LiveDeal (Nasdaq: LIVE) – Discerning What May Have Driven its 58% Gain

LiveDeal (Nasdaq: LIVE) might be mitigating its delisting issue, or the day's 58% gain may be without solid basis. We explore several possibilities herein, and expect you'll find value in our perspective. LiveDeal (Nasdaq: LIVE) led most shares Wednesday on no corporate news and little sign of reason. Even the message boards were empty of speculation. Thus, the mysterious movement only drew in more capital and perpetuated momentum of the lightly traded microcap stock with few shares outstanding and fewer floating.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

LiveDeal (Nasdaq: LIVE) – Discerning What May Have Driven its 58% Gain

Relative Tickers: Nasdaq: GOOG, Nasdaq: BIDU, Nasdaq: YNDX, Nasdaq: LNKD, Nasdaq: AKAM, Nasdaq: ACOM, NYSE: AOL, Nasdaq: ATRN, Nasdaq: ABTL, AMEX: BNX, Nasdaq: BITA, Nasdaq: JRJC, Nasdaq: CCIH, OTC: CLKZ.PK, Nasdaq: EDGR, Nasdaq: DIETD, Nasdaq: GSOL, Nasdaq: HSTM, Nasdaq: HSWI, Nasdaq: INSP, Nasdaq: INXN, Nasdaq: DATE, OTC: KBAS.PK, Nasdaq: LOCM, Nasdaq: LOOK, Nasdaq: LEDR, OTC: MMRF.OB, OTC: PCIR.PK, OTC: QPSA.PK, Nasdaq: REDF, Nasdaq: RENN, OTC: SLNM.PK, Nasdaq: SOHU, Nasdaq: SFUN, Nasdaq: SBAY, Nasdaq: TTGT, Nasdaq: KNOT, NYSE: TST, Nasdaq: TZOO, AMEX: TCX, Nasdaq: VTRO, Nasdaq: WWWW, Nasdaq: WBMD, Nasdaq: YHOO, Nasdaq: YOKU, OTC: ZAOFF.PK, Nasdaq: LIVE, Nasdaq: NGSX, Nasdaq: SCEI, Nasdaq: WFSLW, Nasdaq: NFEC, NYSEArca: TVIX, AMEX: XPO, AMEX: ESA, NYSEArca: CVOL, NYSE: DST, NYSEArca: VZZ, Nasdaq: OVRL, Nasdaq: DHRM, Nasdaq: HOLI, AMEX: ELC, Nasdaq: CMED, Nasdaq: SMRT, Nasdaq: CDTI, Nasdaq: EPOC, Nasdaq: RGDX, Nasdaq: SPMD and Nasdaq: PFED.

The stock closed up 58%, taking it to a technical level it had previously found comfort in. At $4.34 though, the shares still traded well short of their 52-week high of $22.25. Given the stock’s float of just 470K, based on Yahoo Finance data (Nasdaq: YHOO), it wouldn’t take much to move it like it did Wednesday. Institutional holders UBS (NYSE: UBS) and Wells Fargo (NYSE: WFC) recently (March 31, 2011) reported small stakes, though Thomson Financial data at Yahoo seems to show net sales on the institutional level in the quarter before last.

The latest news we could find on the wire was of LIVE’s delisting notification for violating a NASDAQ exchange rule regarding minimum shareholders equity, and so on May 24, 2011 it was given 45 days to show NASDAQ (Nasdaq: NDAQ) how it planned to achieve and sustain compliance. Therefore, perhaps the day’s movement can be explained to be relative to LiveDeal’s near-term ability to meet the NASDAQ’s listing rules. I say this because the shares began downward from $4 on the delisting release on May 24, and have restored the market value lost since that news broke in one day’s trading on Wednesday.

Thus, it would appear that someone is betting on the possibility of this company mitigating its delisting issue. The stock’s activity seems to reflect that driver if we are discerning clearly. My study of the company’s website turned up a bit of a confusing (to me) headline above the newest company press release on its press releases page (which I have saved and notified the company of), which read, “LiveDeal Secures Additional Commitments from Foreign Equity Investors.” There was no date on the press release teaser, leaving me unsure as to whether it was published today. Thus it was confusing to me. I suppose that if you only read that headline, something a prudent investor should never do, you may have misunderstood the page. However, if you clicked through the release underneath that headline, which offered a lead-in that discussed the appointment of the new CEO (onus on the reader to notice), you found a news item detailing the appointment of the new CEO, which is old news. There was no information about a new foreign investment in the release text or leader. Only the headline was confusing if taken in isolation, which any investor should never do! However, I wonder if any did.

I called in to LiveDeal and spoke with the Investor Relations contact, CFO Lawrence Tomsic, and he said the company had not issued any press release Wednesday nor announced any news of new foreign equity investors since the March 25 release last indicating so. He said the company had no comment with regard to the day’s stock movement, and knew of no specific timely reason for the stock’s activity Wednesday.

Because of the possibility of a gunslinging investor potentially acting on incomplete due diligence, the driver of the 58% move in the stock could be without any base, though I cannot be sure; it could also be an independent bet on the company avoiding delisting; or it could be on another issue or theory or other reason. Whatever the case, I perceive risk in holding the shares now after the big gain, while not knowing certainly the true driver and with those possibilities seemingly in the cards.

If the stock is up on a presumed ability to avoid delisting, without any other important news, it would seem the shares would find balance at around $4, where about it traded steadily before the delisting warning. If the stock appreciation was driven by faulty reasoning, then the stock could move back toward where it stood before Wednesday, in my estimation, which was $2.75. In after-hours trading Wednesday, speculators have taken the shares to near $5 (seen on Yahoo Finance), which based on our reasoning here, looks lofty in my view (above $4) if not completely without base given the risks outlined above.

Note: Risk of missing upside also exists if the catalyst for the day's rise is something other than NASDAQ listing violation mitigation but still construed as positive by the market, or if that catalyst exists simultaneously with another, or for many other reasons.

We will continue to explain vaguely understood stock movements as best we can for our readers, so join our mailing list or revisit us regularly. We welcome your requests. Simply submit your stock questions to us via comments to any of our articles or to a button we will establish shortly atop the blog. If the stock is especially active that particular day, or if it is of broad interest otherwise, we will dedicate a post toward answering your question.

Disclosure: The author has no direct or beneficial interest in the shares of or securities relative to LiveDeal (Nasdaq: LIVE) or any other stock mentioned in this article.

The day’s top gainers included LiveDeal (Nasdaq: LIVE), NeurogesX (Nasdaq: NGSX), Sino Clean Energy (Nasdaq: SCEI), Washington Federal (Nasdaq: WFSLW), NF Energy Saving (Nasdaq: NFEC), VelocityShares Daily 2X (NYSEArca: TVIX), Express-1 Expedited Solutions (AMEX: XPO), Energy Services of America (AMEX: ESA), C Tracks Exchange Traded Notes (NYSEArca: CVOL), DST Systems (NYSE: DST), iPath Long Enhanced S&P 500 VIX (NYSEArca: VZZ), Overland Storage (Nasdaq: OVRL), Dehaier Medical Systems (Nasdaq: DHRM), Hollysys Automation (Nasdaq: HOLI), Eastern Light Capital (AMEX: ELC), China Medical (Nasdaq: CMED), Stein Mart (Nasdaq: SMRT), Clean Diesel Technologies (Nasdaq: CDTI), Epocrates (Nasdaq: EPOC), Response Genetics (Nasdaq: RGDX), SuperMedia (Nasdaq: SPMD), Park Bancorp (Nasdaq: PFED).

This article might interest other Internet Information Providers like Google (Nasdaq: GOOG), Baidu (Nasdaq: BIDU), Yandex (Nasdaq: YNDX), LinkedIn (Nasdaq: LNKD), Akamai (Nasdaq: AKAM), Ancestry.com (Nasdaq: ACOM), AOL (NYSE: AOL), Atrinsic (Nasdaq: ATRN), Autobytel (Nasdaq: ABTL), Banks.com (AMEX: BNX), Bitauto (Nasdaq: BITA), China Finance Online (Nasdaq: JRJC), ChinaCache International (Nasdaq: CCIH), Clicker Inc. (OTC: CLKZ.PK), EDGAR Online (Nasdaq: EDGR), eDiets.com (Nasdaq: DIETD), Global Sources (Nasdaq: GSOL), HealthStream (Nasdaq: HSTM), HSW Int’l (Nasdaq: HSWI), InfoSpace (Nasdaq: INSP), InterXion (Nasdaq: INXN), Jiayuan.com (Nasdaq: DATE), Knobias (OTC: KBAS.PK), Local.com (Nasdaq: LOCM), LookSmart (Nasdaq: LOOK), Market Leader (Nasdaq: LEDR), MMR Information (OTC: MMRF.OB), Prime Companies (OTC: PCIR.PK), Quepasa (OTC: QPSA.PK), Rediff.com (Nasdaq: REDF), Renren (Nasdaq: RENN), Salon Media (OTC: SLNM.PK), Sohu.com (Nasdaq: SOHU), SouFun Holdings (Nasdaq: SFUN), Subaye (Nasdaq: SBAY), TechTarget (Nasdaq: TTGT), The Knot (Nasdaq: KNOT), TheStreet.com (NYSE: TST), Travelzoo (Nasdaq: TZOO), Tucows (AMEX: TCX), Vertro (Nasdaq: VTRO), Web.com (Nasdaq: WWWW), WebMD (Nasdaq: WBMD), Yahoo (Nasdaq: YHOO), Youku.com (Nasdaq: YOKU) and Zaio Corp. (OTC: ZAOFF.PK).



Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

RIMM Disconnect OR Consumer Spending Issue

The latest news received in Mobility may have as much to do with gasoline as it does with product segment disruption driven by Apple's iPhone and Google's Android. If consumer caution has increased in mobile phones, then investors had better steer clear of Consumer Discretionary stocks for as long as gasoline is this high and threatening further inflation.

Relative tickers: Nasdaq: RIMM, Nasdaq: AAPL, NYSE: NOK, Nasdaq: MSFT, NYSE: HPQ, NYSE: MOT, NYSE: MSI, Nasdaq: QCOM, NYSE: ALU, Nasdaq: ACOM, Nasdaq: SPWRB, Nasdaq: SPWRA, Nasdaq: FFBH, Nasdaq: NTGR, Nasdaq: WEBM, Nasdaq: STBC, NYSE: LVB, Nasdaq: ASGN, NYSE: MXL, Nasdaq: TNAV, Nasdaq: GBLI, Nasdaq: SCEI, NYSE: NR, Nasdaq: AMTC, NYSE: DRL, NYSE: TGS, NYSE: N, NYSE: LFT, AMEX: AIM, Nasdaq: SWKS, NYSE: KEG, Nasdaq: ZNWAW, Nasdaq: INUV; Losers – Nasdaq: REGN, Nasdaq: USATW, NYSE: HRZ, Nasdaq: KVHI, Nasdaq: EDSWW, NYSE: SKH, Nasdaq: USAT, Nasdaq: SUNH, Nasdaq: INPH, Nasdaq: SPPI, Nasdaq: ENSG, Nasdaq: ROSA, Nasdaq: CNGL, NYSE: ZZ, Nasdaq: GDOT, Nasdaq: CTCT, Nasdaq: SURW, NYSE: IM, Nasdaq: GFRE, Nasdaq: DECK, Nasdaq: TGIS, Nasdaq: DRIV, NYSE: RAS

RIM (Nasdaq: RIMM) Disconnect OR Consumer Spending Issue?

Research in Motion (Nasdaq: RIMM) dropped 14% Friday. RIM was slammed by a downgrade and severe price target slashing by RBC Capital Markets. Unfortunately, that followed the company's forecast revision, which was the real catalyst for the stock's slide. RBC cut the stock to "Sector Perform" from "Top Pick," and reduced its price target to $55 from $90.

Really? Are you serious? Can a story change that much overnight? A $35 change to a $90 price target calls for some serious explaining, not just to the investors who followed the advice, but to the boss. We're talking about a reduction of forecast value to 61% of the estimate that stood a day prior. As an analyst, I understand that when dealing with high-technology, emerging growth companies, significant shifts can occur in value opportunity (keyword). This is why we use scenario and sensitivity analysis, to hedge against this kind of catastrophe - if the analyst was ever right in the first place or is even right currently. Analysts are employed to at least come close, and that $35 shave is better suited for Vegas than Wall Street.

The Operations

Research in Motion cut its first quarter profit outlook, and looks to be following the path of other Apple (Nasdaq: AAPL) iPhone and Android (Nasdaq: GOOG) competitors turned footstools. The list includes Palm (saved by HP (NYSE: HPQ)) and Nokia (NYSE: NOK). Motorola (NYSE: MOT, NYSE: MSI) is so long gone that we almost forgot to mention it, sort of like a rotary dial telephone, irrelevant.

RIM cut its May-ending Q1 profit forecast to a range of $1.30 - $1.37 a share, down from $1.47 to $1.55. Yahoo Finance (Nasdaq: YHOO) had the analysts' consensus EPS estimate for RIMM at $1.48, and the lowest mark at $1.40, so even the most pessimistic of analysts surveyed was too optimistic in reality. Before last week, I bet the analyst with the low estimate felt naked; he was probably even pressured by his boss to stay tighter to the consensus from which he bravely ventured. We hope he made sure to see the boss took notice of RIM's news.

One of the company's CEOs (seems one too many) said in the conference call that it was a margin issue hurting the bottom line, which he blamed on aged high-end product. That seems to show a misconception, or hopeful desperation. The view from inside a company is often completely different than from the outside. If we were at dinner tonight, and I was Apple, and my date was RIM, I would likely say, "It's not you RIM, it's me."

But what if it was neither?

Given Broadcom's bad news earlier in the week and RIM's news to close out the week, not to mention the ongoing saga at Nokia (NYSE: NOK), I would be looking to get out of all mobile telecommunications stocks today. When Broadcom analysts blamed BRCM's drop on general product demand slippage in mobility, we had our doubts, but BRCM's customer list does not mention Research in Motion.

I would take my view a step further even. I'm wavering from all Consumer Discretionary shares for as long as gasoline remains near current levels, while threatening to go higher. This mobility squeeze may have as much to do with gasoline as it has to do with Apple and Google disruption. If consumers are being more cautious with regard to what is now considered a non-discretionary spend in mobile phones, then how much closer to the vest will discretionary money be kept? We said last week that the old adage, "Sell in May and Walk Away" seemed to make good sense today. With regard to consumer discretionary shares, I think you can add an exclamation point to that.

Article should interest investors in Apple (Nasdaq: AAPL), Nokia (NYSE: NOK), Microsoft (Nasdaq: MSFT), Google (Nasdaq: GOOG), Hewlett-Packard (NYSE: HPQ), Motorola (NYSE: MOT), Motorola Solutions (NYSE: MSI), QUALCOMM (Nasdaq: QCOM), Alcatel-Lucent (NYSE: ALU) . Friday's other most active stocks were led by: Gainers – Ancestry.com (Nasdaq: ACOM), SunPower (Nasdaq: SPWRB, SPWRA), First Federal Bancshares of Ark (Nasdaq: FFBH), Netgear (Nasdaq: NTGR), WebMediaBrands (Nasdaq: WEBM), State Bancorp (Nasdaq: STBC), Steinway Musical (NYSE: LVB), On Assignment (Nasdaq: ASGN), MaxLinear (NYSE: MXL), TeleNav (Nasdaq: TNAV), Global Indemnity (Nasdaq: GBLI), Sino Clean Energy (Nasdaq: SCEI), Newpark Resources (NYSE: NR), Ameritrans Capital (Nasdaq: AMTC), Doral Financial (NYSE: DRL), Transportadora de Gas (NYSE: TGS), Netsuite (NYSE: N), Longtop Financial (NYSE: LFT), Aerosonic (AMEX: AIM), Skyworks Solutions (Nasdaq: SWKS), Key Energy (NYSE: KEG), Zion Oil & Gas (Nasdaq: ZNWAW), Inuvo (Nasdaq: INUV); Losers – Regeneron (Nasdaq: REGN), USA Technologies (Nasdaq: USATW), Horizon Lines (NYSE: HRZ), KVH Industries (Nasdaq: KVHI), Exceed (Nasdaq: EDSWW), Skilled Healthcare (NYSE: SKH), USA Technologies (Nasdaq: USAT), Sun Healthcare Group (Nasdaq: SUNH), Interphase (Nasdaq: INPH), Spectrum Pharmaceuticals (Nasdaq: SPPI), The Ensign Group (Nasdaq: ENSG), iPath Short Extended Russell (Nasdaq: ROSA), China Nutrifruit (Nasdaq: CNGL), Sealy (NYSE: ZZ), Green Dot (Nasdaq: GDOT), Constant Contact (Nasdaq: CTCT), SureWest (Nasdaq: SURW), Ingram Micro (NYSE: IM), Gulf Resources (Nasdaq: GFRE), Deckers Outdoor (Nasdaq: DECK), Thomas Group (Nasdaq: TGIS), Digital River (Nasdaq: DRIV) and RAIT Financial (NYSE: RAS).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Netflix (Nasdaq: NFLX) a Buy for Aggressive Investors

Stock Pick Long Idea

While not for the faint of heart, Netflix (Nasdaq: NFLX) shares look to me like a buy for aggressive capital. The company blew away fourth quarter EPS forecasts. Consensus estimates look too conservative, which have the effect of over-inflating the P/E and PEG ratios. Beware though that high growth and valuation bring with it sensitivity to news, and so any failing can be disastrous for capital.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative Tickers: Nasdaq: NFLX, Nasdaq: TIVO, Nasdaq: CMSCA, Nasdaq: DTV, Nasdaq: AMZN, Nasdaq: AAPL, Nasdaq: MSFT, Nasdaq: YHOO, Nasdaq: GOOG, NYSE: DIS, NYSE: DWA, NYSE: CNK, NYSE: RGC, NYSE: RLD, NYSE: LGF, OTC: BLOAQ.PK, Nasdaq: RENT, Nasdaq: CKEC, Nasdaq: LSTZA, NYSE: MHP, NYSE: PSO, NYSE: JW-A, NYSE: JW-B, Nasdaq: SCHL, Nasdaq: CRRC, NYSE: NED, Nasdaq: PEDH, NYSE: BKS, Nasdaq: BAMM, NYSE: BGP, OTC: LYFE.OB, Nasdaq: NOOF, OTC: PUBM.OB, OTC: IFLM.OB, Nasdaq: PTSX, Nasdaq: SAPX, OTC: AFFW.OB, NYSE: TWX, Nasdaq: NWSA and Paris: VIV.PA, Nasdaq: QCOM, NYSE: ABT, NYSE: BA, Nasdaq: SYMC, NYSE: TER, Nasdaq: CTXS, NYSE: AF, Nasdaq: BOKF, NYSE: CP, Nasdaq: COHU, NYSE: COP, NYSE: CBE, NYSE: CVD, Nasdaq: ETFC, NYSE: EK, NYSE: GD, NYSE: ISH, NYSE: KYO, NYSE: LM, Nasdaq: LOGI, NYSE: LSI, NYSE: MKC, NYSE: MWV, NYSE: OXY, NYSE: ROK, NYSE: SAP, Nasdaq: SEIC, NYSE: SO, Nasdaq: SBUX, Nasdaq: TSCO, NYSE: UTX, NYSE: VLO, NYSE: WLP, NYSE: XRX, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

Netflix (Nasdaq: NFLX) a Buy for Aggressive Investors

Netflix (Nasdaq: NFLX) shares jumped 10% after-hours Tuesday and were up 14% through the premarket morning, after the pioneer in the movie rental business beat the street with its quarterly earnings. Netflix grew EPS by 55% in its fourth quarter, with its $0.87 in EPS exceeding the analysts' consensus of $0.71 by 22.5%. The growth came on 34% revenue growth, which was short of but close enough to the analysts' consensus for the top line.

The blockbuster growth was driven by better than forecast subscriber growth. The company added 3.08 million new subscribers in the quarter, some 500K more than analysts had forecast. Netflix grew subscribers at a fierce rate of 18% from the third quarter, and at a count of 20.01 million, it can now boast the third largest US video subscription service, behind Comcast (Nasdaq: CMSCA) and DirecTV (Nasdaq: DTV).

Subscriber growth was certainly lifted by its late year launch of its unlimited streaming-only subscription plan. The company's expansion into Canada, while generating an international operations operating loss momentarily, will be followed shortly with a launch into a second international market. I'll go ahead and speculate that to be the United Kingdom, because it just makes sense due to language, custom and technological consistencies. Netflix estimates that it will take about 8 quarters to turn that second market profitable; we say it will happen quicker, as is occurring with the Canadian market. We expect Netflix is underestimating its brand power and the nearness of the global community.

The leverage of revenue over operating expenses allowed for operating margin expansion and operating profit growth of 47%. Since the company had been buying back shares, the lower count allowed for even faster EPS growth. It appears the company also produced the most free cash flow in its history this past quarter.

We find Netflix's partnership with Amazon.com (Nasdaq: AMZN) quite interesting. What already appears to be a complementary fit, is now working together, and we have to wonder if either Netflix or Amazon knew exactly what they were doing by engaging the other when this deal formed. In case you were not aware, Netflix has shifted from its own servers to AWS servers, and things got a whole lot easier for them since.

I must say that I've read a lot of earnings releases over the years, and have rarely come across the tone found in Netflix's news. Perhaps this is the direction we're heading, casual conversation on corporate releases, but sometimes people and corporate executives speak perfectly and the words are all made up (God knows I've seen too much of that on Wall Street). One thing I like about the Netflix team though is the candid conversation, and perhaps this is why the company does not take live questions on its conference calls; they might accidentally say too much to the rightly posed query.

The management team of this firm might not be up to par with the task at hand, or perhaps it is precisely because the CEO and Founder cares about his company so much that it will continue to astound. Usually though, these guys are pushed out, and it's unfortunate, because these companies are their babies. I feel I should say congratulations to Netflix's founder, for thinking outside the box, and then doing it again when the box changed. All small businessmen should be inspired by this success. Still, I will say that the trouble with the forecasting we saw this quarter, which resulted in a wildly positive surprise and stock surge, might someday lead to a bad miss or reflect a poor decision.

That said…

Given the big miscalculation by analysts this past quarter, let's assume the high estimate for 2011 is correct, and NFLX will earn $4.55. Let's say the stock opens where after hours trading took it, at $202. That gives NFLX a P/E ratio of roughly 44 on the forward estimate. The growth that estimate projects for the company in 2011 is 54%, and it would seem, if this or somewhere near is more correct than the conservative consensus estimates out there, then the high flying stock might not be overvalued.

Whenever you get an unsustainable growth rate, though, and a P/E value that nearly matches it, you're going to find volatility and sensitivity to news. Thus, even though the PEG ratio might be 0.8 when applying that one-year growth, or close to 1.0 for a lesser three-year growth rate, owning the shares is not for the faint of heart. That said, the run up after hours appears justified to me, and the stock still seems a proper fit for aggressive investors.



Disclosure: I have no interest in any mentioned stock.

This article should interest investors in Disney (NYSE: DIS), DreamWorks Animation (NYSE: DWA), Cinemark Holdings (NYSE: CNK), Regal Entertainment (NYSE: RGC), RealD (NYSE: RLD), Lions Gate Entertainment (NYSE: LGF), Rentrak (Nasdaq: RENT), Carmike Cinemas (Nasdaq: CKEC), LYFE Communications (OTC: LYFE.OB), New Frontier Media (Nasdaq: NOOF), Public Media Works (OTC: PUBM.OB), Independent Film Development (OTC: IFLM.OB), Point 360 (Nasdaq: PTSX), Seven Arts Pictures (Nasdaq: SAPX), Affinity Medianetworks (OTC: AFFW.OB), Time Warner (NYSE: TWX), News Corp. (Nasdaq: NWSA), Vivendi (Paris: VIV.PA), Liberty Starz Group (Nasdaq: LSTZA), McGraw-Hill (NYSE: MHP), Pearson Plc (NYSE: PSO), John Wiley & Sons (NYSE: JW-A, NYSE: JW-B), Scholastic (Nasdaq: SCHL), Courier (Nasdaq: CRRC), Noah Education (NYSE: NED), Peoples Educational Holdings (Nasdaq: PEDH), Barnes & Noble (NYSE: BKS), Amazon.com (Nasdaq: AMZN), Books-A-Million (Nasdaq: BAMM) and Borders (NYSE: BGP).

Other of the day's corporate EPS Wednesday came from from Qualcomm (Nasdaq: QCOM), Abbott Labs (NYSE: ABT), Boeing (NYSE: BA), Symantec (Nasdaq: SYMC), Teradyne (NYSE: TER), Citrix Systems (Nasdaq: CTXS), Astoria Financial (NYSE: AF), BOK Financial (Nasdaq: BOKF), Canadian Pacific Railway (NYSE: CP), Cohu (Nasdaq: COHU), ConocoPhillips (NYSE: COP), Cooper Industries (NYSE: CBE), Covance (NYSE: CVD), E*Trade (Nasdaq: ETFC), Eastman Kodak (NYSE: EK), General Dynamics (NYSE: GD), International Shipholding (NYSE: ISH), Kyocera (NYSE: KYO), Legg Mason (NYSE: LM), Logitech International (Nasdaq: LOGI), LSI Corp. (NYSE: LSI), McCormick & Co. (NYSE: MKC), MeadWestVaco (NYSE: MWV), Netflix (Nasdaq: NFLX), Occidental Petroleum (NYSE: OXY), Rockwell Automation (NYSE: ROK), SAP (NYSE: SAP), SEI (Nasdaq: SEIC), Southern Co. (NYSE: SO), Starbucks (Nasdaq: SBUX), Tractor Supply (Nasdaq: TSCO), United Technologies (NYSE: UTX), Valero Energy (NYSE: VLO), WellPoint (NYSE: WLP), and Xerox (NYSE: XRX).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Apple's (Nasdaq: AAPL) Smart PR Effort and Our Outlook

Managing Disaster

Apple's PR team did a decent job of best managing the worst possible scenario, the loss of its iconic leader, but we suspect guarding against investor concern will require a little more than just blowout earnings.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative Tickers: Nasdaq: AAPL, Nasdaq: DELL, Nasdaq: GOOG, Nasdaq: RIMM, NYSE: HPQ, Nasdaq: MSFT, Nasdaq: AMZN, NYSE: NOK, NYSE: GLW, NYSE: MOT, NYSE: ALU, NYSE: HRS, Nasdaq: TLAB, NYSE: SNE, NYSE: PHG, NYSE: PC, NYSE: HIT, NYSE: ST, NYSE: HUB-B, NYSE: HAR, Nasdaq: GNRC, Nasdaq: DTSI, NYSE: FN, NYSE: TCH, NYSE: LXU, Nasdaq: UEIC, NYSE: VPG, Nasdaq: KLIC, Nasdaq: KLAC, Nasdaq: COHR, Nasdaq: DSPG, NYSE: PLT, Nasdaq: BBOX, NYSE: EMC, NYSE: BAC, Nasdaq: ALTR, Nasdaq: ISRG, NYSE: FRX, NYSE: AOS, NYSE: AEP, Nasdaq: ASRV, Nasdaq: ASTE, NYSE: BMI, NYSE: BK, Nasdaq: BBND, NYSE: BSX, Nasdaq: CREE, Nasdaq: CYBI, Nasdaq: DTLK, Nasdaq: DEAR, NYSE: DPZ, Nasdaq: EFSC, Nasdaq: ESBF, Nasdaq: FBCM, Nasdaq: FLXS, Nasdaq: FLTTE, Nasdaq: FFIC, AMEX: FRS, Nasdaq: FSII, Nasdaq: FULT, Nasdaq: GILD, NYSE: GS, Nasdaq: HA, NYSE: HDB, NYSE: HNP, Nasdaq: HUBG, NYSE: ITW, Nasdaq: JNPR, Nasdaq: MRTN, Nasdaq: MICC, NYSE: MLI, Nasdaq: ONAV, NYSE: OMC, NYSE: PH, Nasdaq: PWOD, Nasdaq: PVSW, NYSE: PII, Nasdaq: RCRC, Nasdaq: RNST, Nasdaq: SONC, Nasdaq: SFST, NYSE: STT, Nasdaq: STSA, NYSE: TPX, NYSE: MNI, NYSE: NYT, NYSE: TUP, Nasdaq: TWIN, NYSE: UNF, NYSE: UNH, NYSE: WCN, NYSE: WFT, Nasdaq: WABC, NYSE: WDC, Nasdaq: WSCI, Nasdaq: YHOO, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ

Apple's (Nasdaq: AAPL) Smart PR Effort and Our Outlook

Apple (Nasdaq: AAPL) smartly tried to control the impact of the announcement that its idea-man and CEO Steve Jobs would need to take a medical leave of absence. The pre-release of this unfortunate information, ahead of the blowout earnings numbers, were meant to allow a free flow of funds to occur on the good news. If both pieces of data were released at the same time, the effect would very likely have been neutral to negative for AAPL shares. If only The Greek were focused Tuesday on Apple, we might have offered you an opportunity to benefit from beaten down call options before they stabilized and recovered. So now the best we can do is prepare you for the decision tree before you and the prospects for Apple, short, medium and long-term.

While it's clear what Apple's PR people were up to this past weekend (basically the best possible handling of the worst possible situation), what they may not be able to stave off no matter how hard they try is investor realization of the risk of the long-term loss of Jobs to Apple and its shares. Though the company is doing its best to make this seem bearable, we suggest investors will increasingly question whether it is or not. As that uncertainty plays out and gains play, pressure should build on Apple shares, and so any momentum to the upside would seem to offer wise opportunity to seek a new driver for technology born capital investment gains - thus to exit AAPL and replace it with something else near-term.

Apple shares were up $4.25 or 1.25% after hours Tuesday after reporting EPS Tuesday afternoon, but only after falling $7.83 (2.25%) through the day Tuesday, the first day of trading since the best-timed release of Jobs' unfortunate news. AAPL shares had held their gain through much of Wednesday, but heading into the close Apple shares had moved back into negative territory. At the close, the stock had to account for a loss of near 1%.

It took this long for good reason, as the company posted blowout earnings, exceeding analysts' expectations by nearly 19%. The EPS gain was an astounding 78% greater than the year ago quarter. The company's quarterly net income, for one quarter and after expenses, was six billion dollars. Apple's sales increased 71%, to $26.7 billion in the quarter. Granted, this was the most important quarter for the consumer oriented firm, but still, those are blowout numbers, period.

Thus, Apple's PR people had quite a situation before them with regard to how to manage the news that their iconic CEO would need to leave day-to-day operations to take care of himself. Given his importance to Apple, and the perception of his importance to Apple, this became more than just a problem of how to author a public release to best serve the man. Rather, it needed to manage how investors, both current and prospective might react to this clearly unplanned division of the company and its brilliant CEO.

You'll note that in the short release, a letter Jobs' authored to employees, he states that he will remain CEO and that the 2011 operating strategy had already been laid out. In other words, he'll still be actively involved, but off-site for the most part, while he takes care of his health problem. Secondly, there's reassurance in the fact that all the important product planning has occurred already for this year, so whatever magic might be lost, perhaps another amazing year lay in store for Camelot in 2011 at least.

I know where I would focus my product attention if I were Apple, but I'm still saving that idea for a later article I had better get to soon. While AAPL shares are drifting now, be careful not to underestimate the company's marketing savvy, nor its PR prescience. Another release or important news item might lay in store for just that scenario. That said, I would expect the company to let the news of Jobs' temporary leave sink in and digest completely before any such release were made. Thus, I would be taking short-term profits in AAPL, outside of valuation and on just an artistic point of view (versus scientific). I'm not even going to talk valuation in this article, because I don't expect it will matter given the special situation.

Besides the idea-man issue, what can make a seemingly cheap stock get cheaper is when it runs the risk of losing market share. It's hard for an innovation leader of Apple's size to keep growing, and it gets increasingly easier for such a firm to fall off the top of the hill. I only need reference all the competitors and products out there that appeal to the non-fanatical fans of Apple. These are market share threats that are being discounted by investment pros of any worth right now, considering that the genius Jobs has been stumbled. That said, let me remind you that over the medium term, beware the risk of already prepared corporate plans and a still savvy PR team at Apple. The next great catalyst for Apple and stopper of a stock slide could be just an email delivery away.

Short-Short Term: Sell
Medium Term: Buy
Long Term: Not So Clear Yet - Hold



Disclosure: I have no notable position in any relative stock

Article should interest investors in Apple (Nasdaq: AAPL), Dell (Nasdaq: DELL), Research in Motion (Nasdaq: RIMM), Hewlett-Packard (NYSE: HPQ), Microsoft (Nasdaq: MSFT), Amazon.com (Nasdaq: AMZN), Nokia (NYSE: NOK), Corning (NYSE: GLW), Motorola (NYSE: MOT), Alcatel-Lucent (NYSE: ALU), Harris (NYSE: HRS), Tellabs (Nasdaq: TLAB), Sony (NYSE: SNE), Philips (NYSE: PHG), Panasonic (NYSE: PC), Hitachi (NYSE: HIT), Sensata (NYSE: ST), Hubbell (NYSE: HUB.B), Harman (NYSE: HAR), Generac (Nasdaq: GNRC), DTS (Nasdaq: DTSI), Fabrinet (NYSE: FN), Technicolor (NYSE: TCH), LSB Industries (NYSE: LXU), Universal Electronics (Nasdaq: UEIC), Vishay Precision (NYSE: VPG).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Apple Pie (Nasdaq: AAPL)

"We still have a few surprises left for the remainder of this calendar year."
Steve Jobs

Those words alone have strategically carried AAPL shares since its mixed earnings release. We think it is going to take more prescient insight into the consumer electronics future and further amazing execution by the company's management team for Apple's pie, or its portion of the consumer electronics market share, to grow. Likewise, the value of its stock might seem attractive, but it incorporates these great expectations to some extent, setting it up for disappointment if it cannot deliver. What are you betting on?

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

Relative Tickers: Nasdaq: AAPL, Nasdaq: DELL, Nasdaq: GOOG, Nasdaq: RIMM, NYSE: HPQ, Nasdaq: MSFT, Nasdaq: AMZN, NYSE: NOK, NYSE: GLW, NYSE: MOT, NYSE: ALU, NYSE: HRS, Nasdaq: TLAB, NYSE: SNE, NYSE: PHG, NYSE: PC, NYSE: HIT, NYSE: ST, NYSE: HUB-B, NYSE: HAR, Nasdaq: GNRC, Nasdaq: DTSI, NYSE: FN, NYSE: TCH, NYSE: LXU, Nasdaq: UEIC, NYSE: VPG, NYSE: EMC, NYSE: BAC, Nasdaq: ALTR, NYSE: KO, Nasdaq: ISRG, NYSE: FRX, NYSE: AOS, NYSE: AEP, Nasdaq: ASRV, Nasdaq: ASTE, NYSE: BMI, NYSE: BK, Nasdaq: BBND, NYSE: BSX, Nasdaq: CREE, Nasdaq: CYBI, Nasdaq: DTLK, Nasdaq: DEAR, NYSE: DRH, NYSE: DPZ, Nasdaq: EFSC, Nasdaq: ESBF, Nasdaq: FBCM, Nasdaq: FLXS, Nasdaq: FLTTE, Nasdaq: FFIC, AMEX: FRS, Nasdaq: FSII, Nasdaq: FULT, Nasdaq: GILD, NYSE: GS, Nasdaq: HBHC, NYSE: HOG, Nasdaq: HA, NYSE: HDB, NYSE: HNP, Nasdaq: HUBG, NYSE: ITW, NYSE: JNJ, Nasdaq: JNPR, Nasdaq: KOSS, NYSE: LAB, NYSE: LMT, Nasdaq: MANH, Nasdaq: MRTN, Nasdaq: MBWM, NYSE: MTG, Nasdaq: MICC, NYSE: MLI, Nasdaq: NBTF, NYSE: OXY, Nasdaq: ONAV, NYSE: OMC, NYSE: PH, NYSE: BTU, Nasdaq: PWOD, Nasdaq: PVSW, NYSE: PII, Nasdaq: PSYS, Nasdaq: PULB, Nasdaq: RCRC, Nasdaq: RNST, NYSE: SLM, Nasdaq: SONC, Nasdaq: SFST, NYSE: STT, Nasdaq: STSA, NYSE: SYK, NYSE: SVU, NYSE: TPX, NYSE: MNI, NYSE: NYT, NYSE: TUP, Nasdaq: TWIN, NYSE: UNF, NYSE: URI, NYSE: UNH, NYSE: WCN, NYSE: WFT, Nasdaq: WABC, NYSE: WDC, Nasdaq: WSCI, Nasdaq: YHOO.

Apple Pie (Nasdaq: AAPL)

Apple reported its fiscal fourth quarter results Monday night and they were stellar indeed. However, a great company does not always make for a great stock investment. I hear you! I hear you! Even while the shares were down Tuesday, they have gained 47% this year. I give you that, but Apple's time in the sun must come to an end (or at least slow up a bit), as it is governed by Moore's Law.

For those of you unaware, Moore's Law, strictly defined, governs the rate of change in the technological development in computer hardware and semiconductors. Generally speaking, new technology is rendered obsolete in a matter of a couple years, by the rule of law. Well, modern times and slang have stretched the law to cover the rate of innovation in all high technology.

Apple has proven a disruptive force under the leadership of its iconic CEO Steve Jobs. Upon his return to the company, Apple took right to turning the consumer electronics world upside down again. The iPod marked the first breakthrough of the AJ period (After Jobs' return). Apple became the driving force in the mobile music market (do you still own a Walkman?), and dominates MP3 player rivals like Sony (NYSE: SNE) and SanDisk (Nasdaq: SNDK) today. I mention SanDisk because I like their cheap basic player a ton (less than $50, but don't tell my girlfriend who got it for her birthday – let's see if she reads me).

Apple sold 9.05 million iPods in its fiscal quarter ended September 25, reported Monday night. But the trend in the iPod market foreshadows the future I see for Apple. While those sales were huge, they were down 11% from the year ago period. That's due to intensified competition from players like SanDisk.

The company was able to hand the baton of growth over though to another blockbuster breakthrough, the second of the AJ period, the iPhone. iPhone sales were up 91% this quarter (over prior year), to 14.1 million units. That is characteristic of the disruption Apple created in the mobile market, turning basic mobile phones obsolete (except for a shrinking segment of the marketplace – for low priced), killing Motorola's business (NYSE: MOT) and putting Nokia (NYSE: NOK) on the defensive. Apple also blew established smart phone players like Palm nearly out of business, before its rescue by Hewlett-Packard (NYSE: HPQ). Research in Motion (Nasdaq: RIMM), with its BlackBerry models, now sits behind Apple in smart phone sales. RIM sold 12.1 million phones (2 million less than Apple) in its most recent fiscal quarter, which the cocky Apple Inc. pointed out in its press release.

And not leaving good enough alone, the aggressive disruptor took on Amazon's (Nasdaq: AMZN) Kindle Book Reader (read us on the Kindle) in its third major move for the AJ period; this of course came with its introduction of the iPad computing tablet. Apple sold 4.19 million iPads in its fiscal fourth quarter. The iPad may also be putting coffee table books on the shelf as well, at least in Upper East Side dental offices.

Indeed, Apple's revenues soared 77% over the prior year quarter, to $20.343 billion. Its net profit rocketed 70%, and its diluted EPS climbed 67.5% (lower than profit on share dilution), to $4.64 a share. These do not only represent corporate records, but awesome growth due to the size of increase and given the absolute value of sales. Meanwhile, the company accomplished this growth while giving back ground in its profit margins. But this also hints at where I'm going with my argument, and my more critical than Wall Street's wondrous expectations for Apple.

Apple's iPad sales were a disappointment this quarter, believe it or not, as analysts were looking for 4.5 million unit sales or so. This sent the stock lower in the aftermarket Monday night, but only after recent weeks of skyrocketing above the $300 mark. Thus, even while it was down on Tuesday, investors who took first stake just a short time ago were still in the green. Analysts also have supported their own momentum based forecasts for Apple, and they will ride the stock until it crashes for the most part. Their higher ups are telling them not to fight the tide (trust me), and with bonus season near and job security slim on Wall Street, it does not pay to argue with your boss, for the sake of your pocket anyway (your soul's sake is another story).

The Future: A Rotting Apple?

Disruptive as it has been, and as cocky as it remains, Apple must continue to innovate in the amazing fashion it has in order for the company to continue to justify an above average industry valuation. Steve Jobs hinted at his expectation to do so in his statement we republished atop this article. He says Apple has more surprises in store for us this year. I think I know what Apple is working on, and if I'm right, he just might be ready to take the stock much higher. Still, unless Jobs has a standing deal in place with the devil, and even though he is by far the consumer genius of our times, the continuation of this epic tale gets harder and harder to extend with time.

As an analyst, I believed in incorporating this type of management value-add (in this case genius) into the valuation of a company and into the success rate expected from R&D spending, commensurate market share gains, and EPS growth. But there are limits, and Apple seems to be testing them. Some analysts seem to me inebriated by Apple's success and their own buy opinions. This and the market's chasing of the shares this week, offers clear cut sign of an inevitable and eventual disappointment. The higher you raise expectations, you see, the more difficult they become to achieve. Apple is approaching impossible levels, but it's not there just yet.

Apple's pie is being sliced up among its competitors, even as it takes from the whole. We have seen look-alikes pop up in each of its product segments, and while they may not all live up to Apple standards, they do find buyer interest at varying price points. As the competition gets closer to Apple, the pioneer is forced to reduce price, and thus the give backs in margins. The iPad might still be taking share from Amazon's Kindle, but at the same time, it is losing share to Dell and others. As the lives of Apple's products begin to resemble the iPod, the company (and stock) will come under increased pressure to reinvent the wheel again, and also reinvent another wheel. In other words, it must stay atop the markets it is currently shocking, and also enter new markets in disruptive fashion to keep growing at its fantastic pace and to maintain an above average valuation.

My hat is tipped to Apple's management team, though I do not own one Apple product (feel free to send me one to sample and review). Apple clearly is a cut above, as a company, but as a stock, today may not represent the most opportune time to take an interest. But that is not so clear either.

The iPod is maturing and the competition is catching up. The iPhone is cutting edge, but the gauntlet has been long thrown down, and the competition is impressive. Google (Nasdaq: GOOG) recently sold more units of its Android phones in a month than Apple sold iPhones. Finally, the latest product, the iPad, seems less disruptive than the others, and thus, looks destined to reign on top for a shorter span (more likely behind the Kindle), especially given product introductions by rivals Dell (Nasdaq: DELL) and Research in Motion (Nasdaq: RIMM). Though Steve Jobs got on Apple's conference call for the first time in two years, and said the rival products were too small. The fact that he even addressed them says something.

Apple's shares rose with purpose heading into the EPS release, and then sold off after it; a typical buy the rumor, sell the news scenario. The stock closed the day down 2.7%, but is in the hands of day traders now and is slightly higher a day later.

Apple's Valuation

With its mix of businesses, Apple does not really have a pure peer; HP gets close though. Its P/E ratio of about 22X its trailing EPS does not seem too expensive when compared to historic growth, nor does it rate too high above analysts' forecast growth of 19% for the next few years. The tentative P/E ratio against FY 11 is 17.3, but that will likely move lower as analysts adjust forecasts to account for recent data. On a P/E basis, the stock is priced above Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL), Microsoft (Nasdaq: MSFT), and Research in Motion (Nasdaq: RIMM). However, its expected growth rate justifies the valuation premium. The only question is, how reliable is the growth forecast?

While the stock appears to be worth buying today, much depends on its ability to continue to innovate. This is what justifies the elevated valuation, and the only dynamic factor that can sustain it. So, if you are buying Apple now, you are really banking on Steve Jobs and his team's ability to continue its streak of reinvention. Can Apple, now the second largest stock in the S&P 500 Index (behind Exxon Mobil (NYSE: XOM), based on market capitalization, stay on top of the stock market hill? History tells us that it's hard to stay on top.

"...if my intuition is correct, Apple may be about to bite into a new pie, where its disruptive ways could help its stellar growth continue and its stock price rise further as well."

Apple's special valuation has my attention but does not scare the hell out of me, despite the company's size and the difficulty to grow from such a heavy base point. My intuition tells me the stock could give back some ground in the near term, on the absence of news. However, I believe Jobs and his statement about another surprise coming, and if my intuition is correct, Apple may be about to bite into a new pie, where its disruptive ways could help its stellar growth continue and its stock price rise further as well. Thus, I would be looking to enter on weakness that might come on some macro factor, and I would use technical help to find that entry point. My untrained technical analyst's eye (I'm a fundamental analyst) tells me that is probably somewhere between $280 and $300, and I see a solid basement floor at $260. The stock trades today near $312.

I wonder if Jobs has a holiday season announcement planned for his latest invention, as the period is clearly key to any new product introduction. Maybe it will be the driver for 2011's EPS growth, but he stated the surprise would be announced in this calendar year. The one thing you can count on is that AAPL's near-term share performance will be tied to it and the rest of its pie eating as well.



Article should interest investors in Apple (Nasdaq: AAPL), Dell (Nasdaq: DELL), Research in Motion (Nasdaq: RIMM), Hewlett-Packard (NYSE: HPQ), Microsoft (Nasdaq: MSFT), Amazon.com (Nasdaq: AMZN), Nokia (NYSE: NOK), Corning (NYSE: GLW), Motorola (NYSE: MOT), Alcatel-Lucent (NYSE: ALU), Harris (NYSE: HRS), Tellabs (Nasdaq: TLAB), Sony (NYSE: SNE), Philips (NYSE: PHG), Panasonic (NYSE: PC), Hitachi (NYSE: HIT), Sensata (NYSE: ST), Hubbell (NYSE: HUB.B), Harman (NYSE: HAR), Generac (Nasdaq: GNRC), DTS (Nasdaq: DTSI), Fabrinet (NYSE: FN), Technicolor (NYSE: TCH), LSB Industries (NYSE: LXU), Universal Electronics (Nasdaq: UEIC), Vishay Precision (NYSE: VPG).

The day's EPS included news from EMC Corp. (NYSE: EMC), Bank of America (NYSE: BAC), Altera (Nasdaq: ALTR), Coca-Cola (NYSE: KO), Intuitive Surgical (Nasdaq: ISRG), Forest Labs (NYSE: FRX), A.O. Smith (NYSE: AOS), American Electric Power (NYSE: AEP), AmeriServ Financial (Nasdaq: ASRV), Astec Industries (Nasdaq: ASTE), Badger Meter (NYSE: BMI), Bank of New York Mellon (NYSE: BK), BigBand Networks (Nasdaq: BBND), Boston Scientific (NYSE: BSX), Cree (Nasdaq: CREE), Cybex International (Nasdaq: CYBI), Datalink (Nasdaq: DTLK), Dearborn Bancorp (Nasdaq: DEAR), Diamondrock Hospitality (NYSE: DRH), Dominos Pizza (NYSE: DPZ), Enterprise Financial Services (Nasdaq: EFSC), ESB Financial (Nasdaq: ESBF), FBR Capital Markets (Nasdaq: FBCM), Flexsteel Industries (Nasdaq: FLXS), Flint Telecom (Nasdaq: FLTTE), Flushing Financial (Nasdaq: FFIC), Frischs Restaurants (AMEX: FRS), FSI International (Nasdaq: FSII), Fulton Financial (Nasdaq: FULT), Gilead Sciences (Nasdaq: GILD), Goldman Sachs (NYSE: GS), Hancock Holding (Nasdaq: HBHC), Harley-Davidson (NYSE: HOG), Hawaiian Holdings (Nasdaq: HA), HDFC Bank (NYSE: HDB), Huaneng Power (NYSE: HNP), Hub Group (Nasdaq: HUBG), Illinois Toolworks (NYSE: ITW), Johnson & Johnson (NYSE: JNJ), Juniper Networks (Nasdaq: JNPR), Koss (Nasdaq: KOSS), LaBranche (NYSE: LAB), Lockheed Martin (NYSE: LMT), Manhattan Associates (Nasdaq: MANH), Marten Transport (Nasdaq: MRTN), Mercantile Bank (Nasdaq: MBWM), MGIC Investment (NYSE: MTG), Millicom International (Nasdaq: MICC), Mueller Industries (NYSE: MLI), NB&T Financial Group (Nasdaq: NBTF), Occidental Petroleum (NYSE: OXY), Omega Navigation (Nasdaq: ONAV), Omnicom (NYSE: OMC), Parker Hannifin (NYSE: PH), Peabody Energy (NYSE: BTU), Penns Woods Bancorp (Nasdaq: PWOD), Pervasive Software (Nasdaq: PVSW), Polaris Industries (NYSE: PII), Psychiatric Solutions (Nasdaq: PSYS), Pulaski Financial (Nasdaq: PULB), RC2 Corp. (Nasdaq: RCRC), Renasant (Nasdaq: RNST), SLM Corp. (NYSE: SLM), Sonic (Nasdaq: SONC), Southern First Bancshares (Nasdaq: SFST), State Street (NYSE: STT), Sterling Financial (Nasdaq: STSA), Stryker (NYSE: SYK), Supervalu (NYSE: SVU), Tempur Pedic (NYSE: TPX), McClatchy (NYSE: MNI), The New York Times (NYSE: NYT), Tupperware (NYSE: TUP), Twin Disc (Nasdaq: TWIN), UniFirst (NYSE: UNF), United Rentals (NYSE: URI), UnitedHealth (NYSE: UNH), Waste Connections (NYSE: WCN), Weatherford International (NYSE: WFT), WestAmerica Bancorp (Nasdaq: WABC), Western Digital (NYSE: WDC), WSI Industries (Nasdaq: WSCI), and Yahoo! (Nasdaq: YHOO).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

M&A Activity on Large Cap Tech Sector Dynamics

Large Cap Tech Driving Merger Wire

A wave of merger mania has seemingly suddenly swept over the corporate world, and especially the tech sector. Naturally, analytical minds want to know why, and we believe we can help clear that up for investors swiftly. Basically, it has everything to do with a confluence of factors found within the current character of the large-cap technology sector: cash, price and growth. We go a step further today, and give you three 3Par like ideas, and look into how M&A plays with the broader market and the economy.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, and Mr. Kaminis has appeared across major media. While writing for Wall Street Greek, he presciently predicted the financial crisis in detail.

(Tickers: NYSE: HPQ, Nasdaq: DELL, NYSE: PAR, Nasdaq: GOOG, NYSE: TXN, Nasdaq: CSCO, NYSE: EMC, NYSE: MU, Nasdaq: SNDK, Nasdaq: INTC, NYSE: MFE, NYSE: IBM, Nasdaq: AAPL, NYSE: C, Nasdaq: QCOM, NYSE: CML, Nasdaq: ISLN, Nasdaq: CVLT, NYSE: POT, NYSE: BHP, NYSE: HBC, NYSE: CPB, NYSE: UBS, Nasdaq: NTAP, NYSE: WDC, NYSE: STX, Nasdaq: BRCD, Nasdaq: STEC, Nasdaq: XRTX, NYSE: IMN, Nasdaq: VOLT, Nasdaq: HTCH, Nasdaq: HILL, Nasdaq: OCZ, Nasdaq: LCRD, Nasdaq: OVRL, OTC: SONP.OB, Nasdaq: DRAM, Nasdaq: ALAN, OTC: TMOL.OB, NYSE: VMW, Nasdaq: BBHL, NYSE: SNP, Nasdaq: CNYD, Nasdaq: CNCN, Nasdaq: CISG, Nasdaq: EDS, Nasdaq: FMCN, Nasdaq: IRBS, Nasdaq: KNSY, Nasdaq: MGPI, Nasdaq: MWGP, Nasdaq: NGBF, Nasdaq: SAFM, Nasdaq: GASS, Nasdaq: TPIV, Nasdaq: TIGE, Nasdaq: TUES, Nasdaq: VBFC, NYSE: YZC, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: NYX, NYSE: ICE, Nasdaq: NDAQ)

Large Cap Tech Sector Dynamics at Play in M&A Activity

Hewlett-Packard (NYSE: HPQ) today made a competing bid for 3Par (NYSE: PAR), a data storage company. HP upped the ante for 3Par with its $24 per share bid worth $1.6 billion, surpassing Dell (Nasdaq: DELL), which had started the bidding with an $18 offer. HP might soon be re-nicknamed MnA, as it has not skipped a beat since the departure of its scandalized CEO, who by the way, oversaw the deals for 3Com and Palm before he had to go away. HP is not alone in the tech world though in its active M&A efforts, and has only contributed to the market's expectations for more. That was evidenced by trading in PAR and its relatives on Monday.

The high-end storage firm's shares spiked to a level even higher than the latest takeover bid price, all the way to $26 at the close. It seems investors expect a second offer from Dell, or a new bidder to enter the fray for this once semi-anonymous firm (to most of us). Investors seem to have good reason to expect a bidding war too, given the nascent acquisition frenzy within the technology sector.

Tech M&A Frenzy

This latest bidding war only continues a trend that's been increasingly recharacterizing the current marketplace. Just last week, the big news centered on Intel's (Nasdaq: INTC) offer to buy McAfee (NYSE: MFE) for $7.68 billion. Tech M&A activity increased in Q2 2010, on deals by Google (Nasdaq: GOOG), IBM (NYSE: IBM), Apple (Nasdaq: AAPL) and private equity firms Silver Lake Partners, TPG Capital, and Warburg Pincus. A total of 36 tech companies were acquired in Q2, in fact, which compares to 34 in Q1. The latest pace of deal making contrasts highly with the 24 deals that took place in last year's quarter. July was the biggest M&A month in 10 years for $1 billion plus transactions in tech. According to Citigroup (NYSE: C) Global M&A Chief Mark Shafir, we have seen $31 billion in transactions versus $7 billion in all of 2009. Activity is clearly on the rise, and that's a good driver for the tech sector and the investment banks that facilitate the deals. However, it may not offer any reason infer near-term economic gains nor broader stock market rise.

Rather, it seems to me that it's a product of the industry characteristics within the tech space. There are more than a few large cap tech companies with hoards of cash piling up. These once high-growth names have become cash cows in many instances. Still, all of these firms would like to relive their past glory and fuel future growth by making sweet deals for more robust businesses. By doing so, they seek to maintain or restore the higher P/E ratios that defined their past, and create value for shareholders in the process.

Whether value will be created or not is dependent on the specific stories and corporate leadership savvy and insight at each individual acquiring firm. In some cases, investors will end up wishing management had just paid out cash stores in dividends.

Given the economy and market's recovery to a more stabilized state, though still not confirmed stable, corporate managers have the guts now to buyout firms that may still look like relative bargains to them. It sure would have been nice for many of us if they had that same conviction a year and a half ago, when prices were dirt cheap. Still, we'll give these guys a break, since most of you also thought the world was coming to and end back then and were trading shares down to bottom dollar prices.

So, if capital is a key driver of these acquisitions, then CNBC's research today on the wealthiest potential acquirers might help us also anticipate who they might acquire. The only problem is that it will not, since recent deals have been across tech fields of play. The financial news channel noted Micron Technology (NYSE: MU), Sandisk (Nasdaq: SNDK), and a few others as cash rich. Texas Instruments (NYSE: TXN) is one Wedbush Morgan analyst's big pick to keep acquiring smaller firms for growth. The company has $2.3 billion in cash and no debt. An Edward Jones analyst looked towards Intel and Qualcomm (Nasdaq: QCOM) as rich potential future acquirers. He calls attention to the fact that Intel still has double-digit billions left over, even after it closes its pending deal. But, you'll want to stay away from these firms, since the acquirer's shares usually give back ground on deal announcement.

To benefit from this trend, you have to get into the heads of the corporate managers of the large cap tech companies with cash. You'll need to listen to a few conference calls, especially the Q&A sessions if available. You might call a solid analyst for some insight as well. Mark Shafir, Citigroup's M&A man, continues to look toward security and data storage for acquisition activity. IDC data seems to agree, noting the volume of data out there will increase 44X by 2020. This is not news though, but it seems to finally be finding money. Look at EMC's (NYSE: EMC) chart since the tech bubble bust, and you'll get what I mean.

3 Names to Consider

The market is a smart cookie, and smart money led some stocks on the PAR news today. Compellant (NYSE: CML), Commvault (Nasdaq: CVLT) and Isilon Systems (Nasdaq: ISLN) were three names that jumped by double-digit percentages. So, the market may already be giving us ideas, since these three companies are involved in relative businesses to 3Par. Of the three companies, ISLN's chart seems to show solid operational gains reflected in a steadily rising price chart. You'll need to do a little research here, but the chart jumps out at me for starters. I also like the rising EPS estimate trend in ISLN, but as far as valuation is concerned, CVLT looks most balanced. Again, some more due diligence would be needed to find value, if it exists. I would never invest in these stocks before a good deal more research work. Also, it's generally not wise to make a long-term investment, or to buy a stock, based on acquisition hope. Since these shares have jumped sharply now, I would be cautious in the near-term with regard to any long-term investment strategy.

The Broader Read

The fun also seems to be spreading to other industries, likely at the soft prodding of investment bankers. Potash (NYSE: POT), for instance, today spurned a bid by BHP Billiton (NYSE: BHP) on expectations for a better offer. The company is reportedly talking to others, including for instance China Sinochem. Campbell Soup (NYSE: CPB) is reportedly considering an acquisition of Britain's United Biscuits, or just its biscuits business. Campbell has been relatively active of late, acquiring artisan bread maker Ecce Panis last year. Heck, even banks are back to buying apparently, as HSBC (NYSE: HBC) is reportedly in exclusive talks with Old Mutual PLC (OTC: ODMTY.PK) to take a majority stake in South Africa's fourth largest bank, Nedbank Group.

UBS' (NYSE: UBS) Art Cashin said the deal activity is a good sign for the market, but I don't agree. Cashin says the fact that they're using cash for acquisitions indicates that they view their own stock undervalued, and therefore not the best currency to use to acquire. That would be a positive, except for the fact that corporate managers regularly view their own stock as undervalued. Now they are putting their money where their mouths are in using cash here, but just the same... So I'm not banking on this factor to look toward general market rise. And there's a golden rule I like to quote on the Street that might apply here: "Just because a stock is cheap does not mean it can't get cheaper." Cashin also points to the fact that companies are buying now as a positive sign for stocks generally. This has not proven true in recent history, and you already know my economic view, so be careful about getting trigger happy beyond specific picks on solid study.



Article should interest investors in NetApp (Nasdaq: NTAP), Western Digital (NYSE: WDC), Seagate (NYSE: STX), Brocade (Nasdaq: BRCD), STEC (Nasdaq: STEC), Xyratex (Nasdaq: XRTX), Imation (NYSE: IMN), Quantum (NYSE: QTM), Voltaire (Nasdaq: VOLT), Hutchinson Technology (Nasdaq: HTCH), Dot Hill Systems (Nasdaq: HILL), OCZ Tech (Nasdaq: OCZ), Lasercard (Nasdaq: LCRD), Overland Storage (Nasdaq: OVRL), Sonnen (OTC: SONP.OB), Dataram (Nasdaq: DRAM), Alanco (Nasdaq: ALAN), Trimol (OTC: TMOL.OB), VMWare (NYSE: VMW). The day's EPS included BCB Holdings (Nasdaq: BBHL), China Petroleum and Chemical (NYSE: SNP), China Yida (Nasdaq: CNYD), Cintel (Nasdaq: CNCN), CNInsure (Nasdaq: CISG), Exceed (Nasdaq: EDS), Focus Media (Nasdaq: FMCN), IR Biosciences (Nasdaq: IRBS), Kensey Nash (Nasdaq: KNSY), MGP Ingredients (Nasdaq: MGPI), Midwest Grain (Nasdaq: MWGP), New Generation Biofuels (Nasdaq: NGBF), Sanderson Farms (Nasdaq: SAFM), Stealthgas (Nasdaq: GASS), TapImmune (Nasdaq: TPIV), Tigrent (Nasdaq: TIGE), Tuesday Morning (Nasdaq: TUES), Village BK & TR (Nasdaq: VBFC) and Yanzhou Coal Mining (NYSE: YZC).

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

Inside Intel's EPS Report Q2 2010 (Nasdaq: INTC)

The Gorilla in the Room

It's official! The PC upgrade cycle has begun. After being mired in an environment characterized by cautious capital investment, corporations seem to finally have reached a point where they are once again willing to spend. At least that is what Intel's latest EPS report seems to imply. However, we question whether Intel's result offers a reason to buy the shares of its rivals, and we remain highly contra to forecasts for economic revival and general medium-to-long-term stock market rise.

"The Greek" earned clients a 23% average annual return over five years as a stock analyst on Wall Street. While writing for Wall Street Greek and others, he presciently predicted the financial crisis and housing and banking failures of the Great Recession. Visit the front pages of Wall Street Greek now to see our current coverage of business news, the global economy & financial markets, real estate, shipping, fine art & antiquities and global affairs.

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Inside Intel's EPS Report Q2 2010 (Nasdaq: INTC)

After rising 2% Tuesday, Intel shares jumped nearly 6% on Wednesday morning on the company's best quarterly profit in a decade. The news offered hope to technology shares, that perhaps a PC upgrade cycle had begun and corporate capital investment activity had returned.

Intel's Q2 EPS Report

Intel (Nasdaq: INTC) reported enthusing numbers after the close of trading last night, starting an after hour buying binge. The PC semiconductor giant posted EPS of $0.51, well above the analysts' consensus forecast for $0.43 (based on Thomson Reuters). Quarterly revenues reached $10.77 billion, again surpassing analysts' expectations for $10.25 billion. The company's revenue level marked a 34% increase over the prior year quarter, which is pretty significant even when not considering the size of its sales levels. At $10+ billion, it's huge!

The last time Intel posted earnings this high was before the dot-com bubble burst. Even better, the company forecasts revenues of $11.2 to $12.0 billion for its upcoming third quarter, again higher than analysts' forecasts for $10.92 billion. As a result of its revenue gains and also due to production efficiencies, Intel's gross profit margin is seen expanding above its own previous forecasts, to 65% to 69%. The company now expects its full year gross margin to reach 66%, up from its previous 64% outlook. We took note that Intel's cost of sales decreased year-over-year, despite a near $3 billion increase in sales. As a result of its success, the company is increasing its R&D spending and capital investment, a direct driver for the tech sector.

Intel's president and CEO Paul Otellini stated, "Strong demand from corporate customers for our most advanced microprocessors helped Intel achieve the best quarter in the company's 42-year history. Our process technology lead plus compelling architectural designs increasingly differentiate Intel-based products in the marketplace. The PC and server segments are healthy and the demand for leading-edge technology will continue to increase for the foreseeable future."

Tech Bellwether?

PC and server segment sequential strength were certainly encouraging for Intel and the whole of the tech sector. Intel dominates the PC space, with 80% or so global market share for microprocessors. One analyst warned not to translate Intel's success to Advanced Micro Devices (NYSE: AMD) though, which operates to a lesser extent in Intel's Q2 driving markets. AMD shares thus only managed to gain 1% in Wednesday trading through midday.

Also, Intel earns more than half its revenue from Europe and Asia, where business has not been as good as the US of late. However, the company notes that business has settled in Europe through Q2. Intel's CEO reported growth returned before quarter's end. That said, we have to wonder how good a barometer Intel serves for the overall tech sector today. Europe looks certain to offer drag through 2010. Besides Europe, there's one other reason why Intel's gains may not offer reason to buy stocks on the whole.

The PC upgrade cycle has been on hold for some time. If it is indeed finding traction now, it would surely be propelled by pent-up demand and needs to upgrade outdated equipment. The rate of innovation within technology should have intensified that desire in the corporate space. Meanwhile, budgets on lockdown and uncertain economic outlook kept managers from making necessary and desired improvements. Intel's own gains in gross margin, which were also aided by found efficiencies during hard times, evidence the freeing of capital. With economic growth now generally forecast, corporate decision makers may simply be making the upgrades they would have incurred under normal operating conditions. Thus, Intel's stellar growth may not offer reason for enthusiasm about general economic growth. That said, it seems to provide support to equipment makers of all sorts, who have seen orders die off over the last few years. Keep in mind though, that if economic conditions offer dark clouds, capital may still be held on the sidelines.



Intel's peers include: NYSE: TXN, NYSE: ADI, NYSE: STM, Nasdaq: MXIM, Nasdaq: AVGO, NYSE: AMD, NYSE: NSM, Nasdaq: ONNN, Nasdaq: ATML, NYSE: CY, Nasdaq: ISIL, Nasdaq: CAVM, Nasdaq: IDTI, NYSE: LDK, Nasdaq: MLNX, Nasdaq: FORM, Nasdaq: ENTR, Nasdaq: SPRD, Nasdaq: SIMG, Nasdaq: GSIT, Nasdaq: OPXT, Nasdaq: SPIR. Technology shares of interest include Nasdaq: DELL, Nasdaq: MSFT, Nasdaq: CSCO, NYSE: IBM, NYSE: RTG, NYSE: RYT, NYSE: MTK, NYSE: XLK, NYSE: ROM, NYSE: REW, NYSE: VGT, NYSE: DBT, NYSE: IYW, NYSE: IXN, NYSE: IGM.

Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.