Stocks To Watch: AmTrust Financial Services, Molycorp, Transocean...

by: SA Stocks To Watch


SA contributors highlight stocks to watch for unusual movement, their bias (long/short), and brief comments.

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AmTrust Financial Services (NASDAQ:AFSI) - long - Don Dion
  • AFSI reports earnings Thursday (8.7) before-market.
  • AFSI has gapped up the past five out of six quarters and moved up over the day the past three out of four quarters, on positive results.
  • Given this pattern and AFSI’s recent relative strength, it is likely AFSI could move up again Thursday.
Molycorp (MCP) - long - Pat Stout
  • The bad -- Reported a miss on earnings and revenue.
  • The good -- Secured $400 million financing.
  • The encouraging -- Production volume increased, pricing stable to lower.

Transocean (NYSE:RIG) – long - Chris Lau

  • Analysts downgraded RIG ahead of quarterly results.
  • After market close company reported revenue of $2.33 billion, beating consensus.
  • Earned $1.61 per share.
  • Upcoming dividend payment should give support for stock at current prices.
  • BP also caught in down-trend (link: here), but might bottom soon.

Theravance, Inc (THRX) – long – Chris Lau

  • Quarterly revenue and earnings lower than consensus, but market anticipated results.
  • Stock is already down a significant 37.20% from yearly high. 26% drop was in previous month alone.
  • Firm initiated dividend of $0.25 per share quarterly, as promised.
  • Steady royalty income should ease worries and attract income investors.

Tibco Software (NASDAQ:TIBX) – short – Chris Lau

  • Tibco moved sharply higher, closing up 7.51% yesterday on renewed takeover talk.
  • Company fundamentals remain subdued: license revenue is not picking up.
  • Last quarter, Q2, licensing revenue dropped 7% YoY, non-GAAP operating income fell 15%.
  • Firm still has 581M in cash, is cash flow positive.
  • Jaspersoft acquisition could weigh on results this year.
  • Ongoing discussions of takeover could propel shares higher but will be short lived. See Nuance (NASDAQ:NUAN) as example of what happens when talks break down.

Time Warner (NYSE:TWX) - long - Chris DeMuth Jr.

  • Fox announced it had "withdrawn its proposal to acquire Time Warner" for approximately $86 / share in cash and stock.
  • Withdrawal of the offer does not change the intrinsic value of TWX which is $85/share +/- $5.
  • Many alternatives remain that could be superior to this standalone value:
    • A significant leveraged recap by using current cash and increasing Net Debt to EBITDA from 2.1X to 5X.

    • Alternative buyers include Google (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), or Verizon (NYSE:VZ).

    • Fox could retool their approach and try again.

Walgreen (WAG) - long - Pat Stout

  • Stock price hard hit after earnings outlook reduced.
  • Increased quarterly dividend to 33.75 cents per share, set long-term payout at 30% to 35%.
  • Plans on spending $3.13 per May 31st outstanding shares to repurchase shares by year-end FY2016.

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