Morgan Stanley is going from bearish to bullish equities

Morgan Stanley is going from bearish to bullish equities. Firm's upside for the S&P 500 is 1300 by end 08 at a minimum, with scope to trade higher depending on the strength of policy action to stabilize the financial system.

This is not a call that the bear market is over, or even that we have seen the lows in the current cycle, but for the rest of the year they believe the improvement in risk tolerance will outweigh the downgrade cycle in earnings. Morgan Stanley believes the risk/reward profile of the market has changed due to the following factors:

Global policy makers have woken up to the severity of the financial crisis and are expected to continue to respond aggressively as growth and systemic risks
dominate inflation concerns.

The last strands of complacency have disappeared with severe declines in emerging and non-US equities, representing a capitulation on the unrealistic decoupling theme. This has also been reflected in the change in loss leadership within the US market, with global cyclicals underperforming.

Risk tolerance is at extremely low levels as reflected in collapsed Treasury yields, elevated VIX, and considerable widening in corporate and LIBOR spreads. Aggressive and concerted global policy action, especially specific to financials, could provoke a sizeable improvement in risk tolerance.

On their fair P/E for the S&P 500 of 15.2, the implied earnings for 2009 is $79. They see this as realistic, with moderate rather than substantial downside risk.

The speed of global consolidation (i.e., BAC/MER) within the financial sector, together with regulatory intervention, will help put a floor under solvency risk even though asset quality deterioration and deleveraging will take time to work through. Firm is moving overweight Financials from neutral while reducing Healthcare overweight. They are buying NOK, COH, GS and HIG and selling SGP, DIS, MSFT and AIG.

Notablecalls: fyi

Raising Banking Sector to Overweight -RBC Capital

RBC Capital is moving their rating on Banking Sector to Overweight:

Gathering of Powerful People: Thursday night Congressional Leaders, The Treasury Secretary and The Federal Reserve Chairman jointly announced a cooperative effort to get ahead of the credit crisis. The plan is expected to be delivered to Congress in the next 24 hrs:

Expected Key Components of Plan: 1) Create a mechanism that would take bad assets off the balance sheets of all financial companies 2) create federal insurance for investors in money-market funds 3) ban short selling of financial stocks through year end.

Resolution Trust Corporation (RTC) II: RBC anticipates a key component of the Treasury plan will be the creation of a govt. entity that will buy bad assets similar to the RTC in the late 80s-early 90s.

The Devil is In Details: The headlines are very appealing to bank stock investors but the critical information about the plan will be in the detail. Important details include determination of sales prices of bad assets, capitalization and funding of RTC II, what assets will qualify to be sold to
RTC II, and length of the ban on shorting financial stocks.

Short Sellers Run Out of Town: A key component on our group weighting change is the proposed ban on shorting bank stocks through yr end. Heavily shorted stocks will be targeted by aggressive buyers to squeeze the shorts, in firm's view

The expected plan by the govt. will lead to higher bank stock prices through the end of the year. High equity prices will allow companies with rising credit problems to raise additional equity to handle the expected higher charge-off levels. The ability to dump assets to the govt. will
enable companies to return to normality quicker than earlier anticipated.

RBC believes the US govt's plan will lead to an acceleration of M&A activity. They also believe since the US Govt. is creating new rules to solve this crisis, temporarily suspending purchase accounting for acquisitions could be implemented. Pooling of interests deals will allow big problem banks to be acquired by healthier bank.

Notablecalls: Money center banks (JPM, WFC maybe even BAC) look like the safest bets. If you want more risk, try some GS. High octance bets include WB and MS.

Constellation Energy (NYSE:CEG): Downgraded to Hold at Citi

- Citigroup's Greg Gordon deals a blow to Constellation Energy (NYSE:CEG) today after the co confirmed that its firm, underwritten $2Bn credit facility commitment announced on 8/27 remains in effect. However, S&P placed the company on CreditWatch, essentially giving CEG an ultimatum to raise $750mm-$1bn of cash through equity or asset sales, or sell the company outright. Absent action in the short term, S&P would lower CEG’s rating to subinvestment grade, which would put CEG out of business given the collateral requirements and lack of willing trading counterparties that would result.

What's Next — CEG has retained Morgan Stanley and UBS to evaluate strategic alternatives. CEG is in active discussions with potential strategic partners. The company is for sale either in part or in whole. Options range from issuing equity or convertible equity, selling off the more liquid positions in the trading book, selling merchant assets, or finding a merger partner for the entire company. They think CEG will choose its course of action in the next week or face the above-mentioned credit rating downgrade.

Conclusions — Firm's Buy rating was contingent on several factors, including CEG's navigating the ratings review process, avoiding a material ratings downgrade. CEG will now have to move to get the best deal available in a limited time frame, like Merrill Lynch did with BofA. They believe CEG’s assets are worth $50/share, but given the circumstances the company may dilute shareholders below our valuation, be sold at a discount to intrinsic value or not reach a deal at all. The firm is therefore lowering their rating from Buy to Hold with a $40 target.

Notablecalls: Well, Greg your clients must be thrilled. You downgrade the stock after sticking to your $95 tgt and Buy rating all the way down.

The best part?

Remember how CEG got murdered on Tuesday? The slide from $47 to $13 intraday. Greg wasn't in to answer customer inquiries. Gotta love it. Wonder how long you will be able to hold on to your job at Citi, really.

There is no question in my mind this downgrade will hurt the stock once more. The credit agencies have the power to put CEG out of business.

American Intl Group (NYSE:AIG): Colour on FED news - CSFB

CSFB comments on American Intl Group (NYSE:AIG) after the Federal Reserve announced that it was lending up to $85 billion to AIG, due mainly to the fact that the Federal Reserve Board determined that a disorderly failure of AIG would create too much turmoil to the global financial markets.

# This announcement raises several questions and/or observations specific to AIG:

# 1. The size of the credit facility suggests that the liquidity/capital needs at AIG may be substantially greater than we had estimated, implying that a considerable amount of the total value of AIG's businesses may not go to current debt or equity holders, but rather to repay the Fed's term loan.

# 2. The 11.3% interest rate of the term loan (if the entire facility is tapped), would shave about $2.00 per share off of EPS (before considering dilution from the Fed's new 80% stake), or about 50-60% of our prior EPS estimate. Combining the dilutive effects of the high cost debt plus the government's 80% stake in the equity would leave us with about 90% pro forma dilution for common shareholders (or about 30 to 40 cents in annual EPS).

# 3. The Fed's comment that AIG will pay off the $85 billion loan from proceeds from the sale of businesses, suggests that the majority of the company may be sold off in pieces. This is a staggering development, that the formerly largest global insurance company will potentially be unwound through a 1 to 2 year auction process.

# 4. What will the rating agency reaction be with the company operating with better liquidity but dramatically higher financial leverage assuming that it taps a large portion of the term facility? Both Moody's and S&P have the senior debt rated in the single A range, but there clearly is still risk that debt holders may not be made whole as the company sells businesses and pays down debt.

# 5. A fairly swift execution of sales of businesses will be important to avoid substantial erosion of franchise value, since customer lapse rates and withdrawals should remain elevated following the publicized difficulties at the company, and 6. Book value is likely to be hit hard by both bigger asset impairments and DAC charges associated with AIG likely moving to liquidation based valuation methodologies vs. the prior going concern asset valuations.

# With all of this in mind, CSFB's $3 price target for AIG common equity still seems reasonable though more of a best case scenario for the equity value in their view, if AIG does in fact look to sell off most or all of its businesses. With pro-forma EPS likely 30-40 cents, and pro-forma tangible book value in a $3 to $4 range, they would expect the stock to trade in a $1 to $4 range, toward the lower end if the debt fails to stage a significant rally, and toward the upper end if the debt and preferreds rally.

Notablecalls: Looks like my call to buy AIG in the $6's was only right for the first 60 mins of trading. This CSFB call gives a pretty good overview of the situation.

The FED did the only right thing they could do - bail out AIG. Otherwise it would have been pure exodus.

The stuff from LEH will hit the results of other players starting from Q3. I suspect we will continue to have wild swings in the fins until then. Goldman (NYSE:GS) continues to look like the best bet here. Risk is defined by book value, I think.

American Intl Group (NYSE:AIG): Reiterate Buy - UBS

UBS has some comments on American Intl Group (NYSE:AIG):

Press reports are that AIG is seeking $10-20B in equity from KKR, TPG, and JC Flowers, and plans to divest of ILFC and other holdings (estimates are worth$5B or >$20B including core assets). Assuming an equity raise at a depressed share price and more CDS and investment losses, they think AIG shares still seem to have upside potential. But near-term, AIG may trade down on this news and likely rating agency downgrades.

A liquidation of Lehman likely will put substantial pressure on MBS/CMBS/CDO other securities, resulting in sizable marks for AIG. Moody’s and S&P said earnings weakness could lead to a downgrade (1-to-3 notches) to AIG’s AA-minus holding company credit ratings. UBS now projects $(10)B in super-senior CDS losses (but, could be more) and $(5)B in realized inv portfolio losses in 3Q08.

Even post rating any agency downgrades, they think AIG has sufficient cash/collateral to meet
near-term liquidity/capital needs without raising equity. But, a reported $10-20B equity raise and $5-$20B in divestitures would offer a good cushion. Also, Hurricane Ike loss exposure seems manageable at $175-$475M.

Lowering 12-mo price target and EPS, but still rated Buy
a) Cutting ‘08 op and net EPS to $(2.63) and $(8.18), from $0.57 and $(2.96), largely to reflect further CDS and inv losses and an equity raise. Also reducing PT to a conservative $26 (from $41) per our P/B analysis, which assumes$10B equity raise and another $(30)B in CDS and inv losses through 1Q09.

Notablecalls: I continue to reiterate my view that AIG has ample value in the $6's.

Note that MLCO and Citi downgrade the stock to Neutral/Hold from Buy this morning.

Some early thoughts:

I don't think analyst calls will help you guys much this morning. So I'm going to tell you what I like this morning:

- Goldman Sachs (NYSE:GS) down 10+ pts, near the Bear Stearns low of $140 looks like a buy. GS's been the smartest operator around.

- American International Group (NYSE:AIG) may have some value here in the $6's and $7's. Tight stops.

- Wachovia (NYSE:WB) looks interesting as MSCO and GSCO are now hunting for a bank.

fyi,

NC

MEMC Elec (NYSE:WFR): Sell-Off offers entry, Reit Buy & $70 tgt - Merrill Lynch

Merrill Lynch is defending MEMC Elec (NYSE:WFR) this morning after the co announced they are anticipating a loss of 5 days of polysilicon production due to hurricane Ike. As management had already built in a 2 week buffer as part of their quarterly guidance, the disruption has not changed management’s outlook for the quarter.

On the mid-quarter update call management said if production in September was at the same level as August, they would be in the upper half of their guidance range. In August, hurricane Edouard plus maintenance on Unit 1 and Unit 2 resulted in 7 or more days of lost production by Merrill's estimate. If the estimate of 5 days of lost production due to Ike are correct, MEMC still has 2 or 3 more days of buffer to reach the high end of the forecast range for 3Q, making the overall range still reasonable.

Discount to peers, sell-off is a good entry point
The impact of the storm is a short term, risk from weakness in the semi wafer market is well known and MEMC is back to building in a buffer for normal execution risks. Firm's channel checks suggest solar demand and pricing should remain strong enough to make their 2009 estimates very achievable. MEMC now trades for 6x 2009 EPS estimate versus peers REC and Wacker Chemie at 10x and 16x consensus EPS estimates, with all three facing the same issues, excluding the hurricane, but with MEMC a lower cost, higher margin, pure play. As a result, MEMC should be bought for a recovery to a multiple at least at the average of its peers of 14x 2009 EPS estimate for a $70 price target.

Reiterates Buy.

Notablecalls: The decline in WFR stock has become ridiculous. Here you have a company that can't meet demand. Sure, they have had execution problems but it goes to show how difficult it is to produce poly meaning the chatter of more capacity coming online in the n-t is bollocks. If they have problems, the chinese will surely have even more problems.

Trading 6x 2009 EPS WFR looks like a springed coil ready to burst higher on ANYTHING positive.

Potash (NYSE:POT): Actionable Call Alert - Merrill Lynch

Merrill Lynch is out with a bullish Fertilizer call noting the recent sharp fall in fertilizer sector valuation multiples is unprecedented, with share prices down 44% since peaking in mid-June. Firm attributes most of the decline to investor fears that the commodity boom is over as the dollar has weakened and energy prices have declined sharply. While corn prices have declined 31% since their flood-induced late-June peaks, fears of demand destruction from high fertilizer prices appear overblown. US corn growers would still be profitable with fertilizer costs twice current levels, by firm's calculations.

For the last month they have been saying that fertilizer valuations indicate that the market believes that earnings will peak in 2009 and decline rapidly thereafter. With little new supply set to come on line before 2011-12 depending on the nutrient and with a likely multi-year grain cycle sustaining high demand levels they believe that peak earnings are still several years away. One potential catalyst for the sector could come post this fall’s harvest as investors once again focus on the need for growers to raise global grain production to rebuild grain inventories which are hovering at 35-year lows relative to demand.

Potash supplies have tightened even further with the month-long strike affecting 30% of Potash Corp.’s production. Firm is trimming their Q3 EPS estimate for POT by $0.10 to $3.65 due to lower potash shipments. They believe Canadian producer supplies are now at all-time record lows, likely leading to further price increases this fall. Firm expects China to settle its 2009 contract with Canadian and Russian producers prior to year-end at $900/mt cfr, which could prove to be low.

Merrill is raising their 2009 EPS estimates for the potash producers.

Potash Corp (NYSE:POT) 2009 EPS goes to $23 from $22 with 2010 EPS going to $25 from $23.50.

Notablecalls: I'm putting my foot down here - I think the Ferts are going to bounce today. Plus, I suspect the bounce will have some more legs than first 30 mins of trading.

Potash (NYSE:POT) is my fav.

PS: MLCO is also out with a bullish Steel call saying the export price and domestic price have fallen approximately 15%, US HRC is down 7%, but steel stocks are down 50%. They believe this is overdone. Firm is Buying NUE, STLD, and X, but see upside to all of steel stocks.

Why have I gotten more bullish on the names?

I think most of the hedge-fund panic selling is done here. We saw a relatively high volume bounce yesterday which to me is a big tell.

I suggest you use the early morning weakness as a buying oppy.

Merrill Lynch on Lehman (NYSE:LEH): Going to No Opinion

Merrill Lynch on Lehman (NYSE:LEH):

Firm is changing their opinion on LEH to "No Opinion" because Moody’s has stated definitively that LEH will be downgraded to Baa absent a strategic partner within an unspecified, but very short, time. In their view, this puts LEH in play. While the number of potential acquirers at this point is, they believe, very few (they cannot really name any with any degree of comfort), Moody’s action certainly raises specter of takeout, potentially at a very low price.

“Take-under” threat makes analytical valuation difficult

Firm estimates EPS potential in weak environment with LEH at Baa at $1.33 in ‘09, ROE of 4 - 5%. MLCO estimates "worst case" Book Value at $15.10, assuming another large net loss ($2.4bn), sale of Neuberger for no gain, and another dilutive capital raise to regain 13% Tier 1 ($3.8bn at $6/share). However, with potential for “take-under” amid rapidly unfolding events, it is very difficult to determine a price objective with any degree of confidence. For this reason, they are taking this "No opinion" action.

Notablecalls: Note that both Citigroup and Goldman Sachs are downgrading Lehman this AM

PS: Today is 911. We can't close in red, guys.

Texas Instruments (NYSE:TXN): Increasingly Missing Out on 3G Baseband Cycle - Baird

Baird has some harsh words for Texas Instruments (NYSE:TXN) noting that while reiterating the midpoint of its 3Q revenue/EPS guidances, they expect TI to lose 30-40% market share in low-end Nokia phones against Infineon, which they believe starts ramping within the next few months. Also, TI acknowledged it no longer expects 3G baseband wins to ramp at EMP in 2H09. Net, the firm believes TI is increasingly missing out on the 3G baseband cycle, while OEMs increasingly migrate to merchant solutions. Neutral rating.

TI does not have yet a 3G merchant solution, per Baird's checks. TI highlighted on the call yesterday a shift by mobile phone OEMs to merchant baseband solutions as they emphasize spending on software, applications, and user interface. Firm believes the ongoing shift to 3G merchant solutions will lead TI to lose further market share in 3G in 2009.

Firm expects a continuation of below-seasonal trends in wireless in 4Q, as their checks indicate slight order reductions late 3Q from tier-one mobile phone OEMs primarily impacting high-end phones (versus weakness primarily in low-end phones this 3Q).

They view is that TI's under-investments in 3G architecture development two yearsago are now leading the company to increasingly miss on the 3G baseband cycle, while 3G-based mobile phones are now ramping aggressively. TI's 3G baseband footprint will be mostly limited to Nokia, and possibly to Motorola, in 2009.

Notablecalls: Note that most other firms are positive on TXN this morning following guidance reit last night.

Google (NASDAQ:GOOG): Added to Piper Jaffray Alpha List with a $785 tgt

Piper Jaffray's Gene Munster is adding Google (NASDAQ:GOOG) to their Alpha List with $785 tgt:

There are two specific potential catalysts for the back half that encouraged them to add Google to the Alpha List:

1. September Quarter Expectations. Firm does not think that the September quarter will be as bad investors think (shares are down 18% in the last three weeks). While they are slightly reducing numbers, we expect the company to meet Street estimates for September, based on their belief that concerns over slowing organic UK growth, are overblown. A 10% miss in estimated UK organic growth equates to a 0.7% revenue miss and a 1% EPS miss to Google's overall numbers.

2. Increased Search Ad Market Share. Google has stated it expects the Yahoo! search deal to begin in October. We estimate the Yahoo! deal should add 12% to Google U.S. search ad market share, which PJ believes would bring Google to over 80% U.S. search ad market share. They believe it to ultimately pass DOJ scrutiny.

Historic Q4 Stock Strength. Firm notes that over the last three years, Google has returned an average of 30% from September 9 to December 31 (a range of 22% to 45%). If the stock were to perform in line with this historical trend, it would mean a share price of around $550 by year end.

Notablecalls: I think GOOG will at least bounce on this call. Gene Munster has been and continues to be the Axe in the space.

Fannie Mae & Freddie Mac (NYSE:FNM/FRE): Colour on news - Piper Jaffray

Piper Jaffray comments on Fannie Mae & Freddie Mac (NYSE:FNM/FRE) after the U.S. Gov't, led by Treasury Secretary Paulson, took control of co's yesterday, in an aggressive and bold move.

In exchange for a commitment to 1. provide capital to the GSE's to insure positive net worth, 2. a credit facility and 3. an MBS purchase program, Treasury will receive a $1 billion senior preferred stock issuance with a 10% coupon with warrants to purchase 79.9% of the company for a nominal price. Treasury could provide up to $100 billion in each GSE, if needed

Most importantly, the U.S. government takeover of FNM and FRE will ensure the last remaining significant source of liquidity to the U.S. mortgage markets will continue flowing. While the firm believes the market had already largely reached the conclusion that the government would not let the GSEs fail, this historic government action ensures a steady flow of liquidity to the mortgage market. Going forward, it is vital that the GSE organizations function smoothly from an operational standpoint, as they continue to work through significant mortgage credit challenges.

Treasury's action may provide a shot of adrenaline into the housing market through lower mortgage interest rates. To be sure, they do not believe that the government takeover of the GSEs will by itself bring an end to the current housing downturn. However, they believe Treasury's action could narrow mortgage spreads and reduce mortgage interest rates.

There might not be much left for current GSE common shareholders. Whether or not the government puts additional capital into the GSEs should be key to the final outcome. The preferred shareholders appear to have much more hope of retaining significant value over the long run.

Piper believes FAF, FNF, and NLY are stocks within their mortgage coverage universe that may respond positively to this historic government action.

Notablecalls: Not sure how to play this one. I suspect NLY etc. will be gapped up hard giving us zero chance to buy at decent levels. Same goes for the rest of the market.

So, we're gonna get spike & retrace. Will be looking for an entry after that happens. Overall risk premiums will fall, making stocks more attractive.

Note that Merrill Lynch is out with a broad mkt call saying US stocks are once again poised to outperform over the next 6-12 months.

PS: Congrats to FNM/FRE shorts. You made a killing.

Mark this date on your calander Oct 1, 2008 - fyi

A smart hedgie pinged me with the following:

Finally this homebuilder rally (XHB up 6% YTD) is making sense.

A buddy I know who is a seasoned real estate veteran says the down payment assistance program is creating quite a sense of urgency. BUT it expires on 10/1/2008. Consumer awareness that this program is going away in less than 30 days is causing alot of buyers to get in and get in NOW... They are pulling out all the stops to get these deals done. But outside of that... there really isn't any other demand in the pipeline.

I read an article recently that talked about the fact that 75% of the new home buyers in the Phoenix area are using this down payment assistance.

This is causing alot of current demand that is being mistaken for the real turn in real estate. Beware, because after Oct 1st... this demand will evaporate and the real decline will start, and it will be sharp. It wouldn't be outside the realm of possibility to see sales fall off a cliff this fall.

As anecdotal home sales data is being released over the next 30days the news will be good and the builders will likely go higher, and cramer can declare victory... so don't try to fight this... YET.

The easy money will be made on the other side.


Fyi

Potash (NYSE:POT): Very positive Fertilizer call from Morgan Stanley

Morgan Stanley is out with a very positive Fertilizer call saying they think the business model meltdown implied in fertilizer equities’ recent ~35% decline will prove unfounded. Firm believes that peak earnings are likely to come in 2011 (rather than in 2008, as implied by the equity market) and be substantially higher than the market discounts. Finally, they expect profits ultimately to trough above 2008 levels.

Fertilizer prices will stay higher for longer: i) A global economic slowdown is unlikely to affect fertilizer demand; ii) US farmers are still earning a ~60% ROIC on fertilizer purchases and are thus unlikely to reduce fertilizer application; iii) Emerging market farmers are very low on the yield response curve (i.e., increased application pays for itself); iv) NPK prices have yet to catch up to commodity prices (i.e., record US farmer profits despite higher NPK prices); and v) They believe capacity increases will simply meet underlying demand rather than flood the market and force lower prices.

Valuation extremely compelling: 2009e EV/EBITDA of 2-5x; FCF yields of 10% to 20%. Minimal balance sheet leverage (in some cases none) should allow for substantial share repurchases and dividend payments.

Potash (POT, $280) has the most leverage to potash, the nutrient with the greatest pricing power and barriers to entry. Mosaic (MOS, $155) is best positioned in phosphate and has not been properly credited for its potash assets. Agrium (AGU, $135) has exposure to all nutrients and a growing retail business. Monsanto (MON, $170 - NOT a fertilizer company) remains Morgan Stanley's top pick in Agriculture as they believe it is the best-positioned company in the value chain.

Notablecalls: We saw some bottoming action in several Fert names late yesterday, which may indicate the liquidation sellers are at least taking a break. Plus, we have CSFB out today upgrading MON.

Think the sector could be in for a bounce.

Notable Calls Network (NCN): UST Inc (NYSE:UST)

We caught another beautiful mover at Notable Calls Network (NCN) today.

Around 10:00 AM I started getting questions regarding strength UST Inc (NYSE:UST) was showing, up 4% in early trade. While at first I assumed it had something to do with a positive Tobacco call Morgan Stanley had put out in the morning regarding the Engle ruling, none of the other usual suspects (PM, RAI etc) showed any action.

It had to be related to UST (NYSE:UST).

Some 15 minutes later a rumor of UST pulling out of a Lehman conference emerged.

The logic behind buying a stock of a co that has pulled out of a industry/broker /etc conference is quite simplistic - a takeover may be coming & and acquirer does not want the current management to give any new comments before the deal is done. A quiet period of a sort.

So, in these cases what ones needs to find out is the real reason behind the pull-out. If it's due to a scheduling conflict for example & the stock is still up on takeover chatter, there is money to be made on the short side.

Around 10:26 Briefing.com put out the following comment:

UST Inc: Hearing catalyst behind the move is that co pulled out of a Lehman conference today, spurring takeover chatter; we are checking on the validity of this now (56.28 +2.24).

So, the race was on to find out the real reason behind the pull-out.

Around 10:37 a NCN member pinged me with the following:

"...CEO got sick in UST. Pulled out of conf because of that not takeover - fyi..."

This was coming from a top5 NCN member. A pro with almost 20 yrs of experience on the Street. No bullshit type.

So I quickly distributed the call to other 50+ NCN members. As you can see, this pretty much represented the top in UST today as the stock gave back all of its gains. One could have shorted any size for up to a $2.5 pt gain depending on one's entry/exit. Not bad for an intraday trade.


Oh and Briefing.com got their confirm too (20 minutes later, though):

04-Sep-08 10:57 ET UST Inc Update -- We just spoke to representative of UST; confirms UST will not appear at the conference today; cites scheduling conflict (56.73 +2.69) -Update :

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.

Bunge (NYSE:BG): Slowing Growth in Emerging Markets Pose Risk to '09 Outlook; Reducing Price Target to $95 from $130 - Citigroup

Citigroup is out negative on Bunge (NYSE:BG) saying that given what their Cir Emerging Markets Economist teamviews as the possible beginnings of a potential slowdown within the emerging markets, they believe that the risk of moderating demand growth has increased and thus future earnings at Bunge could come under pressure. This translates into a reduction in price target to $95 (from $130) on a reduced target PE multiple of 9.5x as they are becoming more concerned with the viability of '09 numbers at Bunge

Currently, CIR economist team is forecasting a slowdown in emerging market GDP growth to 6.3% in '08, down from 7.4% in '07, with growth expected to moderate further in '09 at 6.0%. This ties in with USDA projections for global soy demand over the next 12 months at 3.0%, down from the previous 10-yr CAGR of 4.8%.

Adding to the risk profile surrounding 2009 earnings at Bunge is the recent decline in commodity prices which has been led by crude oil, which is down approximately -25% from its July peaks. At this point they don't know for sure that events will unfold to reduce commodity demand and thus prices, but the signs seem to be forming, as several of firm's fellow analysts have reduced their price forecast for different commodities such as their commodities strategy analyst who on Monday reduced his forecast on aluminium, copper, and nickel prices by -10% to - 27%, due to concerns of a slowdown in industrial activity.

Notablecalls: BG will be in the casualty list today. Citi has been one of the more bullish firms covering the name. On the bright side, this is the 1st step towards capitulation.

I suspect BG will be down 5% on this.

US Steel Sector downgraded to Neutral at Goldman Sachs

Goldman Sachs is downgrading their view on US Steel Sector to Neutral from Attractive this morning:

They are transferring coverage of the steel sector to Sal Tharani from Aldo Mazzaferro. Firm is also downgrading their coverage view for the sector to Neutral from Attractive due to the re-emergence of various risks-both perceived and real, such as rising dollar, "China fear", weak economic data out of the developed and emerging markets, and softness in steel and scrap prices. They believe that negative news flow in the near term would keep multiples compressed, and wait for a better opportunity to get more constructive on the sector.

Nucor and US Steel remain Buy rated stocks. However, they are removing US Steel from Conviction Buy List and also upgrading STLD to Buy, replacing CMC, which is now rated Neutral. In the near term, the firm see smore upside in mini-mills due to a sharper drop in scrap prices than steel, which should expand their metal margins. Worthington and Gibraltar remain Sell rated stocks.

A sharp correction in steel equities, primarily driven by the macro concerns and decline in oil prices, has created selective investment opportunities. Valuations of some of these stocks reflect a doomsday scenario, which the firm believes is not what longer-term fundamentals suggest.

Goldman has lowered their steel price estimates by an average of 6% for 2H-2008 and 2009. Earnings estimates are now 1% and 7% lower than earlier estimates for 2008 and 2009, respectively. The biggest change they have made is in multiples which they are lowering to reflect near-term risk aversion by investors. Firm's target prices have been cut by an average of 18% across coverage universe.

Notablecalls: This looks like bottoming action to me. The bids wanted situation we saw yesterday will reverse itself as I feel the shorts have gotten somewhat ahead of themselves.

Early Morning Tid-bits:

- CSFB is lowering Goldman (NYSE:GS) ests FQ3/FY2008 for the second time in couple of weeks.

- RBC Capital is positive on Potash (NYSE:POT) reiterating their $375 tgt telling to look for sig. potash price increases in China.

- RBC Capital is positive on Apple (NASDAQ:AAPL) saying 4MM iPod announcement coming soon.

- Oppenheimer out positive on RF Micro (NASDAQ:RFMD) saying qtr is tracking better than consensus. Reits Outperform and $7 tgt.

- Lehman (NYSE:LEH) looks interesting as KDB's $5 bln offer for 25% stake shows there may be a premium to the story after all. Especially with HSBC also looking into buying the co.

- CIBC is upgrading US Steel (NYSE:X) to Outperform.

- Citigroup is defending Dell (NASDAQ:DELL)

Notablecalls: Hope it helps - fyi

Apple (NASDAQ:AAPL): Added to Piper Jaffray Alpha List with $250 tgt

- Piper Jaffray is adding Apple (NASDAQ:AAPL) to their Alpha List with $250 tgt.

They are reiterating their Buy rating and adding shares of AAPL to the PJC Alpha List based on 2H08 catalysts in each of the three major businesses: Mac, iPod, and iPhone.

1) Back-To-School Promo Positive For Macs & iPods. Firm believes the Mac and iPod units driven by Apple's Back-to-School promotion will be a catalyst for the stock when Apple reports its Sept. quarter. The promotion is widely understood by the Street, and while Apple has communicated its impact on margins, they believe its impact on Sept. Mac and iPod units is generally underestimated.

2) Expect Sept. Event; Historically A Catalyst. Although it has not yet been announced, PJ expects Apple to host a special event in early Sept. to announce new iPods and redesigned Mac portables. They have analyzed stock action around the Sept. events over the last 3 years. On average shares of AAPL have risen +4% from the week before to the week after the Sept. event and +47% from the week before to four months after (through the holidays).

3) iPhone 3G Int'l Rollout In Sept. & Dec. Quarters Will Be Positive. In Aug. Apple increased the iPhone's addressable subscriber base from 370m to 660m (+78%) by adding 34 new carriers in 21 new countries. They expect this rollout to drive upside to Sept. est. of 4.1m units. The potential addition of Russia in CY08 increases firm's confidence in our Dec. iPhone number (6.4m). In general, they believe the iPhone's international rollout is underappreciated by the Street.

Notablecalls: I believe AAPL could hit $180 level on this call in the s-t. This is the call the stock needed to move higher.

Dell (NASDAQ:DELL): Colour on quarter

Several tier-1 firms are defending Dell (NASDAQ:DELL) this morning following FQ2 results:

- Merrill Lynch notes Dell remained on course to reignite growth and in F2Q08 it gained share across its primary product segments and grew revenues 11% YoY, above their 6% estimate. However, aggressive pricing and increased deferred services revenue in EMEA resulted in gross margins over a pt. below MLCO estimate and a $0.03 miss on EPS. Firm reiterates their Buy rating and $27 price objective based on Dell’s traction in share gains as it benefits from the investment phase of its turnaround and in the long term operating leverage improvement.

- Morgan Stanley says they are buyers of DELL shares on a pullback post the July quarter EPS miss because: 1) while clearly an execution problem, EMEA margins are isolated and fixable with some improvement likely in F3Q. 2) Our enterprise mix thesis is on track as evidenced by market share gains that drove a 70 bps improvement in Americas + APJ commercial operating margins (to 8.4%). 3) New product momentum should accelerate in F2H09 and these lower-cost products shift the restructuring focus to COGS. DELL’s EPS fell $0.04 short of their forecast and $0.03 short of consensus, but would have beat estimates by $0.02-0.03 if not for the EMEA shortfall. Firm lowers the EPS bar for the next two quarters but don't believe this quarter’s mis-execution is structural; therefore FY2010 and FY2011 estimates remain unchanged. Maintains OW.

- Citigroup believes both short and long-term investors should buy DELL shares on yesterday's weakness. 2FQ's gross margin shortfall was self inflicted and should largely reverse in 3FQ. Moreover, the company is making solid progress with op ex and should start to see significant progress with product COGS during the coming 6-12 months. While $2.00 in earnings has probably been pushed back by six months, their valuation work still suggests a twelve-month target of $28, 23% above the after-market price of $22.69.

Self Inflicted Wounds in Europe - Europe was almost entirely responsible for an unanticipated 90bp qoq decline in gross margin. Sixty percent of the shortfall was caused by a shift in services revenue recognition from upfront to deferred while 40% was mgmt's decision to aggressively pursue commercial notebook share in EMEA. We sense that Dell is considering a return to previous services sales practices which allow immediate revenue recognition. On pricing, they believe Dell has already rectified its mistakes.

- UBS, I'm hearing is the most negative of the bunch saying they do not expect an improvement in the n-t.

Notablecalls: I think DELL will be higher from here (@ $22.70 pre mkt) in couple of weeks. Not exactly sure how to trade the stock in the very s-t, though. We may touch $22 (or even lower) levels is what I'm worried about.

I will be an oportunistic buyer here leaving a lot of dry powder to take advantage of lower levels.

Dell (NASDAQ:DELL): Defended by tier-1 firms

I see DELL being defended by almost all tier-1 firms this AM - fyi

More to follow

NC

MEMC Elec (NYSE:WFR): Stock should be trading closer to $70 - Merrill Lynch

- Merrill Lynch is out positive on MEMC Elec (NYSE:WFR) this morning noting they expect the co to report that 3Q is progressing as planned and leave guidance unchanged on their mid 3Q conference call, Tuesday September 2 after the close. Management’s guidance is based on 11 weeks of polysilicon production in a 13 week quarter, allowing room for unexpected manufacturing interruptions, keeping the firm comfortable with their estimates. However, Investors are concerned that execution risk remains, if the firm is correct in their view that 3Q has run smooth so far, they believe the call will be a catalyst to reinforce their view that the stock should be valued in-line with peers for a 14x P/E on 2009 to reach their $70 price target.

Inventories have been at historically low levels of 12 days during1H08, leading to additional execution concerns. If manufacturing is running smoothly, the firm believes the company could rebuild some silane and polysilicon inventory in the current quarter to handle any unanticipated production issues down the road.

Maintains Buy and $70 tgt on WFR.

Notablecalls: We had couple of tier 2 firms out positive on WFR yesterday but the stock did very little for the bulls. I think MLCO's comments may ignite it to the upside here.

Pilgrim's Pride (NYSE:PPC): Yesterday's 15% decline an over reaction - Merrill Lynch

- Merrill Lynch rates Buy and $28 tgt on Pilgrim's Pride (NYSE:PPC) noting the stock was off ~15% following weaker than expected results from Sanderson Farms (SAFM). While they do not cover SAFM, they believe the market is overreacting to the weak quarterly results and outlook from SAFM management. Sanderson has produced solid results in the face of rising grain prices as a result of hedging contracts, in Merrill's opinion, and now the company is beginning to experience the same tough conditions the industry has faced over the last few quarters as these contracts roll off. Firm believes the sell-off in PPC is unwarranted as there is no new news and that the tough conditions have already been priced into the stock.

They expect that incremental production cuts—announced since grain prices rallied in June—should lead to a curtailment of supply in the early fall and a bottom of the cycle in the September quarter. Firm believes the decline in supply should allow for a non-seasonal move in poultry prices over the next few months, as supply and demand move into balance. While they expect grain prices to remain volatile, Pilgrim’s earnings and margins are much more levered to poultry pricing.

Merrill continues to expect a sharp recovery in F2009, as they estimate EPS of $2.07 versus a loss of $3.25 in F2008. Believes that earnings will recover as industry production cuts take hold and pricing responds.

Notablecalls: Note the call was out last night just before close. Yet, I think it will get some play
today. I view PPC's 15% slide yesterday as gross overreaction and expect the stock to retrace at least part of it today.

Suspect corn (feed) prices will take a hit and as the poultry co's have shortened their supply contracts with the restaurants, they can more easily pass on price hikes from here.

Note that PPC was down more than SAFM itself yesterday depsite already warning of coming short this qtr.

Marvell Tech (NASDAQ:MRVL): MRVL under $15 should be bought - Avian Research

Avian Research thinks the street is too low for next qtr and the concerns on HDD related biz is overdone. The bar for next qtr is set so low that they could keep HDD rev's flat (WDC guided for 8-14% shipment growth) and still hit street numbers. Firm's model right now has them doing $930M in revs for Q3, significantly above the street's $887M. Share loss at RIMM shouldn't be a concern until mid '09 and we can back out Thunder and Javelin entirely and still have their cellular business doing 20% growth in '09. This company was $37 when they bought xScale from INTC and went through a whole slew of problems since then with SEC investigation and options overhang and potential management shake up. Last qtr was when they turned the corner. They cleared up the SEC investigation, got the margin profile headed back in the right direction, announced a new CFO and showed ridiculous revenue growth. Outside of being a supplier to WDC (which hasn't been a bad place to be) MRVL is in Blackberry, they're in the iPhone, they have an SSD controller biz with INTC, they are basically in every important area of technology outside of Solar. Believe MRVL growing revenues at 20+% and trading under 15x EPS is one worth owning.

Notablecalls: Good colour from Avian - fyi

Marvell Tech (NASDAQ:MRVL) - Possible bounce candidate

Jeffco is out today w/ a dg to Hold and the stock is down 5%+ in reaction to that.

Yet, we have Cowen out saying things are good. They actually spoke to the CFO that reiterated HDD side ticking as planned. Their checks also suggest that MRVL has seen some important wins at INTC and MU;

Also, Avian Research is reiterating their positive opinion on MRVL; remains one of their favorite names and they believe they will beat and raise when they report tomorrow.

Notablecalls: So, even if Jeffco is right on the L-T, the shorts are likely going to get squeezed following the results. One to watch. - fyi

Energy Conversion Devices (NASDAQ:ENER): Cowen out positive on the name

Cowen is out positive on Energy Conversion Devices (NASDAQ:ENER) saying they expect Q4 EPS to meet or beat our 20c ENER estimate (vs. St. 16c), based on revenue and margin upside, with operating expenses (ex. restructuring) below consensus. Firm sees room for Street estimates to rise, particularly on greater operating leverage. Increased backlog should aid visibility on demand and ASP trends, boosting investor confidence. And, details on the next expansion could help illuminate out-year earnings power. They see 50% upside vs. the market in 12 months and reiterate Outperform.

Higher Backlog Should Boost Investor Confidence. Concerns about ASP erosion compressing margins have been overhanging solar stocks. In mid-June, ENER had already booked 94% of F09 (48% take-or-pay) and 48% of F10, with 600MW of backlog through 2013 (up from 400MW on the Q3 call). F09 ASPs were expected to be flat to just slightly down, and another bump in bookings may allow management to more explicitly frame the F10 outlook.

Details Of Next Expansion, F09 Cost Targets Should Be Triggers. The next factory is likely to be 300MW, probably in a tax-advantaged, Asian location. This would double the run-rate capacity ENER expects to reach when Greenville is fully ramped in Q4:10. While it may be too early for definitive details, an outline would help investors begin to model F11/CY10 earnings. Firm also expects an update on F09 cost/watt reduction.

Notablecalls: I suspect ENER will move on this call. I especially like Cowen's comments regarding the backlog. Could do 2 pts easy or even challenge recent swing highs.

salesforce.com (NYSE:CRM): Upgraded to Buy at Citigroup

- Citigroup is upgrading salesforce.com (NYSE:CRM) to Buy from Hold with a $70 tgt based on:

1) valuation – stock down 13% in 3 days since earnings, even after short-covering; trades at 24.1x CY09 FCF/share vs. 30% 3-yr CAGR (CY07-10);

2) 2H seasonality – Sep. & Oct. are historically strongest months for CRM stock (+18% & +14%
avg. in 2004-2007); also, big deal pipeline bodes well for 2H bookings.

Firm notes CRM’s CY09 EV/S of 4.4x is only at a slight premium to median of 4.0x for the sub-group of enterprise software co’s within their coverage universe, despite having a CY09 rev growth of 34% that is more than 3x the sub-group’s 11% median and boasting a more predictable subscription model.

August has historically been one of the best months to buy CRM stock as it is followed by the 2 strongest months. On average during 2004-2007, Sep.-Oct. has returned gains of 34%. The next major catalyst is likely CRM’s annual Dreamforce user conference, which is scheduled for Nov. 3-5, right after the close of FQ3 (Oct.).

Notablecalls: This is a pretty solid call that will take the stock to $58+ in a jiffy. It's still down 10 bucks from last week. Anything below $57.50 is buyable this morning.

GSE's: Backstop or Bailout- Implications Aren’t All Bad - Citigroup

Citigroup is out positive (or semi-positive) on the GSE's Fannie (NYSE:FNM) and Freddie (NYSE:FRE) noting the recent sell-off has been surprising. This is especially true since the only catalyst appears to have been a press report suggesting that federal officials are likely to recapitalize (“nationalize”) the GSEs soon. The market reaction indicates that a government seizure of the GSEs is imminent and that common and preferred shareholders would likely suffer. This view has prevailed despite the recent public comments of the Treasury secretary and other policymakers in support of the GSEs in their current form (as shareholder owned institutions).

Citigroup believes the GSEs are not entirely without options. First, policymakers could reassert the benefits of the backstop plan that became law last month. Second, the GSEs’ regulator could ease the arbitrary capital surplus requirement further. Third, the GSEs could free-up capital by allowing portfolio assets to run down over time. Fourth, given firm's analysis, which shows that both FNM and FRE should have sufficient capital through (at least) year-end 2008 under a variety of negative credit scenarios, all parties could wait-it-out until market conditions calm.

Firm is not convinced that Treasury needs to take any action over the near-term. While the decline in the GSEs’ stock prices, if they persist, may pose challenges to any capital raising efforts down the road, the short-term stock price performance does not have any bearing on the success of the “Paulson Plan.” In fact, they believe Treasury Secretary Paulson’s plan to provide a backstop for the GSEs in order to ensure their market access for debt issuance (included in the recent mortgage legislation, see below) is working. As evidence, the recent notes issued by FRE, which were oversubscribed and included 40% participation from non-U.S. investors (30% Asian) showed the success of the backstop plan, regardless of the price paid (which is more of a business issue than an access to funding issue).

Accordingly, they explore a possible scenario for a government “bailout”, such as a Chryslerlike federal loan with warrants and discuss implications for investors. In this unique situation, the impact on stakeholders was generally positive over the long-term.

Citi maintains Buys on both FNM and FRE with $9 and $6 tgts, respectively.

Notablecalls: Was going over this call with a tier-1 trader this AM. This is what he had to say:

As the only semi positive note I've seen in weeks, I think it should generate some interest, if not from longs, then from shorts... but any price action to the upside will prob be limited.

I must agree here. I like FNM more here as it's just somewhat bigger in mkt cap. It's being offered @ $4.80 (down 5%) in pre mkt which looks like a solid initial entry. Keep it small and tight. Let's see if this Citi call puts some fire under the shorts.

Notable Calls: Gone Fishing..

Dear Readers,




I will be taking a short vacation after 2 years of almost non-stop posting.

Will be back next Monday.

Same goes for Notable Calls Network (NCN)

Yours faithfully,

NC

Monsanto (NYSE:MON): Morgan Stanley and Merrill Lynch out positive on MON this morning

We have several tier-1 firms out positive on Monsanto (NYSE:MON) this AM:

- Merrill Lynch is raising their tgt to $165 from $155 (Reit Buy) noting that at its recent investor field event Monsanto indicated that fiscal 2009 biotech trait price increases will be above earlier expectations, particularly for triple stacked corn up 33% on average from 2008 versus June guidance of a 20% increase. MLCO's proprietary review of Monsanto’s just-issued price lists indicate that the trait increase approaches 50% for the premium product (VT triple) in the high-yield, high-rootworm pressure areas, but is roughly flat in lower-yielding, low rootworm pressure areas, which they believe will drive penetration rates. Second generation Roundup-tolerant soybeans will be priced $20/acre above first generation versus original expectations of $15. The first generation product will see a seed and trait increase of ~$12/acre, which will be largely offset by higher production costs.

Firm is raising their F2009 and 2010 estimates to $5.10 and $6.10 to reflect the improved pricing outlook in both the seed and genomics segment and in Roundup.

- Morgan Stanley notes that following Monsanto’s third annual Whistle Stop investor event in Monmouth, IL they have increasing conviction in: i) The Company’s ability to execute its overall business plan regardless of the commodity price environment (i.e., secularly higher commodity prices provide upside to the opportunity set, but not the opportunity set itself); ii) The efficacy of Monsanto’s pipeline products; and iii) The Company’s ability to commercialize its pipeline on time. Firm expects the confluence of the above to allow Monsanto to continue to enjoy corn and soybean market share gains (i.e., bigger castle) while lengthening its lead in developing new farm biotechnology (i.e., wider moat).

While Monsanto shares may remain volatile around swings in the US$ and crude oil price, the firm sees only correlation in this regard and not causation (i.e., no P&L impact) and therefore anticipate that as Monsanto continues to execute on its business plan regardless of the US dollar,
crude oil price or corn price (i.e., it anticipates corn gross profit to grow 25-30% in F2009 against a 25% comp), Monsanto shares will trade up towards their intrinsic value.

Reits Overweight and $170 tgt.

Notablecalls: I think these two calls serve to push the stock towards higher levels today. I feel that under overall positive tone the stock could reach $120+ in coming weeks.

Note that Citigroup is out with a positive Fert. call this AM, pushing Potash (NYSE:POT) as their Top Pick. This will surely help the positive sentiment.

PotashCorp (NYSE:POT): Citigroup adds Potash to their Top Picks Live list: - sell-off overdone

POT: Citigroup adds Potash to their Top Picks Live list: - sell-off overdone - Reit Buy and $264 tgt.

Friday data from the TFI showed that North American potash producer inventories fell by 10% MoM in July to ~1.0 mln tonnes (35% below the 5-year average).

POT shares have suffered along with the rest of the materials/energy sector as global growth concerns mount. However, the market has failed to recognize that demand for grains rarely cycle (supply cycles though) and has shown little historical correlation with economic activity.

Bottom Line – Citi believes the sell-off is overdone and at 7x core ’09 earnings, POT is discounting a far worse earnings scenario than fundamentals indicate.

Notablecalls (as disted on NCN): I think POT will get a boost on this call. One to watch today.

First Solar (NASDAQ:FSLR): SPWR Announces Big Utility-Scale Deal; Buy FSLR - Citigroup

Citigroup is out very positive on First Solar (NASDAQ:FSLR) following a CA utility PG&E deal supplied by Sunpower (NASDAQ:SPWR).

Based on firm's checks, these deals were the consummation of last year's utility RFQ process and are separate from current utility RFQs. In fact, the ~550MW facility from OptiSolar had been already announced (without PG&E as the customer) in April (for capex of ~$1.80/W). It is very important to keep in mind that SPWR was just about the only reputable game in town at that time as FSLR was not yet servicing the utility scale market, only acquiring capabilities to do so (via its Turner acquisition) in November 2007.

Pricing appears very aggressive — Again, based on checks, they think pricing on these deals is as low as ~$0.12/kWh - a level where FSLR can make very good money, but a level where they can't see SPWR getting much more than ~10-15% OpM - about in-line with C2007 levels, but well below the current CQ2:08 run-rate.

While the market will almost certainly take this positively for SPWR and may even draw a negative conclusion for FSLR, Citi would be buyers of FSLR on the news and not SPWR. It appears SPWR is racing to sign big deals - even at the eventual expense of margins - ahead of lower-cost suppliers like FSLR in an attempt to build scale and worry about margins later. As for FSLR - which has not had any major announcements while SPWR has been on a binge - checks suggest a largescale announcement may be forthcoming in the near-term.

Reits Buy and $450 tgt on FSLR.

Notablecalls (as disted on NCN): With SPWR up 9%+ here I think FSLR will see at least a 3-4% move as well. Could do $270 early on.

Notable Calls Network (NCN): Campbell Soup (NYSE:CPB)

Notable Calls Network (NCN) caught another nice mover yesterday morning.

Around 10:28 PM ET a particularly active NCN member pinged me with the following:

-- Hearing HNZ saying CPB would represent a "nice fit" for HNZ ( prob coming from shareholder meeting ) --

I knew three things:

- Heinz (NYSE:HNZ) had its annual shareholder's meeting scheduled for the same day with the CEO expected to discuss 2008 performance and give some colour on 2009 expectations.

- Campbell Soup (NYSE:CPB) had been mentioned by analysts over and over again as a potential target for Heinz.

- I also knew hedge funds would try playing some games at the sh. meeting asking controversial questions.

It felt as a no brainer so I quickly distributed the call to other NCN members. Depending on one's entry/exit a $60c-$70c gain was to be had on pretty much any size.


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

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

Research in Motion (NASDAQ:RIMM): November could be a blow-out quarter for RIM - Merrill Lynch

Merrill Lynch is out very positive on Research in Motion (NASDAQ:RIMM) reiterating their Buy rating and $170 PO on RIM, heading into a seasonally strong Sep-Dec period which also coincides with the contract renewal/device upgrade timeframe for the older Blackberry 8700 and Blackberry Pearl customers. Firm believes street expectations are low – especially for the November quarter that could feature 2 to 3 new product launches with multiple global carriers and couldbe a blow-out quarter for RIM. Valuation remains compelling at 26x CY09EPE, relative to expectations for 35%+ annual EPS growth rate for next 3-5 years.

Currently consensus estimates are for RIM’s shipments to grow from 6.1mn units in F2Q09 (Aug) to ~7mn units in F3Q09 (Nov). This QoQ growth of ~0.9mn units is the same as last year’s growth in the same period, which seems extremely conservative as RIM could launch 3-4 new platforms (**) within F3Q09, AND has 1.5x more subscribers than last year with pent-up demand for upgrades. Firm forecasts 7.1mn units for F3Q and believes shipments could be closer to 8mn to 9mn units, or 10%-30% above current street expectations

Notablecalls: I was just talking to one smart trader about RIMM yesterday. He was taking some long just before the close noting the last 3 day retracement was on really light volume.

So, today we have MLCO out with a uber-bullish call on the name. The call stands out from the consensus and I expect the stock to hit at least $130+ on it.

Deere (NYSE:DE): Reits Overweight and $105 tgt - Morgan Stanley

Morgan Stanley reits OW on Deere (NYSE:DE) with a $105 tgt noting 3Q08 results and
guidance may disappoint the market somewhat, but are not a huge surprise given materials costs that have spiked since Deere’s May 14 guidance. Deere’s 2008 net income outlook was lowered to $2.13 billion from $2.20, an effective decline of 14% for 4Q guidance. They don’t see anything structurally wrong, they simply think materials costs are higher than expected.

Deere could easily have raised prices more in 2008 to deal with materials costs, in firm's view,
and the weak pricing vs materials is simply not an indicator of structural pricing weakness. They see no immediate need to adjust 2009 estimates.

Notablecalls: I think DE represents a good play here @ $62 (10x FY09 EPS)

Amedisys (NASDAQ:AMED): Bounce candidate?

Two firms defending Amedisys (NASDAQ:AMED) this morning following 18% downside move yesterday following a negative Citron Research piece:

- Oppenheimer notes they have reviewed a report on AMED by Citron Research. The report primarily questions the company's accounting for receivables and its ability to generate greater internal growth than its peers. After speaking to management and analyzing the supporting details of the report, the firm believes the report is irresponsible in its innuendos of an underlying problem at Amedisys. Furthermore, they believe the stock's reaction to the report is significantly overblown. Regarding the question of A/R management, Amedisys has recently made a number of acquisitions, which can make it difficult to interpret the numbers. However, most importantly AMED's OCF as a % of EBITDA was 84% in '07, the highest of any company we cover.

The report implies AMED's revenue per admission("pricing") growth is excessive relative to its
peers. However, this is actually due to the company's growth strategy, which focuses on increasing its re-certifications as its agencies mature. This has led to an increase in episodes per admission, which has been the true driver of revenue-per-admission (not "pricing"). Opco notes they continue to have the utmost confidence in the current management team. In their experience, AMED has always been very forthcoming and transparent with the details it provides around the business.

Overall they believe the accusations are unfounded. While clearly this will present an overhang in the short term, when the dust settles they believe the stock will offer a compelling buying
opportunity.

Maintains Overweight and $73 tgt.

- BB&T Capital Markets also defending AMED: - While they are normally not in the habit of writing response notes, the severe stock reaction compels them to give their take on the situation. Firm notes they had the opportunity to speak with management yesterday and while they were deeply troubled by the reaction of their stock, they reiterated confidence in their quarterly results, and their outlook for the company remains unchanged.

Notablecalls: AMED has a 30% short interest. I think this one bounces on these defenses. A close 20% downside move in reaction to Citron's call almost never lasts.

Deere (NYSE:DE): Colour on quarter

Citigroup comments on Deere (NYSE:DE) following results and pre conf call:

- Firm notes Ag profits were upside surprise, Construction and lawn care downside (more Construction than lawn care segment). Higher than expected tax rate cost the quarter $0.03.

Stock Reaction: After AGCO's and CNH's solid reports set the bar a little higher for Deere, this report, despite the strong Ag results, will push stock lower this morning, in firm's view. Key to report is 4Q guidance weak with costs sounding like a major element as rev guidance for 4Q of +29% is strong (despite slightly lower than expected 3Q revs, strong 4Q raises full yr rev guidance from 20% to 21%. However, for bulls, they will feel better that 4Q is a cost issue, not a revenue issue. Citi notes they are aware of many investors looking at Deere as improving price vs cost story for '09 when new large equipment models get the announced price increases of +5%+ (especially with commodity prices having pulled back suggesting less input cost pressure), with ag equipment demand being up in '09 as better than avg predictability, along with the strong Deere balance sheet as a security blanket. Stock likely finds strong support around $65-$66 (10x-12x range of '09 EPS assumptions).

Maintains Buy and $98 tgt.

Notablecalls: I have DE on my radar as a bounce candidate this morning.

Zoltek (NASDAQ:ZOLT): Need to get this off my chest

I usually don't do this but I wanted to say something about Zoltek (NASDAQ:ZOLT) and its CEO/Chairman Zsolt Rumy.

As many of you know, ZOLT missed ests badly and guided down last night.

The stock was very weak already yesterday, in reaction to RBC Capital's wonderful call saying they were highly cautious holding shares into the qtr as the firm believed significant margin compression could lead to a 5-6 cent shortfall to Street estimate of 27c. Primary culprit was expected to be ~12-14% increase in raw material acrylonitrile (refined crude oil product) costs in the June qtr and inability for company to pass through price in its contract and spot market, representing 2-3% GM downside potential to Street estimate of 30.3%.

The CEO's response to this, you ask?

Well, around 1:40 PM ET we had this cross over at Bloomie:

Zoltek's Rumy says co's fundamentals are 'good as ever' and says unsure how to respond to analysts' reports - Bloomberg

The stock recovered a full 1pt in reaction to this.

Hell, why not buy a stock down 15% when you have the CEO defending it ahead of results.

Right?

Nope. ZOLT's down another 17% today as it looks like business isn't as 'good as ever'

I know's there's RegFD but what about misleading investors like Mr. Rumy did?

My message to Mr. Rumy?

You ought to step down. Right now, right here. As if the problems with your CFO weren't enough!

Got it off my chest.

Thanks.

NC

Goldman Sachs (NYSE:GS): Opco's Meredith Whitney cuts EPS

Looks like Opco's Meredith Whitney is also taking her ests down this AM:

Firm is lowering 3Q08 EPS estimate to $2.15 from $3.54, FY2008 estimate goes to $14.32 from $15.75, and FY2009 estimate to $14.90 from $16.30.

Notablecalls: This is in addition to DB's downgrade this AM (see below). Goldman is going to get whacked today, I suspect.

Goldman Sachs (NYSE:GS): Deutsche Bank downgrades to Hold from Buy

Deutsche Bank downgrades Goldman Sachs (NYSE:GS) to Hold from Buy this morning. Price tgt is cut to $192 from $209, with Q3 earnings per share view cut to $2.40 from $3.25.

2008 earnings per share view goes to $14.60 from $16.25.

Notablecalls: I expect GS to trade below $170 in the n-t. Note that Ladenburg Thalmann's Richard Bove cut Goldman Sachs fiscal 2008, 2009 EPS yesterday before close.

It looks like the analyst community is starting to realize ibanks have difficult times ahead.

Potash (NYSE:POT) looks interesting here - fyi

I think Potash (NYSE:POT) looks good for a bounce here around $161/$162.

I remember the $160 level has been mentioned by several major market commentators as THE level.

Very little has change on the fundamental side over the past weeks.

fyi

NC

Monsanto (NYSE:MON): Some more colour

I continue to think Monsanto (NYSE:MON) is a solid buy around here, despite the early unexpected weakness in the name.

My logic tells me people will want to position themselves ahead of the investor meeting as knowing MON we are likely going to get some nice headlines from there.

MON @ $105 here.


PS: The other AG's look overextended to the downside as well. POT in particular.

Monsanto (NYSE:MON): Stock looks cheap here - Morgan Stanley

Morgan Stanley is out with a positive call on Monsanto (NYSE:MON) reiterating their Overweight rating and $170 tgt on the name calling the stock cheap here.

- According to the firm 100+ investors will travel to Monmouth, IL with Monsanto management this week to tour fields containing Monsanto’s biotechnology pipeline. What makes this year’s trip particularly exciting is that MSCO's math indicates that at today’s share price investors will be handed the pipeline for free (i.e., they believe that the existing business is worth $110 per share and that the pipeline is worth $60). To be clear, their models assume $3 corn and $8 soybeans; using current $5 corn and $12 soybean prices would increase the pipeline’s value by $8 and $5 per share, respectively. They expect two days in the fields with management to flood the current bumper crop of investor concerns (i.e., “plummeting” corn prices, stronger US$, fears of a US economic slowdown leaking into emerging markets, et al) as they relate to Monsanto’s both current and future
P&L.

Stock even looks attractive on P/E. While they still do not believe that P/E is the correct way to value Monsanto (as it ignores the earnings power that is being reinvested in R&D - i.e., ~$1.50 of EPS in F2009), following the 23% pull back in Monsanto’s share price since its all time high on June 16, the firm no longer believes that bears have much of a P/E leg to stand on.

Notablecalls: I think this call will generate some buy interest in MON today ahead of the investor meeting. The stock has been crushed over the past months and the meeting could act as a significant trigger here.

MON could hit $110-$112 easy today if it gets going.

PS: Note that Citigroup is also out pos on MON reiterating their Buy rating and $145 tgt after after recently meeting with senior BASF Ag leaders at an Investor event (MON has a partnership in place with BASF).

One to watch today.

Merrill Lynch (NYSE:MER): BofA out with a Buy call, $40 tgt - fyi

I'm hearing Banc of America is out with a Buy call on Merrill Lynch (NYSE:MER) this AM.

Fyi

Notablecalls: One to watch.

Notable Calls Network (NCN): WellCare Health Plan (NYSE:WCG)

Notable Calls Network (NCN) caught another nice mover today.

Around 11:30 AM today, a fellow NCN member pinged me with the following:

WCG- Mergermarkets, Inc is saying that United Healthcare will bid $56 for WCG - Wellcare Health Plans

While I tend to pass on most market rumours and stick to analyst calls etc., this one was almost a sure mover. This one had it all:

- WCG has been long viewed as a buyout candidate.

- Mergermarkets is a solid service and has gotten many calls right over the past years.

- Short interest still stands at 7% of float. Let's assume you're short 200,000 shares and have a credible rumor of a buyout starting to make the rounds. You know there's a fair chance of the rumour being true and being announced over the weekend. So you cover. Covering a 200,000 share block on a August Friday is a short's nightmare (been there personally). So you pay up, pushing the stock up 1-1.5 pts just to get out.

Knowing all this, I quickly gave heads up to the rest of the 50+ NCN members.

The result can be seen here: 2pt+ move to the upside.


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

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

Sprint (NYSE:S): Colour on recent chatter - Avian Securities

Avian Securites comments on recent Sprint (NYSE:S) chatter:

Sprint is up today on rumors that the company is close to selling its iDEN (Nextel push-to-talk) platform. This, coupled with the proposed WiMAX venture with Clearwire (CLWR), would leave Sprint with its core CDMA platform. Our checks suggest that there are several parties that would be interested in acquiring Sprint's core CDMA platform, including Deutsche Telekom/T-Mobile (DT), Comcast (CMCSK), and Carlos Slim (American Movil, AMX). We are hearing that Sprint may be close to a deal with the U.S. Government wherby the Government would assume Sprint's iDEN assets (no economic consideration) for use as a secure, private network. As part of the arrangement, Sprint would migrate all iDEN subscribers onto its new push-to-talk platform (QChat) before delivering the network assets to the Government. Motorola (MOT) would management the network for the US Government under a long-term contract. This business would likely be housed in MOT's Government and Public Saftey business within Enterprise Mobility Solutions. We would view such an announcement as a positive for MOT. In addition to the U.S. Government, we are hearing that Tim Donahue (former head of Nextel) together with Cerberus Capital may also be mounting a bid for the iDEN platform. Interestingly, in Sprint's recent 10-Q filing, the company discloses a recent compensation agreement with Keith Cowan whereby Cowan stands to receive $500,000 upon the close of the Sprint-Clearwire WiMAX transaction and $1 million "upon the Board's approval of the strategic resolution of the iDEN network".

Notablecalls: Well, Avian may be on to something interesting here. Their comments regarding Cowan's comp package and iDEN network make sense.

My take on the stock? It's a dog. Bow-wow.

Deckers (NASDAQ:DECK): Colour on quarter

Several firms comment on Deckers (NASDAQ:DECK) after the co issued quarterly results and guidance last night:

- RBC Capital notes yotal inventory for the quarter increased 70%, in-line with revenue growth of 73%. The increase is predominantly attributable to the UGG brand which saw a 74% increase. While in isolation this increase appears high, they note the following: 1) revenues at the UGG brand grew 131% in 2Q, and 2) the vast majority of this inventory has orders written against it and was not produced "on spec."

Gross margin decreased 120 basis points vs. RBC expectations for a 90 basis point increase. The decline in gross margin relates predominantly to above plan international shipments which carry lower margins. SG&A expense leveraged a dramatic 450 basis points vs. RBC estimate for a 150 basis point deleverage. As a result, operating margin was 8.7%, representing a 330 basis point improvement vs. last year.

For 2008, management guided EPS to grow 34% vs. prior guidance of 27%. Hence, they are raising their estimate from $6.40 to $6.75. However, based on some earlier shipments of fall product in 2Q and an increase in SG&A expense (mostly an increase in long-term incentive compensation accruals due to earlier realization of performance targets), they are adjusting our 3Q estimate down while taking their 4Q estimate up.

RBC believes the story here continues to be the strength of the Ugg brand. Uggs remain one of the few must-have items in the footwear arena and they believe the momentum in the brand will continue this fall season. Remain buyers of the shares. Reits Outperform and $154 tgt.

- Baird notes DECK exceeded Q2 expectations and raised its guidance. But some will argue that inventory is too high. Firm says they are glad that UGG inventory is up 74% because it suggests that DECK has a very strong backlog, as the company is essentially building product to its orders, and they see little risk of order cancellation. firm continues to like DECK because they believe the shares are undervalued relative tothe company's prospects. Reits Outperform and $190 tgt.

- Piper Jaffray says they are reiterating their Buy rating and revisitingLT peak EPS analysis following another solid quarter and upwardly revised guidance. Ugg sales growth in the period at 130% far exceeded even lofty expectations and firm's published estimates at 85% - a theme they expect to continue into the prime selling cycle in 2H. EPS of $0.39 (net of items) exceeded PJ and Street $0.24 estimates. Given broader concerns surrounding macroeconomic and spending pressures balanced with an upward bias to estimates, they are resetting their PT multiple closer to the LT growth range at 22x, resulting in a price target revision from $169 to $150. (Peak earnings analysis suggests close to $11-$12/share in EPS)

Notablecalls: The stock briefly hit $100 level in after hours action in reaction to Q3 guidance and reported inventory levels. I think DECK's no Crocs (CROX) - the demand is for real (as confirmed by management comments on conf call).

The real question here is of course what to do with the stock trading at $115. Should you chase it after the 15pt rebound in after mkt or lay low and hope for a pull-back?

I think that there will be some people out there that will look at the inventory growth and hit the sell buttons. That will give us a good entry point. $110 looks like the level.

I would not want to chase DECK here.

Hell, did you see the comps miss ANF posted yesterday? I sure haven't seen a miss of this magnitude in a while from them. Goes to show how tough the business is out there.

Sprint (NYSE:S): In the near term, expect a bounce - Merrill Lynch

Merrill Lynch is out in defense of Sprint (NYSE:S) noting the stock sold off 14% after announcing improved Q2 operating metrics and a $3bn convertible. Investors seem concerned that the convertible could limit take-over potential, although terms have not yet been announced. They doubt that Sprint would restrict its M&A options for the sake of better terms on $3bn. In the near term, the firm expect a bounce. For longer-term outperformance, they would need better visibility on the path to subscriber base stabilization and margin improvement.

Sprint’s operating performance has improved but is not yet stable, with wireless service revenues down 11.2% y/y. The highlight was a 45bps+ reduction in postpaid churn (to <2.0%), but with soft gross adds, postpaid subs declined by 776K (MLe: 1.0mn). Guidance for 3Q08 was slightly downbeat, with postpaid subscriber losses to worsen and EBITDA to decline. Management guidance has been consistently conservative, although they do believe that AT&T’s 3G iPhone launch and a weak economy are hurting Sprint.

Notablecalls: I like this one. We may get a bounce.

Also note that Pali is out upgrading S to Buy this AM.

FTI Consulting (NYSE:FCN): Heads up from a smart hedgie

A smart hedgie just pinged me on FTI Consulting (NYSE:FCN) saying:

Keep your eye on this FCN had big news this morning aside from hitting numbers, they are spinning off there technology business in the form of an IPO, big news, will be kind of hairy but i dont think people understand how positive this spin off is.

Going to be hairy though. May not shake out until conf call is over.

Notablecalls: Same guy that gave the SGMS heads up last wk. - Fyi

PS: $64 looks like a great spot to enter here - fyi (NC comment)

Microsoft (NASDAQ:MSFT): Buyback coming, stock could hit $40 next yr - UBS

I'm hearing (and have it confirmed) that UBS is out with call on Microsoft (NASDAQ:MSFT) saying the co could be preparing for a $20B stock buyback, one that would be completed over the next three months.

The firm recommends buying the stock now as the company is unlikely to make an announcement until the buyback has been completed. UBS thinks MSFT shares could reach $40 in the next year.

Notablecalls: I see some buy interest in MSFT here in pre mkt.

$40 target sure sounds huge. But on the other hand, UBS research has been so-so lately.

Fyi

Deckers (NASDAQ:DECK): We expect a strong 2Q - RBC Capital

- RBC Capital is out with a good call on Deckers (NASDAQ:DECK) saying that despite the the sell-off in shares over the last week, they continue to believe that momentum in the business remains strong and that there is modest upside to consensus estimates for 2Q. In addition, the firm does not view their estimates for the remainder of the year as being particularly risky.

While 2Q represents a relatively small quarter (12-13% of revenue and 3-4% of profits), sales trends, particularly at the Ugg brand, remained strong based on channel checks. In addition, the early feedback they have gotten on fall styles available at Nordstrom during the July Anniversary Sale has been equally positive and they believe bodes well for performance during the fall season, overall.

Last week, the firm attended the analyst event management hosted during the WSA Show in Las Vegas. The meeting was used as a venue to showcase the upcoming Spring 09 merchandise assortments for their three main brands (Ugg, Teva, and Simple). During the meeting, management's commentary was very upbeat. Pertaining to the Ugg brand in 2Q, management commented that they were happy with the early reads on new fall styles that were shipped to retailers in June and July and that their close-out business was very small and consistent with prior years.

RBC anticipates 2Q EPS of $0.25, up over 40% vs. last year's $0.17. Street consensus for the quarter is $0.24. Remains optimistic with regard to the DECK story and would continue to be buyers of the stock.

Reits Outperform and $154 tgt.

Notablecalls: I think DECK deserves to go higher from here based on RBC comments. The stock is a good mover so I think there is a trade to be had there.

Note that Lazard is also pos on the name this AM.

Bluegreen (NYSE:BXG): Diamond Resorts may have problems financing Bluegreen acquisition, , industry bankers say - Dealreporter

Dealreporter is out with an interesting piece on Bluegreen (NYSE:BXG) saying Diamond Resorts may find financing an acquisition of Bluegreen, the Florida timeshare company, challenging, according to bankers following the situation. “This is a tough thing to finance,” said an industry banker, adding that his bank would not lend towards a possible deal between the two parties. It is the wrong time to finance a timeshare transaction, commented a second banker who was familiar with the companies involved and had previously been involved in lending for transactions in the industry.

On 21 July, Diamond Resorts signed a non-binding letter of intent (LOI) relating to the acquisition of Bluegreen for USD 15 a share, or approximately USD 500m. The agreement allows for Diamond Resorts to conduct “extensive” diligence until 15 September. In its 18 July letter to Bluegreen, Diamond Resorts said it was “confident that it will be able to raise the financing necessary to consummate the proposed transaction.”

A source close to the situation said Bluegreen had taken reasonable steps to satisfy itself “to some extent” that Diamond Resorts could finance the transaction. The source said Bluegreen had been given some insight into Diamond’s financing plans, but would not go into detail. The source acknowledged that financing market conditions were uncertain at present and decisions on both sides of the table could change during the due diligence process.

Yet, a third banker said the timeshare industry has been a steady performer in tough economic times as people have been unwilling to let go of the equity in their timeshare investments. However, he pointed out vacation ownership and residential sales at Starwood Hotels & Resorts Worldwide, one of Bluegreen’s major competitors, had dropped 28.4% in 2Q08 when compared to the same period in 2007.

The first banker speculated that because a LOI was signed rather than a definitive agreement, financing was probably the biggest question mark surrounding the deal. “I think that they are struggling on financing,” the banker said. Bluegreen is actually taking on the financing risk by allowing Diamond Resort’s access to its books with no breakup fee, this banker said. Diamond Resorts had been given access to conduct diligence because it was a highly motivated buyer, and because of the attractive price being offered, the source close to the situation said.

Notablecalls: I think BXG should move towards the $8-9 level on this tidbit. BXG was a $6.5 stock when the "deal" was announced.

I expect the media to pick up on this one by tomorrow morning as they did with AKS (the next day after Dealreporter broke the story to subscribers)

Wachovia (NYSE:WB): Take Profits Ahead of CEO's "Meet-and-Greet" with the Sell-Side Today - Morgan Keegan

- Morgan Keegan is out with a decent call on Wachovia (NYSE:WB) noting the shares outperformed last week up 30.9% versus a 6.4% rise in the KBW Bank Index (BKX). However, this rally followed a period of significant underperformance by WB shares between 07/23-07/25 when shares declined 23%, versus a 12% decline in the BKX.

They believe that last week's rally was mostly driven by short covering ahead of new CEO Bob Steel's meeting with the sell-side later today. Firm would be defensive and take profits ahead of the meeting as the reality is...there are no easy fixes near term at Wachovia.

Keegan notes they have seen this same story play out several times before during this current credit cycle where share prices have risen, ahead of fundamentals, following CEO changes. John Thain - Merrill Lynch, Alan Schwartz - Bear Stearns are a couple of instances that they have witnessed over the last one year where shares rallied following the CEO announcement only to retrace back later.

Based on Mr. Steel's comments during the second quarter earnings conference call they believe it is too early to make the call with regards to whether or not Wachovia will need to raise more common equity given the significant credit challenges ahead.

While the firm believes Mr. Steel is a good-fit to fix Wachovia, we are not sure what he can say to alleviate balance-sheet and credit concerns after less than a month in office when he meets with sell-side analysts later today. While the recent resignations of the Chief Financial Officer - Tom Wurtz and Chief Risk Officer - Don Truslow indicate the urgency with which he is approaching the job, in our view it also risks Wachovia being saddled with a new management team that might require more time in getting familiar with the balance-sheet and the complex issues that currently face the bank, prolonging the fundamental recovery of this franchise. Having said that, they still expect more changes among the executive ranks and line of business heads at Wachovia in the coming months.

Nothing has changed fundamentally. Wachovia has significant exposure to Option-ARM (25% of total loans) and CRE loans (10%) which should continues to drive higher credit losses, requiring additional dilutive capital infusion.

Reits Underperform.

Notablecalls: A decent call. Not sure how to trade it, though. Short it right here and risk getting caught in a wave of positive stuff coming out of the conf call. I'd rather sell any rips during the day as I think this is offers a better risk/reward. I'm sure others will join.

Elan (NYSE:ELN): PML near term pain could yield long term Tysabri gain - Leerink

- Leerink Swann is back with some comments on Elan (NYSE:ELN) following yesterday's PML related sell-off:

- Bottom Line: Report of two newly confirmed cases of PML in MS patients treated with Tysabri are likely to create significant volatility in BIIB and ELN stocks today. But they believe the occurrence could create a positive long-term environment for the drug by demonstrating successful intervention using plasmapharesis (PLEX, initial details of which were presented at ECTRIMS in October 2007).

The patients who developed PML were treated in Europe, a region for which a TOUCH program has not been established. A MEDACorp MS consultant noted to the firm last night that the lack of confirmed cases of PML in the U.S. may suggest that the RiskMAP is effective. As of the end of 2Q:08, BIIB and ELN reported that 17,800 patients were being treated with Tysabri in the U.S. and 13,400 internationally.

They believe it highly unlikely that the FDA would remove Tysabri from the market once again following these latest cases of PML for reasons that include the fact that no confirmed cases have occurred in the U.S. and they suspect the Agency has gained comfort that the TOUCH program is working.

Second, they note comments made by Dr. Russ Katz, Director of the Division of Neurology Products at the March 2006 FDA advisory panel where it was recommended that Tysabri be reintroduced into the U.S. market. Prior to the start of the panel, Dr. Katz said "It is absolutely critical to state at this point that if marketing is permitted, we fully expect that additional cases of PML, many likely to be fatal, will occur."

Key will be whether the recent incidences of PML will impede growth in Europe or perhaps contract usage and if physicians in the U.S. will discontinue treatment or at least not initiate treatment in new patients.

Notablecalls: I have bought some ELN for my L-T investing acccount here around $11. I see the PML problem as a minor issue. The only risk here are the big funds that may be dumping the stock over the next couple of weeks due to risk-management issues.

On the valuation side, ELN's now dirt cheap. I suggest you ignore the media ga-ga and start buying some.

Long ELN