Seeking Alpha
  • Friday, April 17, 2015

  • 7:14 PM
    • "We believe ServiceNow (NYSE:NOW) saw increased seasonality in Q1, which is in part the result of the company's shift to Services Automation beyond IT, where the company will be focusing on larger cross-enterprise deals," writes Brean (Buy) after ServiceNow (NOW) provided light Q2 guidance and a smaller top-line beat than has been seen in recent quarters amid heavy forex pressures.
    • On the CC (transcript), CEO Frank Slootman stated ServiceNow "had quite a bit of deal slip" in Q1, and was also dealing with a drained deal pipeline (as of January) and a salesforce reorg. Brean isn't worried. "This is a common occurrence for enterprise software companies, but appears to have unfortunately caught many by surprise (ourselves included). However, we believe the after-market reaction reflects strong outperformance into the print, as well as overall anxiety in the market, as opposed to deteriorating fundamentals."
    • "When you trade at 9x 2016 revenues you don't get a pass...on anything," admits Canaccord (Buy). It's not thrilled with the Q1 numbers, but also thinks there was nothing to change its belief ServiceNow will grow to $3.5B-$4B/year business with 20%+ free cash flow margins by 2020. The firm still sees shares reaching $200 in 4 years.
    • TechStockRadar's Rob DeFrancesco: "[T]he longer-term outlook remains bright because the company continues to benefit from the broad enterprise transition to the cloud (it faces little legacy vendor competition) and gain traction in IT operations management (ITOM), a $10-billion market that is significantly larger than its core [IT service management] market. In the latest quarter, ServiceNow generated about 10% of its business from ITOM, indicating plenty of room for expansion."
    • Shares fell 11.5% in regular trading to $73.29. They're still up 38% from where they traded a year ago.
    • Yesterday: ServiceNow's Q1 results, guidance/details
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  • 6:51 PM
    • "AMD’s model appears to be breaking, as we now have them burning substantial amounts of cash," writes Bernstein's Stacy Rasgon, reiterating an Underperform following the CPU/GPU vendor's Q1 miss and soft Q2 guidance. "Frankly, this call is getting depressing. But, we see little reason to step off of it."
    • Rasgon doesn't see AMD going bankrupt (no major debt payments are due before 2019), and likes its improved inventory management. But he also thinks the company will be in "serious trouble" if PC demand doesn't stabilize later this year thanks to improved inventories and Windows 10.
    • He also notes AMD's 20% Q/Q and 38% Y/Y PC CPU/GPU division sales drops compare with 16% Q/Q and 8% Y/Y drops for Intel's PC/mobile CPU unit. "This continues to suggest continued share losses by the company (though this should hardly be shocking at this point)."
    • Ascendiant's Cody Acree, who downgraded to Hold: "In addition to a relatively weak macro computing environment, we believe AMD’s gross and operating margin leverage will likely also be constrained. We believe CPU and GPU pricing from both INTC and NVDA will continue to be aggressive and that AMD’s semi-custom business will only support modestly higher margins as pricing declines meet console volume increases."
    • Though maintaining an Outperform for now, Wells Fargo's David Wong now forecasts losses for the rest of 2015, and also through 2016. He sees profits eventually returning on account of AMD's engineering expertise. Oppenheimer notes gross margin (down in Q1) is expected to be flat Q/Q in Q2, and thinks new semi-custom wins are unlikely to ramp before 2H16.
    • Jefferies' Mark Lipacis (Buy) is hoping improved PC/console demand and the launch of AMD's anticipated Fiji GPUs provide a 2H15 lift. He also expects AMD to use its May 6 analyst day to "articulate its first long-term strategy and business model in years."
    • Shares fell 10.3% in regular trading to $2.58. The 52-week low is $2.14.
    • Yesterday: AMD's Q1 results, guidance/details
  • 6:11 PM
    • Advaxis (NASDAQ:ADXS) has filed to sell up to $200M in common stock through future offerings. No details have been given on the drug developer's plans for any proceeds it might raise.
    • Advaxis raised $23M through a February stock offering. It had $30.6M in cash at the end of January, and no debt.
    • Shares have fallen to $18.30 AH.
  • 5:36 PM
    • Top gainers, as of 5:15 p.m.: MDVN +2.5%. PH +2.4%. VSLR +2.2%. E +2.1%. FXCM +1.9%.
    • Top losers, as of 5:15 p.m.: FARO -13.2%. IGT -3.9%. CRIS -3.2%. YOKU -2.0%. MNK -1.9%.
  • 5:12 PM
    • Costco (NASDAQ:COST) is hiking its quarterly dividend by 13% ($0.045/share) to $0.40/share. That's good for a 1.1% yield at current levels. The next dividend is payable on May 15 to shareholders on record as of the May 1 close.
    • The bulk goods retailer is also launching a new $4B buyback that replaces its existing $4B authorization (had $2.5B remaining). The buyback expires in April 2019, and is good for repurchasing 6% of shares at current levels.
    • COST +0.5% AH to $145.25.
  • 4:57 PM
    • After initially soaring on news it's buying Atmel's XSense touch sensor ops and taking out a related patent license, UniPixel (NASDAQ:UNXL) gradually sold off today. 1.01M shares were traded, far above a 3-month daily average of 133K.
    • In an 8-K filing, UniPixel discloses it paid $450K to Atmel for XSense equipment and inventories, using a promissory note. It also detailed the licensing agreement. "[UniPixel] agreed to pay an annual royalty fee ... of the greater of $3.25 million or 3.33% of the total net sales (as defined in the Patent License Agreement) of the Touch Sensors during the Initial Term. [UniPixel] has the right to renew the license for a term of 10 years. If [UniPixel] exercises this right, the annual royalty fee will consist of 2.5% of the total net sales of the Touch Sensors until it reaches a total of $16.75 million ... [UniPixel] paid a non-refundable, non-returnable prepayment of minimum annual royalty fees of $9.33 million."
    • In an SA PRO column under embargo until 10:06AM ET Saturday, Paulo Santos argues the deal will "enable Uni-Pixel to finally deliver product to the market and register revenues." However, he remains far from positive about UniPixel's long-term outlook.
  • 4:33 PM
    • FARO Technologies expects to report Q1 revenue of $70M, -5% Y/Y and well below an $85.4M consensus. The company blames a $7M forex hit, weak Japanese macro conditions, and soft Brazilian industrial demand (also blamed on macro). In addition, $1.3M in forex losses are expected for intercompany account balances, primarily involving the Swiss franc.
    • CEO Jay Freeland: "Our expected sales growth of approximately 5%, excluding the $7 million of negative foreign exchange impacts, is below our long term mid-teens sales growth goal primarily due to lower metrology unit sales.  On a positive note, we are very pleased that the FARO Focus3D laser scanner is expected to report greater than 20% year-over-year unit sales growth, and that our new hand-held Freestyle 3D laser scanner has received a strong market reception."
    • In response to the shortfall, FARO is "implementing efficiencies and cost reduction measures." Full Q1 results arrive on April 28.
    • Shares have fallen to $56.30 AH. They fell 1.8% in regular trading thanks to a market selloff.
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  • 4:18 PM
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  • 3:58 PM
    • Plug Power (PLUG -1.8%) is initiated with a Buy rating and $3.70 price target at Dougherty, which thinks PLUG has reached an inflection point for growth in the virtually unpenetrated materials handling market in addition to adjacent markets with its expanded product offerings, strategic partnerships and strong customer relationships.
    • The firm expects PLUG to become a break-even company by the end 2016 as it expands its margins by lowering its product and service costs, and believes the stock is undervalued at current levels.
  • 3:39 PM
    • CECO Environmental (CECE +5.4%) is upgraded to Buy from Neutral with a $14.50 price target at Roth Capital, citing increased confidence that CECE's management depth continues to strengthen, which should improve overall execution on growth opportunities.
    • CECE's end markets remain fragmented and diverse, allowing for continued opportunity to grow market share and make acquisitions, Roth says.
    • The firm also cites compelling valuation at 10.4x its 2016 EPS estimate of $1.08, and estimates free cash flow generation of $28.3M 2016 with a balance sheet levered at 2x EBITDA.
    | Comment!
  • 3:07 PM
    • With the Nasdaq off 1.7% amid a broader market selloff, many tech companies are posting outsized losses, and only a few (excluding microcaps) are posting 2%+ gains.
    • Notable decliners include Russian online payments leader Qiwi (QIWI -7.8%), Chinese solar firms JinkoSolar (JKS -5.3%), ReneSola (SOL -8.4%), Trina (TSL -5.1%), and Yingli (YGE -5.2%), Chinese online real estate play Leju (LEJU -7.8%), analog/mixed-signal chipmakers ON Semi (ONNN -5.3%) and InPhi (IPHI -4.7%), enterprise flash storage vendor Violin Memory (VMEM -5.2%), online travel deals platform Travelzoo (TZOO -6.4%), and smart grid hardware/software vendor Silver Spring (SSNI -4.6%).
    • Profit-taking appears to be a big culprit in many instances. Qiwi (like other Russian firms) had rallied strongly in recent weeks thanks to the ruble and oil's rallies. Chinese solars have also been early-2015 standouts, and so have ON Semi and Silver Spring; the latter has recently announced deals (I, II) with Paris' street light/traffic control operator and Australian energy firm AusNet. Travelzoo is returning a chunk of yesterday's big post-earnings gains.
    • Previously covered: AMD, ServiceNow, cloud/analytics stocks, Etsy, Wayfair
    • Notable gainers: Seagate,, ZBB Energy
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  • 2:57 PM
    • Thompson Creek Metals (TC -5.2%) reports Q1 concentrate production for its Mount Milligan mine in British Columbia totaled 30.3K dry tons, with 15.4M lbs. of payable copper and 46.1K oz. of payable gold which were respective 8% and 18% Y/Y increases.
    • TC says recent improvements at Mount Milligan should allow it to increase secondary crushing for the rest of 2015, and achieve throughput of ~60K tons/day by year's end.
    • TC also says Q1 molybdenum sales from the Thompson Creek Mine and 75%-owned Endako Mine totaled 4.3M lbs.
    • Royal Gold (NASDAQ:RGLD) says its subsidiary received 26.2K oz. of gold in Q1 from Mount Milligan as part of its purchase and sale agreement with TC.
  • 2:42 PM
    • There's not much working as today's selloff is an especially broad one, with even stalwart safety sectors like utilities (XLU -0.5%) and REITs (IYR -0.7%), (REM -0.2%) in the red - though outperforming the S&P 500's 1.5% decline.
    • Treasurys had spent most of the session lower as well following a stronger-than-expected inflation report, but yields have turned lower (prices higher) as the equity selloff intensified post-lunch. The 10-year Treasury yield is now off by four basis points to 1.85%. TLT +1.2%, TBT -2.4%
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  • 2:30 PM
    • The WSJ and Bloomberg report Teva (TEVA +3.4%) is weighing a bid to acquire fellow generic drug giant Mylan (MYL +5.5%), while adding no decision has been made yet. Shaes of both companies have spiked higher.
    • Bloomberg's sources state Teva "hasn't made a formal approach yet," though Mylan is aware of Teva's interest. Many analysts have long expected Teva to go after Mylan, given many perceived top and bottom-line synergies. Teva is currently worth $66.2B, and Mylan $34.3B.
    • Perrigo (PRGO -2.8%), which Mylan announced a $28.9B ($205/share) bid for last week, has moved lower on the news.
  • 2:09 PM
    • The Justice Department's staff attorneys looking into Comcast's (NASDAQ:CMCSA) $45B bid to purchase Time Warner Cable (NYSE:TWC) are close to urging the deal be blocked, Bloomberg reports -- and they're also not working with Comcast to secure changes that would satisfy them.
    • Already lower with the market today, TWC took a cliff dive, now -7%. Comcast shares are still down 2.8%.
    • The lawyers could submit their review as soon as next week to deputy assistant AG Renata Hesse. Officials will then decide on whether to sue to stop the deal.
    • Hesse is running the review since antitrust chief Bill Baer recused himself, as a previous representative of NBCUniversal in its takeover by Comcast.
  • 1:46 PM
    • Cloud IT service management software leader ServiceNow is down 14.5% after providing soft guidance (thanks in part to forex) to go with a Q1 beat. Many high-beta enterprise tech names are off sharply amid a 1.5% drop for the Nasdaq.
    • In addition to Salesforce and Workday (previous), cloud software firms posting big losses include NetSuite (N -4.8%), Constant Contact (CTCT -3.3%), InContact (SAAS -3.9%), Paycom (PAYC -3.6%), Ultimate Software (ULTI -3.6%), and Textura (TXTR -3.7%). NetSuite reports on April 23, Ultimate Software on April 28, Constant Contact on April 30, and Paycom on May 6.
    • Big data/analytics software plays have also been hit hard. Tableau (DATA -6.3%), Splunk (SPLK -5.2%), Hortonworks (HDP -6%), and Varonis (VRNS -4.3%) are all off sharply. Though its growth rates and multiples are similar to those of many analytics software firms, ServiceNow generally isn't seen as an analytics play. This morning, D.A. Davidson launched coverage on Tableau and Splunk at Buy, and Hortonworks at Neutral.
    • Tableau, which surged yesterday following bullish Stifel and William Blair coverage launches, reports on May 7. Stifel praised Tableau's "superior product performance and simplified user experience," data discovery market lead, international growth potential (less than 25% of license revenue is from outside of North America), and ability to capitalize on "free demo downloads by front-line information workers evangelizing [Tableau's] product."  William Blair stated its survey work "indicates that the perceived value of Tableau exceeds that of other self-service [business intelligence] vendors."
    • Pac Crest hiked its Splunk target to $82 yesterday after attending a user conference. "[T]he economic value derived from expanding Splunk implementations ... into new areas like security intelligence, compliance and real-time capacity planning results in cost avoidance that can far overshadow the historical pricing objections to Splunk. This is a significant change in customer behavior and pricing perception ... It was clear that the appetite of existing Splunk users to find new use cases remains fierce..."
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  • 1:13 PM
    • ETSY is now down 10% from a post-IPO opening trade of $31.00, and 22% from a Thursday high of $35.74. Shares remain up 74% from their $16 IPO price.
    • With the craft/vintage goods marketplace still trading for nearly 16x 2014 sales, valuation concerns have been easy to find. Wedbush, which launched coverage with a Neutral rating before the IPO, notes Etsy traded as high as 84x 2015E EBITDA, a level declared to be "well beyond the high end of any comparable group."
    • Wedbush's $14 target is equal to 23x 2016E EBITDA (in-line with Alibaba). Aside from valuation, the firm is worried about seller practices drawing more scrutiny. "We have identified several examples of sellers sourcing from Alibaba (contrary to Etsy guidelines and sometimes at markups exceeding 30,000%) and possible trademark infringement."
    • It's also concerned about Etsy's long-term market size. "We believe Etsy benefits from the difference in what individuals expect to receive for their work time versus their free time, as well as the lack of overhead, resulting in lower prices ... However, we believe this arbitrage is only possible in limited categories of goods, thus capping Etsy's ultimate growth."
    • Bulls have focused on Etsy's strong top-line growth (56% in 2014), cult following, and healthy mobile exposure (36% of 2014 GMS and 53% of visits). SA author M Nunez, after going through the S-1: "I feel the key word for this company is uniqueness, it has done a phenomenal job creating a true ecosystem of buyers and sellers of unique products and has been able to capitalize on that in a significant way."
  • 12:59 PM
    • Three of the world's largest pension funds - Ontario Teachers’ Pension Plan, British Columbia Investment Management, and the Netherlands’ PGGM Vermogensbeheer - say they will vote against the re-election of Barrick Gold’s (ABX +1.8%) board, citing poor corporate performance and excessive compensation.
    • The pension funds' stand is a slap against ABX Executive Chairman John Thornton, whose $13M pay package for 2014 has been widely criticized by investors.
    • None of the three pension funds are among ABX’s biggest investors, and some other shareholders have expressed support for the board, but complaints from the funds may act as a rallying call for protesters.
  • 12:50 PM
    • Supertel Hospitality (SPPR +64.9%) closes on the sale of two Savannah Suites hotels - 172 rooms in Augusta, GA for $3.4M and 120 rooms in Chamblee, GA for $4.4M. $4.1M of the proceeds was applied to the GE Capital mortgage maturing in December.
    • The company also agrees to sell two Alexandria, VA hotels for $19M. Closing is expected in late spring or early summer.
    • Source: Press release
    | 1 Comment
  • 12:45 PM
    • SM Energy (SM +3.6%) posts strong gains on a broadly down day after saying it expects Q1 production to total 16.8MM boe, or 186.4M boe/day, up 6% Q/Q and beating the company's guidance.
    • SM says it plans to re-forecast its FY 2015 production following the completion of its Mid-Continent asset marketing process.
    • SM also says its borrowing base under its senior secured revolving credit facility is maintained at $2.4B following its lenders' regularly scheduled semi-annual redetermination.
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