Thursday, August 27, 2015
Wednesday, August 26, 2015
- Biotech analysts at Piper Jaffray say they are buyers on weakness of four biotech names - Vertex Pharma (NASDAQ:VRTX), Novavax (NASDAQ:NVAX), Alnylam Pharma (NASDAQ:ALNY) and Arrowhead Research (NASDAQ:ARWR) - that boast strong enough balance sheets to make it through upcoming value-driving events.
- The firm notes VRTX holds more than $1B in cash, and expects a dramatic increase in treatable cystic fibrosis patients with the newly approved Orkambi, which will help drive revenue growth and a return to near-term profitability.
- Jaffray says it has increased confidence in NVAX following positive Phase 2 data in its RSV-F in elderly subjects; the company ended the quarter with $315M in cash, which can fund "at least one" pivotal RSV trial.
- ALNY ended the recent quarter with $1.4B in cash, with key patisiran and revusiran Phase II in OLE updates expected in Q4.
- On ARWR, the firm looks to an expected September update of Phase IIa HEPARC 2001 data.
- No financial sector stocks are immune to the "higher risk" themes of energy, interest rates, and emerging markets, say Nomura's Steven Chubak and Sharon Leung, but they have picked three oversold ones offering big long-term value.
- Morgan Stanley (MS +3.7%), says the team, has been disproportionately punished over energy concern, E*Trade (ETFC +3.1%) for rates (the chance they're not headed higher), and Lazard (LAZ +2.9%) for its exposure to emerging markets/China.
- Long-term earnings potential supports more than 30% upside at all three, they say.
- The team is also bullish on Citigroup (C +2.9%), but note the stock has been surprisingly resilient despite heavy leverage to both emerging markets and rates. They thus prefer Morgan.
Tuesday, August 25, 2015
- investors should stick with "market darlings" - the 25 stocks that had performed the best during the six months before a market pullback - according to the analyst team at RBC.
- The firm notes that although many recent winners are leading the market lower, the extent of the underperformance is just 1%; it also says investing in the group following sharp market pullbacks is a winning strategy over the ensuing week, month and six months.
- RBC's 25 market darlings are AET, ALTR, AMZN, AIZ, CVC, CI, CAG, EA, EQIX, EXPE, GME, GOOGL, HAS, HCA, MNST, NFLX, NKE, PRGO, REGN, SBUX, TSO, TWC, TSS, UA, UHS
- A new report from Deutsche Bank says the perfect storm of bad news has driven energy MLPs down to the most compelling levels since the selloffs of 2008, and suggests three new MLP ideas for investors to consider.
- The firm says Energy Transfer Partners (ETP +1%) is very undervalued, trading nearly 35% off its peak with high single-digit distribution growth foreseen over the next few years; the company owns and operates ~35K miles of natural gas and natural gas liquids pipelines, and its Sunoco affiliate supplies motor fuel to independent dealers, stores, distributors and commercial customers.
- MarkWest Energy (MWE +0.9%) has a leading presence in many natural gas resource plays, and the firm thinks the company has outstanding interconnectivity to takeaway capacity, strong regional expertise, strong producer relationships, and views MWE as a solid buyout candidate.
- Deutsche Bank also likes MPLX ([MPLX]] +1.2%), the MLP formed in 2012 by Marathon Petroleum to own, operate and acquire pipelines and other midstream assets related to the transportation and storage of crude oil and refined products.
- Goldman Sachs analysts say the U.S. stock market correction has many more parallels with 1998 than 2008, which “suggest[s] a rebound ahead,” while predicting the S&P 500 will rise by 11% from current levels to reach 2,100 by year's end.
- The S&P fell 19% between July and August 1998, but "ultimately, the U.S. economy was relatively unaffected by overseas financial market gyrations in 1998, and we believe a similar situation will occur in 2015," Goldman says.
- The correlation between U.S. economic growth and Chinese growth is relatively low, Goldman says, estimating that a one percentage point drop in Chinese growth would translate into a 0.06 pp reduction in U.S. GDP.
- The best strategy for U.S. consumers, the bank advises, is to hold companies with high domestic revenues and avoid companies with high foreign sales.
- Goldman's list of the 25 most oversold stocks with high U.S. sales exposure: KMX, M, WFM, CHK, SWN, RRC, COG, PXD, OKE, MPC, NAVI, ETFC, LNC, BXP, KEY, RF, DFS, ANTM, CSX, NSC, UNP, JBHT, FSLR, ADS, PAYX
- "We believe MYGN's share in hereditary testing is stable, and positive developments in new markets could drive accelerating growth," argues Wells Fargo, upgrading to Outperform following a talk with CFO Bryan Riggsbee and IR chief Scott Gleason. The firm's valuation range has been hiked to $36-$38 from $33-$34.
- Wells believes Myriad's hereditary cancer testing share has stabilized around 90%, following losses seen in the wake of the Supreme Court's 2013 gene patent invalidations. "We believe MYGN's key advantage is the quality of its database, which we better appreciate following meetings with management."
- The firm also expects $10M-$12M in revenue this year related to Myriad's Prolaris testing product, and notes VectraDA demand improved in FQ4 (the June quarter) following "several quarters of stagnation." A new CEO/CFO are also seen as a positive, and Myriad's Sep. 14 analyst day a potential catalyst.
- Believing shares can double or even triple from current beaten-down levels, JPMorgan has upgraded ROVI to Overweight, and set a $23 target.
- The firm adds it expects Rovi, stung this year by Netflix-related legal setbacks, to see positive outcomes for contract renewals with AT&T, Dish, and Comcast.
- Shares remain down 54% YTD. They trade for just ~5x a 2016 EPS consensus of $2.07. Over $700M worth of net debt is on the balance sheet.
- "We are now into the foothills of the revenue and margin reacceleration which should gain momentum going forward," writes Baird's Steven Ashley, upgrading Adobe (NASDAQ:ADBE) to Outperform while maintaining an $85 target.
- Much like RBC's Ross MacMillan, Ashley is optimistic about the ability of Creative Cloud to expand Adobe's addressable market. "The Adobe business model transition not only enhances customer lifetime value, it also expands the market by attracting new paying-customers, and perhaps most importantly is transformational from a customer point of view."
- He adds Adobe's Creative Cloud mobile apps "incentivize legacy CS6/CS5 customers to adopt CC," as well as bring more content to the cloud, bring in new customers, and boost renewal rates. ARPU (recently pressured by subscription discounts) is expected to bottom soon, before rising over the next 18 months.
- Shares are up strongly as the Nasdaq posts a 2.9% gain.
Monday, August 24, 2015
- Stating checks came back strong (particularly for North America), JMP's Erik Suppiger is reiterating an Outperform on Palo Alto Networks (PANW -0.8%) ahead of its Sep. 9 FQ4 report.
- Suppiger: "We believe the company is investing aggressively in sales to continue its rapid top-line growth with new products, such as its high-end security platform ... While the entire security sector has traded off in the last month, we feel the sell-off in PANW shares (down 19% vs. Nasdaq down 9%) represents a particularly attractive buying opportunity ahead of what we believe will be a very strong quarter."
- After falling as much as 11.7% in early trading, Palo Alto is now down modestly in the face of a 2.6% Nasdaq drop. Shares are still up 29% YTD.
- Last week: Palo Alto launches new flagship firewall, claims 200Gbps of throughput
- Michael A. Brown bought 23.2K shares on Friday via 5 purchases at prices ranging from $21.36-$21.38. His total stake is now at 450.8K.
- The purchases come less than two weeks after Symantec (SYMC -3.2%) posted an FQ1 miss, issued light FQ2 guidance, and announced it's selling Veritas to Carlyle for $8B.
- Shares -21% YTD. They're down today amid a 1.4% drop for the Nasdaq.
- Perhaps looking to make a show of confidence following a massive summer plunge, SunEdison (NYSE:SUNE) directors Emmanuel Hernandez (chairman), Clayton Daley, and Peter Blackmore have respectively disclosed they bought 20K, 6.1K, and 8.7K shares last Friday. Their stakes are now at 20K, 11.1K, and 34.5K.
- SunEdison has rallied sharply after opening the day down 9%. Shares remain down 65% from a July peak of $33.45.
- In an epic intraday swing, SolarCity (NASDAQ:SCTY) is up 25% from an early-morning low of $34.65 as tech bargain-hunters/short-coverers emerged. 4.76M shares have already been traded, topping a 3-month daily average of 2.45M.
- CEO Lyndon Rive has responded to Jim Chanos' bearish Friday remarks. Regarding Chanos' assertion that SolarCity is a subprime finance company at heart, Rive notes the average FICO credit score for SolarCity customers is 740, well above the 640 level considered the threshold for subprime lending. "[Chanos is] wrong. He knows this. Our FICO score is public when we do securitizations ... He's intentionally saying this to add more pressure to the stock so he can make money."
- Rive also insists SolarCity has been offering cheaper electricity prices than utilities regardless of specific contract terms - Chanos argued many SolarCity clients are stuck with "relatively uneconomic" long-term electricity contracts, given solar panel prices have continued declining.
- Update: Goldman has also come to SolarCity's defense, arguing financing/cost of capital worries that have weighed on shares are unjustified. The firm notes SolarCity successfully sold solar asset-backed securities 11 days ago, and expects more such deals.
- Update 2 (12:36PM ET): SolarCity is now up 18.3%.
Friday, August 21, 2015
- "It's worse than you think," says longtime China bear Jim Chanos, having a day on CNBC. "Whatever you might think, it's worse."
- "People are beginning to realize the Chinese government is not omnipotent and omniscient ... like many of us, sometimes they don't have a clue."
- Chanos is short Solar City (SCTY -8.9%), saying it's really a subprime finance company, burning a lot of cash, and with negative EBITDA ... "this environment ... scary."
- He remains short some of the bigger names in the energy exploration and production space - DVN, MRO, OXY, APC.
- I don't like Shell (RDS.A -1.8%) or Chevron (CVX -1.5%), he says, and believes neither Chevron's dividend nor its buyback are safe.
- ETFs: FXI, ASHR, CAF, YINN, PGJ, GXC, FXP, YANG, CHN, PEK, MCHI, TDF, XPP, YAO, GCH, ASHS, YXI, CN, CHXF, FCA, CNXT, CHNA, KBA, JFC, AFTY, CHAU, XLE, VDE, ERX, OIH, XOP, ERY, DIG, DUG, BGR, IYE, IEO, FENY, PXE, FIF, PXJ, NDP, RYE, FXN, DDG, DRIP, GUSH
- With Advanced Semiconductor Engineering (NYSE:ASX) buying up to 25% of Siliconware Precision Industries (NASDAQ:SPIL) at a healthy premium, Seeking Alpha contributor Dane Capital Management says ChipMOS (NASDAQ:IMOS) should be very much on watch.
- Even at a sizable premium, a purchase by almost any larger competitor would be tremendously accretive, says Dane, and IMOS' huge net cash position and tremendous cash flow makes funding a deal an easy task.
- Previously from Dane Capital: ChipMOS: Oligopoly At 4x EBITDA, 8x EPS With Pending Buyback - A Holiday Gift
- SPIL +23.55% premarket to $6.40.
Thursday, August 20, 2015
- On a bleak day for equities, Syntel (NASDAQ:SYNT) is staying green thanks to an upgrade to Outperform from Baird's David Koning.
- Koning, whose target remains at $54, notes Syntel is the only IT/BPO services firm covered by Baird to have underperformed the S&P to date, and states Q2 trends appear better than Q1's. He also thinks 2015 EPS estimates will rise if the rupee remains weak.
- JPMorgan downgraded Syntel in early July, citing the impact of healthcare M&A. The company posted a Q2 EPS beat on July 23, but also cut the top ends of its full-year revenue and EPS guidance ranges by $10M and $0.10.
- Believing the company will be pressured by declining coal volumes and that its valuation still isn't cheap, Macquarie's Cleo Zagrean has downgraded Union Pacific (UNP -2.4%) to Neutral.
- Zagrean: "We now no longer expect that UNP will be able to achieve its 60+/- by full year '19 OR target ahead of time, and see further downside to our growth outlook if in fact more than 50% of the upcoming gas capacity translates into coal displacement rather than feeding new electric demand growth." 2016 and 2017 estimates have been cut by 2%-4%.
- At the same time, Zagrean has upgraded Kansas City Southern (KSU -0.8%) to Outperform, arguing it's the only railroad still seeing double-digit growth. "KSU becomes our top pick in US rail given the superior growth profile in a space where we continue to see mid single digit downside to LT EPS expectations. We would also pair KSU long against UNP short or GWR short given the potential for earnings surprises and the relative resilience of valuation multiples." His 2017 EPS estimate has been raised by 2%.
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