MARKET CURRENTS
real-time news and commentary for investors
MARKET CURRENTS
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Today - Tuesday, May 22, 2012
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6:38 PM Renowned NYU finance prof. Aswath Damodaran assigns Facebook (FB -8.9%) a value of $29/share, a little below today's $31 closing price, based on a detailed valuation analysis. His assumptions: Facebook's annual revenue growth will average 40% over the next 5 years before slowing; its operating margin will fall from a sky-high 45.68% to 35%; and its cost of capital will be a relatively high 11.42% (to account for higher-than-normal risk). (Blodget's valuation) Comment!
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6:10 PM Think housing will improve? Buy truckers, KeyBanc's Todd Fowler suggests. “All the freight required to build a new home has a very positive impact on trucking activity," he says, noting each new residence requires 5-8 truckloads to transport supplies such as lumber, roofing materials and interior furnishings. Fowler likes KNX, WERN and CGI, plus retailers HD and LOW. Comment!
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4:34 PM Falling commodity prices, tightening processing margins and renewed fears of a European banking crisis have dragged down master limited partnerships, but Credit Suisse says fundamentals remain strong. The firm suggests investors overweight MLP portfolios with large-cap, diversified names such as Kinder Morgan (KMP), Enterprise Products (EPD) and Plains All American (PAA). 2 Comments
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2:38 PM China Mobile (CHA +1.8%) trades higher on an upgrade to Outperform from Credit Suisse, which sees strong 3G uptake in "Tier 2" Chinese cities leading to double-digit revenue growth for the country's carriers. CS notes 2/3 of China's net adds since April '11 have involved 3G, leading its penetration rate to grow to 15.6% of phones, and that 3G subs tend to sport higher ARPUs. Outperforms are reiterated for China Mobile (CHL) and China Unicom (CHU - previous). 1 Comment
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2:10 PM The Street is pricing Qualcomm (QCOM +1.2%) as if its business model is broken, says Bernstein's Stacy Rasgon. At a sub-$60 stock price, he thinks investors are pricing in a major decline in Qualcomm's royalty payments, either due to a lower rate or declining 3G/4G phone prices, and/or a drop in its chip margins. Rasgon, who has a $75 PT on Qualcomm, doesn't see either scenario as likely. (earlier) 1 Comment
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11:42 AM Goldman's Bill Shope is encouraged by the huge product refresh announced yesterday by EMC (EMC +0.7%). Shope sees the company's new VMAX systems allowing it to re-take share in the high-end storage market, and believes its OneFS system, a product of the Isilon acquisition, will put EMC on better footing in the network-attached storage (NAS) market relative to NetApp (NTAP). He also likes EMC's continued embrace of flash memory. (earlier) Comment!
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11:12 AM Shares of Hugoton Royalty Trust (HGT -22.9%) plunge as a Sir Perfluis analysis on Seeking Alpha says "purchasing HGT units at current prices is like buying 60 cents for a dollar... Quite literally, unless natural gas prices stage a rally, a current HGT unit-holder can expect to receive total cash flows of less than the current share price." 6 Comments
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10:56 AM Investors can grab Plains All American Pipeline (PAA +1%) and its 5.3% dividend yield even cheaper than director Gary Petersen did when he bought 5K shares on May 17 at $79.47 each, DividendChannel writes. A long-term dividend history chart strongly suggests PAA is likely to continue paying a comparably attractive dividend. Comment!
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10:22 AM The selloff in Chesapeake Energy (CHK +0.2%) creates a buying opportunity, Oppenheimer says while maintaining its Outperform rating and $28 price target. CHK is accelerating its liquids production growth and asset monetization, and the firm thinks its net asset value after pending asset sales is above its current share price.
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10:09 AM EnerNOC (ENOC +12%) shares surge after Needham raises its rating to Buy from Hold, believing the stock has bottomed and should become more attractive to long-term investors. The firm says ENOC isn't another Comverge (now private), "as the company has far more substantial scale, prior history of profitability, and healthier overall capitalization." Comment!
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9:39 AM Half of all S&P 500 stocks now yield more than the 10-year Treasury note's record low 1.74%, according to Bespoke. There are 271 stocks in the S&P 500 with a greater yield than the 10-year Treasury; of the remaining 229 stocks in the index, 126 have a dividend yield less than the 10-year, while 103 pay no dividend at all. Comment!
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6:25 AM Piper backtracks on a recent upgrade of Lowe's (LOW) after yesterday's guidance blunder, shuffling LOW to Neutral from Overweight, and reducing price-target to $28 from $41. "We still expect home remodeling growth to run above GDP growth for 2012-3, but no longer believe LOW is fully participating in the remodeling cycle," firm says. Shares -10% Monday to $25.60. 1 Comment
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Monday, May 21, 2012
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5:22 PM Henry Blodget sets a target range of $16-$24 for Facebook (FB -11%), based on a valuation of 20x-30x a 2013 EPS estimate of $0.80. Blodget's retort to those bullish due to Facebook's growth potential: Facebook has already been working on monetization for years; Mark Zuckerberg cares more about Facebook's "social mission" than its business; and the company's next billion users, weighted towards emerging markets, will be much less valuable than its first billion. (previous) 22 Comments
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4:01 PM Though it sold off from the day's highs, Envivio (ENVI +3.8%) closed with a decent gain after underwriters launched coverage with bullish ratings. Stifel thinks the TV Everywhere hardware/software vendor will see its addressable market grow at a 34% CAGR through 2015 with the help of new products, and Goldman argues deals with Time Warner Cable, Verizon, and Cablevision validate Envivio's technology lead. Comment!
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2:45 PM The sharp pullback in shares of Martin Marietta (MLM +1%) and Vulcan (VMC +3.5%) since February is overdone, KeyBanc says in upgrading each stock to Buy from Hold. On MLM, the firm thinks industry structure remains favorable, reflecting price power on a locally sourced and shipped product. On VMC, the firm sees a "nascent recovery" in its cyclically depressed aggregates. Comment!
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2:29 PM Goldman Sachs downgrades XL Capital (XL -1%) to Sell, believing XL’s professional liability-heavy book, along with last year's hiring ramp-up, will make it difficult to see margin expansion despite moderately improved pricing. "Margin improvement at XL will lag peers with a lower expense load or without books of business that require fixing." Comment!
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2:12 PM Coverage of Penn Virginia (PVA +12.9%) is started at Brean Murray with a Buy rating and a $10 price target, as the firm says proceeds from the company's anticipated Granite Wash divestiture should shift market focus from liquidity concerns to the value of its Eagle Ford acreage. Comment!
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2:11 PM Splunk (SPLK +1.5%) receives more positive analyst coverage (previous) courtesy of Barclays' Raimo Lenschow, who argues the potential market for Splunk's software, used to analyze machine data, could be much larger than is currently believed. In Lenschow's view, Splunk's solutions for analyzing petabytes (thousands of terabytes) of data per day, are "creating a whole new market." (earlier) Comment!
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1:45 PM SA author Kevin Quon highlights 5 firms that are prospering from low natural gas prices, including those that benefit from the use of gas as a fuel source and those that make it readily available. The five are Clean Energy Fuels (CLNE +7.55%), Fuel Systems (FSYS +2.9%), Golar LNG (GLNG +3.6%), Chart Industries (GTLS +5.3%) and Westport (WPRT +11.3%). 10 Comments
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12:08 PM Nabors Industries (NBR +6.5%) is one of today's top S&P gainers after Guggenheim upgrades shares to Buy from Neutral, "first and foremost" a valuation call. "Improving U.S. gas market fundamentals and expanding international margins [may] prompt investors to consider how oversold the stock has become" relative to its underlying asset value and strong cash flow. Comment!
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