Friday, May 22, 2015
- As part of a broader chip stock coverage launch, Mizuho's Vijay Rakesh has assigned Buy ratings to Micron (MU +2.2%), Avago (AVGO +1.8%), and Synaptics (SYNA +2.6%). His targets are respectively $39, $150, and $115.
- Like other bulls, Rakesh sees Micron's PC DRAM sales (recently under pressure) improving in 2H15, aided by the launch of Windows 10 and Intel's 14nm Skylake CPU platform. He also downplays concerns about Micron's 20nm DRAM transition, thinks tri-level cell (TLC) and 3D NAND ramps will drive NAND gross margin improvement, and likes the hiring of Ernie Maddock as CFO.
- Rakesh forecasts Avago will continue benefiting from strong FBAR filter sales (boosted by 4G phone growth), growing smartphone dollar content, and the Chinese 4G ramp (aided by recent carrier tariff cuts). "AVGO is completely booked on its FBAR filter capacity through 2015 and the ramp of its industry leading 8-inch FBAR wafer capacity will likely lead to significant operational efficiencies versus its peers"
- He also notes Cisco is seeing strong sales for its ASR 9000 edge router line, which Avago has exposure to, and expects the Emulex deal to boost margins and EPS.
- TDDI (integrated touch/display driver) ICs, fingerprint sensor sales, and Chinese 4G demand are expected to act as tailwinds for Synaptics. Rakesh forecasts the company will produce FY16 (ends June '16) free cash flow of $304M, and thinks this could pave the way for buybacks.
- Synaptics has made fresh highs, and Avago is within $5 of a high of $136.28. Micron remains 25% below a high of $36.59.
- Shopify (Pending:SHOP) is now up 76% from its $17 IPO price, and 7% above a post-IPO opening trade of $28.00. The Canadian e-commerce software/payment service provider's valuation is up to $2.2B, or a steep 21x 2014 sales.
- SA author West Coast Growth Picks was bullish going into the IPO, noting Shopify has nearly doubled its merchant base each of the last 3 years and still gets 84% of its revenue from the U.S., U.K., and Canada (leaving plenty of room for international growth)
- Lior Ronen has been more cautious on account of Shopify's valuation, arguing SMB Web services provider Wix (WIX +0.2%) is a better deal given its far lower P/S multiple. Though not a direct Shopify rival, Ronen sees Wix benefiting from the launch of e-commerce services aimed at getting smaller merchants to upgrade to premium subscriptions.
- Prior Shopify coverage
- Update: Don Dion, who recommended buying into the IPO, is now closing out his position.
Thursday, May 21, 2015
- Believing the company still has plenty of room to grow its Taobao/Tmall GMV, and mobile take rate, Bernstein's Carlos Kirjner has launched coverage on Alibaba (BABA +3.6%) with an Outperform rating and $120 target.
- Kirjner thinks Alibaba's mobile monetization rate can match or exceed its PC rate long-term - Alibaba's mobile take rate was 1.73% in FQ4 (calendar Q1), and its total take rate 2.17%. He also argues rising Chinese incomes, Internet penetration, and e-commerce adoption will continue acting as secular growth drivers, and that a slower hiring pace will boost margins.
- Shares are at their highest levels since January, and up 17% since Alibaba posted an FQ4 beat on the back of 40% Chinese marketplaces GMV growth and a stabilizing take rate on May 7.
1:47 PM| Comment!
- Following two days of investor meetings with CFO Ofer Maharshak and business development chief Yonah Lloyd, Citi has hiked its Mobileye (NYSE:MBLY) target by $8 to $70, and upped its long-term estimates further above consensus.
- Citi asserts the meetings boosted its conviction Mobileye is benefiting from an "arms race" among automakers to "equip vehicles with ADAS & automated features," and that (in spite of new competition) the company's competitive lead continues to grow.
- The firm also believes Mobileye's ability to boost ASPs via the bundling of "newer safety innovations (free space, traffic light, road profile) and next-gen semi-autonomous apps" is underappreciated. Citi thinks the features can add $10-$20 to the $50+ ASP Mobileye receives for its automatic emergency braking (AEB) + pedestrian detection solution; its forward collision warning (FCW) + lane-detection warning (LDW) solutions is believed to sport a $30-$40 ASP.
- Shares are near their 2015 highs. They rallied 10 days ago after Mobileye posted a Q1 beat and reiterated its full-year guidance.
- Citing valuation and a belief earnings will bottom later this year, Oppenheimer has upgraded beaten-down Stratasys (NASDAQ:SSYS) to Outperform, and set a $50 target. Rival 3D Systems (NYSE:DDD) has been cut to Perform, but is higher anyway.
- Stratasys, which remains down 55% YTD following multiple warnings, could be benefiting from short-covering: 10.7M shares (22% of the float) were shorted as of April 30, a 52-week high.
- Last week: Stratasys rises following Q1 report; new $194M MakerBot charge taken
- Alongside Goldman's list of 50 stocks appearing most as top holdings at hedge funds is its list of the 50 top shorts.
- New additions this quarter: Baxter Intl (NYSE:BAX), UPS, Marriott (NASDAQ:MAR), NextEra (NYSE:NEE), Ford (NYSE:F), National Oilwell Varco (NYSE:NOV), McDonald's (NYSE:MCD), M&T Bank (NYSE:MTB), CenturyLink (NYSE:CTL), Amgen (NASDAQ:AMGN), Pioneer Natural (NYSE:PXD), Duke Energy (NYSE:DUK), Seagate (NASDAQ:STX), AbbVie (NYSE:ABBV), Cisco (NASDAQ:CSCO).
- The full list (in order of $ value of short interest): AT&T (NYSE:T), Disney (NYSE:DIS), IBM, Verizon (NYSE:VZ), Intel (NASDAQ:INTC), Kinder Morgan (NYSE:KMI), Exxon (NYSE:XOM), Pfizer (NYSE:PFE), J&J (NYSE:JNJ), Deere (NYSE:DE), Caterpillar (NYSE:CAT), Exelon (NYSE:EXC), GE, Boeing (NYSE:BA), Halliburton (NYSE:HAL), Fox (NASDAQ:FOXA), Comcast (NASDAQ:CMCSA), UTX, Regeneron (NASDAQ:REGN), Merck (NYSE:MRK), salesforce.com (NYSE:CRM), AbbVie (ABBV), Conoco (NYSE:COP), Wal-Mart (NYSE:WMT), Eli Lilly (NYSE:LLY), Celgene (NASDAQ:CELG), Schlumberger (NYSE:SLB), AutoZone (NYSE:AZO), Wells Fargo (NYSE:WFC), Emerson (NYSE:EMR), McDonald's (MCD), Reynolds (NYSE:RAI), Target (NYSE:TGT), Accenture (NYSE:ACN), Coca-Cola (NYSE:KO).
- New additions to Goldman's hedge fund hotels - 50 stocks which most frequently appear among the largest ten holdings of hedge funds: AerCap (NYSE:AER), Assured Guaranty (NYSE:AGO), Baker Hughes (NYSE:BHI), Citizens Financial (NYSE:CFG), Colony Capital (NYSE:CLNY), Dresser-Rand (NYSE:DRC), Family Dollar (NYSE:FDO), Hospira (NYSE:HSP), Netflix (NASDAQ:NFLX), NXP Semi (NASDAQ:NXPI), Pharmacyclics (NASDAQ:PCYC), Visa (NYSE:V), and Walgreens (NASDAQ:WBA).
- Since 2001, the basket has outperformed the S&P 500 in 66% of quarters by an average of 73 basis points. YTD, however, it has underperformed by nine bps. Goldman notes the current basket overweights Consumer Discretionary (22%) and underweights Consumer Staples (2%).
- Looking at the full list, Actavis (NYSE:ACT) leads the way, with 77 funds naming the stock as a top 10 holding. Next up is Apple (NASDAQ:AAPL) with 69, then Facebook (NASDAQ:FB) at 42. For the entire list of 50, the average is 26 funds making a stock a top 10 holding.
- The rest in order: Valeant (NYSE:VRX), Microsoft (NASDAQ:MSFT), DirecTV (NASDAQ:DTV), Citigroup (NYSE:C), Time Warner (NYSE:TWC), Delta (NYSE:DAL), Cheneire (NYSEMKT:LNG), Yahoo (NASDAQ:YHOO), Liberty Global (NASDAQ:LBTYK), AIG, SunEdison (NYSE:SUNE), Air Products (NYSE:APD), Amazon (NASDAQ:AMZN), GM, BofA (NYSE:BAC), JPMorgan (NYSE:JPM), Macquarie Infrastructure (NYSE:MIC), American Airlines (NASDAQ:AAL), Charter Communications (NASDAQ:CHTR), Google (GOOG, GOOGL), Ally Financial (NYSE:ALLY), NorthStar Realty (NYSE:NRF), Priceline (NASDAQ:PCLN), eBay (NASDAQ:EBAY), MasterCard (NYSE:MA), Alibaba (NYSE:BABA), Micron (NASDAQ:MU), Williams (NYSE:WMB), Gilead (NASDAQ:GILD), Berkshire Hathaway (BRK.A, BRK.B), Dolar General (NYSE:DG), NorthStar Asset (NYSE:NSAM), Brookdale Senior (NYSE:BKD), DISH Network (NASDAQ:DISH).
- See also: Goldman updates list of hedge funds most-shorted stocks (May 21)
Wednesday, May 20, 2015
- MKM's Michael Genovese has hiked his Ciena (CIEN +1.4%) target by $2 to $27 ahead of the company's June 4 FQ2 report. Shares have made fresh 52-week highs.
- Genovese: "We are positive on CIEN because demand for 100G Optical capacity is strong and broad-based across Internet, Cable and Tier 2 carrier customers. Ciena is also seeing good growth in Europe from better distribution. Overall revenue growth should accelerate in FY16 as U.S. Tier 1 demand improves. We also expect [operating margins] to expand in FY15-FY16 to normalized low-double-digit levels."
- The upgrade comes two weeks after Ciena struck a $400M deal ($335M net of cash) to buy carrier SDN software vendor and metro packet-optical hardware rival Cyan (CYNI +1.4%). The deal was widely seen as being software-focused - Wells Fargo argued the advanced software orchestration features of Cyan's Blue Planet SDN platform could help Ciena "capitalize on rising customer demand for open, programmable, and virtualized network architectures over the next several years."
- With Ciena set to given Cyan shareholders consideration equal to 0.224 Ciena shares (89% in stock, 11% in cash), Cyan is following Ciena higher.
- With shares having closed yesterday just $0.45 above a 52-week low of $5.70, Rosenblatt Securities has upgraded Himax (NASDAQ:HIMX) to Buy, while declaring "the worst is over" for the company and that there's M&A potential for the company's LCoS microdisplay ops.
- Himax rallied last week after providing mixed Q1 results, soft Q2 guidance, and upbeat commentary about its LCoS efforts, but quickly gave back its gains.
- After backing out $309M in cash, shares trade for 1x 2015E sales. The 2015 revenue growth consensus is at -4.7%, and the 2016 consensus at 18.6%.
Tuesday, May 19, 2015
- As part of a change in analyst coverage for cloud software stocks, Needham's Scott Berg has launched coverage on Workday (NYSE:WDAY) and HealthStream (NASDAQ:HSTM) at Buy, upgraded Cornerstone OnDemand (NASDAQ:CSOD) to Strong Buy, and upgraded Ultimate Software (NASDAQ:ULTI) to Buy after the close. Though their product lines differ, all 4 companies have exposure to the cloud HR/talent management space.
- Berg on Workday: "[W]e believe WDAY has the combination that growth investors seek: large market, well positioned product versus industry megatrends, and a financial model that yields significant revenue visibility ... Although we believe the company's current valuation assumes almost flawless near-term sales execution to further expand its valuation multiples, we believe its execution within a HCM market exhibiting high demand creates a positive risk/reward scenario..." The remarks come ahead of Workday's May 26 FQ1 report.
- Berg on HealthStream: "We believe HealthStream uniquely benefits from two significant mega-trends; 1) the strong secular adoption rates within the Talent Management Enterprise Software subsector, and also 2) an environment that is increasingly regulated, requiring its products’ end users to evaluate competencies and train employees on a more frequent basis." The cloud healthcare software firm is a month removed from posting a Q1 beat.
- WDAY +0.7% AH to $91.28. CSOD +1.9% to $32.44. ULTI +1.2% to $170.29. HealthStream hasn't yet moved AH.
- MaxPoint (NYSE:MXPT) chairman/CEO Joe Epperson discloses he bought 6K shares last Friday at $8.28. COO Gretchen Joyce bought 3K shares at $8.40, and CTO Kurt Carlson bought 2,895 shares at $8.29.
- The purchases occurred two days after the local online ad services firm posted a Q1 beat, and with shares continuing to trade below March's $11 IPO price.
Monday, May 18, 2015
- Goldman's sees the S&P 500 hitting a mid-year high of 2,150 by mid-year, but fading to 2,100 by year-end after the Fed hikes rates. Its 12-month forecast of 2,125 stands against the current level of 2,130.
- With appreciation returns expected to be nil, Goldman suggests having a look at its dividend growth portfolio - a sector-neutral basket of 50 stocks. They have a median yield of 2.5% and are expected to boost payouts by 16% this year and 12% in 2016. The group's P-E ratio is 15 vs. 17.3 for the S&P 500.
- The ten highest-yielding additions: Harley-Davidson (NYSE:HOG) - with a 2.3% yield, Home Depot (NYSE:HD) - 2.1%, Dr. Pepper Snapple (NYSE:DPS) - 2.5%, National Oilwell Varco (NYSE:NOV) - 3.6%, Regions Financial (NYSE:RF) - 2.3%, Baxter International (NYSE:BAX) - 3.1%, Cummins (NYSE:CMI) - 2.4%, Seagate Technology (NASDAQ:STX) - 3.9%, International Paper (NYSE:IP) - 3.1%, AES Corp (NYSE:AES) - 3%.
- Looking over a ten-year horizon, Goldman expects dividends to account for 46% of the S&P 500's 5% annualized return, up from 20% during the current bull market which started in 2009.
- ETFs: DVY, SCHD, ADX, SDOG, DLN, DHS, FDL, DTD, FVD, DVYL, SDYL
- Rosenblatt Securities has reiterated its Buy rating and $11 target for iDreamSky (NASDAQ:DSKY) in a new bullish note. iDreamSky has decided to issue a PR to help share the news.
- Rosenblatt forecasts a strong Q1 report later this month, aided by Chinese New Year promos for Ninja Fruit, Temple Run, and other games. The firm's Q2 estimates have been slightly cut due to China Mobile's temporary suspension of billing systems in several provinces, but it thinks new games will help offset. "We believe China Mobile cracking down on illegal games will be positive for DSKY over the long-run."
- Rosenblatt's $11 target is respectively equal to 12x and 7x estimated 2015 and 2016 EPS of $0.94 and $1.57.
- Shares remain down 46% YTD; they sold off hard in January, and plunged in March due to a Q4 warning and soft Q1 guidance.
- Last week: SA author questions iDreamSky's accounting
- Citing a favorable valuation, stabilizing demand, and a belief double-digit growth could return in 2H15, Pac Crest has upgraded A10 Networks (NYSE:ATEN) to Overweight, and set a $10 target.
- A10's beaten-down shares are up 25% since the company beat Q4 estimates and provided in-line guidance on May 4. BofA/Merrill upgraded to Buy in response. Shares trade for 1.9x 2015E sales; the 2015 revenue growth consensus is at 6.4%.
Friday, May 15, 2015
- After having exited a prior GM position a year ago, David Einhorn's Greenlight Capital bought 9.5M shares of the auto giant in Q1, per Greenlight's Q1 13F.
- Einhorn previously disclosed the purchase, along with his reasoning, in his Q1 letter. "2015 should be a better year for GM: the company is a year closer to eliminating its losses in Europe; low gas prices should stimulate demand for its highly profitable SUV and light truck product lines; raw material costs are low; and we believe that the worst of the product recalls is behind them." He also noted GM's buyback, and called earnings estimates beatable.
- A 1.7M-share stake was taken in Macy's (NYSE:M), and a 1.1M-share stake in Ingram Micro (NYSE:IM). Greenlight's stake in Chicago Bridge & Iron (NYSE:CBI) was more than doubled to 6.7M shares, and its stake in AerCap (NYSE:AER) hiked by 49% to 5.6M.
- On the flip side, Greenlight liquidated a 1.3M-share stakes in Aetna (NYSE:AET) and Amdocs (NASDAQ:DOX). The firm cut its stake in chipmaker/long-time holding Marvell (NASDAQ:MRVL) by 63% to 9M shares, and in chip equipment maker Lam Research (NASDAQ:LRCX) by 33% to 1.7M shares.
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