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2 Reasons Why InvenSense Is Not A Viable Takeover Target
- InvenSense trades at 34x run-rate earnings.
- The crowd thinks its robust p/e multiple is due to the fact that it is a buyout candidate.
- It would be difficult to forecast InvenSense's declining asp and gross margin, and there is a risk Samsung or Apple would leave post-transaction.
- Because of these two issues, InvenSense is not a viable takeover target at this juncture.
Bristol Myers' HCV Cocktail Has Gilead, AbbVie In Its Crosshairs
- Bristol Myers' regimen for HIV-HCV co-infected patients achieved a 97% cure rate in a recent study.
- The cure rate appears on par with the 96% cure rate Harvoni achieved in patients with chronic HCV genotypes 1 and 4 co-infected with HIV.
- Individuals co-infected with HIV and HCV represent about 6% of the total HCV market.
- For this subsection of the HCV market Bristol Myers could be a threat to Gilead and AbbVie.
Molycorp Earnings Preview - 3 Key Items
- Molycorp announces Q4 earnings on Monday.
- Operating costs, potential goodwill impairment and future debt-for-equity swaps are key items I hope management will address.
- There is still money to be made in the stock. Visibility on these key items could help determine how to play this investment opportunity.
Yellen Gets Her Dander Up Over Inequality - 'A Hit Dog Will Holler'
- Fed Chairwoman Janet Yellen recently got into a shouting match after being pressed on her October 2014 speech on inequality.
- Now that QE has ended and the free fall in oil prices point to a global recession, it begs the question, "How effective was the Fed stimulus?".
- All signs point to central bankers and their policies as having led to inequality.
Baker Hughes Is Worth $33 - $48 Standalone
- Analysts have speculated on merger activity in the oil & gas industry as oil prices have declined nearly 50% since June 2014.
- Baker Hughes trades at $63. Its November merger agreement with Halliburton currently values the stock at $66.
- The oil and gas industry has been in a state of contraction since November, and Baker Hughes' future earnings estimates are much lower.
- Standalone the company is worth $33 to $48 - an indication of how far the stock could fall if the Halliburton deal gets re-priced.
Will Oil Free Fall, Petrobras Exposure Sink Dril-Quip
- Dril-Quip reports earnings before the market opens on Friday.
- The company's business prospects are down amid the contraction in the oil & gas industry.
- Petrobras represents about 8% of its contract backlog, and Dril-Quip has high exposure to offshore drillers facing liquidity strain.
- Investors should avoid the stock.
Transocean Beats Estimates, But Cash Burn And Debt Load Are Alarming
- Transocean reported Q4 earnings after-hours on Wednesday.
- The company beat estimates, but $238 million cash burn and $9.1 billion debt load are alarming.
- If the oil and gas industry continues to contract, Transocean may face a liquidity strain.
- Moody's recent downgrade of Transocean's debt to junk status may limit the company's capital raising ability going forward.
BlackBerry's Enterprise Mobility Deal With Google Is A Potential Game Changer
- Wednesday BlackBerry announced it was partnering with Google to provide enterprise mobility for Android devices.
- The deal gives BlackBerry a wider universe of mobile devices to manage.
- Google gets credibility that Android devices can operate securely within the enterprise.
- The partnership is a potential game changer.
Transocean - 3 Things Investors Need To Know
- Transocean reports earnings after hours today.
- The company is reeling under declining oil prices and a contraction in the oil and gas industry.
- Cash burn, stickiness of the company's contract backlog and expected operating costs from maintaining idle rigs are 3 things investors need to know.
- Until management addresses these issues, investors should avoid the stock.
Micron Stock A Hold On Samsung Deals With Apple And LG
- Korea Times reports that Samsung has entered DRAM deals for Apple's iPhone 6 and LG's G4 smartphones.
- Previous reports of Samsung's DRAM expansion were simply market chatter. Today's news solidifies it.
- Micron gets 68% of its revenue from DRAM. The stock is down over 3% on the news.
- Micron remains a hold.
Schlumberger Remains A Short Amid Oil Industry Contraction
- After Schlumberger announced 9,000 layoffs in Q4, I predicted it would portend a protracted decline in the oil & gas industry.
- Four weeks and 650 fewer oil rigs later, the oil industry has officially battened down the hatches.
- As a supplier to big oil, Schlumberger's revenue and margins will decline amid the contraction.
- Schlumberger is a short.
Gilead: All Is Still Well Down On The Farm
- 2015 HCV sales are projected to be about $13B, down from previous estimates of $20B.
- Market discounts have lowered Gilead's HCV revenue. However, lower prices have also expanded the market for consumers who can afford to pay.
- A $15B stock buyback program should also be a boon to the stock.
- At 14x p/e Gilead remains a buy.
Abbvie's 'One Trick Pony' Faces Patent Expiration In 2016
- HUMIRA represents 63% of Abbvie's total revenue. HUMIRA's $14B run-rate revenue could decline precipitously once its patent expires in 2016.
- Abbvie's HCV cocktail, Viekera Pak, will need to make up for the decline in HUMIRA.
- Non-Gilead share of 2015 HCV sales could be about $3.3B. However, Viekera Pak will have to split that $3.3B pie with Merck and any new entrants.
- Abbvie is in a precarious position.
Molycorp's Potential Delisting Still In Play
- Despite its rapid appreciation over the past month, MCP is still not in compliance with the NYSE's minimum average share price requirement.
- To meet the requirement for February, it MCP must close at $1 or above on Friday and it must at least average $2.79 over next 5 trading days.
- I do not think it will get there. A potential delisting is still in play.
3 Reasons EIA Report Will Drive Financial Markets In 2015
- Thursday's EIA Petroleum Status Report had the market tuned in.
- Oil stocks increased about 8 million barrels, less than the 14 million increase predicted by the API.
- As traders look for signs that oil prices have bottomed, all eyes will be on the EIA report.
- Oil prices will determine which oil producers will survive, impact high-yield bond returns, and have an outsized impact on U.S. unemployment figures.
Molycorp's $1.4B Bonds Are Screaming Bankruptcy
- Molycorp's stock has risen over 200% since the beginning of February.
- Despite the euphoria from longs that Molycorp is on track to recover, nothing has fundamentally changed with the company.
- Molycorp's corporate bonds have yields as low as 28% and as high as 125%.
- Bondholders value the bonds as if Molycorp is headed for bankruptcy and I believe them.
Insiders Are Bailing On Dril-Quip
- Big oil is cutting capital outlays and reducing the rig count amid the free fall in oil prices.
- Dril-Quip sells drilling and rig equipment to the oil & gas industry. Such sales should decline as the industry contracts.
- Insider selling has accelerated over the past three months. Investors should follow suit.
Rolls Royce Accused In The Petrobras Scandal - Who's Next?
- Rolls Royce was recently accused in the Petrobras mult-billion kickback scheme.
- This comes at an inopportune time as the company expects 2015 revenue and earnings to decline due to the contraction in the oil and gas industry.
- The scandal could result in the company losing future business from Petrobras and a loss of reputation in the oil and gas industry.
Molycorp's Shorts Are Getting Cooked
- Molycorp has nearly tripled in value since a February press release divulging higher production volume and lower cash production costs at its Mountain Pass facility.
- Recent volatile trading signals short covering - 57 million shares were sold short (9 days to cover) on January 30th.
- Shorts are getting cooked, but the losses may be short-lived.
- I expect management to report another quarter of operating losses and cash burn when earnings are released in a few weeks.
Oil States International Earnings Preview
- Oil States International reports Q4 earnings on Wednesday.
- The oil & gas industry is contraction. As an oil & gas services company, I expect Oil States' future revenue and earnings to decline.
- Investors should avoid the stock.
Petrobras Represents 8% Of Dril-Quip's Order Backlog
- Seadrill recently reduced its order backlog by its $1.1B Petrobras orders (5% of total). The stock sold off 5%.
- Dril-Quip has completed $24MM of work in dispute with Petrobras and has $104MM (8% of total) of Petrobras orders in its $1.25B backlog.
- The Seadrill action may trigger a reduction in Dril-Quip's backlog as well.
- In addition to the contraction in the oil & gas industry, the Petrobras exposure makes Dril-Quip a sell.
Molycorp Nearly Triples On Higher Production Volume - Too Bad It's Ethereal
- Molycorp recently issued a press release stating Q4 production was up Y/Y and Q/Q. MCP has nearly tripled on the news.
- The positive press release followed a January 30 Seeking Alpha article on a potential delisting by the NYSE.
- It is reminiscent of a positive press release from Molycorp on June 19, 2014 - the same day Moody's announced a debt downgrade.
- The Company has never addressed cash burn, operating losses or how it would avoid a potential delisting.
- Until these matters are resolved the recent surge in the stock price could be ethereal.
Qualcomm: South Korea Opens Pandora's Box
- Qualcomm recently agreed to reduce its 4G and 3G licensing fees in China by more than one third.
- South Korea opened Pandora's Box after it launched an investigation amid complaints from Samsung and LG over Qualcomm license fees.
- I expect several countries to demand royalty rates on par with those garnered by Chinese officials.
- Revenue from chipset shipments also could decline due to loss of market share and continued erosion of the average selling price.
- The stock's 15x p/e ratio does not appropriately reflect these risks.
Avoid Precision Drilling Amid Oil And Gas Industry Contraction
- Precision Drilling announces quarterly earnings after-hours on Thursday.
- 85% of the company's revenue is derived from on shore drilling contracts for oil and gas exploration.
- The oil and gas industry is shutting down rigs amid the free fall in oil prices.
- Precision Drilling's revenue and earnings should decline in 2015 and beyond. Precision Drilling is a sell into earnings.
Sell National Oilwell On A Severe Market Downturn In 2015
- National Oilwell Varco reported earnings late last week.
- The company's revenue and normalized EPS met or exceeded analysts' expectations.
- However, management expects a severe downturn in 2015 drilling activities, and equipment sales to the oil and gas industry.
- At 13x 2015P EPS, National Oilwell is overvalued. Investors should avoid the stock.
FMC Technologies Misses On Earnings - Short Thesis Intact
- FMC Technologies reported Q4 earnings after-hours on Tuesday.
- Revenue beat analysts' expectations, but eps fell shy due to charges related to a defined pension benefit plan and a strengthening dollar.
- Management declined to give forward guidance due to uncertainty over contraction in the oil & gas industry.
- I expect revenue and earnings to decline in 2015 and 2016. My short thesis remains intact.
Sell FMC Technologies Into Earnings
- FMC Technologies reports Q4 earnings after-hours today.
- I expect the company to meet or exceed analysts' expectations, but give weak guidance amid a contraction in the oil & gas industry.
- FMC Technologies is a sell into earnings.
Regulators Probe Reuters' Report Of A Samsung Takeover Of BlackBerry
- Regulators are probing a recent Reuters report that BlackBerry and Samsung were in takeover talks.
- At issue is whether someone leaked the report to Reuters in order to manipulate BlackBerry's stock.
- I expect news reports of the BlackBerry takeover interest to persist. However, potential investors should focus on the company's earnings fundamentals.
Did InvenSense Make A Faustian Bargain With Apple And Samsung?
- InvenSense reported its fiscal Q3 earnings last week.
- It beat on revenue, but the stock dropped 7% due to declining profit margins.
- Apple and Samsung represent nearly 70% of total revenue.
- The company appears to have sacrificed profit margins in order to win high volume business.
- Declines in average selling price and profit margin may not justify the company's 35x run-rate P/E multiple.
AbbVie Projects $3B Sales For HCV Cocktail, But Shares Fall 3%
- AbbVie reported solid Q4 earnings last week, despite one-time expenses for fees related to backing out of acquiring Shire Plc.
- Management did nothing to assuage investors that its HCV regimen was on pace to achieve its $2 billion 2015 revenue target.
- With Merck expected to launch its own HCV regimen, AbbVie may be wasting a chance to establish itself as the number two player behind Gilead.
- AbbVie is a hold.
Bet The Farm On Gilead... Again
- Gilead is set to report Q4 earnings on Tuesday.
- Revenue and earnings will reflect the full potential of the blockbuster HCV treatment, Harvoni.
- At 14x run-rate earnings, there is more upside ahead.
- Bet the farm on Gilead... again.
Insider Selling Accelerates At FMC Tech
- FMC Tech reached a 52 week low last week amid a free fall in oil prices and decline in U.S. rig count.
- Insider selling has accelerated over the past three months.
- My short thesis remains intact and I am emboldened by insider sales data.