Futures are lower this morning, and so too is oil. It seems that growth worries are once again causing concern in the market and we still have infighting in Europe on many fronts. Also of importance, which could affect telecom makers' shares here in the U.S. this morning, is a draft from Congress which states that China's Huawei and ZTE should be barred from sales in the U.S. on the premise of national security. It is a dangerous road to go down, but if the rumors of hardware coming preloaded with malware and programs which could undermine the country during wartime are true, then it would be necessary. It will be an interesting story to watch to see how China responds if the U.S. does keep their manufacturers from selling here.
We will not have any economic news out today and investors will have to wait until Wednesday until the first batch this week.
Looking at Asian markets we see markets are lower:
- All Ordinaries - down 0.26%
- Shanghai Composite - down 0.56%
- Nikkei 225 - CLOSED
- NZSE 50 - up 0.49%
- Seoul Composite - down 0.67%
In Europe markets are lower:
- CAC 40 - down 1.23%
- DAX - down 1.33%
- FTSE 100 - up 0.02%
- OSE - down 0.81%
We have been bearish many of the social media names with Zynga (ZNGA) being one of the names at the top of our list ever since the Nasdaq botched Facebook's IPO. The company pre-announced last week and shares have been taken to the woodshed, with shares falling another $0.34 (11.90%) on Friday to close at $2.48/share to continue the losing streak that has taken place over the past few weeks. The competitive landscape is changing and the company appears to be bleeding talent. It is a bit ironic that this social media story has gone negative so quickly with investors praising the IPOs initially due to the companies having real revenues and, in some cases profits, to now worrying whether some of these names will be around in the near future. We would still recommend staying away from this stock at this time, it is dead money at best and a dead position at worst.
Monster Worldwide (MWW) is another name which saw shares fall sharply on Friday. The shares fell off of a cliff, down $0.75 (9.32%) to close at $7.30/share, after news reports surfaced that private equity firms which had taken a look at the company for a buyout had walked away. At this point we wonder who is left to buy the company now…and if anyone, then the question is at what price. This certainly has not been a name to play for a buyout, even though the company has been actively shopping itself. We would continue to stay away from playing this as a takeover story, however if shares trend much lower as the premium is taken out this could become a value play so it is definitely worth keeping an eye on.
Starbucks (SBUX) and Green Mountain Coffee Roasters (GMCR) have both seen their shares come under pressure in recent months. It has been two very different stories forcing shares lower, but the end result has been the same for both companies. We have been receiving emails asking U.S. about our take on the two companies and which one was a better value. To U.S. the answer is simple, we would stick to Starbucks and forget Green Mountain Coffee Roasters. Starbucks is a much larger, more diversified company which has proven that it is more than a one hit wonder and that the company can reinvent itself and appeal to changing consumer tastes/demands.
Another name which we received a few emails about was Sarepta Therapeutics (SRPT) which saw shares fall $3.62 (9.55%) on Friday to close at $34.30/share. Volume was 6.8 million which was still about three times higher than the company's three month daily average. We would encourage readers not to get worried about this name right now as the stock is going to consolidate after the huge run-up, which is the reality when these run-ups occur. We have no position here, but if we were inclined to initiate one then we would wait until we saw the stock begin to build a foundation after a retracement. Stocks never just rise, they rise and take a few steps back to then take a few more steps forward.