Friday, March 7, 2014
- Palo Alto Networks (PANW +10.9%) is within striking distance of its post-IPO high of $79.99 after a mistrial was declared for rival Juniper's (JNPR -0.6%) infringement suit against the company. The judge presiding over the suit has instructed lawyers from both parties to meet to determine their next moves.
- FBR calls the decision a big "sigh of relief" for Palo Alto investors. Ahead of the mistrial announcement, Citi was already arguing the odds of a settlement had grown, given a judge's ruling that no second trial covering indirect infringement would occur.
- Citi even thinks a cross-selling deal between Palo and Juniper is possible, given Juniper's recent struggles in the branch office firewall market.
- Palo Alto's official statement
- DuPont Fabros (DFT -5.5%) discloses Yahoo (YHOO -2.4%) plans to sub-lease premises it directly leases at two DuPont data center facilities in Ashburn, VA. DuPont says the leases "represent 11% of the Company's operating property portfolio."
- Other data center owners have also sold off: DLR -3.7%. COR -2.3%. CONE -1.7%.
- Yahoo directly owns four data centers - they're in New York, Washington state, Nebraska, and Singapore. The company announced last October it's investing $170M to expand its New York facility.
- While Internet giants and cloud service providers remain among the top clients of independent data center owners, they've also been making huge investments in custom, energy-efficient data centers of their own.
- Hardest hit in the mREIT sector today is Javelin Mortgage (JMI -5.3%) after reporting core EPS of $0.45, down from $0.54 in Q3, but inline with the current monthly payout of $0.15.
- Book value per share fell to $14.28 from $14.69 at the end of Q3 (if you add the dividend back, it actually rose a few pennies), leaving the stock (before today's decline) trading at a premium to book. Net interest margin of 1.78% gained six basis points with CPR falling to 4% from 5.4%.
- Leverage declines to 4.9:1 from 6.48:1 as the agency portfolio falls to $802M from $1.3B and the non-agency to $284.3M from $267.2M.
- 1.5M shares repurchased at average price of $12.72 each during Q4, leaving about 12M shares outstanding.
- The company previously announced a boost in the buyback authorization to 3M shares.
- Press release
- It hardly needs saying with 15% of the portfolio (and 50% of firm capital) now allocated to non-agency paper, but Western Asset Mortgage (WMC -3.9%) management is comfortable (CC transcript) with the firm now being described as a hybrid REIT instead of its traditional agency REIT classification.
- The upshot: The recent foray into non-agency securities isn't a temporary move; management is committed to having a substantial investment in this area going forward.
- Previous earnings coverage
- The growing consensus is that fuel cell companies are transitioning from money losers to money makers, "similar to where solar was in 2011 and 2012, compellingly priced and poised for share-price increase," and are no longer the pawns of short sellers.
- Cowen analysts, who helped kick off the craze early this week they said Plug Power (PLUG +26.1%) could amass more contracts with current customers and possibly expand overseas, are out today saying FuelCell Energy's (FCEL +14.3%) Q4 earnings, expected Monday, have the potential for upside.
- Fuel cell companies are capping a spectacular week: FCEL +79%, PLUG +71%, BLDP +42%, ZBB +132%.
2:57 PM| 3 Comments
- Copper futures slumped to their biggest loss in more than two years as investors worried about slowing growth in China, which accounts for 40% of the world's copper demand.
- Traders were spooked by China's first default on a bond traded in the mainland, which comes amid broader fears about the impact of China's economic slowdown on demand for industrial metals.
- Copper prices have lost 9.2% YTD as signs of faltering growth in China have raised the outlook for a surplus.
- Top publicly traded producer Freeport McMoRan (FCX) -4.8%.
- ETFs: JJC, CPER, CUPM
- Nokia (NOK +2.4%) has been added to Credit Suisse's U.S. and European focus lists. CS is optimistic about Nokia's ability to grow its high-margin patent licensing ops following the Microsoft deal - other firms have aired similar opinions - and also thinks major cash distributions could be on the way.
- Dan Loeb has argued a Nokia buyback or special dividend could happen post-Microsoft. The company stands to have ~€8B in net cash once the deal closes, and has suggested it's eying smaller acquisitions rather than a big one. Nokia suspended its regular dividend a year ago.
- CEO Rory Read appeared on CNBC's Fast Money (video) yesterday evening to talk up AMD's (AMD +6.3%) efforts to lower exposure to a PC market featuring soft industry demand, short product cycles, and intense competition from Intel/Nvidia.
- Read, in reference to his company's PS4/Xbox One design wins: "What we're trying to do is create these long-term strategic relations .... Those are the plays that are going to create the long-term transformation of AMD." In addition to consoles, AMD is looking to create partnerships in the server and embedded computing markets.
- He asserts only 4% of AMD's revenue came from non-PC applications when he joined the company, and that over 30% do so now. Long-term, AMD wants to derive half its revenue from non-PC markets.
- At the same time, Read argued AMD, whose PC CPU ops have historically been heavily exposed to the low-end consumer notebook market (hit hard by tablets), has "greenfield" opportunities in the desktop and commercial markets. The company recently launched low-end desktop CPUs based on its 28nm Kabini architecture (previous), with the goal of enabling high-volume sub-$300 systems for emerging markets.
- With over 1/6 of the float shorted as of Feb. 14, Friday short-covering is likely contributing to today's gains.
- Shares of SeaWorld Entertainment (SEAS -5.3%) as lower after lawmakers in California start to work on and publicize proposed legislation in the region to phase out Orca Whale captivity.
- The group points out that other states already limit the practice of displaying the large marine animals in enclosed spaces.
- The company is likely to be called out during a press conference later today by Assemblyman Richard Bloom.
- Ahead of its March 19 lockup expiration, FireEye (FEYE -9.7%) is offering 14M shares - 5.6M newly-issued shares, and 8.4M from existing shareholders - at a price of $82 (8% below yesterday's closing price). Underwriters have a sizable 2.1M-share overallotment option (all for new shares).
- FireEye, which has forecast a $2.00-$2.20/share loss for 2014 due to massive sales investments, stands to reap gross proceeds of $458M from the offering. The new shares stand to increase FireEye's diluted count by 5%.
- The mortgage REITs are maybe the poorest performing sector amid a big move higher in interest rates, and formerly bullish Deutsche Bank ringing the register on New York Mortgage Trust, CYS Investments, and American Capital Mortgage after nice runs for all have pulled them close to (or above in NYMT's case) book value.
- There's also an earnings miss this morning from one of the last of the players to report Q4, Western Asset Mortgage.
- Annaly (NLY -2.1%), American Capital Agency (AGNC -2.3%), Armour (ARR -1.4%), Two Harbors (TWO -1.8%), Invesco (IVR -2.7%), Capstead (CMO -1.2%), MFA Financial (MFA -2%), Apollo Residential (AMTG -1.7%)
- Alpha Natural Resources (ANR -9.4%) is hit hard after Goldman Sachs last night cut its rating on the shares to Sell and lowered its price estimates for coal; other sector names are following suit.
- Goldman also cut its price estimate for met coal this year to $141/metric ton from $150 and lowered projections for next year and 2016 following increased Australian output, an expected slowdown in the growth of Chinese imports, and “limited U.S. supply rationalization."
- The firm maintains a Neutral rating on Walter Energy (WLT -5.6%) but cuts its price target to $10 from $12.
- Also: BTU -4.2%, ACI -4%, CNX -1.5%, OXF -1.6%, JRCC -1.5%, CLD -0.7%, KOL -2.1%.
- Jury deliberations are continuing for Juniper's (JNPR -0.6%) huge patent infringement suit against Palo Alto Networks (PANW +4.6%). Palo Alto shares have spiked higher on hopes of a favorable outcome.
- Juniper has alleged Palo Alto's next-gen firewalls (taking share from Juniper, Cisco, and others) infringe on IP developed by Palo Alto's founders when they were working at NetScreen (acquired by Juniper in 2004).
- Palo Alto shares jumped in early February after the court handling the suit denied a Juniper infringement motion, and granted two Palo Alto motions for summary judgment.
- Penn West Petroleum (PWE +2%) is on the rise despite reporting a Q4 loss of C$1.49/share, mainly due to C$742M in impairment charges, as investors seem willing to wait past the early stages of a turnaround with a new focus on its industry-leading light-oil position in western Canada.
- Backing out the loss, funds flow of $0.44/share was 29% lower than $0.62 reported in the year-ago quarter mostly due to asset sales completed over the past year, as well as a shrinking capital budget.
- A shrinking asset meant lower production volumes; in Q4, production was ~124K boe/day, down 19% Y/Y.
- Forecasts 2014 output of 101K-106K boe/day, with a planned $900M capital budget.
- Sources tell Reuters (translation) Vodafone (VOD -2.8%) has raised its bid for Spanish cable giant ONO, and has reached a preliminary deal with ONO shareholders collectively possessing a controlling stake.
- No word on the specific offer price. Vodafone was previously reported to have made a rejected €7B ($9.6B) bid for ONO.
- One source states Vodafone plans to formally present its offer before ONO's board meets on March 13 to approve recently-announced plans to pursue an IPO.
- Vodafone is selling off on the report. A successful Vodafone bid for ONO, coming on the heels of its $14.2B Kabel Deutschland acquisition, could lower the odds AT&T (T +0.3%) will make an offer for the company once its 6-month waiting period ends. AT&T CEO Randall Stephenson has reportedly told investors further cable acquisitions by Vodafone would complicate a deal.