By Larry Gellar
Popular ETFs such as DIA, QQQ, and SPY were up big on Wednesday, as the market got a boost from good news regarding the status of European bailouts. Specifically, a lawsuit that would stop Germany from helping other countries in the European Unit was shot down. Here are 5 other stocks that were in the news today:
Progress Energy Inc. (PGN) was up over 1% on Wednesday, but news has come out that Americans may start demanding less electricity. The full details can be found here, and the culprit may be improving efficiency of devices that use electricity. Light bulbs are changing, as well as big consumer appliances like washing machines. Note that this in part due to government subsidies that make energy-efficient hardware more likely to found in homes nowadays. The Electric Power Research Institute believes electricity demand will fall by approximately 0.5 percent per year in the next decade, and economic factors are also contributing to this. More people are living together to save money in this tough economy, and even simple things like shutting off lights not in use are being done to trim electric bills. Needless to say, this type of news bodes poorly for businesses like Progress Energy. Other important electric companies include Duke Energy (DUK), NextEra Energy (NEE), and Southern Company (SO). Progress has a cheaper price to sales ratio than all of those, although other value metrics like price/earning to growth and price to earnings are closer to the middle of the pack. Gross margin isn’t tremendous at 35.22%, although operating margin at 20.47% is a bit better.
Yahoo Inc. (YHOO) was up over 5% on Wednesday due to the firing of CEO Carol Bartz. In fact, the breakup was particularly messy, as Bartz was apparently fired over the phone. One complaint that shareholders had under Bartz was that the company did not evolve quickly enough unlike rivals such as Facebook and Google (GOOG). It’s not hard to understand why this happened though – Yahoo! was tremendously successful during the 90s. Regardless, the question now is who will be the next CEO. Yahoo!’s current CFO and interim CEO Timothy Morse is one guess. Another possibility from within Yahoo! itself is Ross Levinsohn, known for his work involving News Corp.’s (NWSA) acquisition of Myspace. From News Corp. itself is Jonathan Miller, the company’s chief digital officer. As far as value metrics, Yahoo! is in between AOL and Google for ratios such as price to earnings, price/earnings to growth, and price to sales. Gross margin of 64.32% and operating margin of 15.16% also puts Yahoo! in the middle of these two other Internet giants. Cash flows have been a stumbling block for Yahoo! - $1.501 billion left the company in 2010 and $515 million left the company in 2011. Stock buybacks have a played a role in this, however.
General Motors Company (GM), as well as Ford (F) and Chrysler, are in the midst of negotiations with United Auto Workers. Reports claim that General Motors may be closer to a deal than its rivals, however. This, along with generally bullish sentiment, sent the stock up over 6% on Wednesday. Note that these negations are particularly important for Ford and GM (as opposed to Chrysler) because those two companies are believed to have much highest costs than foreign companies with factories in the U.S. One factor that’s hurting GM quite a bit now is the environment of low interest rates because its pension plan is already $10.8 billion short. On the other hand, the company doesn’t have to put anything into pension until 2015, but the company would like to reduce the risk associated with this. As Vice Chairman Steve Girsky said recently, “We don't have to put a penny into this thing until 2015 and there is a long runway from here to there… That said, we think it's a risk. The idea is to de-risk the company.” As for value metrics, GM is a bit lower than Ford in ratios such as price to earnings, price to sales, price/earnings to growth, and significantly lower than Toyota (TM) in these same measures. Gross margin of 12.49% and operating margin of 4.24% put GM in the middle of Ford and Toyota as far as margins go.
Wal-Mart Stores Inc. (WMT) was up over 1% on Wednesday, and many analysts are speculating that current economic conditions will boost the company’s earnings from back-to-school shoppers significantly. Essentially, the economy isn’t so bad that consumers are buying the cheapest items possible, but it’s not good enough that they’re avoiding cheaper retailers like Wal-Mart. The market for clothing is the most important place this trend is being seen. Wal-Mart has also been in the news for a class-action lawsuit that claims the company violated antitrust laws with its Vudu video streaming service. Most recently, it has been reported that Wal-Mart will be able to make payment related to its settlement in the form of Walmart.com gift cards. Needless to say, this move is clever for the money it will bring in, but it’s also who will receive these gift cards that matters. In fact, they will be going to Netflix (NFLX) subscribers, which means Wal-Mart will be able to see who actually subscribes to the rival service. Competitors for Wal-Mart’s brick-and-mortar business include Costco (COST) and Target (TGT). These companies have higher price to earnings ratio than Wal-Mart, although Wal-Mart is in the middle for price to sales and price/earnings to growth. Wal-Mart margins are also in between Target and Costco.
NVIDIA Corporation (NVDA) was up over 8% on Wednesday, as the company increased its outlook going forward. This led to a variety of analysts reaffirming their bullish views on the company. Arnab Chanda from Roth Capital Partners noted that NVDA looks good due to important chips being used in both Android smartphones and tablets. Mike Burton from Kaufman Brothers explained that the company’s strength lies in products related to Visual and Parallel Computing. David Wong from Wells Fargo highlighted that PC-related sales should improve, and that prices for DRAM are also getting better. Daniel Berenbaum (MKM Partners), Romit Shah (Nomura Equity Research), and Uche Orji (UBS) weren’t quite as optimistic. Other important semiconductors include Advanced Micro Devices (AMD), Creative Technology (OTCPK:CREAF), and Intel (INTC). Creative has negative trailing twelve-month earnings, although Intel and AMD are both trading at lower price to earnings ratios than NVDA. AMD and Intel offer cheaper price to sales ratios, although NVDA is in between the two companies for price/earnings to growth. Margins for NVDA are also between AMD and Intel. Recent cash flows for NVDA have been mixed - $218.14 million came in for the year ending January 30th, while $132.75 million was lost for the 6 months following that.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.