Seeking Alpha
  • Tuesday, November 25, 2014

  • 12:16 PM
    • Beaten-down Ceragon (NASDAQ:CRNT) trades at a price/sales ratio of less than 0.2x, and at less than half its book value of $2.31/share, notes SA author Hawkinvest.
    • The author also points out analysts expect Ceragon to post breakeven EPS in 2015 and a $0.28/share profit in 2016, and that the company's new IP-20 RF backhaul line "appears to be the market leader in terms of its size and performance." Ericsson and Alcatel-Lucent are seen as possible acquirers.
    • Also potentially helping Ceragon: Rival DragonWave has soared after announcing over $10M in orders from a tier-1 North American mobile carrier.
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  • 9:52 AM
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  • Monday, November 24, 2014

  • 3:43 PM
    • Twenty-two spinoffs have been completed in 2014, the most in a decade, and another 28 have been announced. Among the catalysts are activist investors, so Credit Suisse screened for companies with multiple business segments, slow growth, and stocks trading for lower multiples than peers, in other words, "good, quality companies that are struggling to grow."
    • The list is heavy on big media names like Time Warner (NYSE:TWX) and Twenty-First Century Fox (NASDAQ:FOXA), big tech like Oracle (NYSE:ORCL), Symantec (NASDAQ:SYMC), and IBM, and big industry like Lockheed Martin (NYSE:LMT), Ingersoll-Rand (NYSE:IR), and Raytheon (NYSE:RTN), but just two financial names - Travelers (NYSE:TRV) and Torchmark (NYSE:TMK).
  • 2:21 PM
    • Analysts weigh in on Shell Midstream Partners (SHLX +3.6%) and its strong post-IPO performance after the end of the MLP's quiet period.
    • UBS initiates SHLX with a Buy rating and $40 price target of $40, as it expects Royal Dutch Shell (RDS.A, RDS.B) to drop assets to the company faster than necessary to drive a 25.7% distribution growth compound annual growth rate during 2015-18, motivated to build scale quickly to make the MLP a meaningful entity within the company and to provide greater flexibility to finance growth projects and/or make acquisitions; it sees upside potential to $56 should Shell accelerate its drops to $1B of EBITDA by year-end 2016.
    • Citigroup also starts SHLX at Buy, while Barclays begins coverage at Outperform and Morgan Stanley at Equal Weight.
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  • 12:29 PM
    • Societe Generale analysts believe there is a real possibility of even lower oil prices, and if that occurs the firm recommends “bottom fishing” in European oil majors.
    • The sector offers more sustainable dividends than in the last oil price crash, as well as stronger balance sheets and liquidity, and reasonable valuations after the recent correction, the firm says, noting that in the 2009 crash, only the three supermajors in Europe - Royal Dutch Shell (RDS.A, RDS.B), BP and Total (NYSE:TOT) - maintained dividends unchanged, while the other six all cut them.
  • 10:59 AM
    • Ring Energy (REI -5.1%) is downgraded to Hold from Buy with a $12 price target, lowered from $20, at Canaccord Genuity on equity dilution concerns.
    • The recent decline in oil prices could accelerate REI's need for new capital, and the company's small relative size likely would preclude it from accessing the high yield market for several years, thus the firm believes dilution could limit near-term gains.
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  • 10:45 AM
    • Exxon Mobil (XOM -0.8%) and Chevron (CVX -0.4%) are lower as Raymond James downgrades both companies given their limited leverage to potential improving oil prices, while analyst Pavel Molchanov feels oil is within weeks of bottoming regardless of the OPEC decision.
    • In cutting shares to Market Perform from Outperform, the firm says XOM's "ultra defensive" characteristics, including a large chemicals and refining businesses, have insulated the company from the worst of the falling oil prices, but it still expects the stock to be a middling performer.
    • CVX, which is reduced to Outperform from Strong Buy, is approaching the peak of its spending while production growth should accelerate in the next two years, the firm says.
    • Also, Molchanov upgrades Occidental Petroleum (OXY +0.8%) to Strong Buy from Outperform and Hess (HES +0.1%) to Outperform from Market Perform.
  • Friday, November 21, 2014

  • 4:35 PM
    • Compass Point's Michael Tarkan has launched coverage on XOOM with a Sell rating and $11 target.
    • Tarkan: "While we favor Xoom's operating model relative to the legacy money transfer agent model, increasing competition and ongoing concentration risk create uncertainty—and with shares trading at 42x our 2015 EPS estimate and 27x our 2016 estimate, versus peers at 10x-11x and 9x-10x, respectively, valuation appears rich."
    • Shares fell 2% in regular trading, and aren't far removed from a post-IPO low of $14. They tumbled last month after Xoom provided light Q4 sales guidance and reported a drop in new customer adds.
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  • 3:52 PM
    • Geospace Technologies (GEOS -10.2%) is downgraded to Neutral from Buy at Dougherty, which also removed its price target, as the firm sees a difficult year ahead amid weakness in the seismic market.
    • GEOS' Q4 results missed estimates due to disappointing product demand and gross margins, and industry commentary suggests the seismic market will continue weak into or perhaps through 2016, with the exception of ocean bottom seismic, the firm says.
    • GEOS shares could remain under pressure with continued quarterly losses in the near term, the firm writes but adds that the $25.28/share tangible book value provides a rough floor.
  • 2:46 PM
    • Tsakos Energy (TNP +1.4%) is reiterated with a Buy rating and $10 price target at Canaccord, which still believes the stock is highly undervalued even after climbing 55% since an "undeserved and unwarranted" decline to $5.05 in October.
    • Noting the "spectacular" improvement in Q4 tanker rates, the firm sees the strength in the rate environment continuing through 2015, particularly given the current favorable supply/demand dynamics within the wet sector.
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  • 12:42 PM
    • Lukoil (OTCPK:LUKOY, OTC:LUKOF) has climbed 12% in U.S. trading this week, and BCS Financial is advising clients to buy the Russian oil producer’s stock, saying the “huge discount” to its biggest competitors is not justified.
    • Lukoil’s stock price does not reflect the tax benefits it will get from developing new Caspian Sea fields as well as production in areas where crude is more difficult to extract, BCS believes.
    • Lukoil, up 3.5% today, said yesterday that overseas output jumped 44% YTD.
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  • 9:49 AM
    • Caterpillar (CAT +3.5%) jumps at the open after China makes a surprise interest rate cut and the stock is initiated with a Buy rating and a $122 price target at Stifel,
    • Stifel says CAT's cycles have two acts and sees a back-half recovery this cycle with a North American focus; the firm also believes seasonal tailwinds, a rebound in commodities on global GDP optimism, and prolonged easy Fed policy should favor CAT shares.
    • The firm anticipates a North American heavy construction cycle, as well as oil and gas, as the catalysts for a late cycle recovery to fill the void that mining has left.
    • JOY also +3.5%.
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  • Thursday, November 20, 2014

  • 6:54 PM
    • "You can’t find a sector that is more out of favor right now than gold,” says former geologist and gold fund manager Joe Foster, who expects volatility to continue but with seemingly every headwind already pushing on the price of gold, it might not take much to spark a rally.
    • Foster prefers junior miners to larger companies, as "the large caps have really gotten too big for their own good,” singling out Rio Alto Mining (NYSE:RIOM), thanks in past to its success with lower-cost heap leaching; RIOM recently acquired another heap leach operation in Peru.
    • He also prefers regional miners, because geographic focus allows companies to better handle the local regulatory and political situation; Foster likes Randgold (NASDAQ:GOLD), which operates mostly in west Africa and has one of the most successful discovery track records in the industry.
    • Rounding out Foster's five favorites: B2Gold (NYSEMKT:BTG), Eldorado Gold (NYSE:EGO) and Torex Gold Resources (OTCPK:TORXF).
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  • 5:58 PM
    • It’s time for the medium-term investor to start buying the biggest of big oil companies, HSBC says, as the market seems to have capitulated on the sector.
    • HSBC views BP and Total (NYSE:TOT) as clearly the cheapest of the oil supermajors, with share price discounts to sum-of-the-parts valuation for BG Group (OTCPK:BRGXF, OTCQX:BRGYY), Statoil (NYSE:STO) and Repsol (OTCQX:REPYY, OTCPK:REPYF); Exxon Mobil (NYSE:XOM) still trades at small premium to the SoP valuation, and the firm likes Chevron (NYSE:CVX), which was penalized in its valuation by its ongoing capital intensity in 2017.
    • The stocks also offer average prospective dividend yields of 5%-plus for 2015, and the dividends look robust as they are supported by strong balance sheets, more active asset disposal programs, and strong new project cash margins.
  • 3:13 PM
    • Given the uncertain and volatile outlook for the dollar and thus gold prices, J.P. Morgan's commodities team suggests three "conservative" pair trades it expects to be profitable in a neutral or weaker metal price environment.
    • The firm recommends buying Newmont Mining (NYSE:NEM) and selling Barrick Gold (NYSE:ABX), “driven by the idea that the deal where Barrick buys Newmont could be back."
    • Buy Agnico Eagle Mines (NYSE:AEM) and sell New Gold (NYSEMKT:NGD), as JPM sees underground mines as more resilient than open pits, and AEM has fallen more sharply than deserved.
    • Also, JPM likes buying Silver Wheaton (NYSE:SLW) and selling Coeur Mining (NYSE:CDE), as it believes royalty/streaming companies will be more robust in times of weak metals prices than pure-play miners.
  • 2:57 PM
    • Cliffs Natural Resources (CLF +8.8%) enjoys a dead-cat bounce after a 25% plunge in the prior two days, rising today despite Deutsche Bank's downgrade to Hold from Buy with a $10 price target, lowered from $17, citing on reduced volumes (-15%) and lower expected EBITDA (-5%).
    • The firm considers CLF's estimated Bloom Lake closure costs of $650M-$700M over five years as a "worst case scenario," an closure costs could be lowered and potential offsets could emerge; in the meantime, CLF will rely primarily on its U.S. iron ore segment, while it continues to entertain the potential sale of Asia Pacific iron ore and North American coal segments.
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  • 2:39 PM
    • Targa Resources Partners (NGLS +1.1%) is upgraded to Buy from Accumulate with a $70 price target at Global Hunter, after units are down by ~10% since the announcement of the Atlas Pipeline transaction and have underperformed most MLP peers.
    • NGLS has dropped despite posting a solid Q3 beat and upgrading its distribution growth guidance for 2015; the firm thinks this is a result of investor concern over NGLS' higher commodity exposure after the APL transaction, but it believes APL's 2015 natural gas liquids commodity hedge book, coupled with the NGLS growing fee-based business, position the combined entity well.
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  • 1:38 PM
    • Optical networking hardware vendors and their component suppliers are turning in a good day. The gains come a day after component vendor Oplink announced it's being acquired by Koch Industries for $445M, and will be managed by connector maker Molex (a Koch subsidiary).
    • RBC thinks Koch's entrance into the slumping component industry could trigger further consolidation. "Current fab utilization rates remain low ... with optical component vendors unable to charge a premium for their innovation. Gross margins are currently weighed by competitive pressures with optical component makers willing to cut pricing to account for high fixed costs."
    • The firm believes Finisar (FNSR +1%) could be a buyer, and JDS Uniphase (JDSU +1.5%) and Oclaro (OCLR +7.1%) sellers. JDS, set to spin off its component unit, is facing activist pressure to put the business on sale.
    • Meanwhile, Ciena (CIEN +2.8%) announced this morning it's partnering with Avaya to offer an enterprise solution that pairs its optical networking and integrated optical/Ethernet gear with Avaya's Ethernet switches. Like peers, Ciena is trying to lower its dependence on pressured carrier capex budgets.
    • Other gainers: AFOP +3.7%. NPTN +3.3%. ADTN +2.7%. INFN +1.9%.
    | 1 Comment
  • 12:26 PM
    • Denbury Resources (DNR -1.2%) is downgraded to Equal Weight from Overweight with an $11 price target, cut from $15, at Barclays, citing DNR's lower production estimates, higher cost assumptions, and a lower target multiple.
    • Yesterday, Wunderlich had lowered shares to Hold from Buy and cut its price target in half from $22, citing a lack of operational or financial clarity provided at the company's analyst day.
    • The downgrade wave began Monday, following DNR's announcement late last week that it planned to cut its 2015 capital spending by 50%, joining several oil and gas producers scaling back investments due to sliding crude oil prices.
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  • Wednesday, November 19, 2014

  • 3:58 PM
    • Potash (POT +1.2%) is upgraded to Outperform from Market Perform with a $40 price target, up from $38.50, at Raymond James after troubles at a mine owned by Russia’s Uralkali forced its closure; in the event Uralkali’s capacity remains handicapped, the firm thinks POT could benefit from a tighter potash market.
    • Fertilizer peer Mosaic (MOS +1.7%) is upgraded to Positive by Susquehanna, which believes its potash operating leverage is underappreciated by investors, as the shares went up less than POT yesterday in response to the Uralkali news even as MOS has more relative earnings leverage to an improvement in potash prices than POT.
    • Earlier: CF Industries upgraded at Credit Suisse, which sees better industry position
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