By Larry Gellar
Not too long ago, CNBC’s Jim Cramer offered 5 stock picks that were set to skyrocket. Let’s see how those stocks have done since then:
Amazon.com (NASDAQ:AMZN) – Recommended at $206.53; now trading at $239.83. A wise pick by Cramer for now, this stock may start hurting in the future once new tax laws are implemented. Essentially, many states are looking to take California’s lead on making Amazon collect sales tax. On the other hand, AMZN stock has been benefiting lately from all the problems that Netflix (NASDAQ:NFLX) is having.
Those have centered on the company’s recent price increase, which led Netflix to announce that it probably will not have as many subscribers this quarters as previously thought. Analysts around the country do not like where this stock is headed. In fact, Caris & Co. cut the stocks’ rating to average, but more importantly reduced its price target from $322 to $185. Piper Jaffray is another firm that’s cut its price target on this stock.
Other important competitors for Amazon include Barnes & Noble (NYSE:BKS) and eBay (NASDAQ:EBAY). Barnes Noble is currently suffering from negative trailing twelve-month earnings, while EBAY’s price to earnings ratio is about a quarter of Amazon’s. As for price to sales, EBAY is the highest in that department at 4.11, while BKS is a mere 0.09. Margins for Amazon are 22.45% gross and 3.14% operating.
Salesforce.com (NYSE:CRM) – Recommended at $126.58; now trading at $136.85. In fact, Cramer recently said this about the company: “I want you to buy some Monday. This one comes roaring back in this seasonal period”. Salesforce.com’s Chatter program is one product that has investors across the country excited. This program facilitates communication within a company, and many executives are finding it to be crucial to their operations.
One of Salesforce.com’s recent acquisitions, Radian6, should also help boost the company’s cloud computing lineup. Salesforce.com also recently named Miguel Milano as President of the company’s EMEA operations. Says Hilarie Koplow-McAdams, head of worldwide sales: "Miguel is a world-class executive with a proven track record for driving growth. He will be a tremendous asset for salesforce.com and will play a key role in driving our social enterprise message across EMEA".
Important competitors for Salesforce.com include Oracle (NYSE:ORCL) and SAP (NYSE:SAP). CRM has much higher value measures than both of these: Price to earnings is 666.15, price/earnings to growth is 3.59, and price to sales is 9.25. Gross margin for CRM is strong - 79.42% - while operating margin is weak at 0.84%. As for cash flows, the company had $587 million flow out in 2010 and $25.5 million flow in during the first half of 2011.
EOG Resources (NYSE:EOG) – Recommended at $91.55; now trading at $90.15. EOG Resources has been receiving quite some attention from investors for its play at Eagle Ford. As discussed at another Seeking Alpha article though, the company’s operations in the Williston Basin are also proving to be quite successful. Specifically, Parshall Field in Mountrail County is doing rather well.
The Wolfcamp is another area that looks exciting for EOG. CEO Mark Papa had this to say about the shale formation: “This play is truly in the first inning… We've seen enough of the data from our drilling out there”. On the other hand, Sterne Agree recently downgraded EOG Resources. EOG’s return on capital employed was apparently one factor in this.
Important competitors for EOG include Anadarko Petroleum (NYSE:APC), Apache (NYSE:APA), and Sonde Resources (NYSEMKT:SOQ). With the exception of SOQ, which has negative trailing twelve-month earnings, those companies offer lower price to earnings and lower price to sales than EOG. Other statistics like gross margin, operating margin, and price/earnings to growth put EOG at about the middle of the pack. Cash flow for EOG has been good with $103 million flowing in during 2010 and $788 million flowing during the first half of 2011. Recent issuance of stock have played a role in these cash flows.
Honeywell (NYSE:HON) – Recommended at $47; now trading at $47.85. News in aerospace/defense has actually focused on a possibly buyout of Goodrich (NYSE:GR) from United Technologies (NYSE:UTX). Tyco (NYSE:TYC) and Honeywell are two other companies that United Technologies might consider. Honeywell has also announced that it will double capacities related to its copper and tin businesses.
These metals have become increasingly important for companies in the semiconductor industry. In fact, here’s what the relevant product line director Mike Norton had to say:
We are committed to meeting the growing needs of the industry for advanced, high-purity metals… We are doing that by making the supply chain and technology investments necessary to meet industry requirements and support our customers, whether they are working on leading-edge technology nodes or within the more mature spaces within the semiconductor industry.
BorgWarner (NYSE:BWA), Johnson Controls (NYSE:JCI), and United Technologies (UTX) are all important competitors for Honeywell. All of these companies trade at about the same range for price to earnings and price/earnings to growth. Gross margin and operating margin for Honeywell are about average as well: Those numbers are 24.21% and 10.25% respectively. As for cash flows, Honeywell had $151 million flow out in 2010 and $898 million flow in for the first half of 2011.
Sanofi-Aventis (NYSE:SNY) – Recommended at $36.47; now trading at $33.46. Concerns have been raised that this company’s revenues will decline significantly as generic versions of Sanofi’s drugs continue to come out. With this in mind the company has named six ways it can improve profits: Emerging markets, animal health, innovative products, consumer healthcare, diabetes solutions, and human vaccines.
That didn’t save the stock from a downgrade from Credit Suisse (NYSE:CS) though, and that firm believes the company could face some short-term financial problems due to poor sales. As discussed here however, Sanofi’s R&D efforts have been going well. Attempts to cut costs are also happening as planned.
Important competitors for Sanofi-Aventis include GlaxoSmithKline (NYSE:GSK), Merck (NYSE:MRK), and Pfizer (NYSE:PFE). SNY offers the lowest price to earnings and price to sales out of the 4 , although it also has the highest price/earnings to growth ratio. Margins for SNY are about average – gross is 71% and operating 22.16%. Cash flows for the company have been pretty good with 1.807 billion euros coming in during in 2010 and 73 million euros coming in during the first half of 2011.
The recent diminished cash flows have been due to non-capital investing expenditures. Additionally, this stock could be a good choice for dividend investors – dividend yield is 3.9%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.