Wachovia (NYSE:WB): Outlook is bleak for equity shareholders - Opco

Oppenheimer's Meredith Whitney is out downgrading Wachovia (NYSE:WB) to Underperform noting that as more news about WB comes out, they are increasingly convinced that the outlook is bleak for equity shareholders. WB has said that it's in the process of "enhancing the capital efficiency of the balance sheet" and "reducing mortgage exposure."

Firm estimates its mortgage portfolio will decline by 9% sequentially and total on-balance sheet loans will decline by at least 5% by year-end. The problem is the "denominator effect"; the loss numerator grows while the asset denominator declines, resulting in spiking loss ratios, lower assets, and lower net interest income, at least 50% of its earnings. In this very real scenario, expenses simply can not come down fast enough, seriously jeopardizing WB's ability to grow earnings.

Notablecalls: Looks like Meredith has given WB stock the proverbial kiss of death. I expect the stock to be down to the tune of -15& to -20% today (or possibly more). Anything above $8.50-$9 level is an Actionable Shorting opportunity this AM.

Marvell Tech (NASDAQ:MRVL): Colour on RIMM chatter - Avian

Avian Securities is out this morning reiterating their positive opinion on Marvell Tech (NASDAQ:MRVL) specifically putting into perspective some of the fears with regard to RIMM. Also they are once again outlining where they believe there is upside to their and street numbers, and why MRVL remains one of their favorite ideas.

Amtech is out indicating this morning that FSL has displaced MRVL in its 2.5G "Javelin" product due mid '09. While Avian is still trying to confirm whether MRVL won or lost this socket they would note that the Javelin product appears to be a lower end, lower cost, product aimed at less advanced networks. Losing such a socket to a lower end FSL product would not be as significant for MRVL which is focusing on higher end portion of the smart phone market and where MRVL is strongly entrenched within RIMM. In the next few months, RIMM has 3 updates scheduled kicking off with the "Bold", followed by "Thunder", and "Kickstart". They believe the Bold is positioned as RIMM's primary offering for enterprise users and expect 3G capabilities to expand RIMM's traction in Europe. Avian expects the touch screen Thunder (available in both CDMA and GSM versions) to target the high end consumer market with 3G capabilities again making this offering more attractive to European consumers than RIMM's previous portfolio. Finally, they see the Kickstart flip phone launching with an extremely attractive price point and targeting the lower end of the consumer market, previously an area where Marvell has not had significant traction. This diversification of RIMM's product portfolio should 1) create significant growth opportunities for Marvell at RIMM, 2) increase MRVL's ASP per part due to the ramp of 3G based products, while 3) mitigating the loss of any single design.

Thus, while Marvell may have lost the "Javelin" product, (note: speculation around potential design losses at RIMM has weighed on the name in varying degrees since they picked up coverage of Marvell in 2007 with the current speculation already having already helped cause nearly a 10% decline), the impact is far less significant than it might have been a year ago as RIMM's product portfolio has become far more segmented than it had been previously, particularly with Javelin likely appealing primarily to customers of carriers that have been slow to roll-out 3G capable networks (e.g. T-Mobile). Finally, with MRVL dominating RIMM's visible roadmap for 3G devices Avian believes that the company is well positioned to continue as a significant supplier to RIMM moving forward.

In the near-term, they continue to see a number of growth drivers beyond the new RIMM phones that should drive upside beyond the seasonal 2nd half pickup. These include Seagate's adoption of MRVL SOCs, MSFT's forthcoming Xbox update, ramp of new MRVL SSD controllers, and lastly increased traction for MRVL controllers in home server type solutions. In particular with regards to these NAS controllers, they believe this segment is becoming a meaningful portion of revenues for MRVL, and given the market growth rates (high double digit last year) will have a meaningful impact on our model as we shift to breaking out this product portfolio moving forward. Firm remains positive on MRVL given both the variety of upcoming catalysts as well as MRVL's attractive valuation (trading at approximately a 25% discount to growth on an earnings basis).

Notablecalls: Good coverage on MRVL by Avian Securities.

American Intl (NYSE:AIG): Do not think that the co definitely has to raise capital - FBR

FBR is out with a positive call on American Intl (NYSE:AIG) noting the shares fell almost 40% during 2Q08 alone, and they have lost 54% of their value since the beginning of the year. In firm's opinion, there is nothing wrong with AIG's core insurance operations. In fact, AIG is among the best poised in the P/C insurance industry to weather the soft market with its rock-bottom expense ratio and truly global presence. AIG's insurance investment portfolio and its credit default swap (CDS) portfolio, however, are two primary areas of concern for investors.

In the report, they examine the performance of several CDX indices over the past three quarters. Based on their findings, they believe that the change in the market value of AIG's multi-sector CDO CDS portfolio during 2Q08 was not significant, and they anticipate a modest gain of $500 million to $2 billion. Firm believes that AIG could incur losses in its investment portfolio for 2Q08 comparable to those the company suffered in 1Q08. While it is difficult to predict, they believe investment losses for 2Q08 could be around $7 billion after-tax.

With these potential unrealized losses, AIG has a very thin capital cushion left, but they do not think that the company definitely has to raise capital. FBR reiterates Outperform rating for investors with longer term horizons, but cautions that it will be difficult for the stock to perform until some stability returns in the financials sector. Until then, high stock volatility will remain.

FBR is lowering their 2008 estimate to $2.15 from $4.80 to account for less favorable credit default swap spreads. They are raising their 2009 estimate to $5.85 from $5.80 to reflect an updated share count.

FBR's tgt for AIG is $53.

Notablecalls: I suspect this call will create some nice buy interest in AIG today, especially in light of overall positive tone in financials. I feel AIG has been trampled ahead of the expected capital raise so that the actual news of a successful raise will actually buoy the stock.

AIG's a buy here. Could easily go to $24.50-$25 here. Today.

Fannie (NYSE:FNM) and Freddie (NYSE:FRE): Wild Week For GSE Shares, No Change in Fundamentals, Just Sentiment - Piper

Piper Jaffray is out with defending comments on Fannie (NYSE:FNM) and Freddie (NYSE:FRE) this morning noting GSE shares have gotten pummeled this week with FNM shares -30% and FRE -45%

Interestingly, there has not been one significant piece of macroeconomic or company specific news on either company to drive the decline, in firm's view. They believe FNM will likely not need new capital unless credit losses rise to over 40 bps, which would be about triple current levels.

The drop began on a bullish competitor's speculative note on capital and proposed FASB accounting changes (dispelled by the regulator). FNM/FRE's regulator, OFHEO, put out a press release last night saying "they are adequately capitalized with capital well in excess of OFHEO-directed requirements, have large liquidity portfolios, access to the debt market and over $1.5 trillion of unpledged assets." Piper doubts anyone will listen as fear is so high. They remain cautious with Neutral ratings on the GSEs due to concerns about credit. Firm notes that to upgrade, they need to get some confidence in the peak in credit losses, which they have not been able to do yet. Still, they have been surprised by the decline in FNM and FRE, as there has not been one significant piece of fundamental data to drive the decline.

The bigger decline for FRE is due to the fact that they have not raised capital (FNM recently completed a $7.4 billion financing), which they believe could make FRE capital ratios close to regulatory minimums by year end '08 unless they slow the growth of the portfolio

Firm is is lowering their price target from $30 to $15, which is based on 6x their '10 estimate of $2.50. This multiple is well below historical levels (12x is the 10yr median P/E multiple) due to the lack of visibility on peak credit losses.

They are lowering their price target on FRE from $28 to $9, which is based on 4x '10 estimate of $2.20.

Notablecalls: We have NYT reporting the U.S. government is considering taking over mortgage finance companies Fannie Mae and Freddie Mac if their funding problems worsen, in a plan that could leave shareholders nothing, citing people briefed on the matter.

These are pretty harsh statements that will likely send the shares down some more this morning. Yet, as Piper Jaffray notes, things are not as ugly as the media indicates.

Wachovia (NYSE:WB): Buyable?

- Goldman Sachs notes the good news is that Wachovia has a new CEO. The bad news is that nearly half of the ~$8bn of capital raised in April has already evaporated. If they set aside the good news, the conclusion from the bad news is that more capital is required and the easiest and least expensive source has to be a cut to the dividend, which is still sizeable at $3.2bn annually.

While the stock may be up on the initial CEO announcement, the real outlook hinges on capital. This quarter's loss of $1.23 to $1.33 per share implies that WB will be cumulatively unprofitable since the credit crunch began. Given a lack of profitability and declining capital ratios, a dividend cut is likely while a broader capital plan may include asset/business sales. A goodwill write-down will also come to recognize that Golden West is impaired, but valuation and capital are both based on tangible book.

WB trades at 1.1X GSCO estimate of 2Q tangible book value. Firm's 12-mos DCF price target is $20. Maintains Neutral.

- RBC Capital believes Wachovia's stock will likely remain under pressure until credit quality stabilizes, the timing of which will likely take place in 2009. Under the leadership of its new CEO, they expect the company to incur a significant charge to "clean-up" its problems once and for all, eliminate its dividend and raise additional capital.

- Ladenburg thinks the hiring of Robert Steele will keep alive the belief that Goldman Sachs (GS) will acquire WB.

Firm's 12-month price target of $13 represents an estimated 75% of estimated tangible book value which is well above the 30% level the "Ground Zero" banks traded down to in late 1990-early 1991. Rating is unchanged at Sector Perform with Average Risk.

Notablecalls: I must say I have to take the opposite view here. I suspect Steele wanted some decks cleared before (write-offs) coming in. A guy coming from Goldman Sachs wants to keep looking good.

That makes WB buyable here just under $13

Focus Media (NASDAQ:FMCN): Goldman defends the stock following yesterday's sell-off

Goldman Sachs notes Focus' (NASDAQ:FMCN) stock traded down ~5% intra-day yesterday, which they attribute to concern that Focus' outdoor advertising business in Beijing is subject to a rule that only Olympics sponsors can advertise on the medium during August and September.

Speaking with management overnight, the company confirmed that its commercial network, poster frame, in-store, and online businesses are not subject to this rule, which only applies to a few of the TV screens in its Beijing travel and hotel network. The travel and hotel network is immaterial to revenue or earnings. The rest of the business sounds on track, and has enjoyed a full rebound from the post-earthquake deceleration. Focus will report its 2Q2008 results in the second week of August; GSCO expects the results to be supportive for its stock in terms of both earnings and cash flows.

Reits Buy and $58 tgt.

Notablecalls: Expect the stock to trade up on this. Could go to $27 in a jiffy.

Fannie (NYSE:FNM) and Freddie (NYSE:FRE): Defenses

Several firms are out defending Fannie (NYSE:FNM) and Freddie (NYSE:FRE):

- Piper Jaffray notes there has been much discussion over the past few weeks about the effects of the FASB vote to potentially remove a QSPE concept from FAS 140.

In plain English, the FASB is looking to add visibility to off-balance-sheet assets, especially in the face of huge charges and capital requirements resulting from off-balance sheet assets at some of the large banks such as Citigroup.

Based on a competitors' report outlining worst case results for FNM/FRE, on this topic, those stocks sold off by around 17% yesterday.

Piper had a discussion with a senior partner at a Big 4 accounting firm and with some industry senior executives that have been embroiled in conversations with FASB and regulators, and one thing is clear: they don't know the end result. However, with regard to the credit card assets and the GSEs, it sounds to us like they are not the target of the accounting changes. Despite that, for GAAP accounting purposes, they may have to add those assets to the balance sheet

Firm doubts, especially in the midst of a credit crunch, that regulators or Congress would allow a massive imminent increase in the capital required by those businesses. A worst-case scenario for the GSEs, taking an asset that requires 45 bps of capital and forcing an increase to 250 bps of capital, would be a massive cost increase for the mortgage industry driving large increases in interest rates to consumers. They doubt that is acceptable.

They remain very cautious on the most credit sensitive names and need to feel more comfortable about the outlook for credit to get more optimistic. However, the firm believes the reason for the sell-off yesterday was likely not justified.

- Keefe Bruyette notes that FNM and FRE have both suffered significant share price declines based on possible FASB interpretations for off-balance-sheet treatment of securitizations. The firm believes this sell-off is unwarranted on this issue as the GSE regulations already have capital requirements for off-balance-sheet exposures of the two companies.

Notablecalls: The media is approaching this issue in a way less aggressive way I expected this morning. With several defenses, I suspect we will see at least an early bounce in the names. My fave is FNM of the two. Give the shorts a run for their money.

WHERE is the Rally??

A good hedgie contact with an excellent track just pinged me with the following:

Hey.. wait a minute... I thought that when oil drops the market would rally?? Isn't that what CNBC tells us??.

Today I see

Oil down $5
NG down 60 cents
soft commodities limit down across the board ( I think)
dollar is behaving too.

My guess is that this is the final blow to the bulls... they stayed long hope.. that an oil/commodity drop would spark a rally.... and NOW WHAT?? Perhaps we see the last of them simply throw in the towel in coming days.

Here is another observation.........

We have FNM FRE collapsing and the market down only 100?? Could there be THAT much short interest in the market?? We may very well be pushing on a coiled spring here.... and if so... at some point we could have a massive reflex rally. I see that VIX is spiking at the same time we are approaching 1210 on the SP500.

Perhaps the simultaneous intersection of $30-VIX and 1210-SP500 could be the spark that sets it off.

I wish I knew the answer to these questions. Shorts are fat and happy.... and could be getting a bit careless.

Solar In Spain: Are Stocks Pricing In An Unlikely Worst-Case Scenario? - Cowen & Co

Cowen notes Solar stocks have been pummeled by concerns about a potential sharp drop in Spanish solar subsidies. In firm's view, a proposed 2009 cap of 300MW is unlikely to become law, as it would cause significant job losses and business closures. Unemployment and economic growth are the major issues for the Spanish government. The power sector has accumulated a large deficit, because regulated prices have not kept pace with fuel costs, underscoring the case for renewables.

They see Outperform-rated thin-film players ENER ($64) and FSLR ($253) as best-positioned, but believe Outperform-rated ESLR ($9), SPWR ($64) and STP ($35) are also oversold.

Modules are fungible across PV markets, so they believe that 2009 industry volume of about 9GW is achievable, but a smaller Spanish market implies lower ASPs (perhaps down 15% for c-Si players, vs. our prior 10% est.). ENER and FSLR have not seen ASPs skewed upward by Spain and have higher gross margin. Moreover, ENER benefits from higher roof and BIPV tariffs. SPWR and STP should benefit from a lower blended-cost silicon portfolio next year, while ESLR has no spot-poly exposure and should see margin expansion from the ramp of Quad-ribbon technology and the new Devens plant.

Notablecalls: I don't have great conviction in this one but we may see a slight bounce in the Solars in the n-t.

Cleveland Cliffs (CLF): CLF should have rallied, not dropped 17% - JP Morgan

JP Morgan notes they believe the extreme sell-off in steel stocks today can be largely attributed to a Bloomberg story Tuesday – “ArcelorMittal Says Half of Customers Rejected $250 Surcharge” - quoting Lou Schorsch, head of MT’s Flat Carbon Americas. The market interpreted this information as the steel producers are unable to pass through higher raw material prices with higher steel prices.

It should also be noted that the $250/t raw material surcharge, or as MT likes to call it “cost recovery program,” was implemented for their fixed price contracts which represent less than 50% of shipments and not for MT’s spot market shipments. Firm views the program as a success by achieving a 50% success rate given this unprecedented move in altering fixed price contracts.

With steel stocks in their coverage universe off an average of 15% in the last two days, they view this as an opportunity to gain an attractive entry point in a group with strong fundamentals that should see record high earnings in both 2Q and 3Q. While they believe most steel stocks warrant a strong rebound, firm's top picks in the group are Cleveland Cliffs (CLF), Nucor (NUE) and US Steel (X). CLF dropped $19.93 or 17% today and now trades at only a 2009 PE of 7.5x and EBITDA multiple of 5.4x. Thermal coal represents only 2% of CLF sales, and they see numerous positive earnings catalysts both this year and next for the company.

For those who read beyond the title of the Bloomberg article, they should have noticed that Mr. Schorsch stated that their iron ore prices from CLF will be up 60% in 2008 (compared to JPM's 26% forecast). If this was true, CLF should have rallied, not dropped 17%. NUE is trading at a 2009 PE of 7.9x and EBITDA multiple of 4.3x, near the lows of its historical trading range and recently raised its earnings guidance.

Notablecalls: Note the call was initially issued yesterday afternoon as CLF was trading around $104. I continue to view CLF as the prime bounce candidate in the coal-steel space. See more colour below.

Cleveland-Cliffs (NYSE:CLF): Bounce time?

Several firms are out with defenses on Coal names following yesterday's sell-off:

- Citigroup notes coal has benefited from structural change, with historically isolated/fragmented regional markets linking up and "going global." Mine shortfalls, transport constraints, thin stockpiles, and voracious BRIC-country demand suggest that this process has several years yet to run.

Firm sees the recent 10 - 18% correction in the equities to be excessive, in response to a downtick in European spot from records. This seems profit-taking amid a deteriorating economy, and the "End of the beginning, not the beginning of the end." Met and PRB names should be insulated.

PRB coal is among the last large pools of cheap energy worldwide. They see it as 50 - 60% undervalued relative to C/N.App, while lags are typically 9 - 12 mos. Focus on test burns, exports, CTL/IGCC tech.

Citi is hiking forecasts across major US basins to levels in-line with survey data, with Met benchmarked to seaborne. The PRB is the only area where forecasts are materially above-market. As a result, they are upgrading BTU and ACI to Buy.

- Morgan Stanley says they remain constructive on US coal equities despite the extreme weakness yesterday. Firm believes the case for very strong 2009 domestic thermal coal contracts remains in place. There is potential for further coal price weakness in global and US coal markets following recent strong gains. They believe any further equity weakness in response to softer OTC prices presents an attractive opportunity to build positions, and in particular favorite Overweight–rated names, Alpha Natural Resources (ANR) and Peabody Energy (BTU).

US coal equities have declined sharply,likely in response to a sharp drop in European and US OTC thermal coal prices. MSCO believes the coal price correction represented some profit-taking following the sharp run-up, rather than a change in coal fundamentals. They do not believe the latest $25/ton run to approximately $150 in coal prices was fully priced into the stocks, nor do they think it should have been.

Yesterday's price action does not pose risk to estimates.

Notablecalls: Coal stocks are ready for a bounce this morning, I suspect. Apart from the usual suspects ACI & BTU my favourite of the bunch is Cleveland-Cliffs (NYSE:CLF) due to its exposure to metals. CLF was among the hardest hit yesterday and I feel it will trade back over $100 swiftly.

Deutsche Bank was only 3 days ago out with a call on CLF raising their tgt to $150 from $115. Suspect it is only a matter of time when they come to defend their stance on the name.

Sandisk (NASDAQ:SNDK): More colour from Amtech

Amtech on Sandisk (NASDAQ:SNDK) (Focus List BUY): SSD Adoption is Being Constrained by Cost/Benefit Equation. Based on our checks during the recent AmTech Asia Bus Tour, we believe that SSD demand and adoption rates are being temporarily delayed by price, performance and endurance issues, which could result in push-outs of volume ramps until 2010. The obvious headwind is SSD pricing preventing demand elasticity, including SLC and initial MLC-based solutions. Asia-based ODMs believe that pricing is preventing SSD adoption in their notebook platforms. We also think SSD performance is a significant factor holding back adoption as the throughput performance of SSD-based storage is not improving as expected, especially in high-end server systems. Volume adoption of notebook SSDs based on MLC NAND could be pushed out into 2010 as customer perceptions of high price and low performance needs to be addressed by suppliers. We believe the low endurance of inexpensive MLC SSDs is a new constraint that storage architects must accept and design solutions around and is not a permanent headwind to SSD demand elasticity.

Maintain BUY on SNDK rating and $40 price target.

Notablecalls: See below for more colour on SNDK.

Sandisk (NASDAQ:SNDK): Major positive call from ThinkPanmure

ThinkPanmure is out with a major call on Sandisk (NASDAQ:SNDK) noting the stock has been hurt by collapsing NAND pricing and build up of inventory at retail, OEMs, and the Taiwan module houses. However, NAND pricing could stabilize. Firm's checks indicate that Samsung is allocating 50M chips of 8Gb MLC to AAPL in July and August, which could substantially reduce Samsung's inventory and reduce some of the price pressure on NAND and inventory overhang in the market. In firm's view, while not a panacea for the inventory in the channel or at retail, it should stabilize NAND pricing. NAND spot pricing in the last two days has been trending up modestly.

While Bears have been calling for a renewed drop in NAND pricing, they believe the 50M chip order could remove a lot of NAND inventory and reduce a lot of inventory overhang from Samsung. Think believes it will also stabilize the NAND spot and contract pricing trends. If the pickup from the AAPL iphone, given what they view as an attractive $199 in the U.S. and free offers in some countries, is ahead of forecasts, it could drive more allocations from Samsung and help stabilize NAND pricing through the quarter

Reits Buy and $40 tgt

Notablecalls: SNDK will trade over $18 level today following this wonderful call by ThinkPanmure's Vijay Rakesh. Also note that Morgan Stanley is closing out their short SNDK idea this morning which is likely to contribute to buy interest.

Well done Vijay

PS: Digitimes talking about NAND this morning saying AAPL is back and spot pricing is going to start reflecting it.

General Motors (NYSE:GM): Downgraded to Underperform at Merril Lynch, tgt to $7

Merrill Lynch downgrades General Motors (NYSE:GM) to Underperform from Buy lowering their price objective significantly to $7, and lowering estimates to significant losses for 2008 and
2009. The key change in firm's outlook is a much lower forecast for U.S. auto sales that is driving a higher cash burn necessitating a much larger capital raise than the market is currently anticipating. Furthermore, they believe there is potential downside in the stock below $7 and that bankruptcy is not impossible if the market continues to deteriorate and significant incremental capital is not raised. Although they believe GM has made strides in restructuring and has built a solid product pipeline, there are three recent factors that dwarf management’s best efforts.

Merrill now believes that much higher cash burn is likely to result in the need for a larger capital raise than anticipated, likely about $15bn (including revolver draws), which would materially dilute return of value to existing shareholders. They also believe the company has not recognized the stress in the capital markets. As time passes, the supply of capital for GM to bridge the gap to 2010 is becoming increasingly scarce, which is at least driving up the cost.

The recent drastic drop-off in sales, which is likely to continue through 2009, has been more severe than anyone anticipated.

The mix shift away from body-on-frame large SUVs that was generally expected over the next few years has been pulled forward to present day with the spike in gas prices and has been more extreme than expected. This has essentially rendered the large SUV segment obsolete, cutting into GM’s profit potential.

Notablecalls: Lots of unhappy buyers from yesterday. I suspect GM will trade below $11 as soon as today.

General Electric (NYSE:GE): Possible 2Q08 earnings upside trade - Merrill Lynch

Merrill Lynch reiterates their Buy rating on GE with PO $37.50.

Firm thinks GE will likely deliver 2Q08 EPS results in-line with the previous guidance of 53-55 cents – this event could present a positive upside trading catalyst for GE’s shares. They believe GE would have pre-announced an earnings shortfall rather than risk even greater investor backlash from reporting a miss the day of the earnings release. After 2Q08, earnings comparisons start to ease. GE has already materially lowered guidance for the full year and consensus expectations have declined substantially since mid-April. Firm believes the impact of higher loss provisions, lower securitization gains, and slower Real Estate markets are part of the company’s previous guidance.

Notablecalls: Ah, lovely. Just what we need this morning. GE's a buy here for sure. The co already lowered the bar and has traded down significantly from here. I'm betting the stock will surpass the $27 level in the s-t.

Calling it Actionable Trading Call

DeVry (NYSE:DV): Bounce?

Two tier-1 firms are out defending DeVry (NYSE:DV) following yesterday's sell-off:

- Merrill Lynch notes the hares of DeVry were down 12.4%, with the main news being that a 3.1mn block of shares was sold. The rest of the education sector traded down as well on no new news. The sale came as a surprise as DeVry only has four institutional holders that own 3mn shares or more. However, there wasn’t any fundamental news, and the firm believes the decline presents an opportunity for a high-quality name in the education sector. DeVry has also been added to the Russell 1000.

The next catalyst for DeVry will come when it reports 4Q08 (June) earnings on 8/14 after the close. MLCO forecasts diluted EPS of $0.33 in 4Q (+26% YoY) & $1.76 for the year (+86% YoY). Their 4Q forecast is $0.05 below consensus; firm believes the main difference is margin expectations as they expect spend on growth initiatives to ramp sequentially vs. 3Q. However, they believe this will drive future growth and forecast EPS of $2.21 in FY09 (+26% YoY).

Reits Buy and $69 tgt.

- Morgan Stanley notes there is no news coming from the company and they see no reason for the decline (apart from the 3.3 mln share block). While this is likely related to concerns regarding Apollo’s earnings, expected tomorrow after the close, they view Apollo’s problems as company specific and expect little impact on its peers, including DeVry. Firm maintains $62 price target and view the weakness as a compelling buying opportunity. Reits Overweight.

Notablecalls: I think DV represents a nice bounce candidate here. The shares were hit with the block sale & with this now out of the way (block was priced at $56 with the seller being MSCO itself, btw) it's ready to move back up again. My target for the bounce is $56.

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.

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.

Fyi,

NC

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.

fyi

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.

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.

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.

Sohu.com (NASDAQ:SOHU): Bounce candidate

Two tier-1 firms are out defending Sohu.com (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.

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.

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.

Priceline.com (NASDAQ:PCLN): Expect Share Gains to Continue; Adding as an Internet Top Pick - Piper Jaffray

- Piper Jaffray is adding Priceline.com (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.

Amazon.com (NASDAQ:AMZN): Three supporting reasons why AMZN can speedily double revenues - Goldman Sachs

Goldman Sachs is out positive on Amazon.com (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.

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.

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.

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.

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.

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.

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).

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.

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.

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.

Notablecalls:

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.

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 Briefing.com reporting the call as positive, it's actually a short here.

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

Hershey (NYSE:HSY): Short?

Deutsche Bank is out with a negative call on Hershey (NYSE:HSY) reiterating their HOLD opinion based on challenging fundamentals incl. competition and input cost volatility, a premium valuation, and difficulty of the changing US choc. market. Although long term they believe the Trust will change its strategic approach, they don't think action will occur short term.

Firm highlights several scenarios noting most point to downside risk:

- Hershey-Cadbury deal would value the stock around $36 per share.

- Cadbury-Hershey deal would vlue HSY around $47-$48 but there is minimal pressure on Cadbury to pay a premium for Hershey and, given activist shareholders and questions about Cadbury's execution missteps, any dilution to Cadbury would be viewed with significant skepticism.

- Nestle-Hershey. Recent unconfirmed press reports, as for example, in the Dow Jones wire service, on a Nestle-Hershey JV has led to investors bidding up the shares of Hershey. While an agreement between the two would certainly be advantageous to Hershey as it gives the company global distribution, the firm doesn't see much upside for Nestle.

- Kraft-Hershey. This scenario to DB is the most unlikely.

Hershey's leadership team will host an analyst meeting in NYC on 6/17/08. With numerous intermediate term challenges, the firm expects CEO West to focus on LT turnaround efforts incl. greater brand support and higher quality. As a result, they expect mgmt to lower LT EPS growth expectations to 6-8% vs. previous 9-11%.

Notablecalls: I think this is the call that should put the recent takeover chatter to rest. Would strongly consider shorting the stock here for a reactionary move down (would not overstay my welcome, though)

Dell (NASDAQ:DELL): Downgraded to Sell at Cross Research

- According to the firm while DELL reported F1Q09 EPS upside driven by higher revenue and aided by lower share count ($0.03 benefit), gross margins were down (83 bps y/y), despite a favorable component pricing environment, contributing to a 73 bps y/y decline in operating margin. Dell reported unit share gains (total units up 22%) in all geographies, driven they believe by aggressive pricing and at the expense of margin. Assuming component pricing increases somewhat (as most companies are now expecting) and emerging markets sales continue to increase, the firm believes gross margin will be difficult to maintain/or improve.

Based on where the firm assumes the stock will open this morning (DELL is now trading in the mid teens versus consensus and HP around 10x to 11x), they think significant, positive quarterly earnings surprises will be required to provide much upside to the share price. With exposure to the US, potential for a slowdown overseas, need to fund the enterprise leasing business (potential drag on earnings and significant use of cash) and apparent aggressive pricing required to drive revenue growth, they are lowering their rating to Sell with a price target of $19.

Notablecalls: Note that Lehman is also out on DELL saying they were quite surprised by the magnitude of the after-hours reaction. Co reported EPS of $0.38 vs consensus of $0.33, and they believe that excluding about $0.04 in net benefits, EPS was actually largely in-line. Revs from notebooks, servers, storage, services, and S&P modestly exceeded their ests, while desktops fell short. Currency & acquisitions added almost 6 points of help y/y.

I think DELL may be a short here below $24.

Cover your Solar shorts! - Piper Jaffray

Piper Jaffray is out with a Solar call saying that according to German news agency DPA, and supported by their contacts close to the Social Democrat Party (SPD), the German Government reached final agreement on feed-in tariff reduction for Solar and Wind at 02.00 AM this morning. They understand that the agreement will be incorporated in the EEG bill on Monday by which time the feed-in tariff reduction will be made public. They also understand that the bill will be voted through parliament as early as Friday next week rather than end of June.

The feed-in tariff reduction is said to be 8% for 2009 (previous 9.1%), 8% for 2010(previous 7%) and 9% for 2011 and onwards (previous 8%).

Notablecalls: Good news for Solars as most of the stocks have been getting hit lately on fears of Germany lowering support for its solar initiative. I expect the likes of STP, FSLR, SPWR retrace at least most of their yesterday's losses. Note the worst case expectations were for 30% decline in 2009.

Short Term Actionable Call

Amdocs (NYSE:DOX): Citigroup raising estimates above consensus - Expect upside to stock

Citigroup is out very positive on Amdocs Ltd (NYSE:DOX) raising their revenue estimates above consensus for the rest of this year. Citi's new FY08 EPS estimate is also modestly above consensus. They believe that the progress DOX has made on its Sprint transition and the robust selling environment for telecom support services supports our incrementally bullish stance. DOX should react positively, as it returns to beating consensus revenue estimates after a break of 6 quarters. Reits Buy and $46 DOX.

For each of the next 3 quarters, they are now $6-$10 mil. above consensus for revenues - they also believe that there is potential upside to their estimates if DOX signs incremental business or if Sprint's own turnaround yields results. Citi is also raising FY08 EPS to $2.36 from $2.35, FY09 EPS to $2.63 from $2.60 and FY10 EPS to $2.88 from $2.86.

DOX has begun to deliver on expected 'inflection point' in revenue growth and margins. The perceived risks associated with Sprint should also abate now. The valuation (less than 13x CY08E of $2.43) is quite attractive, given the accelerating growth.

Notablecalls: I think this is a pretty strong call on Citi's part. Expect to see buy interest in the stock today.

Merrill Lynch cuts Solar Sector

SunPower (NASDAQ:SPWR) & Evergreen Solar (NASDAQ:ESLR) get cut to Sell from Neutral.

First Solar (NASDAQ:FSLR) tgt cut to $325 from $360. Maintains Buy.

German ruling CDU party says State support for solar power should fall by 30% in 2009 -- Reuters

NC

Early Morning Tidbits:

- Citigroup is somewhat cautious on American Intl (NYSE:AIG) lowering their tgt to $41 from $47 saying that despite the new funds, it is not clear that AIG's capital position is sufficient, as they believe it merely adds capital sufficiency for AIGFP without increasing former capital adequacy to the holding company. If AIG will need to funnel the funds to its subsidiaries, the rating agencies could suggest an increase in capital cushion. (Not sure it's a short here, though - NC)

- RBC Capital is upping Digital River's (NASDAQ:DRIV) tgt to $47 from $43. (Nice chart. Ugg likes it too - NC)

- Omnivision (NASDAQ:OVTI) downgraded to Perform at Opco just ahead of earnings. (Worth keeping an eye on. Ugg thinks OVTI will get killed on this d/g today. - NC)

- Kaufman is initiating a bunch of Solars today. My favourite is SunPower (NASDAQ:SPWR) as according to the firm the co is on track to double capacity in '08 while their models show SunPower exceeding revenue of FSLR in '09. Sets Buy & $120 tgt on.

Visa (NYSE:V): 2009-2010 ests raised to new Street high at SunTrust

SunTrust is out with a pretty major call on Visa (NYSE:V) reiterating their Buy rating and raising fiscal 2008, 2009 and 2010 EPS estimates and price target. Firm's target is $100, and new fiscal 2008, 2009 and 2010 EPS estimates are $2.11, $2.96 and $3.82, respectively. These compare with prior 2008, 2009 and 2010 EPS estimates of $2.04, $2.69 and $3.55. These sharply higher estimates reflect firm's confidence in Visa's volume growth, pricing power and operating leverage.

Firm argues that Visa and MasterCard (NYSE:MA) are the premier payments companies in their universe. These companies boast the most compelling franchises and exposure to the strongest global secular growth drivers. As a result, they should continue meaningfully outperforming Street mean revenue and EPS expectations. While they appear richly valued, they believe this is more a function of unrealistically low analyst estimates, rather than intrinsically rich multiples. Firm can support Buy ratings on each as their models make an effort to depict actual earnings power, rather than artificially conservative estimates.

SunTrust's significant fiscal 2009 and 2010 financial projection increases reflect modestly more aggressive volume and transaction growth in fiscal 2009, along with a more bullish view of the company's pricing power.

It is firm's view that most analysts have been unwilling to boost their growth forecasts for Visa as the company gave markedly conservative guidance during the IPO process and did not alter its long-term growth objectives following impressive 2Q08 outperformance. Further, while MasterCard has been public for two years, and has consistently posted organic revenue and earnings growth well ahead of its long-term goals, Visa has only beaten expectations for one quarter.

As a result, they believe analysts' MasterCard estimates are closer to reality than their Visa projections. This has created a situation in which V appears to have a valuation comparable with MA on EBITDA and higher on EPS. They believe the opposite is actually true, however.

Notablecalls: I think this is a pretty major call from SunTrust. I don't know how many of you remember but SunTrust was out on Mastercard on June 15 2007 with a hefty EPS raise (one that pretty much triggered another round of EPS raises by other firms).

Same thing may be happening with Visa here. Note that SunTrust's EPS ests for 2009-2010 are the new Street high.

Technically, the stock looks ready for a nice bounce.

ATA (NASDAQ:ATAI): Tgt upped to $24 from $17 at Piper Jaffray

Piper Jaffray raises ATA (NASDAQ:ATAI) tgt to $24 from $17 saying they understand China's Ministry of Health has already given ATA control of its registration system and as such, expect tests will soon be delivered to the Ministry's doctor and possibly nurse population. Firm also learned the company has been in discussions for some time with the Ministry of Justice and believes a new testing relationship could be announced in the not too distant future.

Notablecalls: Thin name to keep on the radar as Piper's call seems pretty significant. - (as disted on NCN)

Apple (NASDAQ:AAPL): Added to Conviction Buy List at Goldman

Goldman Sachs adds Apple (NASDAQ:AAPL) to their Conviction Buy list.

Remember what Amazon.com (NASDAQ:AMZN) did on Monday?

PS: I think there are plenty of shorts in this one as general view has been lately that AAPL is vulnerable to the downside.

NC

VeriFone (NYSE:PAY): First Data could buy PAY - SunTrust

SunTrust analyst Andrew Jeffrey is out with a major call on VeriFone (NYSE:PAY) saying the protracted internal accounting challenges, and the shares resulting swoon, leave the company susceptible to a hostile takeover bid. Firm sees First Data Corp. as the most likely suitor and the most logical strategic partner for VeriFone. Further, a recent conversation with a leading value-added reseller leaves them confident that VeriFone's market share has not suffered from its internal accounting challenges. Firm believes a business combination would significantly extend FDC's distribution reach and technology capabilities while sharply lowering its manufacturing costs. Reits Buy and $22 tgt on PAY.

Notablecalls: Looking for a $0.50-1.00 move in PAY - fyi. (As distributed on NCN)

First Marblehead (NYSE:FMD): Upgraded at FBR

The unthinkable has happened - FBR has upgraded First Marblehead (NYSE:FMD):

Rating goes to Market Perform from Underperform on belief that much of the bad news is baked into the stock, particularly with early indications of thawing within the private student loan ABS (SLABS) market. Notwithstanding the company's increased risk to its residual receivables following rising credit losses and TERI's bankruptcy filing, the firm no longer believes the risk/reward warrants an Underperform rating for First Marblehead shares at current levels, especially as derivative benefits might start to form, stemming from governmental efforts to provide funding to the federally guaranteed student loan market. Trading at 43% of stated tangible book and approximately at the cash on hand, they believe the shares reflect a near total impairment of the company's residual receivables. While further operating losses and possible liabilities related to the failure to securitize customer loans could drive the liquidation value to the company lower, we view the potential for acquisition and/or the eventual opening of the ABS market as balancing risks.

Assuming a 100% impairment of the company's existing residuals, thereby eliminating the financial exposure to its outstanding trusts, FBR calculates this will result in a pro forma tangible book of $2.85 per share. Though the company will continue to bleed cash until it is able to access the capital markets, they believe the company becomes increasingly attractive as a target for its loan database and origination platform—along with the nearly $2.95 per share of cash. Furthermore, in the event the securitization market opens up, the stock is set up for a potential squeeze with an estimated 22% of the float short. Balancing the upside, in their opinion, are the risk of cash burn, cannibalization from higher FFELP loan limits, warehouse refinancing uncertainty, and loss of loan volume from JPMorgan Chase, Bank of America, and RBS Citizens—which collectively represented 76% of the company's volume.

Notablecalls: FBR has been negative on FMD since 2006 and rightly so. With the firm stepping back from their negative stance I suspect we may see some considerable short covering (& even buying). The stock can be viewed as a call option here - JPM & BAC may actually return as clients when dust settles. If that happens FMD will be a $10+ stock again. Unless it gets bought in the n-t.

Limited downside and ample upside is what you get here. I'm taking it.

PS: My gut tells me FMD could do $3.25+ today.

Verigy Ltd. (Nasdaq;VRGY): Positive comments from Goldman Sachs

Goldman Sachs has a positive piece on Verigy Ltd. (VRGY), saying they expect the stock to react positively to in-line results and guidance given the recent concerns regarding a top-line miss driven by share loss to Teradyne. They continue to believe that the share loss concerns are misguided as Verigy has gained ~700bps of share over the last several years all while competitors claimed Verigy was losing share. While Verigy did guide for a significant qoq decline in CQ1 revenues, firm believes the weak sales guidance was driven by memory, with SoC revenues guided essentially flat qoq. Our view is that Verigy remains well positioned in SoC and we expect the company to continue to expand its SoC share. In addition, DDRIII should be a significant driver in 2H08 with Intel requiring DDRIII for the Nehalem launch in Q4. Verigy is well positioned to gain significant DRAM test share with the DDRIII transition.

Firm believes that Verigy's business model/profitability are undervalued with Verigy's stock trading at a 33% discount to Teradyne's on normalized EPS despite Verigy's significantly better full cycle profitability. Their view is that the multiple gap between the stocks should narrow as concerns over share loss subside and we expect Verigy's stock buyback (to begin 2 or 3 days after
earnings) to be a significant positive catalyst.

Notablecalls: So we have a Tier-1 firm calling for positive reaction on the stock for two reasons: earnings report and share buyback, both happening near-term. What can I say, it's a buy today.