Monday, August 22, 2011

Yingli Green Energy (NYSE:YGE): Tide turning? Avian & Piper upgrading

Yingli Green Energy (NYSE:YGE) is getting two upgrades from relatively smart operators this morning:

- Piper Jaffray is upgrading YGE to Overweight from Neutral with a $8 price target (prev. $11) noting the company solidly cemented its status as a tier 1 solar PV module supplier, as it continued to gain share through a difficult 1H11 by leveraging its low cost vertically integrated model and very strong brand recognition. YGE saw its shipments rise 36% q/q, while some tier 2/3 module suppliers struggled to maintain flattish shipments. Management expects shipment growth to continue in 2H11 as demand continues to improve, with expected price declines offset by declining costs, enabling YGE to maintain gross margins in the mid-high teens. Additionally,
YGE's PANDA module remains one of the highest efficiency modules shipping out of China today (20% of 2Q shipment, 80mw). Piper believes the significant pullback in the stock presents an excellent opportunity for investors to own one of the leading vertically integrated low cost module suppliers.

- Avian Securities is upgrading YGE to Positive from Negative with a $7.50 price target, representing 43% upside from current levels.

The seasonal trade in solar stocks will likely be compressed to just a few short months given the earlier demand delay caused by the subsidy uncertainty in Italy, but Avian finds YGE as a current outlier to the group that is likely seeing the early signs of the seasonal momentum coupled with increased market penetration. Following a decent Q2 report with both upside to revenue and EPS, the forward outlook was reaffirmed and is good enough to ease our near-term demand concerns. Avian notes waiting to upgrade after the PVSEC show in early September would put them in with the rest of the herd, but they hear the early signs from management’s comments that demand is increasing now for the seasonally strong solar installation period. The firm finds now is an opportune time to ride the wave of the solar trade, and to take the first dip with shares of YGE.

Notablecalls: Couple of points here:

- Piper's Zaman cut YGE back in March helping his clients avoid some of the slaughter in the name.

- Avian only recently picked up coverage in the space but their guys are well respected. I'm told by Avian they are definitely transitioning from a very negative opinion on the entire sector, to some positive opinions ahead of the seasonally stronger 2H.

That makes the YGE call potentially more significant. The co seems to be best-of-breed here (lowest cost producer etc.) and that's exactly the type of stuff you may want to be buying.

YGE has been crushed, so I expect a potentially explosive move off lows. The $6 per share level seems like the first logical stop in the n-t.

Friday, August 19, 2011

Research in Motion (NASDAQ:RIMM): Misek calling bottom

Jeffco's Peter Misek is upgrading Research in Motion (NASDAQ:RIMM) to Hold from Underperform while raising his target to $25 (prv. $22).

- I would probably have ignored the Hold rating from Misek but going over Marvell Tech's (MRVL) conference call transcript I noticed two interesting tidbits:

* MRVL was calling for RIM revenue to stabilize in H2

* Sehat Sutardja Marvell CEO had the following comments on the conf call:

I think investors should not discount RiM. We continue to work closely with RiM in delivering new solutions. They will make the product to look really, really nice, better performance as well. So, don't discount that. Don't discount RiM at all.

Here are the details:

We believe the share price has finally found a floor after months of misexecution, delayed products, and shrinking market share. Our reasons for the more positive view are: 1) patent values based on recent transactions point to higher sum of the parts; 2) build plans have stabilized; 3) focused on releasing QNX before expectations; 4) removal of WebOS. We are upgrading RIM to a Hold from Underperform and raise our price target to $25.

New value for patents: Based on the recent MMI acquisition by GOOG, Nortel acquisition by the consortium, and stock price activity of IDCC, it is clear there is significant interest in the market for patents. By our calculation RIM spent over $5B in acquiring and developing its patent portfolio but we RIM could monetize its patent portfolio for approximately $2B since many of the patents are uniquely security-related or cross-licensed.

Build plan stabilization: our checks indicate that builds plans have begun to stabilize.

Rush to release QNX: we believe that RIM will likely dump features to release new QNX based devices before expectations. While it may not be the superphone we hoped for, we believe it is slightly positive as it demonstrates to investors the ability to execute on time. Chance to become third ecosystem increased: The removal of HP WebOS as a competitor increase the low probability that RIM as an ecosystem vendor may recover.

Salvage value revisited: our scenario analysis assumes a breakeven hardware business, a subscription business run as a cash cow, a monetized patent portfolio, and a $700M restructuring charge. The share price calculation then is $3B net cash + $2B (patents) - $700M restructuring charge + subscription NPV all divided by 524M shares outstanding. Our new $25 target implies a 2.5% annual rate decline and 3% annual subscriber decline.

Blackberry Music Service: RIM is seeking to leverage the popularity of BBM by integrating a music service. According to CNet the company has already signed a deal with at least one of the "Big 4" record labels. We believe this is awfully late relative to competitors, but given the popularity of BBM, it may help the company gain more traction with the consumer market.

Our $25 target is ~8x our FY13 ests (2-year range 7x-18x). Risks: 1) transition to new OS is poorly executed; 2) share loss in both consumer and enterprise.

Notablecalls: Misek turned negative on RIM at the end of April when the stock was still trading in the high $40s, slashing his price target way below the Street average. If my memory serves me correct his $22 price target was the Street low. Until this morning that is.

Bernstein's Ferragu & Misek were the two notable bears in RIM. Now both have told their clients to cover.

I think this coupled with the MRVL CEO comments, upcoming QNX launch and low expectations could produce a bounce in the name in the n-t. Barring a general market crash of course.

Needless to say, executing the trade will be difficult.

Tuesday, August 16, 2011

Notable Calls Network (NCN): Wedge Partners on BIDU

Notable Calls Network (NCN) caught a very nice call in (NASDAQ:BIDU) yesterday. We were super-early on it, which is just the way we like it.

- Around 10:30 AM ET a contributing member of NCN told me to get short BIDU fast as Wedge Partners, independent equity analysis firm with a focus on the technology and media industries was making a big negative call in the name.

A minute later I received the details:

VERY NEG BIDU (Confirmed just now by analyst in Beijing).... Just now (literally 10 mins ago) on CCTV2 a popular TV show, Baidu was exposed by CCTV about providing unreliable advertisement to consumers, accepting ad for healthcare companies without business license and etc.

Remember, at the end of 2008, Baidu's stock price more than halved by the 2-days continuous attack from CCTV. Baidu's stock might be materially impacted by this short term.

Knowing how potentially significant this call could be, I swiftly distributed the details to other Notable Calls Network (NCN) members. This was exactly the type of info people were looking for.

- Over the next 30 minutes the stock started breaking down as more details emerged:

1) BIDU provided links to fraudulent websites for consumer goods and travel agency services. Consumers who followed the BIDU search results to these sits and made online payments were victims of fraud as the online travel agencies and consumer goods companies were not real.

2) The show highlighted how BIDU’s own sales force (Wedge's Lin Juan actually believed they are probably BIDU’s distributor sales folks) actually advised and helped companies who did not have qualifying licenses help fake or bypass the issue.

3) The show also mentioned and brought up the entire 2008 scandal related to healthcare companies who did not have proper licensing.

Link: CCTV exposure caused by Baidu search site users provide false deceived

- By 11:30 AM ET the stock was down 7 pts. A hefty intraday trading gain.

PS: Morgan Stanley is out this morning with a cautious call on BIDU saying they expect some pressure on the stock price, as CCTV's claims appear more widespread this time (vs. 2008), covering more than only healthcare listings.

The firm has issued a Negative Research Tactical Idea saying the share price will fall relative to the country index over the next 30 days. They estimate that there is about a 70% to 80% or "very likely" probability for the scenario.

The stock is trading around $140 in pre market, another 4 pts lower from yesterday's close.

Obviously, Wedge Partners deserves a Kudos here. They beat the rest of the Street by a mile.

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

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, August 10, 2011

MetroPCS (NYSE:PCS): Bargain hunting - Upgraded to Outperform at Bernstein

Bernstein's Craig Moffett is telling his clients to go bargain hunting in the Pre-Paid Wireless space this morning.

- Moffett is upgrading MetroPCS (NYSE:PCS) to Outperform from Market Perform with a $16 price target.

He writes:

The sell-off in telecom stocks has been nothing short of breathtaking in recent weeks, with many stocks in the sector down 40% or more. The pre-paid wireless operators have been particularly hard hit. Since July 1, a month before it reported Q2 results, Metro's stock price has declined -47.5%. Leap Wireless is down a mind-bending -58.9%. The S&P 500 has fallen -12.5% during the same timeframe.

Sector concerns are not unwarranted (we ourselves have been among the most bearish). But of all the stocks that have sold off in the telecom sector, MetroPCS looks to us to be uniquely oversold, and we believe it presents the best buying opportunity. In this report we take a fresh look at the pre-paid players. We’ve scrubbed our models from top to bottom, refreshed our valuations, and closely examined the segment’s recent performance.

- The pre-paid segment appears less profitable than it once had, as the margins associated with smartphones are lower than the voice-only margins of old. But the pre-paid operators continue to gain share, and the prepaid market does not look like it is fundamentally broken. Pre-paid and reseller captured 60% of industry net additions in Q2, 390 bps better than Q2 last year, and MetroPCS remains by far the industry's standout performer on a footprint-adjusted basis.

- By Bernstein's estimates, Metro's forward EBITDA multiple (just 3.9x 2012 EBITDA) is the lowest it has ever been on an absolute basis, and surprisingly, it is lower than Leap’s.

- In contrast, Leap Wireless’s outlook is far more uncertain, and its valuation far less flattering. Given its enormous effective leverage, optimistic scenarios could yield spectacular upside. But firm's valuations suggest that even in their base case scenario, there could still be additional downside to the name, and more pessimistic assumptions yield outcomes with no equity value at all.

Of all the stocks that have sold off in the sector, MetroPCS looks to be uniquely oversold, and Bernstein believes it presents the best buying opportunity for intrepid investors.

By most measures, MetroPCS posted Q2 results that only modestly missed investor expectations; certainly, its business shows no sign of existential distress. Indeed, it appears well positioned to benefit from a continued trade-down from high priced post-paid wireless plans into its discounted pre-paid plans. PCS's numbers were unquestionably far better than that of unlimited pre-paid peer Leap Wireless’s. To be sure, both MetroPCS and Leap missed consensus net additions, but Metro by a far smaller margin. And irrespective of the miss, Metro’s net additions were still a healthy positive number; Leap’s were - 103K (voice net adds of 29K and broadband net losses of -132K, compared to expectations of 89K and - 34K, respectively). And gross additions at MetroPCS actually beat expectations, in a clear sign of sustained strong demand (Leap's gross addition results, by contrast, fell short). ARPU was also close to expectations, missing by a narrow $0.17, while Leap actually outperformed, beating expectations by $0.46.

All in all, these results felt like ones that would normally have dinged MetroPCS’s stock price by several percentage points, but probably not much more. (Leap’s results were worse, and given their volatile trading history one might reasonably have expected a bigger drop).

As anyone who follows the space is surely aware, things did not exactly pan out that way.


To be continued. This is a 32 pg. note so I can only pass on the broad stroaks.

Notablecalls: So Moffett is telling people to buy PCS, which has according to him has gotten unjustly punished.

Given he has been among the most cautious on the Pre-Paid space his change of heart will likely generate enough attention to get PCS moving up.

I'm guessing upwards to $10 in the n-t.

This may prove to be a significant call.

Tuesday, August 09, 2011

The Market - Bounce?

Pick your favourite high-beta names because it seems we're going to have a big bounce today

Notablecalls: Water pistol to head call!

Thursday, August 04, 2011

Just a heads up - An indicator we follow technically just shot off a positive reading suggesting a bounce - Avian

I know we generally don’t put out technical analysis but I thought this was interesting enough to highlight.

Avian’s 10 Week Hi-10 Week Lo indicator fired off its extremely oversold reading of -556. As you can see on the below chart, whenever the red line spikes higher, especially above 400, the market is at a tradable low. The indicator does not shed any light on whether this bottom is a major or minor one. But it should provide a tradable bounce.

Notablecalls: Sometimes we have to rely of stuff like this.

Intermune (NASDAQ:ITMN): Next to blow up?

Jefferies is out with a rather well-timed call on Intermune (NASDAQ:ITMN) saying it could be the next Dendreon (NASAQ:DNDN) to blow up.

Ahead of Esbriet launch starting this September in Germany, they view ITMN shares as likely to come under further pressure given likely slow uptake (vs. consensus high expectations) and potential financing risk (cash enough thru 2012). On very modest sales of Shionogi's Pirespa in Japan and competitors in the works, high expectations for Esbriet may need to be adjusted near term.

- Firm is lowering their target to a Street low of $18 (from $24) & is reiterating Underperform rating.

New drug sales are increasingly dictated by drug efficacy/cost-benefits, not necessarily by a lack of other approved drugs or by the large # of eligible patients, particularly in the current HC cost-sensitive environment. Bull case for ITMN is that there is no alternative for IPF patients; so once launched, Esbriet would be rapidly/widely used, and eligible IPF patients would continue to be on the drug once started. However, given the very modest efficacy of Esbriet, the firm views uptake would be slower and adherence is debatable due to side effects (nausea ~20%, rash ~20%, dyspepsia ~11%, photosensitivity reaction ~11%, placebo-adjusted). While ITMN estimates Esbriet-eligible IPF patients in EU at ~70K, the real question is how many will actually receive Esbriet and continue to stay on the drug. Based on the disappointing launches of several biotech drugs, in jeffco's view it is hard to be convinced why the Esbriet launch would be drastically different.

Lowering their already below-cons Esbriet sales estimates by ~33% & their PT to $18; consensus #s need to come down significantly, in our view. Jefferies notes they now assume ~$400M/$400M in peak EU/U.S. annual sales for Esbriet (vs. ~$670M/$530M previously. For 2011/2012, consensus of $10M/$105M (vs. Jeffco's of $2M/$35M) implies ~880/~2,330 patients being treated with Esbriet (vs. their ~176/780 pts) at assumed $45K/pt/yr.

Estimated current cash balance of ~$200M may not be sufficient through 2012 by our estimates, thus posing financing risks. ITMN currently has ~$85M in convertible debt due in 2015 (coupon rate/conversion price of 5%/$18.88), with a long-term debt-to-capitalization ratio of ~33%.

Notablecalls: With Dendreon (DNDN) crushed last night on lower-than-expected Provenge ramp the timing of this call couldn't have been better (or worse, depending on one's point of view).

JPM's Biotech analyst Cory Kasimov notes this morning: 'As if investors needed another reason to “short the launch” of one-product biotech companies, DNDN just served up the ultimate case study.'

Kasimov's right, investors have seen too many one-trick ponies get slaughtered after analyst estimates collide with reality. Esbriet with its $45K price tag & low efficiency fits right in.

Now Jeffco is saying ITMN may end up being another disappointment. This means stock will likely be taken to the back of the woodshed today and shot.

ITMN could be down as much as 7-10% today, putting 28-29 levels in play.

This could serve as a meaningful overhang for quite some time, so the stock could move lower than that.

PS: I'm posting this at around market open 9:30 AM ET

Tuesday, August 02, 2011

AGP, CNC - Texas Medicaid Awards Largest in History

Texas announced the awards for its highly anticipated $10 billion Medicaid managed care program. The public MCOs dominated the RFP and captured most of the new contract awards.

This was the largest, and therefore the most highly anticipated Medicaid RFP in the history of the Medicaid program. Analysts believe the overall size of the Texas market after full implementation of this expansion will be roughly $12 billion, more than doubling its previous total. The operational start date is March 1, 2012, which suggests that the full earnings potential from these contracts will not be felt until 2013.

There are two major winners:

1) Amerigroup (NYSE:AGP) - AGP will remain the largest Medicaid plan in Texas and should generate around $1 billion in incremental revenue from the Texas expansion. Upon completion of the expansion, AGP should generate over $2.5 billion in annual revenues in Texas Medicaid.

2) Centene (NYSE:CNC) - Centene will generate around $1.5 billion of incremental new revenue in Texas expansion, thus continuing its hot streak as the company also recently won new contracts in both the Louisiana and Kentucky RFPs.

Here are some estimates of EPS impact across Tier-1 firms:

- Deutsche sees $0.40-0.60 2013 EPS impact for AGP, $0.55-0.83 for CNC.

- J.P. Morgan sees eventual run-rate EPS impact for both CNC and AGP to be about $0.50 per share additive

- Credit Suisse notes assuming a pretax margin of 3%, they estimate the following annualized aftertax EPS impact: AGP +36c, CNC +22c

- Barclays estimates that CNC will generate an incremental $0.25 in EPS in 2012, and an additional $0.54 in total run-rate EPS once the new members are fully phased in. They estimate that AMERIGROUP will generate an incremental $0.22 in EPS in 2012, and an additional $0.40 in total run-rate EPS once the new members are fully phased in.

Notablecalls: Considering AGP, CNC trade 10-11x EPS and the EPS impact is around $0.50 for both companies in 2013, both stocks should be up 3-4 pts (im sure some of the impact was already priced in).

Could be some more for AGP as the stock got crushed following earnings last week. I see Citigroup is raising their target on AGP to $76 (from $71) this morning.

Difficult to call any trades here but it's where the action will be this morning, I suspect.