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Yahoo Q3 Earnings: Core Business Is In Trouble
- Yahoo! reports quarterly earnings after-hours today.
- The company's core revenue and operating income has been in decline. I expect it to continue going forward.
- The company has several billion in cash on hand for acquisitions or buybacks that could be a boon to the stock. I rate Yahoo! a hold.
Will iPhone 6 Success Propel Broadcom To New Heights?
- Broadcom is set to release earnings after-hours today.
- The company produced break-even results for Q2. A rapid increase in revenue should fall to the bottom line going forward.
- As a supplier for the wildly successful iPhone 6 Plus, Broadcom's earnings should rise. The stock is a buy into earnings.
ITT Educational: Short-Squeeze Drives Shares Up 65%
- A short squeeze drove ITT Educational's shares up 65% on Friday after the company revealed sufficient liquidity to remain in business.
- With 13 million shares sold short and 14 million shares traded, short covering may have run its course.
- Going forward, investors should focus on earnings fundamentals instead of short-term market movements.
After Losing Lawsuit On Royalties, Sirius 'Not Happy' With The Turtles
- Musicians Flo & Eddie won a recent court ruling requiring Sirius to pay them royalties for streaming their pre-1972 recordings with "The Turtles".
- The ruling could set off a plethora of similar lawsuits across the country.
- Content costs could increase for Sirius and Pandora going forward. I rate both stocks a sell.
Apple Q4 Earnings: After A Record Quarter, What Next?
- Apple is set to report earnings after-hours today.
- It is expected to report record revenue on the strength of iPhone sales.
- Other key factors are gross margin, lagging iPad sales, the European Commission tax probe and future guidance.
- If the company's expected profit growth disappoints the market, Apple's 16x p/e multiple could take a hit.
Is China's Lenovo Group Making A Bid For BlackBerry?
- Just as BlackBerry is close to returning to profitability, takeover rumors are surfacing.
- Internet chatter suggests Lenovo could make a bid for $15 - $18 per share.
- If BlackBerry returns to profitability it could fetch multiples of Lenovo's rumored offer.
- I recommend investors focus on BlackBerry's earnings fundamentals and ignore the rumors.
Caesars Bringing Senior Lenders To Bargaining Table, Stock Soars 13%
- In early October Caesars' second-lien bondholders filed a notice of default.
- Caesars has 60 days to cure the default or be forced to pay off about $3.7 billion in second-lien debt.
- Friday the company started formal negotiations with first-lien bondholders to pare its debt.
- Bankruptcy, which could result in dilution to equity holders, appears imminent.
Molycorp: 2 Reasons Why Leon Black Is Providing Mullet Money
- In July I argued the payoff from Leon Black and Apollo's investment in Molycorp bonds did not warrant the risk involved.
- Molycorp has since received a $400 million lifeline from Oaktree Capital.
- Oaktree's debt is higher up the capital structure than Apollo's, and Molycorp's cash burn has gotten worse.
- Apollo's investment represents mullet money and the bond's value (52 cents on the dollar) reflects it.
John Chen Is Happy You Can't Buy A BlackBerry Passport, Covets China
- After receiving 200,000 pre-orders during its launch weekend, the BlackBerry Passport remains sold out in most major markets.
- Canaccord Genuity lowered BlackBerry's sales estimates due to low availability of the Passport.
- CEO John Chen reiterated that BlackBerry purposely kept low inventory of the phablet.
- Chen believes that a sold out Passport is a good problem to have - so do I. I am long BlackBerry.
SanDisk Down 5% After-Hours On Revenue Miss, Apple Overhang
- SanDisk reported Q3 earnings after-hours on Thursday.
- The company missed on revenue and experienced an earnings decline sequentially and Y/Y. The stock fell 5% after-hours.
- Gross margins declined Y/Y from 49% to 47% due a suspected Apple overhang.
- I rate the stock a hold.
ITT Educational's Short Squeeze Is Here
- ITT Educational Services just released financial and operational statements for nine months ended September 30, 2013.
- The company reported net income for the period was $12 million during the period and cash on hand of $170 million.
- The stock was up 40% Thursday due to short covering. The short thesis is dead for now.
Will SanDisk Be Bullied By Apple Again This Quarter?
- SanDisk is set to report Q3 earnings after-hours.
- I expect the company to report double digit revenue growth Y/Y.
- However, gross margins may be compressed if it tries to appease Apple again by selling NAND flash and SSDs at lower margins.
- I rate the stock a hold based on potential margin compression.
NetFlix Gets Its Comeuppance
- NetFlix reported Q3 earnings on Wednesday.
- The company fell just shy of revenue estimates, but beat on eps. In addition, subscribers only grew 6% sequentially which disappointed the market.
- Down 26% after-hours, NetFlix is one momentum stock that is finally going to get its comeuppance. I rate it a sell.
Netflix Is A Sell Into Earnings
- NetFlix reports earnings after-hours today.
- Analysts expect Y/Y revenue growth of nearly 30%, yet higher content acquisition costs to grow internationally will tamp down earnings growth.
- At 169x trailing earnings, the stock has gotten ahead of the growth story. NetFlix is a sell.
Limited Availability For The BlackBerry Passport: Longs Should Rejoice
- Canaccord Genuity lowered revenue estimates for BlackBerry due to limited availability of the Passport.
- BlackBerry has purposely limited supply of the Passport in order to create frenzied demand.
- The strategy is working to perfection as the phablet is sold out in several markets, leaving customers clamoring for it.
- Frenzied demand should help the Passport return BlackBerry to profitability during the November quarter. Longs should rejoice.
Qualcomm One-Ups Microchip In $2.5 Billion Acquisition Of U.K.-Based CSR
- Qualcomm announced its $2.5 billion acquisition of UK-based CSR this morning.
- CSR makes computer chips and components expected to benefit from the "Internet-of-Things", which complements Qualcomm's presence in mobile devices.
- CSR had a 5pm deadline today to respond to Microchip Technology's takeover attempt. Qualcomm trumped that deal.
- With headwinds from the end of quantitative easing and a slow down in the U.S. economy, I rate Qualcomm a hold.
With Sales In Freefall, Will Samsung Smartphones Go The Way Of BlackBerry And Nokia?
- Samsung warned that Q3 profit could decline by as much as 60% Y/Y. Its smartphone business is the worst performer.
- Smartphones are being hit on the low end by Chinese competitors and on the high end by Apple.
- Samsung's sharp decline is reminiscent of Nokia and BlackBerry, both of which once held commanding market share.
- If sales continue their freefall over the next several quarters, Samsung's smartphones could go the way of Nokia and BlackBerry.
Samsung's Chip Expansion Antagonistic For Micron? Wall Street, 'The Crowd' At Odds
- Wall Street and certain members of the crowd are at odds over Samsung's intentions for its new $15B chip plant.
- Analysts believe Samsung is gearing up to supply explosive demand in memory, in particular, demand for the 2015 iPhone.
- Certain crowd members believe Samsung could attempt to steal share in semiconductors to offset losses in mobile phones. I am riding with the crowd.
Does Standard General Have RadioShack 'A Little Bit Pregnant'?
- With RadioShack facing bankruptcy, Standard General had a tremendous amount of leverage in negotiating its financing package.
- The onerous deal terms - ABL financing and equity sweetener with no skin in the game - implies RadioShack was a little bit pregnant.
- Deal terms require RadioShack to secure additional financing in Q1 2015, maintaining Standard General's leverage.
Mountain Pass Bottleneck Solved, Will Molycorp Return To Profitability?
- Molycorp recently divulged it was close to solving a major bottleneck inhibiting Mountain Pass from becoming fully operational.
- Management also intimated that Q3 results would include more operating losses and cash burn.
- Longs interpreted the news as bullish. Given the company's track record, I would not expect Mountain Pass to become fully operational until 2015.
- Molycorp's vision of becoming the low cost rare earth producer will most likely have to wait until 2015, if at all.
Is Google Turning RetailMeNot Into Kindling?
- RetailMeNot's Q2 results were negatively affected by declining website visits after Google tweaked its search algorithm.
- Google recently shuttered its own digital coupon business - Zavers - after clients balked about sharing customer information with Google.
- RetailMeNot has a business Google covets (digital coupons). Its e-commerce aspirations would also make the company a Google competitor.
- RetailMeNot's dependence on a potential competitor for search results makes the stock a sell.
Have Caesars And Leon Black Been Checkmated By Second-Lien Bondholders?
- Caesars' major shareholder, Leon Black, has been playing a chess game to restructure Caesars' debt, while maintaining control of the company.
- Second-lien bondholders of $3.7B in debt, filed a default notice claiming Caesars pledged collateral to senior creditors without giving them similar claims.
- Caesars has 60 days to take action to avoid such default.
- Next for Caesars could be repayment of $3.7B in debt or a restructuring leading to bankruptcy or substantial equity dilution.
- Caesars remains the short of the year.
The Kool-Aid Is Evaporating For Sirius And Pandora
- Pandora traded up after Apple's $3 billion acquisition of Beats was leaked in May.
- Sirius, which also competes in music streaming, traded up as Pandora takeover rumors spread. Some even suggested that Sirius should buy Pandora.
- After months of speculation and no deal, investors will focus on both companies' fundamentals, which are not pretty. Both stocks are a short.
Samsung CIO Wages War Against Apple, IBM And BlackBerry In Enterprise Mobility
- After announcing a 60% decline in profitability for Q3, Samsung is looking for new streams of revenue.
- Samsung recently hired former BlackBerry CIO, Robin Bienfait, to lead it efforts in enterprise mobile.
- Since its value-add in offering a strong ecosystem and best-in-class security may be limited, Samsung may compete on price.
- Competitors Apple, IBM and BlackBerry should be able to beat back any threat from Samsung.
Sorry Dorothy, Micron Will Not See $50
- Barron's thinks Micron could reach $50 per share.
- Samsung's DRAM supply expansion and the end of quantitative easing will keep Micron from reaching $50 per share.
- Longs who think otherwise are in denial. I rate the stock a hold.
Will Wildly Successful iPhone 6 Be The Final Nail In Samsung's Smartphone Coffin?
- Samsung's disappointing Q2 2014 results were the "canary in the coal mine."
- Xiaomi and Lenovo are eating Samsung's lunch on the low-end of the smartphone market in China.
- With the iPhone 6 making inroads in the premium segment of the market, Samsung could be finished.
Micron Should Be Worried By Samsung's Plans For New $14.7B Chip Plant
- Samsung recently announced it was investing in a new $14.7 billion chip manufacturing plant.
- As its smartphone business gets hit by Apple and low-end manufacturers in China, Samsung is making a larger bet on semiconductors.
- Barron's recently placed a $50 price target on Micron due to expected growth in computer memory.
- Samsung's expansion cannot be good for semiconductor prices or Micron's business prospects. I rate Micron a hold.
Is BlackBerry Channeling iPhone And Air Jordan To Create Frenzied Demand For The Passport?
- BlackBerry limited the initial launch of the Passport to only three countries.
- The Passport received 200,000 pre-orders in one day, creating substantial buzz.
- BlackBerry seems to be following the playbook for how Nike created a frenzy for Air Jordans and Apple created a frenzy for iPhones in China.
- I expect frenzied demand for the Passport to help BlackBerry turn a profit in its November quarter.
iPhone 6 Selling Poorly On China's Gray Market: Are Xiaomi, Lenovo Hurting Apple?
- Apple received 2 million pre-orders for the iPhone 6 in China in a matter of hours.
- IPhone 6 sales on China's gray market dried up in a matter of weeks - this could be a bad omen for future iPhone sales.
- Some attribute weak gray market sales to competition from well-heeled, local smartphone manufacturers.
- At a 16x p/e multiple and headwinds from the end of quantitative easing and an EC investigation into tax treatment in Ireland, I would avoid Apple at these levels.
Molycorp: Anticipate S&P Upgrade Any Week Now, Will Shorts Get Cooked?
- After Molycorp's $400 million Oaktree financing was announced, S&P placed the company's debt on credit watch with positive implications.
- S&P wants to ensure the company has enough capital to meet cash flow needs over 12 months.
- My high level analysis shows Molycorp with [i] cash on hand of $400 million - $410 million, [ii] potential cash burn of $300 million.
- I expect an S&P upgrade within weeks. Molycorp has short interest of 60MM shares. The short sellers who remain will likely get cooked.
Bonds Hawkish After Recent FOMC Meeting, Equities Follow The 'Smart Money'
- Janet Yellen confirmed the Fed's intent to end quantitative easing and gave a 2% target for inflation.
- Bond prices rose and yields declined as investors projected less economic growth. Equities declined as investors anticipated slower corporate earnings growth.
- I believe bond investors are right, and plan avoid the general market due to economic headwinds from the wind down of quantitative easing.
Standard General Offers RadioShack Lifeline, Receives Equity At $0.29-$0.40 Per Share
- RadioShack received a lifeline from Standard General, including $120 million in cash and additional loan capacity to fund inventory for the holidays.
- The Standard General consortium has the option to convert its $120 million cash into equity at 50%-80% of the company.
- The consortium's buy-in price equates to $0.29-$0.40 per share - steep discounts to RadioShack's $0.99 share price.
- I expect the stock to decline on Monday.