Today should be interesting as we have jobs numbers out and we want to see if the recent trend can continue. Asian markets were up big this morning as they rose on the heels of our positive economic numbers yesterday so that strong move higher was reactionary. Europe is up this morning and US futures are marginally higher at this early hour. Earnings here in the US have been disappointing so far this quarter, and we believe that technology plays may be in for a rough patch based on the numbers we are seeing for next quarter and the 'misses' this quarter. On a more serious note we think that investors need to pay some serious attention to capital allocated towards the network security and storage plays moving forward. Not speaking to any specific industry, but we believe that this may be the quarter when companies find little fat left to trim and the revenue misses taking their toll on the bottom line - it is our assumption moving forward but shall be interesting to see whether it is indeed the case.
We have economic news out today, it is as follows (data set - consensus).
Initial Claims - 360K
Continuing Claims - 3275K
Philadelphia Fed - -0.1
Leading Indicators - 0.2%
Looking at Asian markets we see markets are higher:
All Ordinaries - up 0.66%
Shanghai Composite - up 1.24%
Nikkei 225 - up 2.00%
NZSE 50 - up 0.93%
Seoul Composite - up 0.20%
In Europe markets are slightly higher:
CAC 40 - down 0.08%
DAX - up 0.29%
FTSE 100 - up 0.23%
OSE - up 0.01%
Yesterday we saw the computer network security providers come under pressure as both Fortinet (FTNT) and Checkpoint (CHKP) disappointed investors with their earnings reports. Fortinet shares fell $4.66 (18.79%) on volume of 20.8 million shares as the company adjusted their full year sales outlook by a very small amount and estimated that they would be about a penny short on earnings during the next quarter based on analysts' consensus numbers. Investors should also remember that the company's Chief Financial Officer is leaving to take the CFO position at Yahoo.
We heard much of the same from Checkpoint as we have heard from other tech names which have issued cautious tones about future prospects with 'economic uncertainties' being a key phrase used to justify their cautiousness. The company's current quarter was fine, with the earnings consensus being beat by a penny a share, however the fourth quarter guidance is what was cause for concern as the company issued a wider than normal range for their numbers. They pinpointed their cautiousness to the issues in Europe, but are still bullish of their prospects moving forward. Based off of these facts this could very well be one to buy on the weakness if you have faith that Europe will not drag down the company's results moving forward.
Shares in Cymer (CYMI) rose $23.62 (49.38%) after ASML announced that they would be buying the company for $2.5 billion in a cash and stock deal. The acquisition is structured so that 25% of it will be paid in cash with the remaining 75% to be an equity exchange. ASML believes that the acquisition will help them move forward with new technology and make them the leading player overnight. We think that the transaction will close, but we also saw some notes of caution as this will probably need to reviewed on antitrust concerns because of the nature of the sector with few players involved in this technology at this point.
We have gotten many emails and a few comments on Arena Pharmaceuticals (ARNA) and our view that the shares are worth at least $10/share with a price target of between $15-20/share. We try to keep our emotions on the sideline when investing, and that is what allowed us to remain bullish as shares headed south. With the latest run Arena is back up to $9.99 and rose $0.63 (6.71%) on volume of 17.9 million shares yesterday. We continue to believe that readers should hold shares as this will be one of the major players in the weight loss drug market and if we are correct in our thinking then the company will become a cash generating machine.
Apollo Group (APOL) saw enrollment drop by 13.8% during the latest quarter. That is a bad drop, but not nearly as bad as the 22.15% drop in the company's shares after the quarterly results were released. Shares finished at $21.40/share after falling $6.09 with volume registering at 15 million shares. We have been wary of the for-profit education sector for some time as there are far too many stories of people enrolling at these places and then not being able to obtain employment in their respective fields. That indicates that the product has little value and with enrollment down and the company closing campuses, we may be seeing the target market recognize this is a waste of their tuition money. Whatever one thinks of the business, it must be acknowledged that neither the campus closings or lower enrollment numbers are good trends.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.