Friday, March 27, 2015
- Thinly-traded nano cap Adamis Pharmaceuticals (NASDAQ:ADMP) craters 35% after hours on robust volume in response to its announcement that it received a Complete Response Letter (CRL) from the FDA regarding its New Drug Application (NDA) for its lead product candidate, Epinephrine Pre-filled Syringe (PFS), for the emergency treatment of acute anaphylaxis (severe allergic reaction).
- The FDA's questions relate to the general area of Chemistry, Manufacturing and Controls (CMC) and specifically to the volume of dose delivered by the syringe, including the ability to deliver volume within the levels contained in the labeling claim.
- President and CEO Dr. Dennis J. Carlo says, "We are reviewing the CRL and plan to request a meeting with the FDA to discuss the letter, including clarifying the product delivery volume specifications. Although we expect to have more clarity with respect to timing, we believe we can satisfy all of the requests in the CRL and will work closely with the FDA to address the items raised in the CRL and finalize its review of our NDA. Adamis remains committed to bringing the epinephrine PFS to market."
- The company submitted its NDA in May of last year.
- Previously: Adamis submits NDA for adrenaline product (May 29, 2014)
- Two days after getting crushed on news the company lost a breach of contract and trade secret suit against Diablo Technologies, Netlist (NASDAQ:NLST) fell more moderately after posting a Q4 EPS miss (there was only one analyst estimate) to go with roughly in-line revenue.
- Margin pressures weighed on EPS: Gross margin was -4.5% vs. 24.6% a year ago. A 70% Y/Y increase in operating expenses to $5.3M also weighed - legal fees totaled $2.4M (up ~3x Y/Y), SG&A spend $1.6M, and R&D $1.3M.
- Netlist ended Q4 with $11.7M in cash, $7.9M in working capital, and $5.8M in debt. The company has since raised $9M in net proceeds through a stock/warrant offering.
- Since the Diablo verdict, Netlist has stated it plans to continue pursuing its (separate) infringement suit against Diablo and SanDisk, and that it "intends to request that the Court correct the verdict as to the breach of contract count, and to pursue all available appeals."
- Shares fell to $0.64 today. They dropped as low as $0.52 following the Diablo verdict before bouncing a bit.
- Q4 results, PR
- After falling hard on Wednesday amid cautious remarks from TSMC (TSM -1.1%), and falling again (to a lesser extent) on Thursday in the wake of SanDisk's warning, chip stocks rallied during the final 30 minutes of trading (SOXX +2.8%) in response to a WSJ report stating Intel is in talks to buy FPGA vendor Altera. A deal would be among the biggest in the chip industry's non-stop consolidation wave, rivaled only by NXP/Freescale.
- In addition to Altera rivals Xilinx and Lattice (previously covered), chipmakers catching a bid included Avago (AVGO +2.8%), InvenSense (INVN +2.6%), Cirrus Logic (CRUS +2.5%), Synaptics (SYNA +1.9%), Analog Devices (ADI +2.5%), QuickLogic (QUIK +3.8%) (a smaller FPGA maker), and Fairchild (FCS +3.2%).
- InvenSense has occasionally been the subject of speculation Intel or Qualcomm could make a bid. Acquisition-hungry Avago, meanwhile, is reportedly on the hunt for new deals after bidding for Freescale.
- More than a few analysts have defended chip stocks following the TSMC remarks. Jefferies and Susquehanna have argued TSMC's issues are due to share loss to Samsung (partly for Apple/Qualcomm orders), and BMO notes Nvidia (a major TSMC client) recently disclosed adding Samsung as a foundry partner. It's a fan of Synaptics and Maxim (MXIM +2.2%) due to their Galaxy S6 exposure.
- BofA/Merrill reports seeing pockets of excess chip inventory (for PCs and emerging markets smartphones) during a Taiwanese trip, but thinks Apple and Samsung phone-related orders are healthy, as are auto, industrial, and data center chip demand.
- Credit Suisse: "Our cyclical and structural call on Semis remains unchanged – cycle-to-date has been well behaved, Semi rev to global GDP is poised to inflect higher and Semis relative valuation still attractive – growing top/bottom line faster than SPX, twice the margin profile, essentially same dividend yield trading at a two turn discount."
- Chip ETFs: SMH, XSD, PSI, SOXL, USD, SOXS, SSG
- Three months after stating it's exploring such a move, Madison Square Garden (NASDAQ:MSG) has announced it's spinning off its sports and entertainment businesses into a separate, publicly-traded, company.
- The spinoff will include the Knicks, the Rangers, Madison Square Garden itself, Radio City Music hall, several other theaters, live productions such as Radio City Christmas Spectacular, entertainment JVs, and MSG's interest in Fuse Media. It's expected to be completed in 2015.
- MSG +2.8% AH to $83.00, making new 52-week highs in the process.
- The 10-year Treasury yield remains lower by four basis points to 1.95% as Janet Yellen says the current path the economy is on virtually assures gradual rate hikes beginning later this year. Still, the Fed will remain data dependent and she mentions further weakness in inflation indicators as possibly forestalling rate hikes.
- Short-term interest rate futures are pricing in a 25 basis point boost in the fed funds rate by October.
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, TENZ, LBND, TYBS, DLBL
- While Deutsche Bank analysts see oil poised for a modest recovery, they nevertheless downgrade Pioneer Energy (PES -8.1%) and Precision Drilling (PDS -3.7%) to Hold from Buy, believing that some of the traditional early cycle winners - specifically land drillers - will trade up in the near-term but the strong earnings recovery required to justify such a move will disappoint.
- But the firm does not think investors should avoid all oil services stocks, saying well service companies such as Basic Energy Services (BAS -2.8%) and Key Energy Services (KEG flat) could be the biggest beneficiaries, actually helped by a more cautious environment in which operators can generate high returns and quick paybacks by enhancing production from existing wells.
- Sinclair Broadcast Group (NASDAQ:SBGI) is up 1.6% as it launches a unit focused on investment in emerging technologies.
- Sinclair Digital Ventures will put funds into partner companies who can engage Sinclair viewers with advertisers on a series of smaller screens (Web, social media, mobile).
- The unit will be overseen by COO David Amy, CFO Chris Ripley and the COO of Sinclair's Digital Group, Rob Weisbord.
- In its Q4 report last month, Sinclair noted that digital offering revenues were up 70.7%, and Web and mobile platforms had more than 35M unique visitors in December.
- Previously: Sinclair Broadcast Group higher on record results (Feb. 18 2015)
- The WSJ reports Intel (INTC +5.9%) is in talks to buy FPGA vendor/foundry partner Altera (ALTR +22.7%). Shares of both companies have surged in response. With Altera currently sporting a $12.7B market cap, the deal would be the biggest in Intel's history, and one of the biggest in the chip industry's M&A/consolidation wave.
- Intel struck a foundry deal with Altera in 2013, and is set to produce 14nm chips for the company. Altera's FPGAs are found in plenty of products containing Intel's Xeon server CPUs or network processors. The companies have also collaborated on a solution for Web data centers that pairs a Xeon CPU and an Altera FPGA in the same package, with the latter enabling on-the-fly programmability.
- Altera archrival Xilinx (XLNX +5%) and smaller rival Lattice (LSCC +3.7%) have also spiked higher.
- Update (4:00PM ET): The full story is now out. The WSJ states deal terms and timing are unknown.
- Update 2 (4:08PM): Bloomberg has joined the WSJ in reporting of deal talks. Intel closed up 6.4%, and Altera closed up 28.4%.
- In a dig at Third Point's Daniel Loeb, Dow Chemical (DOW +3.2%) CEO Andrew Liveris says his company's decisive move to shift out of the commodity chemicals business shows how “Dow continues to behave as our own best activist.”
- Dow's deal to sell its chlor-alkali business to Olin (OLN +18.2%) in exchange for $2B and a 50.5% stake in the smaller company will create the world’s largest chlorine producer with 5.7B tons/year of production and $1B in EBITDA.
- Citigroup’s P.J. Juvekar offers three reasons why the deal is good for shareholders: The chlor-alkali divestiture at 8x EBITDA is a great multiple for a commodity business, the Reverse Morris Trust deal makes it tax-free and a split-off will allow Dow to buy back its own shares efficiently - a similar move by PPG Industries was viewed very positively two years ago, and Dow will sell ethylene to OLN for 20 years and will receive an upfront payment of ~$400M.
- Dow may still get rid of its agricultural chemicals business, which does not have a lot in common with the rest of the business; with $7.3B in sales and almost $1B in EBITDA last year, the unit could be worth $10B.
- Juvekar says Axiall (AXLL +5%) also could benefit from the deal, seeing consolidation in the U.S. chlor-alkali industry as a positive, and OLN says it will look to optimize its expanded chlor-alkali asset base.
- Today's notable tech gainers include next-gen firewall leader Palo Alto Networks (PANW +3.5%), touchscreen tech developer UniPixel (UNXL +5.9%), solar microinverter leader Enphase (ENPH +5.8%), optical transport/switching hardware vendor Infinera (INFN +3.8%), telecom service/analytics provider Neustar (NSR +4.4%), and Chinese online classifieds leader 58.com (WUBA +4%). The Nasdaq is up 0.3%
- There are relatively few major decliners today. The group includes Infinera rival Ciena (CIEN -4.5%), Chinese sports lottery site 500.com (WBAI -5.3%), and Chinese online video leader Youku (YOKU -3.4%).
- Palo Alto is adding to Thursday gains seen amid a broader cybersecurity stock rally. Likewise, Enphase gained on Thursday following rival SolarEdge's IPO, Neustar gained after announcing a $150M buyback, and Infinera gained following a bullish MKM note.
- Ciena is reversing the Tuesday gains seen after Stifel reported the company's share of a major Verizon 100G metro contract (has been officially announced) could be larger than expected. 500.com is giving back major Thursday gains; yesterday morning, SA Instablog author/former i-banker MNS Global reported hearing Chinese authorities are thinking of indefinitely extending recently-placed bans on online sports lottery sales, after uncovering corruption.
- Previously covered: EMC, HP, Voxeljet, Skyworks, SuperCom, Stratasys, Qunar, Pandora, SanDisk
- Pick your excuse: A slowing in the decline of the U.S. drilling rig count, the crisis in Yemen not having a whole lot of impact, or the chance of a weekend U.S./Iran nuclear deal which would include the lifting of oil sanctions.
- WTI crude oil (NYSEARCA:USO) is lower by 5.4% to $48.64 per barrel, erasing most of a gain this week which had it above $52 not much more than 24 hours ago.
- ETFs: USO, OIL, UCO, SCO, BNO, UGA, DTO, DBO, UWTI, USL, DWTI, UHN, DNO, SZO, OLO, TWTI, OLEM
- Cnooc (CEO +4.8%) says it will shelve its shale gas project in Anhui province, in the latest sign that the U.S. shale gas revolution is unlikely to replicate itself in China.
- CEO Li Fanrong says the company had drilled near Wuhu, in southern Anhui, since late 2011, but decided the block is not suitable for development on a large scale.
- Cnooc joins PetroChina (NYSE:PTR), which has already sharply cut back on a shale project in Sichuan province it was developing with Royal Dutch Shell.
- Cnooc tried but failed to interest foreign investors in the Wuhu block, but potential partners have shied away in part because of the dense population in the area; similar concerns held back the PetroChina-Shell project in Sichuan.
- Earlier: Cnooc surprises with 6.5% profit gain despite oil price plunge
- BofA/Merrill, Goldman, BTIG, and Evercore have downgraded SanDisk (SNDK -3.2%) since the company issued a Q1/2015 warning yesterday morning, and several other firms have slashed their targets. Shares have fallen 21% since the announcement.
- BofA's Simon Dong-je Woo (downgrade to Neutral) thinks SanDisk has lost SSD share to Samsung (particularly for Apple products), and is also concerned about the company's "slower execution" on ramping 15nm MLC and TLC NAND production. His new $85 target is still well above current levels.
- BTIG's Walter Piecyk (downgrade to Neutral): "The minimal amount of information provided by the company whenever it pre-announces as well as its inability to provide additional information for weeks ... leave investors in a vacuum with a lack of information ... The Q1 pre-announcement implies 15% decline in revenue and in the absence of any additional information, we do not expect the company to return to revenue growth until 2016, when its newer SSD products should be hitting full stride."
- Needham's Rajvindra Gill: "When we downgraded the stock on 1/12 ($97.04) we saw several structural challenges facing SNDK, which we think will persist: 1) unfavorable mix with 1/3 of revenue from removable products, where pricing is fierce; 2) a lack of mobile DRAM solution impeding growth in the China handset market as eMCP adoption accelerates; and 3) NAND GMs of 45% that are unsustainable relative to competition (+1500 bps higher)."
- Deutsche's Sidney Ho (target cut to $80) is staying bullish. [O]ur field checks suggest that the NAND market seems to have stabilized after severe price pressure in Q4. While we are lowering our estimates and price target, we continue to believe SNDK can turn things around and drive operating leverage in the back half of the year, especially with the help of better supply-demand dynamics."
- Qunar's (QUNR +6.3%) post-earnings rally has refused to let up. Shares are now up 41% since China's #2 online travel firm beat Q4 estimates and issued strong Q1 guidance on March 16.
- With Qunar now sporting a $4.9B market cap, shares go for nearly 10x a 2015 revenue consensus of $492.6M. Majority owner Baidu (NASDAQ:BIDU) has to be pleased with the jump in Qunar's equity value.
- Stratasys (SSYS -4.6%) has sold off to its lowest levels since Feb. 3, when shares tumbled as low as $51.55 in response to the company's 2014 sales/EPS warning and 2015 guidance (before closing at $57.36). 1.18M shares have been traded thus far vs. a 3-month daily average of 1.47M.
- Shares now respectively go for 26x and 21x 2015E and 2016E EPS. SA author Stone Fox Capital made a bull case for the 3D printer maker earlier this month, noting management is still aiming for 2020 sales of $3B (compares with 2015 guidance of $940M-$960M), that near-term EPS is depressed by major investments, and that P/S ratios have fallen back to 2010/2011 levels.
- Update: Stone Fox in the comment thread: "Though bullish on the stock long term, investors clearly shouldn't buy it with a chart breaking down like this."
- Following talks with HP (NYSE:HPQ) IR chief Andrew Simanek, BofA/Merrill's Wamsi Mohan (Buy) has cut his FY15 (ends Oct. '15) and FY16 EPS estimates to $3.59 and $3.46 (below consensus estimates of $3.65 and $3.84), and his target by $3 to $42 (still 35% above current levels).
- Mohan notes weak PC demand and forex are hurting FY15 sales - aside from directly hurting international sales priced in local currencies, forex has allowed Japanese printer rivals to price more aggressively. Regarding PCs, he estimates the average lifecycle of one has risen to 5-5.5 years from 4 years.
- Meanwhile, FY16 estimates have been cut due to expected "dis-synergies" related to the PC/printing spinoff. In-line with HP's guidance, Mohan sees the split taking place by Nov. 1.
- In the wake of the Aruba Networks deal, Mohan thinks more acquisitions are possible, with software (recently struggling) seen as an area of focus. Post-acquisition, HP expects Aruba sales to benefit from the reselling of its hardware by HP's 50K channel partners (dwarfs Aruba's current 6K), and from the ongoing 802.11ac Wi-Fi upgrade cycle.
- Yesterday: HP reportedly near deal to sell 51% of Chinese networking unit
- ChinaCache's (NASDAQ:CCIH) Q4 revenue of $54.6M missed a $60.1M consensus, and EPS of -$0.05 missed a -$0.04 consensus. In addition, Q1 revenue guidance of RMB340M-RMB350M ($54.7M-$56.3M) is below a sole analyst estimate (possibly outdated) of $77.4M, and full-year revenue growth guidance of 25%-30% is below a 33.7% 2-analyst consensus.
- However, a lot has been priced in over the last 12 months. At the midpoint of its 2015 guidance range, ChinaCache only trades for 0.7x forward sales after backing out cash/investments.
- Soft Q4 sales (-9.7% Q/Q and -0.2% Y/Y) are blamed on "bandwidth and service capacity interruption as customers continue to migrate onto the next-generation HPCC platform in the fourth quarter of 2014 as compared with the previous quarter." ChinaCache, which faces competition from Alibaba and others, expects the migration to be finished by the end of Q1.
- Gross margin fell to 30% from Q3's 30.3% and Q4 2013's 31.6%. Sales/marketing spend fell 23.3% Y/Y to $4.7M and R&D 8% to $4.5M. Excluding a non-cash bad debt provision, G&A spend fell 5% to $6.7M.
- Q4 results, PR
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