweigh
Fixed Inc. trade volumes up sharply as de-leveraging triggered trading activity across Treasuries (+20%), MBS (+29%) Inv. Grade (+10%). But spreads gapped significantly from previous highs as credit markets seized in Sep: High Yield spreads +723bps and Inv. Grade spreads, +193bps QTD. Equity mkts have fallen sharply (S&P 500: -25%, NASDAQ: -27%), on very strong volumes (NYSE: +43%, NASDAQ: +22%).

Inv. Banking hurts as M&A weak; Debt U/W abysmal
M&A closings down 25% sequentially to $472bn, Anncts. also down following marquee deals last quarter (-18%). Annc’d/Completed ratio for 4Q is running 1.4x, indicating pick-up in backlogs. M&A fee backlog now $7.3bn, up 2.3% from 3Q end, but down 7.6% from last month, and off 21% from Oct-07. Equity U/W running down 43% QTD (-55% YoY), with Int’l driving weakness (-74% seq.). US up 52% on weak 3Q, though lucrative IPO business fell to zero QTD. Debt U/W extremely weak.

Goldman Sachs (NYSE:GS) price tgt is cut to $100 from $159. Morgan Stanley (NYSE:MS) tgt remains at $25.

Notablecalls: Phew, this is a BIG cut. One has to embrace the fact MER is calling for negative EPS in Q4 for GS. Yes, n e g a t i v e!

I see GS going below $90 level today.

Apple (NASDAQ:AAPL): iPhone production forecast is now under pressure- FBR

Friedman Billings Ramsey (FBR) is out with a very negative call on Apple's (NASDAQ:AAPL) iPhone demand:

Our most recent checks suggest to us Apple's iPhone production forecast is now under pressure. While our previous checks indicated that iPhone production would fall about 10% sequentially in calendar 4Q, our new checks indicate that iPhone production could fall more than 40% sequentially in 4Q. We believe asimilar amount of production was removed from the calendar 1Q build forecast, though there is still plenty of time to modify that forecast should further revisions be necessary ( - firm sees this neg for BRCM, MRVL, LLTC).

Notablecalls: Note that at the beginning of Oct Apple said iPhone builds remained healthy. Looks like iPhone demand has deteriorated over the past weeks. This is going to hurt AAPL.