MOST NOTEWORTHY: Wyeth, 3SBio Inc, Cellcom Israel and Partner Communications were today's noteworthy initiations:
Citigroup initiated Wyeth (NYSE: WYE) with a Hold rating and $49 target. The firm believes the upside potential from bapineuzumab is masking the company's unfavorable average EPS and revenue growth forecast versus the industry.
Piper believes 3SBio Inc (NASDAQ: SSRX) is the market leader in a largely underpenetrated EPO market in China and sees limited downside risk. Shares were assumed with a Buy rating and $12 target.
RBC Capital initiated Cellcom Israel (NYSE: CEL) and Partner Communications (NASDAQ: PTNR) with Outperform ratings and targets of $40 and $30, respectively. RBC said they have defensive appeal given their predictable earnings stream.
MOST NOTEWORTHY: The Refining Sector, International Game Tech and Gilead Sciences were today's noteworthy downgrades:
Bernstein downgraded the Refining Sector to Market Weight from Overweight based on the weakening earnings outlook for the group. The firm downgraded Sunoco (NYSE: SUN) and Tesoro (NYSE: TSO) to Market Perform from Outperform.
Citigroup downgraded shares of International Game Tech (NYSE: IGT) to Hold from Buy following the company's lower than expected guidance and removed the stock from their Top Picks Live List. The firm lowered their target to $25 from $45. Shares were also downgraded at Oppenheimer to Perform from Outperform following the company's lower-than-expected results.
Jefferies cut Gilead Sciences (NASDAQ: GILD) to Hold from Buy following the company's Q2 results as they see limited upside catalysts and a matured core HIV drug franchise. The firm maintains a $56 target. BMO Capital downgraded GILD to Market Perform from Outperform based on valuation, flattening HIV sales, Letairis growth below expectations, and increased R&D costs.
OTHER DOWNGRADES:
Best Buy (NYSE: BBY) was downgraded at RBC Capital to Outperform from Top Pick.
Goldman removed Coca-Cola (NYSE: KO) from the Conviction Buy List.
Progressive (NYSE: PGR) was lowered to Neutral from Outperform at Credit Suisse.
MOST NOTEWORTHY: UAL Corp, WPP Group, Aventine Renewable and VeraSun Energy were today's noteworthy upgrades:
JP Morgan upgraded UAL Corp (NASDAQ: UAUA) to Overweight from Neutral based on valuation and expectations for the company to make a capital announcement on next week's conference call.
Citigroup upgraded shares of WPP Group (NASDAQ: WPPGY) to Buy from Hold as they believe the company's diversification will lead to low earnings volatility.
UBS upgraded Aventine Renewable (NYSE: AVR) and VeraSun Energy (NYSE: VSE) to Buy from Neutral based on expectations for margin improvements following recent corn price declines.
OTHER UPGRADES:
Werner Enterprises (NASDAQ: WERN) was upgraded to Neutral from Underweight at JP Morgan and to Neutral from Underperform at Merrill.
Wachovia raised Yum! Brands (NYSE: YUM) to Outperform from Market Perform.
Entergy (NYSE: ETR) was lifted to Buy from Hold at Jefferies.
MOST NOTEWORTHY: Solarfun Power, BioMarin Pharmaceutical and Genentech were today's noteworthy initiations:
Jefferies initiated Solarfun Power (NASDAQ:SOLF) with a Buy rating and $18 target. The firm believes the one-third stake purchased by Good Energies and new management hires could generate operational momentum and that declining silicon costs may help margins.
BioMarin Pharmaceutical (NASDAQ:BMRN) was started at Oppenheimer with a Perform rating. The firm recommends waiting for Street estimates on Kuvan sales to moderate and for positive pipeline signals before adding to positions.
Genentech (NYSE:DNA) was initiated at Citigroup with a Buy rating and $91 target. The firm believes several studies could lead to robust growth and points out the company's Q2 results showed Avastin reaccelerating due to growth in breast cancer.
OTHER INITIATIONS:
Goldman reinstated Staples (NASDAQ:SPLS) with a Neutral rating.
Zebra Tech (NASDAQ:ZBRA) was initiated with a Hold rating at KeyBanc.
Rodman & Renshaw assumed coverage of Corcept Therapeutics (NASDAQ:CORT) with an Outperform rating and $8 target.
AuthenTec (NASDAQ:AUTH) was initiated at JP Morgan with an Overweight rating and at Canaccord Adams with a Hold rating and $10 target.
MOST NOTEWORTHY: Blackboard, Starwood Hotels and ACE Ltd were today's noteworthy upgrades:
Baird upgraded Blackboard (NASDAQ:BBBB) to Outperform from Neutral based on two new state-wide deals with New Mexico and North Carolina, K-12 growth, and up-selling and cross-selling opportunities. The firm raised Blackboard's target to $45 from $38.
Wachovia raised Starwood Hotels (NYSE:HOT) to Outperform from Market Perform citing valuation, high international exposure, and secure capital structure and dividend.
Citigroup upgraded shares of ACE Ltd (NYSE:ACE) to Buy from Neutral on valuation, as they believe additional selling from the company's redomestication to Switzerland will be offset by short covering. They view the recent weakness as an attractive buying opportunity and raised their target to $63 from $58.
MOST NOTEWORTHY: eBay (EBAY), Wells Fargo (WFC) and ASML Holdings (ASML) were today's noteworthy downgrades:
Thomas Weisel downgraded shares of eBay (NASDAQ:EBAY) following the company's Q2 results, as they did not see an improvement in the underlying fundamentals. Goldman lowered eBay to Neutral from Buy and cut its target to $30 from $38.
UBS downgraded Wells Fargo (NYSE:WFC) to Neutral from Buy citing valuation and reduced capital flexibility.
Merrill downgraded shares of ASML Holdings (NASDAQ:ASML) to Underperform from Neutral as they believe the company's demand slowdown could carry into next year.
OTHER DOWNGRADES:
Starbucks (NASDAQ:SBUX) was cut to Neutral from Buy at Piper.
Nokia Corp. (NYSE: NOK) shares are up over 7.4% in premarket trading after the world's largest maker of handsets said second-quarter profit fell 61% to $1.75 billion, or 46 cents per share, while sales rose 4% to $20.87 billion. Excluding items, Nokia's profit rose 8% to $2.18 billion. Nokia beat estimates of earnings of 56 cents per share on $20.05 billion in revenue, according to Thomson Financial. The mobile phone maker slightly raised its forecast for the mobile phone industry, saying volume would grow 10% or more in 2008.
Continental Airlines (NYSE: CAL) are up again this morning after climbing 38% Wednesday with the rest of the airline stocks. Continental swung to a second-quarter loss, hurt by record high fuel prices and weakening economic conditions. Still the losses of $3 million, or 3 cents per share, or excluding one-time items totaled $25 million, or 25 cents per share, beat expectations of a loss of 49 cents per share.
Yum Brands (NYSE: YUM) shares are down 4.3% in premarket trading after it reported a second-quarter profit of $224 million, or 45 cents a share. Revenue rose to $2.65 billion from $2.37 billion a year ago. While this beat estimates, and while the company raised its earnings growth forecast for the full year to 12% from 11%, investors were concerned about rising food costs which hurt profit margins in the second quarter.
It seems that Apple Inc. (NASDAQ: AAPL)'s new 3G iPhone was sold out in Germany after less than a week. Deutsche Telekom AG's T-Mobile division sold 15,000 iPhones and it's not clear when Apple will be able to deliver more iPhones for the German market, Financial Times Deutschland reported.
MOST NOTEWORTHY: P.F. Chang's, ViroPharma and CSX Corp were today's noteworthy upgrades:
Jefferies upgraded shares of P.F. Chang's (NASDAQ: PFCB) to Buy from Hold to reflect the company's capital preservation focus, which they believe will drive a best-in-class free cash flow yield in 2009. Despite upgrading shares, Jefferies lowered their target price to $28 from $31.
Thomas Weisel raised ViroPharma (NASDAQ: VPHM) to Overweight from Market Weight on valuation as they believe the sell-off on the Lev Pharmaceuticals (LEVP) acquisition is unwarranted. The firm raised their target price to $15 from $10.
Merrill upgraded CSX Corp. (NYSE: CSX) to Buy from Neutral based on valuation and improved results.
OTHER UPGRADES:
Borg-Warner (NYSE: BWA) was upgraded to Outperform from Neutral at Baird.
Credit Suiise raised Walgreen (NYSE: WAG) to Outperform from Neutral.
MOST NOTEWORTHY: Veraz , Cisco Systems and tw telecom were today's noteworthy downgrades:
Jefferies downgraded shares of Veraz (NASDAQ: VRAZ) to Underperform from Hold after the company pre-announced a Q2 miss, as they are concerned about the company's ability to execute a turnaround. Jefferies lowered their target to 85c from $2.50.
Credit Suisse cut Cisco Systems (NASDAQ: CSCO) to Neutral from Outperform as they believe carriers may reduce spending given the slowing economic growth. Credit Suisse lowered their target price to $24 from $31.
JP Morgan downgraded tw telecom (NASDAQ: TWTC) to Underweight from Overweight on concerns enterprise trends will continue to deteriorate.
MOST NOTEWORTHY: Cleveland Cliffs, Synthesis Energy and Bookham Tech were today's noteworthy initiations:
KeyBanc believes the pullback in Cleveland Cliffs (NYSE: CLF) shares is an attractive entry point given acceleration of North American Iron Ore pellet contract pricing and increased pellet production into 2009. Shares were assumed with a Buy rating and $180 target.
Stanford believes the Synthesis Energy's (NASDAQ: SYMX) U-GAS technology offers several advantages, including the ability to use waste/low grade coal and operational cost savings and intitiated shares with a Buy rating and $12 target.
Morgan Keegan started Bookham Tech (NASDAQ: BKHM) with an Outperform rating and said the company continues to benefit from a expanding customer base, timing of new product introductions, and new products.
OTHER INITIATIONS:
Arris (NASDAQ: ARRS), Garmin (NASDAQ: GRMN) and Harmonic (NASDAQ: HLIT) were initiated at RBC Capital with Sector Perform ratings.
Citigroup assumed Delphi Financial (NYSE: DFG) with a Hold rating and $23 target.
VanceInfo (NYSE: VIT) was initiated with an Outperform rating and $12 target at Oppenheimer.
Tribune, formerly a public newspaper and broadcast company, lost the publisher of its largest newspaper, the LA Times, and the editor of its flagship, the Chicago Tribune. New controlling shareholder Sam Zell is in trouble, burdened by buyout debt he may not be able to pay.
Most analysts saw another modest drop in newspaper ad revenue this year. It has been much worse than that. At some companies in the industry, ad sales are off nearly 15%. An analyst recently dropped his price target on The New York Times Company (NYSE: NYT) to $8 and said the firm would have to cut its dividend. The stock currently trades at $13.21.
The two public companies which are at most risk for not making it another year are Gatehouse (NYSE: GHS) and McClatchy (NYSE: MNI). Both took on big debt loads buying newspaper properties. Both are seeing operating income chopped by falling sales. Either could hit debt service problems which could force them to sell properties of file for Chapter11.
Gatehouse dropped as low as $1.11 in the last few days. Its 52-week high is $19. McClatchy is down to $4.93 from a 52-week high of $28.65. Gatehouse is the most troubled with a high dividend and $1.3 billion in long-term debt.
Newspapers companies have gone from being in a tight spot to being candidates for liquidation. They are a short-seller's dream.
Genentech Inc. (NYSE: DNA) said Monday its profit rose 5% on sales of its blockbuster cancer drugs to $782 million, or 73 cents per share. Excluding charges, the company earned 82 cents per share. Revenue rose 8% to just under $3.24 billion. The results did not meet analysts expectations, according to Thomson Financial, expected profit of 86 cents per share on revenue of $3.23 billion. The biotechnology company raised its full-year outlook on expectations for additional sales gains, allowing shares to trade 1.4% higher in premarket action.
The downgrades in financials continue. While Wachovia itself has been hit with downgrades two days in a row now,it cut AIG (NYSE: AIG) stock to Market Perform from Outperform. AIG shares are declining over 6.3% in premarket trading.
Staying with financials, the faith of Lehman Brothers (NYSE: LEH) is all but certain these days. LEH shares plunged some 40% in the past five days alone (81% yea-to-date) following speculation about clients leaving and a reported search for new strategic options. But can Lehman find any bidders? With employees controlling around 30% of the stock this would be a more difficult deal than usual. But as Lehman is being compared lately to Bear Stearns, the brokerage firm may not have much choice. LEH shares are declining yet another 2.4% in premarket trading after sinking over 14% Monday.
Who is next to fail/fall? That seems to be the only question on investors' minds these days, and this morning is not different as concern about the health of the financial sector grows. With global markets plunging overnight, the dollar falling to yet another record low against the euro and ahead of a day full of economic data releases and earnings, as well as a testimony from Fed chairman Bernanke, U.S. stock futures dropped this morning, indicating the market is poised for a lower open.
On Monday, what seemed like might be a promising day with the government plan to bail out Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and several large deals including the mega beer deal between Anheuser-Busch (NYSE: BUD) and InBev. But once again financials took front stage and after IndyMac was seized by federal regulators over the weekend Wall Street tumbled. The Dow industrials fell 45 points, or 0.41%, the S&P 500 dropped 11 points, or 0.9%, and the Nasdaq Composite lost 26 points, or 1.17%.
As the day go on, investors will have more to chew on though as several economic reports are due out today. June Producer Price Index, a measure of inflation at the wholesale level, is due before the market open, at 8:30 a.m. EDT. While economists expect a smaller increase in prices in June, an increase is expected for both PPI and core-PPI, which excludes food and energy prices. At the same time, June retail sales will be released, and may show a nice increase due to the government checks. July NY Empire State Index will also be released at that time and it's likely we'll see it decline further. Then, 10:00 a.m., a reading on business inventories for May is due.
Halliburton (NYSE: HAL) shares are trading higher today after an analyst wrote in the Wall Street Journal over the weekend that despite rises in oil prices, many oil stocks and oil service companies are undervalued based on price/earnings ratios. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on HAL.
After hitting a one-year low of $30.00 in January, the stock hit a one-year high of $55.38 earlier this month. HAL opened this morning at $48.23. So far today the stock has hit a low of $48.23 and a high of $50.08. As of 1:05, HAL is trading at $48.90, up $1.03 (2.1%). The chart for HAL looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $42.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.5% return in just five weeks as long as HAL is above $42.50 at August expiration. Halliburton would have to fall by more than 13% before we would start to lose money.
HAL hasn't been below $44 at all since April and has shown support around $45 recently. This trade could be risky if the price of oil drops off in the coming month, but even if that happens, this position could be protected by the support the stock might find around $45 where it formed a bottom in early May.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in HAL.
NASDAQ OMX (NASDAQ: NDAQ) shares are trading higher today after an analyst at Barron's said the stock is undervalued, adding there is "an extraordinary opportunity" to buy NDAQ at a discount. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on NDAQ.
After hitting a one-year high of $50.47 in November, the stock hit a one-year low of $22.76 last week. NDAQ opened this morning at $27.14. So far today the stock has hit a low of $24.57 and a high of $27.20. As of 1:00, NDAQ is trading at $24.81, up $0.48 (2.0%). The chart for NDAQ looks bearish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in just five weeks as long as NDAQ is above $20 at August expiration. NDAQ would have to fall by more than 19% before we would start to lose money.
NDAQ hasn't been below $22.50 at all in the past year and has shown support around $23 recently. This trade could be risky if the company's earnings (due out 8/6) disappoint, but even if that happens, this position could be protected by the support the stock might find around $22.50 where it has bottomed thus far.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in NDAQ.
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MOST NOTEWORTHY: Wyeth, 3SBio Inc, Cellcom Israel and Partner Communications were today's noteworthy initiations:
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