Friday, September 19, 2014
- Though Oracle's (ORCL -4%) cloud-related sales saw healthy growth in FQ1, its core database business saw negative license growth, notes Deutsche's Karl Keirstead, downgrading shares to Hold. "Coupled with Larry Ellison’s decision to give up the CEO role, our confidence in the core database business is getting tested and we’d prefer to step to the sidelines while Oracle shares are still near their 10-year high."
- While Oracle blames the database weakness on tough comps and sales execution - the latter is a common excuse among enterprise software firms - Keirstead also sees other factors at work: A mature relational database market; Microsoft's share gains; and a secular shift to new data types (e.g. Hadoop/NoSQL) and cloud apps (often running on non-Oracle databases). He estimates Oracle's FQ2 guidance implies a 3%-4% Y/Y drop in license revenue.
- D.A. Davidson (Neutral) also isn't thrilled with Oracle's numbers. "ORCL's financial results have now either missed or come in at the low end of management's guidance range in 7 of the last 9 quarters." Ditto Sterne Agee: "Given the current moderate size of the cloud business, the transition will span several years and create both revenue and EPS estimate volatility."
- On the other hand, Sterne (like many others) isn't concerned about Oracle's CEO change, calling it "more of a change in titles than in functions." On the CC (transcript), new co-CEOs Safra Catz and Mark Hurd insisted there will be no major operational changes.
- Wedbush, however, sees negative long-term implications. "Mr. Ellison's desire to delegate more responsibility (and credit) to Safra Catz and Mark Hurd is understandable ... but it underlines our view that Oracle's days as an organic grower are rapidly coming to an end."
- Prior Oracle coverage
- Dan Van Ostrand, a UniPixel (UNXL -9.2%) co-founder and until now its SVP of R&D, has "resigned to pursue other interests."
- He's being replaced by Arnold Kholodenko, whose resume includes stints as a director at chip equipment makers Applied Materials and Lam Research. UniPixel states Kholodenko "has been responsible for the granting of 72 patents in the U.S. and 39 internationally, and is the author of 115 scientific articles" over his 45-year career.
- The management change comes as UniPixel continues with its efforts to start mass-production of its InTouch sensors following multiple delays. The company's market cap is now at $82M.
- Leading the mREIT sector (REM +0.2%) higher this session are American Capital Agency (AGNC +1.9%) and American Capital Mortgage (MTGE +1%) after the two maintained their $0.65 per share quarterly payout last night. Neither move should have been a surprise as both comfortably out-earned their dividend last quarter.
- Also maintaining its payout ($0.30 per shares) after the bell yesterday was Annaly Capital (NLY +0.8%).
- The sector is also getting a break from rising rates with the 10-year Treasury yield lower by four basis points to 2.58%
- ETFs: MORT, MORL
- Talisman Energy (TLM -2.2%) may still consider selling assets to Repsol (OTCQX:REPYY, OTCPK:REPYF) but "probably not of the significance people were expecting,” CEO Hal Kvisle tells Bloomberg.
- Repsol reportedly dropped plans to buy all of TLM in August to instead weigh the purchase of some of the company’s shale assets.
- Kvisle also says TLM may announce a partner to develop assets in the Duvernay shale formation in Alberta, which will require ~$20B of investment over two decades.
- ITT Educational (ESI -37.2%) waits until today to disclose it received notice from the SEC on August 7 about possible enforcement action related to its student loans.
- The company must also submit a letter of credit in the amount of $79.7M by November 4, according to today's filing. That's less than the company earlier figured on, and ITT has reached an agreement with lenders to borrow $85M, down from $98M.
- Buy the dip, says Wells Fargo, noting the letter of credit disclosure is not a surprise.
- There's not a lot of action in the large cap averages this session, but the Russell 2000 (IWM -1.1%) continues to shed ground both absolutely and relative to the S&P 500, and has now turned negative for the year - it's lower by 1.1% YTD, ceding about 1000 basis points to the S&P,
- Maybe bearish, but probably bullish for those with a contrarian streak, technicians are starting to warn about the dreaded "Death Cross" - the 50-day moving average moving below the 200-day moving average. Ryan Detrick points out 19 instances since 1988 where the Russell 2000 has completed a Death Cross - it's tended to be bearish in the very short-term, but bullish over longer periods.
- ETFs: IWM, TZA, TNA, IWC, UWM, VB, IJR, SLY, RWJ, URTY, SCHA, TWM, RWM, SRTY, SAA, DWAS, VTWO, VIOO, SDD, SBB, PZI, FDM, JKJ, RSCO, WMCR, XSLV, FYX, EWRS, TWOK, SMLV, PXSC, CSF
- Caterpillar (CAT -1.7%) says worldwide machinery sales by its dealers fell 10% for the three-month period ended in August, marked by a 29% plunge in Latin America sales; global sales had dropped 9% in the May-July period and 10% in April-June.
- North America was the only region where sales were up in the latest rolling period as sales rose 8%, but that was down from 11% growth in July and a 14% rise in June.
- CAT's worldwide mining equipment sales fell 33% Y/Y, while construction equipment sales fell 1%; a 12% sales increase in its North America construction division was offset by a 23% drop in Latin America and a 10% decline in Asia/Pacific.
- The lone bright spot was a 4% sales increase in its energy and transportation equipment division.
- Mining equipment peers also are weak in today's trade: JOY -2%, MTW -3.7%, TEX -1%.
- Seadrill (SDRL -6.4%) says Tor Olav Troeim, who until recently was considered John Fredriksen's right-hand man, is quitting its board, sending shares sharply lower.
- SDRL says Troeim will focus his efforts on developing liquefied natural gas shipping firm Golar LNG (GLNG +1.7%); it had been known that Troim’s position was set to change, but he was expected to remain a significant player at SDRL.
- Troeim recently owned ~2.6M SDRL shares, but it is not known whether he would sell his stake; Fredriksen reaffirms his commitment to SDRL, in which he is the biggest investor with a 24% stake.
- NADL -12%, SDLP -0.7%.
- Bitcoin (COIN, OTCQB:BTCS) prices are down $25 today, and over $70 on the week. Coinbase is currently showing a bid-ask spread of $400.29-$401.90.
- The Alibaba IPO is viewed as a possible culprit - Bitcoin Magazine observes volume at both major Chinese and European exchanges is well above daily averages, leading it to think investors are unloading Bitcoin positions to buy into Alibaba.
- Quant trader Raffael Danielli isn't buying the theory. "Selling your Bitcoins yesterday (and during the night) will only put USD into your Bitcoin exchange account. From there you have to still transfer it to your stock broker which usually takes a couple of days."
- Though the list of high-profile Bitcoin supporters has kept growing in recent months, Bitcoin prices are now down ~40% from their June highs, and ~65% from all-time highs set last fall.
- Glu's (GLUU -2.7%) 10M-share shelf filing for Cie Games investors has already been factored into analyst models, says Northland. The firm is reiterating an Outperform and $9.50 target, and sees any weakness caused by the filing as a buying opportunity.
- Benchmark's Mike Hickey (Buy) has hiked his target by $2.33 to $7.93, and is also unconcerned about the filing. "These shares are not yet freely tradable and will not be freely tradable until the Form S-3 registration statement is declared effective by the SEC."
- Hickey also points out 2.1M of the shares are being held back by Glu to "satisfy potential indemnification obligations through February 20, 2016."
- Whether it's a case of selling on the news, freeing up capital to buy Alibaba shares, or a mixture of the two, a slew of Chinese Internet stocks are selling off as Alibaba (though off its highs) registers a 30%+ post-IPO gain.
- Baidu (BIDU -2.2%) and JD.com (JD -4.5%), both of which rallied yesterday, are among the decliners. Others: QIHU -2.7%. SFUN -3%. EJ -2.7%. YY -2.1%. WB -2.3%. WUBA -6.3%. MOBI -6.4%. CMGE -6.5%.
- Down over 9% yesterday after announcing plans to sell $95M in convertible debt due 2019, Violin Memory (VMEM +4.3%) is rebounding after upsizing the offering to $105M (net proceeds are expected to total $100.8M) and setting deal terms.
- The debt carries an interest rate of 4.25%, and an initial conversion price of $5.62/share - a 22% premium to current levels. The initial purchaser has a $15M overallotment option.
- Renova, a holding company of Russian oligarch Victor Vekselberg, says it has bought a 4.99% stake in Dresser-Rand (DRC +10.2%), adding a twist to recent speculation on DRC's future.
- Renova also holds a 33.19% stake in Swiss pump maker Sulzer (OTC:SULZF), which said earlier this week it was in talks with the U.S. company about a potential deal.
- A new report says Siemens (OTCPK:SIEGY) is preparing a $6B-plus offer for DRC.
- Meanwhile, DRC is downgraded to Sell at Gabelli, which says shares have run up too far on the M&A talk; also, a potential antitrust review, while likely not an obstacle, could mean a deal close would be 6-9 months out.
- A check of European closing prices finds the euphoric early reaction to the "No" vote from Scotland mostly faded by day's end. The Stoxx 50 (NYSEARCA:FEZ) closed just 0.2% higher, with the U.K.'s FTSE 100 (NYSEARCA:EWU) gaining 0.3%.
- Looking at U.K. bank ADRs: RBS (RBS +1.2%), Barclays (BCS -0.9%), Lloyds (LYG +0.5%), HSBC (HSBC -0.2%).
- Dealing with its own separatist movement, Spain (NYSEARCA:EWP) managed just a 0.1% gain.
- Previously: Euro shares lean green on "No" vote
- Previously: Might Catalonia secession fears ebb following Scotland vote?
- Jay WIntrob's exit from AIG (AIG -1.9%) could hardly be considered a surprise after he was passed over to lead the company in favor of Peter Hancock. Nevertheless, leadership continuity stands for something, and Wintrob played a big role in the bounce in profits at AIG's Life and Retirement unit.
- The new management structure, says Wells Fargo, suggests the insurer sees itself less as a P&C and Life firm, and more of a commercial segment and consumer segment firm.
- Previously: Peter Hancock puts his stamp on AIG's management team
- After peaking at $99.70, Alibaba (NYSE:BABA) has reversed course and is now at $92.14, slightly below an opening trade of $92.70. Shares are still 35.5% above their $68 IPO price.
- Yahoo (YHOO -3.5%) has reversed course as well. 121M Alibaba shares have already changed hands. Yahoo's volume for the day has reached 90M, more than 3x the company's daily average.
- Prior Alibaba coverage
- The latest Datafoha poll shows challenger Marina Silva with just a two percentage point lead over incumbent Dilma Rousseff should the two meet in a runoff election.
- To review, the general election - with three main candidates - is October 5. If no one candidate gets 50% of the vote, the top two would face off in a 2nd round on October 26.
- A current first-round poll show Rousseff getting 37% of the vote, Silva 30%, and 17% for Aecio Neves.
- The Bovespa is lower by 1.1%. EWZ -1.4%
- ETFs: EWZ, BRF, BRXX, EWZS, BRAQ, BRZU, BRAZ, BZQ, BRAF, UBR, BRZS, DBBR, FBZ