Dear members,
We are having a very interesting month of November for the stock market. I had expected some kind of market correction in the early part of this month. Although there were some signs of market choppiness and sector correction, broad market sell-off did not materialize. This is in parts due to Fed that continues to assure the market that the economy is slowing but growing and the inflation pressure is easing. The bulls see this as a great support for the market.
We could have a correction that the market has been expecting any time. Catalysts can be anything from higher energy price, Iran nuclear threats, North Korea political debacle, as well as political uncertainties in Latin countries, African Nations, and Russia. Also, we could see market sway back and forth as the economic indicators come out mixed with some signaling slowdown in the economy (housing, auto, sub-prime mortgage foreclosure, etc) and others suggesting more pick-up that may be worrisome for inflation-watching Fed (higher consumer confidence, elevated energy and commodity prices, higher wage trends, etc). Consequently, I continue to recommend keeping cash at a certain level so you may buy quality name stocks at lower prices if there is indeed a market correction. However, I do feel that 07 will be a nice year for the market once again and with Fed sounding more favorable for the market, you should definitely invested in the market.
Let us walk through individual names. First with the biotech sector, the biotechs have remained relatively weak as the investors are once again concerned with the Medicare reform acts in the Congress that can impact the earning of the large biotech cap names. Also a few well-known biotech names (AMGN and DNA) have reported disappointing pipeline trial results and have suppressed the sector enthusiasm. Finally, there is lack of FDA approval and medical conference news which are typically loaded in the second half of the year. So this sector may stay a little weak in Q1 and Q2. However, I continue to recommend your investment in this area. AMGN has reported negative news regarding its blockbuster drug Aranesp in several cancer applications. The stock is now trading at the valuation that is really cheap (~13X based on 08 estimates). I think you should continue to buy the stock. GENZ also reported the stellar earning in the middle of Feb, but saw the same fate as AMGN (concern over Medicare reimbursement issue and lack of the pipeline catalysts). GENZ is an also great buy. CELG is also nice buy here. It is waiting for European approval of Revlimid by end of March. We could see a near term rally with CELG upon approval. I like the chance of the approval and the stock should be bought at this level. PDLI reported earning last week. I also like this stock and its royalty revenue continues to be strong and I believe that the management's approach to partner with large biotech company to develop next generation drug makes a lot of sense. It is a good buy here. I would put “hold” rating on ISIS and ALNY. Given the nervous state of the market, it is not the time to speculate too aggressively. I think we should stick with mid to large cap names where the fundamentals are more solid, should there be a nasty market correction.
Let us talk about the financial sector. If Fed is really right about the state of the economy, I love this sector. Many bad news continues to take premium out of the stocks in the sector. Lately concerns of sub-prime mortgage affecting earnings of the small banks and loan institutions have depressed the multiple of the solid financial names. It is true mortgage specialists and small banks with high exposure to sub prime loan is in trouble. But do not mistake these names with solid brokerage and integrated bank names. Investors are throwing out the baby with the water. GS is a great buy here. Look at all these M&A and private equity activities. Energy and commodity market remains strong. The stock market is doing great. This is a great environment for GS and the stock deserves higher multiple. JPM is an outstanding buy. The earning power is by far the best of all integrated banks. This bank reminds me of LRCX in the semiconductor equipment play as a turnaround play. I love JPM although people tell me not to fall in love with the stock.
Moving onto the transportation names, both AMR and LUV has been weak as the energy price has been climbing back up above $60 level. Oil inventory has been climbing due to warm weather not only in the US but strangely in Asia nations as well (could it be global warming). Rising energy price is thus primarily contributed to nervousness related to Iran nuclear uncertainties. Once this concern abates, I expect the price to stabilize once again to level below $60. In fact, I continue to believe that oil will trade somewhere between $45 and $55. As such, I continue to believe in the airline companies to show robust earning growth this year. I like both AMR and LUV. They are solid buy at the current level.
Now with the tech names, Techs typically do less well in the first half of the year. Money managers love this sector. NSADAQ has underperformed the market for a while and they think that this will be the year NSADAQ will outperform the overall market. But I really don't see the huge catalysts other than the high hope among investors for this sector in the first half. Semi stocks are rallying in face of the poor fundamentals. I don't like this sector at this juncture. If there is a dip, you could buy for second half year rally but I would not chase stocks in this sector. In this spirit, OPWV and AVID is a HOLD at best. I am really studying the fundamentals of these two companies. Should they continue to underperform the market, I will declare loss and take these two names off our core list. IBM is a hold but good buy upon pullback. I continue to recommend short position on RIMM. PE exceeding 30X for an email company seems just too rich. TIVO will report earning in early March but has seen a great rally from $5 level to mid $6. I would not add at this point. I will preview the earning ahead of the earning date.
With specialty retail names, I am thinking about adding more names in this space to become more diversified in the core holding names. I will address this in the mod term review time in June. PEET is an accumulate. I love Peet's coffee. The franchise is continuing to expand its store network and earning growth has been limited to less than 10% due to increased cost. But once they throttle back on the expansion in a few years, I believe that the company earning growth will reaccelerate. Use this period of stagnation to add. But do not expect huge stock movement to the upside.
Finally with China names, I love this sector for a long haul. But the sector is still in the midst of market correction in China so it may be wise to buy on a dip. CTRP has corrected after the earning conference call as I have predicted. The stock is at a fair value but it is not a great bargain. I would only nimble at the stock below $60. Long term, the stock is risky but should reward you for taking the chance. FMCN will report earning on tomorrow night so stay tuned. I will provide with you with the earning synopsis.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Sunday, February 25, 2007
Thursday, February 22, 2007
JPM: Buy the stock ahead of Analyst Day in early March.
The shares of JPM (JP Morgan Chase) have been exceptionally strong in recent times. Throughout this week, the stock has been setting multi-year high. In my last article on JPM prior to January earning, I noted that the firm could deliver a few cents surprise with respect to the bottom line performance and the stock could decidedly break above the $50 level.
(See http://www.investorhives.com...)
JPM has surprised the analyst community by delivering another confidence building results that surpassed the consensus EPS estimate by nearly 10 cents. This became the catalyst to propel the stock above psychological barrier of $50 level. In my opinion, the stock has not done going up. I expect throughout this year, the company will likely to continue to report robust earning growth, driven by improvement in the company operational metrics and higher net profit margin. Current consensus for JPM for 07 may turn out to be too conservative and 08 estimate could range anywhere between $4.70 to $5 level. In my opinion, the stock now is very much poised to head higher towards $60 level.
Confidence building Jan Quarter
Last Q performance was exceptional. Driven by strong performance in the investment banking and asset management segment, the company gave more credibility and confidence to the investment community. Trading performance of the firm has improved significantly. In addition, Credit Card business remains solid. Pipeline in the investment banking remains fantastic, driven by continued flow of M&A and private equity activities. Big question remains with the traditional banking side, namely retail financial services and commercial banking. However, I continue to believe that the economic indicators will be mixed, with some sectors such as housing and auto declining and other sectors such as retail and industrials leading the modest growth. The wage picture remains fair and I also expect the energy price will be caught in the trading range between $45 and $60. As such, I continue to believe that Fed will stand put with the rate and ease towards the end of this year. Should this happen, the rate picture become much more favorable for the retail banking segment and JPM earning growth will accelerate even further.
Own ahead of Analyst Day.
As the management team becomes more comfortable with meeting their previous guidance for profitability, I expect the company to picture even rosier outlook for future business. Also I suspect that JPM management team may decide to hike the dividend payment to the shareholder in the coming months and they could indicate this over the Analyst Day. Some are concerned about possibility of large acquisition for JPM which will dilute the company earning performance. However, I continue to believe that the company will be very opportunistic and take the deals that are additive to the earning performance. In my opinion, the market may anticipate the bullish tone of the analyst day and may buy ahead of the event. And you should be doing the same. I will pay close attention to what is said during the analyst day and ponder on the current target price of $60.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
(See http://www.investorhives.com...)
JPM has surprised the analyst community by delivering another confidence building results that surpassed the consensus EPS estimate by nearly 10 cents. This became the catalyst to propel the stock above psychological barrier of $50 level. In my opinion, the stock has not done going up. I expect throughout this year, the company will likely to continue to report robust earning growth, driven by improvement in the company operational metrics and higher net profit margin. Current consensus for JPM for 07 may turn out to be too conservative and 08 estimate could range anywhere between $4.70 to $5 level. In my opinion, the stock now is very much poised to head higher towards $60 level.
Confidence building Jan Quarter
Last Q performance was exceptional. Driven by strong performance in the investment banking and asset management segment, the company gave more credibility and confidence to the investment community. Trading performance of the firm has improved significantly. In addition, Credit Card business remains solid. Pipeline in the investment banking remains fantastic, driven by continued flow of M&A and private equity activities. Big question remains with the traditional banking side, namely retail financial services and commercial banking. However, I continue to believe that the economic indicators will be mixed, with some sectors such as housing and auto declining and other sectors such as retail and industrials leading the modest growth. The wage picture remains fair and I also expect the energy price will be caught in the trading range between $45 and $60. As such, I continue to believe that Fed will stand put with the rate and ease towards the end of this year. Should this happen, the rate picture become much more favorable for the retail banking segment and JPM earning growth will accelerate even further.
Own ahead of Analyst Day.
As the management team becomes more comfortable with meeting their previous guidance for profitability, I expect the company to picture even rosier outlook for future business. Also I suspect that JPM management team may decide to hike the dividend payment to the shareholder in the coming months and they could indicate this over the Analyst Day. Some are concerned about possibility of large acquisition for JPM which will dilute the company earning performance. However, I continue to believe that the company will be very opportunistic and take the deals that are additive to the earning performance. In my opinion, the market may anticipate the bullish tone of the analyst day and may buy ahead of the event. And you should be doing the same. I will pay close attention to what is said during the analyst day and ponder on the current target price of $60.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
WFMI: Takes out Wild Oats (OATS) and the stock soars.
Whole Food (WFMI) is the ultimate grocery store for the organic food. The store is known for the fresh, quality organic grocery at premium prices. The brand is well received among consumers and the company has been growing at a brisk clip along with soaring share price until recent times. However, as the valuation started to become a little bit stretched and the earning momentum started to wane, the share price saw steady and at times abrupt decline. Today the shares are soaring as the company took out its primary competition, WILD OATS as an acquisition candidate. I have started to look at the company for a long term idea and pondering on initiating the stock by mid year update or year end update time (June and Dec). With today's larger than 13% gain, the stock is further away from the level where I like it. But I will keep an eye on the stock and let you know if the valuation becomes attractive with respect to the earning growth rate.
Following is the excerpt from Notablecalls. The direct link to this stock blogging site is notablecalls.blogspot.com. Again, this is a great source for summary of analysts' comment on the stock that you are interested. Investorhives.com is working on RSS feeding this site to our news and blogging section so check it out soon.
Several tier-1 firms are out with excellent comments on Whole Foods (NASDAQ:WFMI) after the co issued CQ4 results and the acquisition of one of its main competitors:
- Morgan Stanley notes that as Whole Foods has a strong track record of turning around underperforming natural foods retailers, and they see significant opportunity for both overhead cost savings and store-level productivity gains, they believe this merger will be a significant earnings driver for Whole Foods over the next several years. Using what they view as conservative cost savings and productivity gains, firm's pro forma 2008 EPS rises to $1.88 from current levels of $1.74 and pro forma 2009 rises from $2.08 to $2.37. Applying a 35x P/E, they arrive at a $66 12-month price target (35x pro forma 2008 EPS of $1.88) and an $83 2-year price target (35x pro forma 2009 EPS of $2.37). MS believes investors who have been on the sidelines should ramp back into WFMI shares as they see a multi-year period of significant merger-related earnings growth. Rates WFMI shares Overweight.
- Goldman Sachs says that based on 1Q results alone, they believe that shares would have traded lower. Not only did EPS fall short, but pre-opening expenses will increase as the year progresses. As such, 2007 estimates may need to come down further. Thus, they believe the Oats transaction is largely responsible for the shares' 5% after-market rise. Part of this reflects potential year 2 accretion and some may be short covering since an Oats deal was unexpected. That said, given how the quarter played out and that the next several will be choppy, short covering may not be as pronounced as usual and the shares could trade lower in the intermediate term. The firm therefore maintains their Neutral rating. In their view, however, the longer-term story is intact and they would take a hard look at the shares if they fall to the low-mid $40s.
- Some of the most interesting comments come from JP Morgan saying they obviously hadn't counted on an acquisition of competitor Wild Oats by Whole Foods. Normally, they shy away from acquisitions of these sorts. Nonetheless, the potential value of this transaction is evident as WFMI attempts to acquire its largest competitor and redefine itself as a large company with $12B of sales potential. They give the company the benefit of the doubt and reiterate Overweight rating on the stock.
Given the timing, this deal is likely as much defensive as much as it is offensive. Firm likens this to Walgreen’s purchasing Rite Aid, or if Best Buy purchased Circuit City - both lower margin, lower productive competitors. The truth here, though, is that given the addressable market potential ($400B+ food retail sector annual sales potential) and the onslaught of competition, particularly within organics, the FTC shouldn't be an issue here, in their view. It would likely be for those other sectors. So, Whole Foods is essentially getting the opportunity to purchase its largest competitor, which operates at 49% of the sales per square foot of Whole Foods. This is where the true synergy potential is, as OATS has been a significantly mis-managed company, in their view, with clear merchandising and cultural issues. Whole Foods, on the other hand, is known for its merchandising and its culture. Both companies are non-union. This compensates for the inherent risk with the deal (as WFMI currently has a full plate with an aggressive new store development target, for them).
Due diligence of the OATS deal by WFMI lacked substance, in JPM's view. John Mackey, CEO, apparently contacted Wild Oats within the last two months. Interim CEO, Greg Mays, replaced former CEO Perry Odak on 10/25/06 (Odak resigned on 10/19/06), while the old CFO (Bob Diamond) resigned on 12/20/06. John Mackey indicated that he contacted Mays after the CFO had resigned, which implies after 12/20/06. They announced the acquisition on 2/21/07. Ron Burkle, who owns 18% of Wild Oats, has a history of selling his companies well, a la Dominicks (to Safeway) and Fred Meyer (to Kroger).
Notablecalls: Expect to see some short covering today and over the next couple of days. In the very s-t the rug was surely pulled out from under the bears. On the other hand, WFMI now has their plate full and acquisitions almost always cause operational disruptions.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Following is the excerpt from Notablecalls. The direct link to this stock blogging site is notablecalls.blogspot.com. Again, this is a great source for summary of analysts' comment on the stock that you are interested. Investorhives.com is working on RSS feeding this site to our news and blogging section so check it out soon.
Several tier-1 firms are out with excellent comments on Whole Foods (NASDAQ:WFMI) after the co issued CQ4 results and the acquisition of one of its main competitors:
- Morgan Stanley notes that as Whole Foods has a strong track record of turning around underperforming natural foods retailers, and they see significant opportunity for both overhead cost savings and store-level productivity gains, they believe this merger will be a significant earnings driver for Whole Foods over the next several years. Using what they view as conservative cost savings and productivity gains, firm's pro forma 2008 EPS rises to $1.88 from current levels of $1.74 and pro forma 2009 rises from $2.08 to $2.37. Applying a 35x P/E, they arrive at a $66 12-month price target (35x pro forma 2008 EPS of $1.88) and an $83 2-year price target (35x pro forma 2009 EPS of $2.37). MS believes investors who have been on the sidelines should ramp back into WFMI shares as they see a multi-year period of significant merger-related earnings growth. Rates WFMI shares Overweight.
- Goldman Sachs says that based on 1Q results alone, they believe that shares would have traded lower. Not only did EPS fall short, but pre-opening expenses will increase as the year progresses. As such, 2007 estimates may need to come down further. Thus, they believe the Oats transaction is largely responsible for the shares' 5% after-market rise. Part of this reflects potential year 2 accretion and some may be short covering since an Oats deal was unexpected. That said, given how the quarter played out and that the next several will be choppy, short covering may not be as pronounced as usual and the shares could trade lower in the intermediate term. The firm therefore maintains their Neutral rating. In their view, however, the longer-term story is intact and they would take a hard look at the shares if they fall to the low-mid $40s.
- Some of the most interesting comments come from JP Morgan saying they obviously hadn't counted on an acquisition of competitor Wild Oats by Whole Foods. Normally, they shy away from acquisitions of these sorts. Nonetheless, the potential value of this transaction is evident as WFMI attempts to acquire its largest competitor and redefine itself as a large company with $12B of sales potential. They give the company the benefit of the doubt and reiterate Overweight rating on the stock.
Given the timing, this deal is likely as much defensive as much as it is offensive. Firm likens this to Walgreen’s purchasing Rite Aid, or if Best Buy purchased Circuit City - both lower margin, lower productive competitors. The truth here, though, is that given the addressable market potential ($400B+ food retail sector annual sales potential) and the onslaught of competition, particularly within organics, the FTC shouldn't be an issue here, in their view. It would likely be for those other sectors. So, Whole Foods is essentially getting the opportunity to purchase its largest competitor, which operates at 49% of the sales per square foot of Whole Foods. This is where the true synergy potential is, as OATS has been a significantly mis-managed company, in their view, with clear merchandising and cultural issues. Whole Foods, on the other hand, is known for its merchandising and its culture. Both companies are non-union. This compensates for the inherent risk with the deal (as WFMI currently has a full plate with an aggressive new store development target, for them).
Due diligence of the OATS deal by WFMI lacked substance, in JPM's view. John Mackey, CEO, apparently contacted Wild Oats within the last two months. Interim CEO, Greg Mays, replaced former CEO Perry Odak on 10/25/06 (Odak resigned on 10/19/06), while the old CFO (Bob Diamond) resigned on 12/20/06. John Mackey indicated that he contacted Mays after the CFO had resigned, which implies after 12/20/06. They announced the acquisition on 2/21/07. Ron Burkle, who owns 18% of Wild Oats, has a history of selling his companies well, a la Dominicks (to Safeway) and Fred Meyer (to Kroger).
Notablecalls: Expect to see some short covering today and over the next couple of days. In the very s-t the rug was surely pulled out from under the bears. On the other hand, WFMI now has their plate full and acquisitions almost always cause operational disruptions.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Tuesday, February 20, 2007
AMGN: comments from analysts who were defending AMGN
The following is the excerpts from notablecalls.blogspot.com. it outlines well the view points of the analysts who were defending the stock on DAHANCA announcement.
Couple of firms are out in defense of Amgen (NASDAQ:AMGN) after the "Cancer Letter" posted interim results of an investigator-sponsored Danish study (that itself was posted last December on the investigator's website) looking at Aranesp in head and neck cancer patients that showed more frequent treatment failure rates in patients treated with Aranesp:
- Baird says they are incremental buyers of AMGN after Friday's weakness which stemmed from a misunderstood result of a halted Aranesp trial in an off-label setting using a much too high dose. This trial has little to do with "real world" use, and they see little commercial impact.
First, this study was not designed to show Aranesp's efficacy in hemoglobin correction but rather looked at its therapeutic effect as a radiosensitizer, targeting a hemoglobin range (14.5 g/dL - 15.5 g/dL), which is far in excess of its labeled range which could be considered safe. The Aranesp dosing required to get hemoglobin levels that high also significantly exceeds recommended dosage.
Second, and more commercially relevant, management indicated Friday on its conference call that physicians simply do not use Aranesp in these patients, nor do they use the excessive Aranesp doses required to get hemoglobin levels that high. It should come as no surprise that using excessive levels of a drug in a patient population it is not indicated for may yield some negative effects.
Reiterates Outperform rating, $90 price target.
- Wachovia notes that while they believe negative clinical outcomes observed in DAHANCA 10 and the AOC trials should not be trivialized, it is unclear whether those attributed to Aranesp were due to underlying disease or ramifications of pushing hemoglobin levels too high. Importantly, adverse event rates in DAHANCA 10 were equivalent in both arms of the study. Although EPO receptor expression analysis from various tumor types may be inconclusive, studies investigating EPO signaling in tumor growth arrive at an array of disparate conclusions, by firm's interpretation.
The latest FDA warning applies to use of all EPO agents, which theoretically includes C.E.R.A. (Roche) whose BLA is currently under review at FDA for treatment of anemia associated with kidney disease. With a distinct pharmacokinetic profile from Aranesp and the unmodified erythropoetins, it is conceivable that FDA will analyze the C.E.R.A. safety data with increased scrutiny, potentially delaying approval, in firm's view. They believe such an outcome could lift a significant overhang also weighing on AMGN stock.
Reiterates Outperform rating. Decreasing '08 Aranesp sales estimates by 5%, AMGN now trades at only 13.6x firm's '08 EPS estimate of $4.92 on an estimated 2006-2010 revenue CAGR of 10%. Believing recent pressure on shares to be a result of a market overreaction and that these overhangs should lift following 1H 2007 quarterly results and anticipated news events, the firm would take advantage of this recent pullback to buy AMGN shares.
- JP Morgan notes that though the complete DAHANCA 10 results are not released, available information suggests that Aranesp may not be appropriate for this niche indication that is not in our model. Indeed, very few if any oncologists treat non-anemic patients with Aranesp outside of a clinical trial setting. Current commercial treatment regimens utilize much lower Hb targets (11-12g/dl) in anemic patients only.
CERA remains the lever. Despite the noise on Amgen's anemia franchise, which has driven multiple contractions, the firm remains bullish on Amgen¡¯s risk/reward going into the May PDUFA for Roche's CERA.
Reiterates OW. Despite a less than 16 multiple on their 07 EPS est (biotech peers: 30X), AMGN still has a 06-10e EPS CAGR of 12%, in line with biotech peers (14% ex-MEDI, CELG) and actually higher than Genzyme (10%).
Notablecalls: OK, I must admit AMGN's management messed up by not disclosing DAHANCA 10 results soon after they were known. On the other hand, it wasn't a trial handled by the co. Judging by the way the analyst community is defending the stock this AM, I think investors will be back buying the stock hand over fist over the next couple of days. I just don't see the recent decline as justified. AMGN's dirt cheap here trading only 13x FY08 EPS. Buy it! The defenses are actionable!
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Couple of firms are out in defense of Amgen (NASDAQ:AMGN) after the "Cancer Letter" posted interim results of an investigator-sponsored Danish study (that itself was posted last December on the investigator's website) looking at Aranesp in head and neck cancer patients that showed more frequent treatment failure rates in patients treated with Aranesp:
- Baird says they are incremental buyers of AMGN after Friday's weakness which stemmed from a misunderstood result of a halted Aranesp trial in an off-label setting using a much too high dose. This trial has little to do with "real world" use, and they see little commercial impact.
First, this study was not designed to show Aranesp's efficacy in hemoglobin correction but rather looked at its therapeutic effect as a radiosensitizer, targeting a hemoglobin range (14.5 g/dL - 15.5 g/dL), which is far in excess of its labeled range which could be considered safe. The Aranesp dosing required to get hemoglobin levels that high also significantly exceeds recommended dosage.
Second, and more commercially relevant, management indicated Friday on its conference call that physicians simply do not use Aranesp in these patients, nor do they use the excessive Aranesp doses required to get hemoglobin levels that high. It should come as no surprise that using excessive levels of a drug in a patient population it is not indicated for may yield some negative effects.
Reiterates Outperform rating, $90 price target.
- Wachovia notes that while they believe negative clinical outcomes observed in DAHANCA 10 and the AOC trials should not be trivialized, it is unclear whether those attributed to Aranesp were due to underlying disease or ramifications of pushing hemoglobin levels too high. Importantly, adverse event rates in DAHANCA 10 were equivalent in both arms of the study. Although EPO receptor expression analysis from various tumor types may be inconclusive, studies investigating EPO signaling in tumor growth arrive at an array of disparate conclusions, by firm's interpretation.
The latest FDA warning applies to use of all EPO agents, which theoretically includes C.E.R.A. (Roche) whose BLA is currently under review at FDA for treatment of anemia associated with kidney disease. With a distinct pharmacokinetic profile from Aranesp and the unmodified erythropoetins, it is conceivable that FDA will analyze the C.E.R.A. safety data with increased scrutiny, potentially delaying approval, in firm's view. They believe such an outcome could lift a significant overhang also weighing on AMGN stock.
Reiterates Outperform rating. Decreasing '08 Aranesp sales estimates by 5%, AMGN now trades at only 13.6x firm's '08 EPS estimate of $4.92 on an estimated 2006-2010 revenue CAGR of 10%. Believing recent pressure on shares to be a result of a market overreaction and that these overhangs should lift following 1H 2007 quarterly results and anticipated news events, the firm would take advantage of this recent pullback to buy AMGN shares.
- JP Morgan notes that though the complete DAHANCA 10 results are not released, available information suggests that Aranesp may not be appropriate for this niche indication that is not in our model. Indeed, very few if any oncologists treat non-anemic patients with Aranesp outside of a clinical trial setting. Current commercial treatment regimens utilize much lower Hb targets (11-12g/dl) in anemic patients only.
CERA remains the lever. Despite the noise on Amgen's anemia franchise, which has driven multiple contractions, the firm remains bullish on Amgen¡¯s risk/reward going into the May PDUFA for Roche's CERA.
Reiterates OW. Despite a less than 16 multiple on their 07 EPS est (biotech peers: 30X), AMGN still has a 06-10e EPS CAGR of 12%, in line with biotech peers (14% ex-MEDI, CELG) and actually higher than Genzyme (10%).
Notablecalls: OK, I must admit AMGN's management messed up by not disclosing DAHANCA 10 results soon after they were known. On the other hand, it wasn't a trial handled by the co. Judging by the way the analyst community is defending the stock this AM, I think investors will be back buying the stock hand over fist over the next couple of days. I just don't see the recent decline as justified. AMGN's dirt cheap here trading only 13x FY08 EPS. Buy it! The defenses are actionable!
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
AMGN: Tired of saying "undervalued"
I am getting tired of stating AMGN is undervalued. But I will have to say it again: AMGN is grossly undervalued. The risk to award ratio is favorable and if I was recommending the stock above $70 level, I would be definitely recommend the stock at today price of $66.35.
AMGN saw a lot of selling pressure late last week due to Danish Cooperative Group Head&Neck Cancer (DAHANCA) trial result show increased progression of tumor cell with Aranesp for patients with hemoglobin level above 12 g/dl. Credit Suisse came out with negative comments stating there is an increased risk for AMGN; the insurers and physicians may pare back on the use of Aranesp/EPO products, given the possibility that physicians may become more concerned with negative side effects of EPO products for patients with higher hemoglobin level. The firm also questions that credibility of the management team as it was disappointed that AMGN did not release DAHANCA results during the last conference call. The firm sees slightly decreased estimate for AMGN: revised to $4.04 from $4.12 for 07 and $4.57 from $4.54 for 08. The target price is at $63.
In a separate post, I will post a link which summarizes the view points of many analysts who were defending the stock on DAHANCA announcement.
My take is that even with the decreased EPS estimate from Credit Suisse, AMGN is trading at 14X the 08 EPS. If you take the more bullish analysts' side, it appears that the stock is trading with PE multiple ~13X based on 08 EPS estimate near $5. At this point, AMGN is trading cheaper than some traditional pharmaceutical companies (MRK, etc) and yet the growth rate is expected to be substantially greater than traditional pharmacy companies. All the negativities are built into the stock price. Consequently, AMGN could languish further as the momentum traders continue to bash the stock but I see limited downside and think that risk to award ratio is pretty good for those with the long term outlook on the stock. I continue to stand by my target at $100 for the stock.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
AMGN saw a lot of selling pressure late last week due to Danish Cooperative Group Head&Neck Cancer (DAHANCA) trial result show increased progression of tumor cell with Aranesp for patients with hemoglobin level above 12 g/dl. Credit Suisse came out with negative comments stating there is an increased risk for AMGN; the insurers and physicians may pare back on the use of Aranesp/EPO products, given the possibility that physicians may become more concerned with negative side effects of EPO products for patients with higher hemoglobin level. The firm also questions that credibility of the management team as it was disappointed that AMGN did not release DAHANCA results during the last conference call. The firm sees slightly decreased estimate for AMGN: revised to $4.04 from $4.12 for 07 and $4.57 from $4.54 for 08. The target price is at $63.
In a separate post, I will post a link which summarizes the view points of many analysts who were defending the stock on DAHANCA announcement.
My take is that even with the decreased EPS estimate from Credit Suisse, AMGN is trading at 14X the 08 EPS. If you take the more bullish analysts' side, it appears that the stock is trading with PE multiple ~13X based on 08 EPS estimate near $5. At this point, AMGN is trading cheaper than some traditional pharmaceutical companies (MRK, etc) and yet the growth rate is expected to be substantially greater than traditional pharmacy companies. All the negativities are built into the stock price. Consequently, AMGN could languish further as the momentum traders continue to bash the stock but I see limited downside and think that risk to award ratio is pretty good for those with the long term outlook on the stock. I continue to stand by my target at $100 for the stock.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Thursday, February 15, 2007
AMR: Expect to see multi-year high tomorrow.
BusinessWeek is reporting this evening that AMR is a possible buyout target of Goldman or British Airways. The expected deal is thought to be anywhere between 9.8 to 11.2 billion, making the shares of AMR valued anywhere from $46 to $52 a share. In response to this press release, the shares are trading sharply higher after the market to the level it has not seen in years. I expect that AMR shares will see multi-year high tomorrow when the market opens.
(http://yahoo.reuters.com...)
FilthyRich hive has initiated AMR into our core holding ideas last Nov at the price of around $32 a share. Since then, the shares have been on a torrid rise to $40 level.
(http://www.investorhives.com...)
The shares have stalled recently as the oil price has climbed back to near $60 level. The world economies are seen to be growing at a modest pace and many investors are inclined to think that oil price will be substantially higher again this year. My opinion is that as Fed officials both in the US and many emerging countries are concerned with inflationary pressures, should there be unacceptable level of energy price rise, the rate will be elevated to curb the energy price rise. As such, I do believe that oil price will be in caught in the trading range between $45 to $55. Lower price will be the tailwind for AMR and I see AMR earning growth that can support $60 share price.
(see previous message http://www.investorhives.com...)
Another notable trend is the rise in the airfare. Southwest (LUV), another stock covered in the filthyrich hive, recently hiked the airfare. This was matched by other regional and legacy carriers. Industry consolidation, higher airfare, and normalizing traffic after the cold weather as well as oil price that is likely to head lower as we exit cold winter season will portend improved business environment for all airline companies. Regardless of the takeover rumor of AMR, I like the sector fundamental enough to be an aggressive buyer at a decent pullback. I currently have $48 target on AMR and $21 target on LUV. As the sector fundamentals improve and oil price stabilizes, the TP for the both companies are likely to revise higher.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
(http://yahoo.reuters.com...)
FilthyRich hive has initiated AMR into our core holding ideas last Nov at the price of around $32 a share. Since then, the shares have been on a torrid rise to $40 level.
(http://www.investorhives.com...)
The shares have stalled recently as the oil price has climbed back to near $60 level. The world economies are seen to be growing at a modest pace and many investors are inclined to think that oil price will be substantially higher again this year. My opinion is that as Fed officials both in the US and many emerging countries are concerned with inflationary pressures, should there be unacceptable level of energy price rise, the rate will be elevated to curb the energy price rise. As such, I do believe that oil price will be in caught in the trading range between $45 to $55. Lower price will be the tailwind for AMR and I see AMR earning growth that can support $60 share price.
(see previous message http://www.investorhives.com...)
Another notable trend is the rise in the airfare. Southwest (LUV), another stock covered in the filthyrich hive, recently hiked the airfare. This was matched by other regional and legacy carriers. Industry consolidation, higher airfare, and normalizing traffic after the cold weather as well as oil price that is likely to head lower as we exit cold winter season will portend improved business environment for all airline companies. Regardless of the takeover rumor of AMR, I like the sector fundamental enough to be an aggressive buyer at a decent pullback. I currently have $48 target on AMR and $21 target on LUV. As the sector fundamentals improve and oil price stabilizes, the TP for the both companies are likely to revise higher.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Tuesday, February 13, 2007
AMAT:Splinter sticking his neck out and calling the trough for this down cycle.
AMAT reported the earning after the market close today. Listening from the conference call, the company reported largely inline top and bottom line results. The EPS number of 26 cents was one cent below the consensus estimate. Topline number of 2.28 billion was just a little shy of 2.5 billion expected. Given the downturn that many investors are expecting, these numbers did not have any meaningful implications for the share price. Instead, the investors were seeking any signs of business uptick in the future.
Today CEO Mike Splinter is feeling really bold. The stock price is headed higher after the market as CEO calls for trough (business cycle bottom) this Q. This is in sharp contrast to very cautious stance that other equipment company CEOs are taking in their January earning calls. Splinter sees bottom in logic order this Q and the order is likely to head higher over the coming Qs. He also sees pickup in the memory (flash) segment in the second half of 07. He was also bullish on the flat panel as well as service business going forward. Given the significant underperformance of share price compared to its competitors such as NVLS, KLAC, and LRCX during last upturn, Splinter’s job is perhaps on the line if the stock continues to underperform. In my opinion, Splinter put the job on the line today. If he is right, he will be the hero of the industry by correctly forecasting the bottom and positioning AMAT for the next upturn. If he is wrong, I expect to see someone else in the helm down the road.
Regardless whether he is right or wrong, I continue to prefer other equipment companies over AMAT. The company is too diversified (solar, service, silicon, and flat panel). This may have saved the company from seeing more steep order drop as the other equipment companies. But as the next upturn kicks in, this could work against getting the greater earning leverage. AMAT is also exiting implant business. Implant business is significant portion of overall silicon business. As the device gets more complicated, number of implant steps goes up drastically on the transistor level. I don’t know why AMAT chooses more R&D efforts with solar which does not yield any meaningful revenue over implant which can be a cash cow. With shrinking number of chip customers, increased product life time (taking more time to shrink), and fierce competitions on all silicon process fronts, AMAT has lost its luster as being dominant player in this space. I would be a seller of AMAT above $19. If you believe Splinter and want to play in the semi-equipment space, I prefer LRCX, NVLS, and KLAC as a large cap names. In addition, as AMAT exits implant business, Varian (VSEA) and Axcelis (ACLS) could be superb plays. There are so many more attractive names in this space that I would stay away from AMAT.
As for believing in the bottom for this cycle, I continue to believe that we are just starting to see inventory correction in memory space and could last well into spring and early summer. As such, there will be continued flow of negative news from the chipmakers and equipment makers. I am not sure if all negativities have been baked into the share price of equipment companies. Risk to award ratio is not still favorable in my opinion given the uncertainties with the semiconductor inventory situation. I would rather wait and see to spot firmer signs of uptick. I tend to believe that I would be able to buy all of these names at lower prices. When I feel the time is right, I will reinitiate my old favorite LRCX or NVLS into our core holding idea but I am not in any rush at this moment.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
CTRP: Start buying back your shares.
Pullback following the earning call resulted in the CTRP shares trading at $58 level today. I am liking the shares at these levels. Although the shares will remain volatile and we could see additional dip as nervous traders continues to like to take the momentum out of the stock, I would start buying back your shares at these levels. Start commiting 50% of what you have sold earlier. Buy back again as you confirm the uptrend.
CTRP is currently trading at roughly 31X based on forward (08) multiple. This multiple (in the range between 30 ~ 35) is what I feel comfortable with the stock. The management indicated the revenue guidance exceeding 30% YOY and 35% op ex number. This will put PEG below 1. Also I continue to believe that this guidance is conservative, given traditionally slow Q1 involving Chinese New Year. This implies PEG ratio well below 1. In my opinion, CTRP will continue to execute its business and achieve topline growth rate in excess of 35% over next 5 years. In 08, upcoming Chinese 08 Olympic will drive tremendous travel volumes for the company; consequently, guidance is conservative and the company is poised to beat the YOY growth estimate. As we enter late 07, the investors will be looking towards 09 estimate, which may be in excess of $2.5. Again applying PE of 35 (upper range of my comfort zone), I would see shares trading around $88 by late 07 to early 08. I like the upside from the current level.
Original investment thesis for CTRP:
(http://www.investorhives.com...)
Previous articles on CTRP:
http://www.investorhives.com...
http://www.investorhives.com...
http://www.investorhives.com...
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
CTRP is currently trading at roughly 31X based on forward (08) multiple. This multiple (in the range between 30 ~ 35) is what I feel comfortable with the stock. The management indicated the revenue guidance exceeding 30% YOY and 35% op ex number. This will put PEG below 1. Also I continue to believe that this guidance is conservative, given traditionally slow Q1 involving Chinese New Year. This implies PEG ratio well below 1. In my opinion, CTRP will continue to execute its business and achieve topline growth rate in excess of 35% over next 5 years. In 08, upcoming Chinese 08 Olympic will drive tremendous travel volumes for the company; consequently, guidance is conservative and the company is poised to beat the YOY growth estimate. As we enter late 07, the investors will be looking towards 09 estimate, which may be in excess of $2.5. Again applying PE of 35 (upper range of my comfort zone), I would see shares trading around $88 by late 07 to early 08. I like the upside from the current level.
Original investment thesis for CTRP:
(http://www.investorhives.com...)
Previous articles on CTRP:
http://www.investorhives.com...
http://www.investorhives.com...
http://www.investorhives.com...
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Monday, February 12, 2007
CTRP: Expect selling pressure tomorrow but good entry point
Late last month, I have downgraded CTRP to hold from buy as the stock hit my long term target of $70. I advised you to sell a portion of your holding as I anticipated selling pressure after the earning. Since then the stock has drifted lower from high of $74 level to $67. I also indicated that long term story for CTRP is intact and should there be a dip in the share price well below $65, you should be buying back your shares.
(http://investorhives.com...)
CTRP reported Feb 07 earning Sunday evening. As I expected, the company reported solid revenue growth by largely inline Q. Reported revenue was 28.9 mil slightly above the consensus number of $28.5 mil. The bottom line number came in at 26 cents, inline with the street estimate. Given the high multiple that the stock is trading at, the stock had to beat the number by a solid margin and needed to guide the number higher for next Q.
However, the company's performance just came in as expected and even more disappointingly, the guidance calls for 30% YOY growth for FY 07 and 35% operating margin for the same fiscal year. Due to PE exceeding 35 based on 08 estimate, I felt that CTRP needed to maintain 40% or higher YOY revenue growth to justify additional gain in the share price from the current level.
These events will point to lower share price after tomorrow. And I believe my previous call to liquidate certain portion of CTRP was indeed correct one. I believe that over the next week, we may revisit low $60 to high $50 level for CTRP shares. In my opinion, CTRP's management is again being conservative with the guidance as it has been consistent in exceeding the consensus estimate. In my opinion, CTRP's long term story is intact and outlook for great growth ahead is better than ever. As such, I would continue to wait for a pullback and start buying back your shares in the low $60 dollars (anywhere between $62 to $64 level). Long term, CTRP will be a clear winner as Chinese economy continues to chuck along. Maintain as a top pick idea for 07.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
(http://investorhives.com...)
CTRP reported Feb 07 earning Sunday evening. As I expected, the company reported solid revenue growth by largely inline Q. Reported revenue was 28.9 mil slightly above the consensus number of $28.5 mil. The bottom line number came in at 26 cents, inline with the street estimate. Given the high multiple that the stock is trading at, the stock had to beat the number by a solid margin and needed to guide the number higher for next Q.
However, the company's performance just came in as expected and even more disappointingly, the guidance calls for 30% YOY growth for FY 07 and 35% operating margin for the same fiscal year. Due to PE exceeding 35 based on 08 estimate, I felt that CTRP needed to maintain 40% or higher YOY revenue growth to justify additional gain in the share price from the current level.
These events will point to lower share price after tomorrow. And I believe my previous call to liquidate certain portion of CTRP was indeed correct one. I believe that over the next week, we may revisit low $60 to high $50 level for CTRP shares. In my opinion, CTRP's management is again being conservative with the guidance as it has been consistent in exceeding the consensus estimate. In my opinion, CTRP's long term story is intact and outlook for great growth ahead is better than ever. As such, I would continue to wait for a pullback and start buying back your shares in the low $60 dollars (anywhere between $62 to $64 level). Long term, CTRP will be a clear winner as Chinese economy continues to chuck along. Maintain as a top pick idea for 07.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Saturday, February 10, 2007
Tivo: AMZN unbox movie downloading service a game changer.
In the report issued on Feb 7th, SmithBarney had a following summary on Tivo announcement on partnership with movie downloading service with AMZN.
- TIVO announced a partnership with AMZN to provide internet movie downloads on TIVO's standalone boxes. While details are limited, we believe it could be a game changer for TIVO and movie d'load svs by providing an economical means to get PC content to living rooms. The product looks to have support from most of major studios and will "soon" launch to the public.
- Strategically, the product is part of TIVO's d'load strategy and follows other new prods that support user generated, TV, & music content. We believe these help make clear that TIVO is not just a DVR, but a living room media hub.
- While we do not expect a direct meaningful impact from the service near-term, it could boost standalone sales in 2H07 and, combined with cable deal rollouts, benefit overall 2H07 results. We maintain our Buy rating and $11 target price as we see TIVO continuing to gain traction through: 1) its stand-alone business, 2) MSO deals, and 3) DVR advertising.
In summary, the firm thinks that Tivo DVR service is beyond the simple DVR hardware and software provider. Tivo device is poised to become media hub where all internet content, TV media content, music content (recent deal with Real Network), and movie content (amazon and independent film producer) all converge on powerful search platform. In my opinion, this is the trend of the future that will bring significant business model change in the TV ad and content delivery industry. Tivo is revolutionalizing the industry and continues to differentiate its product against simple generic DVR makers. Tivo's search capability and ad delivery platform with its software enables the company to target significant business opportunities for the industry that Tivo is currently revolutionizing.
Although the profitability still remains elusive for the company as the industry is yet to embrace the upcoming model changes with open arm, it is inevitable that the trend will continue to point towards rapidly changing business climate for large media and cable companies. Tivo is in the heart of this phenomena and only question remains to whether the company would be around long enough to really take advantage of the revolution that it is creating for its market.
I continue to like Tivo's chance that the company will be able to grab niche (better yet large) market within DVR segment and the stock performance will eventually follow.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
- TIVO announced a partnership with AMZN to provide internet movie downloads on TIVO's standalone boxes. While details are limited, we believe it could be a game changer for TIVO and movie d'load svs by providing an economical means to get PC content to living rooms. The product looks to have support from most of major studios and will "soon" launch to the public.
- Strategically, the product is part of TIVO's d'load strategy and follows other new prods that support user generated, TV, & music content. We believe these help make clear that TIVO is not just a DVR, but a living room media hub.
- While we do not expect a direct meaningful impact from the service near-term, it could boost standalone sales in 2H07 and, combined with cable deal rollouts, benefit overall 2H07 results. We maintain our Buy rating and $11 target price as we see TIVO continuing to gain traction through: 1) its stand-alone business, 2) MSO deals, and 3) DVR advertising.
In summary, the firm thinks that Tivo DVR service is beyond the simple DVR hardware and software provider. Tivo device is poised to become media hub where all internet content, TV media content, music content (recent deal with Real Network), and movie content (amazon and independent film producer) all converge on powerful search platform. In my opinion, this is the trend of the future that will bring significant business model change in the TV ad and content delivery industry. Tivo is revolutionalizing the industry and continues to differentiate its product against simple generic DVR makers. Tivo's search capability and ad delivery platform with its software enables the company to target significant business opportunities for the industry that Tivo is currently revolutionizing.
Although the profitability still remains elusive for the company as the industry is yet to embrace the upcoming model changes with open arm, it is inevitable that the trend will continue to point towards rapidly changing business climate for large media and cable companies. Tivo is in the heart of this phenomena and only question remains to whether the company would be around long enough to really take advantage of the revolution that it is creating for its market.
I continue to like Tivo's chance that the company will be able to grab niche (better yet large) market within DVR segment and the stock performance will eventually follow.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
Wednesday, February 07, 2007
Tivo: Trial test with Amazon movie downloading starts.
After the market close, Tivo announced that movie downloading service to view the downloaded movie via internet on TV set will be available for certain Tivo DVR subscribers on a trial basis. This service is expected to be widely deployed to 1.5 mil standalone Tivo subscribers sometime this year.
(http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070207:MTFH84910_2007-02-07_05-01-14_N06308517&type=comktNews&rpc=44)
After the market close, Cisco reported better than expected earning and cites digital downloading of the video as a huge catalyst for the future growth of the company. Tivo has been the poor performer when it comes to investment return for its shareholders. The stock has been a good candidate for trading opportunities as the stock gyrated from $5 to $8 several times last two years.
Today, Tivo is sitting at lower range of its trading range. Investors have pushed the stock down since last fall. They have been impatient with ongoing litigation against Dish which is entering appeal process by Dish. At this point, I believe that the stock has most of the negative outcome built into the stock price. Yet the positive catalysts may be around the corner. Tivo will report its earning in early March. The company has guided the sub add outlook for the coming Q lower during last earning call. However, January Q is the traditionally the strongest Q of the year for the company. Tivo is also deploying its long-waited Comcast service this spring. Finally, other cable deals may follow after successful launch of the Tivo service with Comcast. As such, the stock may soon trade higher on these expectations towards the higher trading range.
Ultimately, if Tivo cannot prove to the investors that it has a viable business model, I would expect the company would be taken out at a higher premium this year. Many speculate it could be Google, Yahoo, or Cisco who acquires the company. However, if the service with Comcast proceeds smoothly, don’t be surprised if Comcast step up and takes out Tivo.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
(http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070207:MTFH84910_2007-02-07_05-01-14_N06308517&type=comktNews&rpc=44)
After the market close, Cisco reported better than expected earning and cites digital downloading of the video as a huge catalyst for the future growth of the company. Tivo has been the poor performer when it comes to investment return for its shareholders. The stock has been a good candidate for trading opportunities as the stock gyrated from $5 to $8 several times last two years.
Today, Tivo is sitting at lower range of its trading range. Investors have pushed the stock down since last fall. They have been impatient with ongoing litigation against Dish which is entering appeal process by Dish. At this point, I believe that the stock has most of the negative outcome built into the stock price. Yet the positive catalysts may be around the corner. Tivo will report its earning in early March. The company has guided the sub add outlook for the coming Q lower during last earning call. However, January Q is the traditionally the strongest Q of the year for the company. Tivo is also deploying its long-waited Comcast service this spring. Finally, other cable deals may follow after successful launch of the Tivo service with Comcast. As such, the stock may soon trade higher on these expectations towards the higher trading range.
Ultimately, if Tivo cannot prove to the investors that it has a viable business model, I would expect the company would be taken out at a higher premium this year. Many speculate it could be Google, Yahoo, or Cisco who acquires the company. However, if the service with Comcast proceeds smoothly, don’t be surprised if Comcast step up and takes out Tivo.
The current stocks in that I cover are: Filthy Rich Tech ideas (comprised of Openwave, Avid Technology, Tivo, IBM, and Research in Motion), Filthy Rich Biotech ideas (comprised of Amgen, Celgene, Genzyme, Isis pharmaceuticals, Alnylam pharmaceutical, and Protein Design Lab), Filthy Rich Financial ideas (JP Morgan and Goldman Sachs), Filthy Rich China ideas (Focus Media Holding and Ctrip.com), Filthy Rich Transportation ideas ( American Airline and Southwest Airline), and Filthy Rich Specialty Retail ideas (Peet's coffee)
Please check out the archives for past posting on individual stocks. Also market commentary and weekly communication on the core holding list are available at www.investorhives.com on a membership basis. The membership is free for everyone. Simply apply for filthyrich hive membership at www.investorhives.com. Thank you for visiting my blog.
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