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Will Molycorp Be Delisted?
- Molycorp recently received an NYSE notice that the stock could be delisted after trading below $1 for 30 consecutive days.
- With consistent cash burn and operating losses, I do not see any near term catalysts to drive the stock back above $1 for an extended period.
- Investors should avoid MCP as an NYSE delisting appears imminent.
FMC Technologies Is A Short
- FMC Technologies provides products and services to oil and gas companies involved in deep water exploration.
- Oil prices are in free fall and big oil companies are reducing investment.
- The U.S. oil rig count is at the lowest level in nearly 18 months. The rig count is expected to fall further.
- I expect FMC's forward revenue and earnings to decline as the oil industry contracts.
- At 15x trailing earnings FMC is a short.
AbbVie Earnings Preview: HCV Cocktail In Focus
- AbbVie reports Q4 earnings Friday before the market opens.
- The company is heavily dependent upon HUMIRA, which currently accounts for about 65% of total revenue.
- Its HCV treatment, Viekera Pak, was approved by the FDA in December and has been competitive in the marketplace against Gilead's Harvoni.
- If management confirms that Viekera Pak is being prescribed in large amounts, it could drive the stock dramatically higher.
Qualcomm: Caught Between Apple, Samsung And A Hard Place
- In Q1 Qualcomm beat on revenue and earnings, but lowered forward guidance.
- Management alluded that Samsung could drop Qualcomm's Snapdragon 810 processor for one of its units - most likely the Galaxy S5.
- Management also alluded that Apple's increased share as an OEM has changed its business mix, and lowered average chip unit prices.
- Revenue and profitability could decline for the foreseeable future in the QCT segment. Qualcomm is a sell.
Valero: Evaporating Brent/WTI Spread Spells Trouble
- Valero reports Q4 earnings before the market opens on Thursday.
- The average Brent/WTI spread has declined from nearly $12 in Q4 2013 to less than $1 through year-to-date January 2015.
- Ethanol prices have fallen over 25% from their peak in Q1 2014. Valero gets over 10% of operating income from ethanol operations.
- I expect the company to report weak guidance for Q1 2015 and beyond. Investors should avoid Valero.
Qualcomm Q1 Earnings: 4 Things You Need To Know
- Qualcomm reports quarterly earnings after-hours on Wednesday.
- Royalty disputes with customers and China's anti-monopoly investigation have provided headwinds to the stock.
- Apple reported explosive iPhone sales on Tuesday. As a chip supplier for the iPhone 6, Qualcomm could benefit from iPhone sales.
Molycorp Hits 52-Week Low On DA Davidson Downgrade
- Molycorp hit a 52-week low after DA Davidson downgraded the stock on Friday to Neutral from Buy.
- DA Davidson noted that production issues at Mountain Pass remains a major concern.
- Investors should avoid the stock as production issues could amplify cash burn.
Could Samsung Be Setting Up To Hurt Micron?
- Samsung is rumored to become the main supplier of application processors for Apple's new iPhone 7, replacing TMSC.
- Last week sources claimed Samsung was replacing Qualcomm's Snapdragon chip inside the Galaxy S5 for the Exynos which is made in-house.
- As Samsung grows its semiconductor business, I expect it to seek more market share in DRAM and NAND, hurting Micron.
- Micron remains a hold.
Skyworks Beats Q1 Estimates On iPhone Strength
- Skyworks' fiscal Q1 revenue and earnings topped analyst expectations.
- As a supplier for the iPhone 6 and 6 Plus, the company is benefiting from sensational sales growth of Apple's first entry into the phablet space.
- At 28x earnings, Skyworks' expected revenue and earnings growth appear priced into the stock.
Bankruptcy Rumors Hammer Molycorp
- Molycorp hit a 52-week low Thursday on fears of a debt restructuring.
- A potential restructuring could take the form of debt forgiveness or a debt-for-equity swap.
- Investors should avoid MCP on the potential for another dilutive event.
Precision Castparts Earnings Preview
- Precision Castparts is set to announce Q4 earnings after-hours today.
- Last week the company warned revenue and earnings would be negatively impacted by weak demand from oil & gas distributors and destocking by aerospace clients.
- I expect the company to deliver a weak outlook for 2015. At 16x earnings, investors should avoid PCP.
BlackBerry: Samsung Takeover Rumors Persist
- Canada's Financial Post is reporting Evercore Partners has outlined a case for Samsung to acquire BlackBerry.
- BlackBerry was up over 7% after-hours Wednesday on the news.
- The rumor comes as Samsung's smartphone sales are in free fall.
- In my opinion, BlackBerry can offer superior returns to investors on its own.
- Any potential deal would come at a huge premium to BlackBerry's current price of $9.93 per share.
2 Metrics That Will Make Or Break Netflix
- Netflix is set to report Q4 earnings after-hours today.
- The market is expect 5% sequential growth in revenue and 4 million subscribers.
- Cost of sales - currently 68% - will be another key metric as competition for content is expected from CBS and HBO.
- A miss on any key metrics could cause double digit sell-off akin to Q3 2014. Netflix is a hold.
Baker Hughes To Lay Off 7,000 Employees As Oil Prices Free Fall
- Baker Hughes delivered stellar Q4 earnings, but announced 7,000 layoffs as oil drilling declines.
- Oil prices are in free fall, and I expect the company's revenue and earnings prospects to decline in Q1 2015.
- The company's 14x full-year 2014 earnings multiple is unjustifiable given declining growth prospects.
- Baker Hughes is a sell.
Gilead, Abbvie Price War May Reach Fever Pitch In Europe
- Last week European regulators approved Abbvie's HCV cocktail.
- European health systems have garnered steep discounts on Gilead's HCV treatment. Abbvie's presence may trigger a price war.
- The HCV market is expected to exceed $19 billion in 2016 - big enough for both companies to make money.
Schlumberger's Q4 Earnings Portend Protracted Decline In Oil Industry
- Schlumberger's Q4 revenue and normalized earnings were flat sequentially.
- A $1.8 billion restructuring charge included $296 million related to 9,000 job cuts, as Schlumberger and the overall oil industry contract amid declining oil prices.
- Current oil prices are 56% below their June 2014 peak, and may fall further.
- I expect revenue and earnings to decline going forward. At 15x normalized earnings, Schlumberger is a sell.
BlackBerry Up On Reported Samsung Takeover Interest
- Reports have surfaced that Samsung has approached BlackBerry about a potential takeover. The stock soared 30% on the news.
- The stock fell after hours after BlackBerry denied takeover talks.
- Samsung appears desperate for any solution to its own smartphone woes.
- A deal would be improbable since BlackBerry is months from executing its strategic plan and delivering superior value to shareholders.
Premier Oil Tanks 7% On $300MM Impairment Charge - Who's Next?
- Premier Oil opened down 7% after warning it would incur a $300MM (after-tax) impairment charge on assets due to declining oil prices.
- Its slowing top line growth, declining operating margins and impairment charge may be a harbinger for the oil industry.
- Rising oil prices appear to be correlated to the Fed's quantitative easing.
- Now that the Fed has taken away the punch bowl, oil prices should remain low. Investors should avoid oil stocks.
Avoid SanDisk On Declining NAND Pricing Power And Gross Margins
- SanDisk warned fourth quarter revenue would be at least 6% below previous estimates.
- Weaker sales occurred in the retail channel and in iNAND products (from 24% - 32% of revenue).
- Industry chatter suggests Samsung's crumbling smartphone sales left it with excess NAND supply, which it dumped onto the market.
- Declining pricing power and gross margins are not expected to abate any time soon. Investors should avoid SanDisk.
Micron Hit By Reported Samsung DRAM Expansion
- Northland Securities is reporting that Samsung has plans to ramp up capacity in DRAM.
- Micron fell nearly 3% Tuesday on the news.
- With 68% of its revenue coming from DRAM products, Micron is extremely vulnerable. Micron remains a hold.
Abbvie Retreats On Gilead, Anthem Deal. Buying Opportunity?
- Abbvie declined nearly 3% on the recent HCV deal Gilead struck with Anthem.
- BofA also downgraded ABBV, citing expectations are already priced into the stock.
- If Abbvie receives its share of the HCV pie, it should exceed analysts' expectations for 2015.
Gilead Strikes Hep-C Deal With Anthem. Stock Remains Strong Buy
- Thursday Anthem made Gilead's Harvoni its primary HCV treatment for patients.
- Anthem extracted a discount to Harvoni's $94,500 headline price.
- Lower average sales prices from Abbvie competition and insurer demands are already priced into the stock.
- At 14x run-rate earnings Gilead is ridiculously undervalued. The stock is a strong buy.
3 Reasons Why Micron Is A Hold
- Expected chip expansion by Samsung could hurt DRAM prices.
- Increased pricing power by Apple - a key client - could also negatively impact chip prices.
- Factor in stiff economic headwinds, sans QE, and Micron is a hold.
Samsung Warns Operating Profit Down 37% - Avoid The Stock
- Samsung warned that operating profit for December 2014 quarter-end was off 37%.
- Smartphone sales may still be in free fall amid competition from Apple, Xiaomi and Lenovo.
- Samsung is attempting to diversity its revenue stream, but investors should still avoid the stock.
Avoid Sony On Crumbling Smartphone Sales, Diminution Of Movie Franchise
- Crumbling smartphone sales are expected to cause Sony a loss of $2.1 billion for fiscal year-end March 2015.
- Sony is retrenching from the smartphone market in China and has limited distribution in the U.S. The overall outlook is dismal.
- In addition, leaked movies may cause a short-term diminution in the pictures segment.
- Investors should avoid Sony.
Bankers Face BlackBerry Dilemma As EZ Pass Program Expires
- Bankers are considering ending their love affair with BlackBerry once the EZ Pass program ends in February.
- Bankers question BlackBerry's lack of popular consumer products and its ability to operate as a going concern.
- BlackBerry's ability to manage non-BlackBerry devices securely should assuage bankers.
- Going concern issues should dissipate by Q1 2016 when new handset sales kick in and EZ Pass customers migrate to BES 12.
3 Reasons Why Morgan Stanley Is Wrong About BlackBerry
- Morgan Stanley recently downgraded BlackBerry to "Underweight" with a $7 price target.
- Analysts have lowered their BBRY FY16 revenue bogey, so meeting FY16 expectations is now easier.
- Based on book value alone, BlackBerry is worth $6 - $8 per share.
BlackBerry: 2 Factors Working Against Shorts
- Despite revenue declines of 34% Y/Y, BlackBerry delivered solid results for Q3.
- Non-GAAP earnings per share was $0.01 and cash flow was $43 million.
- Positive cash flow and over $3 billion of cash and investments may stymie shorts.
BlackBerry: Buy Downside Protection As Analysts Grow Cautious
- BlackBerry reports fiscal Q3 results on Friday.
- Incremental sales from the Passport could be muted by declining service revenue.
- I advise investors to remain bullish long-term, but buy downside protection "just in case".
Molycorp Hits 52-Week Low On Debt-For-Equity Swap
- Molycorp announced a $38MM debt-for-equity swap with certain convertible bondholders.
- The stock fell 10% to a 52-week low of $1.12 as the deal will increase shares outstanding.
- The transaction is a de-facto equity raise.
- I rate the stock a hold due to the potential for future debt-for-equity swaps.
Molycorp: After Q3 Cash Burn Of $48MM, Is S&P Upgrade Imminent?
- For Q3, Molycorp surprised the market with cash burn of $47 million.
- With cash on hand of $313 million, it appears to have enough liquidity to sustain itself for the next 12 months.
- An S&P upgrade could be imminent.
BlackBerry Needs To Sell 8MM - 9MM Smartphones To Meet FY16 Revenue Bogey
- Morgan Stanley downgraded BlackBerry to "Underweight" due to concerns over revenue projections.
- FY16P service and software revenue of $850MM and $500MM, respectively, implies the bogey for handsets/other revenue is $2.45B.
- At a price of $275 - $300 per unit, BlackBerry needs to sell 8MM - 9MM handsets in FY16.
- CEO John Chen previously estimated 10MM units sales were needed to break-even. I'm all in.