Friday, October 9, 2015
- BOX CEO Aaron Levie followed up on his 15K-share Wednesday purchase by acquiring 10K shares on Thursday at $11.91, and 25K shares today at $12.34.
- In addition, director Josh Stein bought another 5K shares today at $12.14. Altogether, Stein has bought 45K shares since Sep. 21.
- The enterprise cloud storage/file-sharing service provider is up 10% over the last two days. Shares remain below their $14 IPO price.
- The Zephirin Group sees "little risk in going long” offshore drillers such as Transocean (NYSE:RIG), Ensco (NYSE:ESV), Rowan (NYSE:RDC), Noble (NYSE:NE) and Diamond Offshore Drilling (NYSE:DO), given that the shares have been "bleeding out" since the beginning of the year.
- The firm believes investors are accepting the realities of soft demand, day rate and utilization rate - and management should be applauded for navigating the past three difficult quarters - and have zero conviction on the offshore drilling outlook for 2016.
- With plenty of bargains available, Zephirin recommends building a position in the sector's best stocks - RIG, ESV, RDC, NE and DO - in the current final leg of 2015.
- Reuters reports EU regulators have approved Intel's (NASDAQ:INTC) planned $54/share ($16.7B) acquisition of Altera (ALTR +1.3%), following September clearance from the DOJ. Regulatory approval has been widely expected - Intel doesn't compete with Altera's core FPGA products, and Xilinx remains a formidable rival FPGA supplier.
- Altera still trades $1.60 below Intel's buyout price. SA author Chris DeMuth Jr. has been arguing a good merger arb opportunity exists. He estimated yesterday Altera's net arbitrage spread (diminished a bit today) spelled a 15% annual return.
- 3 days ago: Altera shareholders approve Intel deal
- Baird has launched coverage on Sigma Designs (NASDAQ:SIGM) with an Outperform rating and $14 target.
- The launch follows a nosedive that occurred in the wake of Sigma's Sep. 9 FQ2 report (occurred in spite of an FQ2 beat and above-consensus FQ3 guidance).
- Shares currently go for 17x an FY17 (ends Jan. '17) EPS consensus of $0.46, and less than 1x FY17E sales after backing out net cash.
- Arguing Rapid7's (NASDAQ:RPD) recent selloff provides a chance to obtain growth at a reasonable price, Barclays Saket Kalia has upgraded the security threat exposure management (TEM) and incident-detection/response software/services firm to Overweight, while keeping his target at $28.
- Kalia expects Rapid7's revenue to grow at nearly a 30% CAGR through 2017, and notes shares are trading at a discount to peers. He adds growing cybersecurity threats are transforming TEM from a "compliance/check-the-box tool to a proactive, high ROI security tool."
- Shares are up 52% from their $16 July IPO price, but down 9% from a post-IPO opening trade of $26.75.
- Cowen has reiterated an Outperform rating and $60 target for Universal Display (NASDAQ:OLED). Shares have rallied towards $39.
- Earlier this week, Cowen argued Samsung's Q3 pre-announcement boded well for Universal, given Samsung's better-than-expected numbers appeared to stem from OLED and logic IC strength. "When we visited Seoul in September, Samsung noted rising [OLED panel] shipments to other OEMs along with better Y/Y compares for Galaxy models. We note recent [OLED-supporting] models including Google Nexus 6P, and Microsoft Lumia 950/950 XL."
- Short-covering could be helping out: Universal had 3.7M shares (nearly 10% of the float) shorted as of Sep. 15.
- Considering the stock deeply undervalued on a sum-of-the-parts basis, JPMorgan's Mark Strouse has hiked his SunEdison (SUNE +0.8%) target by $2 to $21, while reiterating an Overweight rating.
- The target hike reflects "a higher than previously estimated value" for SunEdison's project development ops. Strouse: “Since SUNE intends to only sell completed projects to warehouses in the future, we are revising our cash flow estimates, eliminating the gross margin deferrals ... Global wind and solar generating capacity should reach about 1.4TW as soon as 2020, yielding up to ~$170 billion of cash available for distribution.”
- He admits capital constraints could pose a risk to future development efforts, but adds SunEdison's warehouse facilities provide it with access to 3rd-party funds.
- Prior SunEdison coverage
Thursday, October 8, 2015
- "Qualys (NASDAQ:QLYS) guided to a meaningful uplift in the company's target operating model as compared with both past guidance and current buy- or sell-side expectations," reports Credit Suisse's Philip Winslow after attending the cloud security/compliance software vendor's investor day. He has upgraded to Outperform, and hiked his target by $10 to $45.
- Winslow notes management's new 5-year plan aims for a 42%-46% op. margin and revenue of "at least" $500M. He estimates that respectively implies revenue and expense CAGRs of 24.7% and 15.8%-17.4%.
- Also: Winslow believes Qualys could be an attractive buyout target given its relatively low valuation, and (with 40% of clients still only using one product) sees ample cross-selling opportunities. New product launches are expected for the core QualysGuard cloud platform.
- Yesterday: Qualys names field operations chief, announces partnerships ahead of investor day
- Believing the company's margins are "steadily deteriorating" and that customer growth is slowing, Cowen's Kevin Kopelman has launched coverage on Groupon (GRPN -2.4%) with an Underperform rating and $2.75 target.
- Seen pressuring Groupon's margins: Fee cuts for retail service partners, merchant subsidies, and a mix shift (has been going on for a while) towards e-commerce/goods sales relative to local deals/services.
- Kopelman also observes Groupon's North American active customer growth has slowed to 10% Y/Y, and argues the company's core market is getting saturated. Meanwhile, he's skeptical about Groupon's prospects in the food delivery market in light of competition from the likes of GrubHub, Amazon, Yelp, and Uber.
- Shares are lower a day after rising 8.2% following news Chinese local deals leaders Meituan and Dianping are merging at a combined $15B valuation that makes Groupon's market cap (currently $2.4B) seem paltry by comparison.
- Activist Elliott Management has disclosed a 4.4% stake in videroconferencing and unified communications (UC) hardware/software vendor Polycom (PLCM +10%), and a 6.3% stake in UC peer Mitel (MITL +17.1%). Each position was worth ~$100M going into today.
- In an open letter, Elliott declares the unified communications/collaboration space is overdue for consolidation, and calls on Polycom and Mitel to merge. "The combination would double the scale of Polycom to $2.5 billion in revenue. Between Mitels $164 million of EBITDA in 2014 and $100 $150+ million of synergies available, Polycom would quickly become a $500+ million EBITDA company following a combination with Mitel. Scale provides important competitive advantages in addition to the financial benefits of greater diversification, stability and access to capital markets."
- The firm also argues Polycom faces tough videoconferencing competition from Cisco, Avaya, LifeSize (Logitech), and others - "The smaller, newer players continue to take share with cheaper and simpler products while the larger, diversified vendors use their marketing power and bundling to squeeze out companies like Polycom." - and that Mitel's Canadian incorporation could yield tax benefits.
- Elliott: "Polycom's stock can increase by over 30% to $14.75 per share by the end of 2016 and nearly 85% to $20.50 per share by the end of 2017. The best part is that we assume the exact same multiple and absolutely no improvement in revenue trajectory ... the transaction is so compelling that Polycom could pay $10.00 per share for Mitel in an all-stock transaction and still yield a 70% return by the end of 2017 and a 95% return by the end of 2018."
- Also: Elliott notes it has a stake in another UC product provider, ShoreTel (SHOR +0.9%). Mitel made a failed attempt to acquire ShoreTel last year; Elliott argues a deal between the two still makes sense.
Wednesday, October 7, 2015
- Schlumberger (NYSE:SLB) is out and Frank's International (NYSE:FI) is in, praising FI's “self-help improvements with a good underlying business.” as Credit Suisse analysts update their top energy stock picks in 10 different subsectors.
- Credit Suisse names Devon Energy (NYSE:DVN) as its favorite oil and gas E&P stock, which should ultimately outperform despite near-term oil price risk “given its defensive valuation, top quartile oil growth profile, and further accretion potential from EnLink."
- Top independent refiner is Marathon Petroleum (NYSE:MPC), as the firm believes the synergy of the company’s recently-acquired Hess retail business is exceeding plans, and it is confident MPC will continue to benefit from self-help initiatives.
- Among MLPs, Genesis Energy (NYSE:GEL) is defensive in terms of its direct exposure to commodity price weakness and offensive in terms of the distribution growth expected following its recent acquisition of offshore assets from Enterprise Products Partners.
- Other subsector favorites:MRO, PDCE, EURN, SCTY
Tuesday, October 6, 2015
- "I've been hearing Juniper (NYSE:JNPR) may go private for a while," says an "experienced [Silicon] Valley technology executive" speaking with Light Reading. "It's the same threat as Riverbed ... In Juniper's case, it would be cool…it is needed."
- The "threat" in question is pressure from activist Elliott Management, which had a stake in Riverbed prior to its acquisition by P-E firm Thoma Bravo, and has prodded Juniper to carry out major job cuts and capital returns. To date, Elliott hasn't publicly demanded a sale.
- Meanwhile, a "senior executive in the router sector" states Juniper has been looking for a buyer. In addition, Benzinga recently reported hearing "unconfirmed market chatter" (doesn't always pan out) that Juniper has hired Goldman to "assist it in handling offers to take the company private for $32 per share."
- Earlier this year, the Nokia/Alcatel-Lucent deal fueled speculation Ericsson would counter by bidding for Juniper. Ericsson has said it's open to a major acquisition, but hasn't yet pulled the trigger on such a deal.
- With a $10.9B market cap - a buyout might require a $13B+ price - Juniper would be a big fish for a peer or P-E firm to swallow.
- Yesterday: Juniper rallies after landing Stifel upgrade, announcing AT&T deal
- Arguing the growing pace and sophistication of corporate data breaches will act as a tailwind, Sidoti's Stan Berenshteyn has launched coverage on Vasco (NASDAQ:VDSI) with a Buy rating and $34 target.
- Berenshteyn also likes Vasco's low tax rate and balance sheet/cash flow profile. His launch comes a day after the authentication hardware/software provider named a new CFO.
- Shares still -34% YTD. They go for nearly 19x a 2016 EPS consensus of $1.00.
- Believing consensus estimates are too high and that the company is likely to cut guidance over the next 6 months, Citi's Jim Suva has launched coverage on F5 (NASDAQ:FFIV) with a Sell rating and $105 target.
- Suva notes he's the only analyst with a bearish rating on F5. He has also started Cisco at Buy, and Juniper at Neutral.
- F5 has fallen to $116.22 premarket. Suva's coverage comes as smaller F5 rival Radware tumbles in response to a Q3 warning. F5's FQ4 (calendar Q3) report arrives on Oct. 28.
- Yesterday: F5 partners with FireEye
Monday, October 5, 2015
- Sirius XM (NASDAQ:SIRI) gained 1% today to close at $3.87, its highest point in three weeks.
- Buckingham Research is recommending getting exposure to the company, which it has Buy-rated -- but instead through Liberty Media (NASDAQ:LMCA) rather than a direct purchase.
- The vast majority of Liberty's market cap has been tied up in holding a majority stake in Sirius XM (59.4% as of July 24). And while Sirius is market priced, Buckingham says, Liberty Media's at a 17% discount to net asset value.
- Analyst James Ratcliffe has a $4.50 price target on Sirius XM; that implies 16%-plus upside from today's close. He has a $48 target on Liberty Media, which closed today up 1% to $37.55, implying 28% upside.
- Previously FBR had reiterated its Outperform rating on Sirius XM in looking at strong auto sales providing a good funnel. Buckingham agrees, expecting an above-guidance 1.95M net added subscribers for 2015.
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