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MOST NOTEWORTHY: Advanced Micro Devices, Intel Corporation, Netscout Systems, Guidance Software and Nasdaq were today's noteworthy initiations:
Morgan Stanley started shares of Advanced Micro Devices Inc (NYSE: AMD) and Intel Corporation (NASDAQ: INTC) with Underweight ratings and a $11 target and $22 target, respectively. The firm recommends selling shares of both as they expect an inventory correction and increasingly aggressive price environment.
Kaufman Brothers initiated shares of Netscout Systems Inc (NASDAQ: NTCT) with a Buy rating and $13.50 target. The firm is positive on the Network General acquisition and believes successful integration as well as continued improvement in sales execution will drive shares higher.
Roth Capital resumed coverage of Guidance Software Inc (NASDAQ: GUID) with a Buy rating and $15 target and said the company is the market leader for digital forensics and that new regulations have accelerated electronic discovery in the forensic market.
Jefferies started shares of The Nasdaq Stock Market Inc (NASDAQ: NDAQ) with a Buy rating and $45 target and believes the company's relative underperformance over the past two years creates an attractive entry point as earnings are poised to accelerate.
Toshiba Corporation (OTC: TOSBF), the large memory chip manufacturer, said that it has sold out of its supply of NAND flash memory. Also, there have been reports that increased handset and smartphone demand is leading to a pick up in demand for chips in general.
Micron Technology (NYSE: MU) reports results today so it will be interesting to see what they have to say and whether any of their diversification efforts are having success.
Micron is one moribund stock sitting at a low. The stock looks pretty washed-out with limited downside risk. It may be worth a look going into today's earnings release.
A chip company is an odd place to get advice on the US healthcare system. But the people who build semiconductors are smart.
The US will lose thousands of jobs to low-cost countries unless companies reduce soaring healthcare expenditures urgently, Intel's (NASDAQ: INTC) chairman Craig Barrett told the Financial Times. As the paper points out, Intel has not had much success selling its solutions to the healthcare industry, so perhaps its comments are just a way to get back at the doctors, insurance companies, and hospitals.
But the comments may have the power of coming from a company that employees tens of thousands of people both inside and outside the US. Intel must constantly be weighing the total cost of supporting each person, balancing skills, resources, salary, and benefits.
Outsourcing functions overseas has been a big topic of debate of the last ten years. Companies like IBM (NYSE: IBM) send more work off-shore every year to places like India.
Intel may only be a chip company, but its seems to have good advice on healthcare costs.
While gold and commodities around the world enjoy one heck of a bull market, the performance of technology stocks is steadily improving.
Last night, Oracle Corporation (NASDAQ: ORCL) once again reported solid results, although margin improvement was a little light and the software giant got a big boost from positive currency movement. Oracle's solid results follow a boost in outlook from Intel Corporation (NASDAQ: INTC). Also, with EMC Corporation's (NYSE: EMC) offering of VMware Inc (NYSE: VMW) being a huge success, equity offerings for the tech sector are also picking up, with Equinix Inc (NASDAQ: EQIX), the data-center company, completing a secondary this week. Improved IPO and secondary markets for tech stocks have usually meant good things for tech in general.
Also, just the general tone in technology is pickup up as both Google Inc (NASDAQ: GOOG) and Yahoo Inc (NASDAQ: YHOO) are remaining very active in the acquisition market as the two search-engine giants scoop more web-centric applications and Web 2.0 products.
While CNBC and Bloomberg focus on the booming commodities market, do not forget technology is beginning a very nice bull market.
Intel Corp. (NASDAQ: INTC) seems to be reaping the benefits of massive layoffs from last year as well as a surge in new products that are outpacing longtime thorn-in-the-side competitor Advanced Micro Devices, Inc. (NYSE: AMD). AMD's woes have been huge of late, although the release of a new quad-core microprocessor may be able to help it get back on track. Unlike in the past, however, Intel is now in reactive mode, not the proactive one.
Intel CEO Paul Otellini said this week that the world's largest chipmaker may speed up work on ever-faster computer chips just as the demand for PCs continues to rise around the world. Intel is positioned nicely to take advantage of expected double-digit growth in PCs, as emerging markets continue buying up hordes of personal computers and saturated markets -- like the U.S. -- fuel growth by replacing desktop PCs with laptop systems at a blistering pace.
Intel's recent focus on developing new chips to outpace products by its scrappy and smaller competitor is winning it more customer sales and loyalty after years of being perceived as beaten when it came to cost and performance of processors used in laptop computers through to corporate server systems. Whatever Otellini has done in the last year is paying off and Intel has roared back this year after having the lowest chip market share in 11 years last year. AMD is going to have a very tough time this go-round with the resurgent Intel, that's for sure. It was probably a good move, then, for AMD to gobble up graphics powerhouse ATI when it did -- as the company will need that business now more than ever.
The EU appeal court has handed down a decision that the anti-trust officials in the Union were right to fine Microsoft (NASDAQ: MSFT) and restrict it from further behavior that would harm smaller rivals.
Cases not entirely unlike the Microsoft one are now pending against Intel (NASDAQ: INTC) and Qualcomm (NASDAQ: QCOM). Both of the newer actions involve the question of whether these companies made conscious moves to knock-off smaller rivals. In Intel's case, the question of who may have been hurt is fairly clear. Its only real competition in the x86 chip market is AMD (NYSE: AMD).
The concerns about whether the Microsoft ruling will begin a trend of judgments against US companies depends on one fairly simple question. Will the cases be decided on their merits or is there a bias against big business that would tend to say that large American companies will lose all at the end of these investigations?
As one expert toldThe Wall Street Journal [subscription required], "This ruling increases the likelihood that liability will be found against Intel and Qualcomm and Rambus," predicted David Balto, a former policy director at the Federal Trade Commission. "It raises the stakes substantially." It that is so, investors in several large US tech companies face years of dicey news, billions in legal fees, and, potentially crippling regulation.
Douglas A. McIntyre is a partner at 247wallst.com.
Sometimes in corporate America, a company doesn't only have to battle competitors, sector conditions, macroeconomic currents, but the performance evaluation process itself.
That may very well be the plight of semiconductor giant Intel (NYSE: INTC). Intel's shares were down 47 cents $24.88 Monday afternoon after Merrill Lynch downgraded the stock to Neutral from Buy.
In its research note Merrill argued that Intel's stock "is nearing the high end of its recent valuation range and we think upside from current levels is limited." Merrill said it expects Intel's stock, currently with a P/E of 18x 2008 estimated earnings, to remain within its 3-year P/E range of 15x to 22x forward earnings.
However, the firm added that it nonetheless expects Intel to benefit from healthy PC demand this year, especially for laptops, and that fact, combined with a general firming of semiconductor order backlogs, margins, and price conditions, suggests the Merrill downgrade may have been a slight overreaction to Intel's P/E. To be sure, the downgrade was to Neutral - not to Sell - but there are other, major investment bank evaluations that point to the contrary, including:
-UBS Investment, which Thursday increased its target to $32 from $30 and maintained its Buy rating.
-Citigroup, which earlier this month maintained its Buy rating and Top Pick designation.
-Bank of America, which increased its target to $31 from $29 and reiterated its Buy rating.
Further, technically, Intel's chart looks strong. The stock has remained above the 50-day moving average, with only minor breaches, for about 6 months. The chart also displays a repeated healthy advance, then minor corrective pull-pack, during that period, and its relative strength index is 50, which is far from overbought conditions.
Fly Analysis: Intel is a moderate-risk stock not suitable for low-risk investors. Patient investors [time frame: 3 years or longer] who need a growth stock for their portfolio should be rewarded by Intel's performance, long-term.
Monster Worldwide Inc. (NASDAQ: MNST) -- September options active on renewed buyout chatter. MNST is recently up 68 cents to $33.87 on renewed and unconfirmed takeover chatter. MNST September 35 calls have traded 96 times on transaction volume of 4,374 contracts above its open interest of 3,450 contracts. MNST September 35 straddle is trading at $2.30. MNST October option implied volatility of 45 is above its 26-week average of 41 according to Track Data, suggesting larger risk.
Intel Corp. (NASDAQ: INTC) -- will hold its INTC Developer Forum in San Francisco on September 18-19. American Technology says, "we expect the company to focus on 45 nanometer process development, mobility as a driver of unit growth, and new areas of growth such as WiMax." INTC over all option implied volatility of 33 is above its 26-week average 29 according to Track Data, suggesting larger risk.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
MOST NOTEWORTHY: Intel (INTC), European investment banks, American Express (AXP), and ImClone (IMCL) were today's noteworthy downgrades:
Intel Corporation (NASDAQ: INTC) was downgraded to Neutral from Buy at Merrill Lynch, which cited valuation.
European investment banks were downgraded by Societe Generale on concerns that investment banking revenue will decline. Deutsche Bank AG (NYSE: DB) was downgraded to Sell from Hold. Credit Suisse Group (NYSE: CS) was downgraded to Sell from Buy, and UBS AG (NYSE: UBS) was downgraded to Hold from Buy.
American Express Company (NYSE: AXP) was downgraded to Neutral from Buy by Merrill Lynch, which cited slower consumer spending.
ImClone Systems Incorporated (NASDAQ: IMCL) was downgraded to Market Perform from Outperform at Friedman Billings, which lowered their estimates following feedback regarding the FLEX study announcement.
[update: Intel (NASDAQ: INTC) shares are down 2% in premarket trading following a downgrade to Neutral due to valuation from Merrill Lynch.]
Palm Inc's (NASDAQ: PALM) stockholders approved proposals that will end up in a cash distribution of $9 a share to its stockholders. Palm also said it would appoint Jon Rubinstein as executive chairman. Meanwhile, Morgan Keegan upgraded PALM to Outperform from Market Perform.
Genentech (NYSE: DNA) said after the close yesterday that the Food and Drug Administration panel will review in December its bid to have its blockbuster drug Avastin approved as a first-line treatment for metastatic breast cancer. Analysts say FDA approval for the new use would boost Avastin sales, which were $564 million in the second quarter.
Dell Inc (NASDAQ: DELL) said last night it is delaying its fiscal 2008 second-quarter report until it has completed a financial restatement process, which could have an impact on the quarter's financial statements. Dell expects to file the 10-Q for the first and second quarters of fiscal 2008 by the first week of November 2007 or not much after that.
Anglo-Dutch consumer products group Unilever NV/Plc and PepsiCo Inc (NYSE: PEP) are expanding their joint venture that sells bottled Lipton tea drinks.
Exxon Mobil (NYSE: XOM) said it was restarting units that had been shut earlier this week due to a power disruption at its Fawley refinery in the UK.
The New York Time's David Pogue weighs in on the ringtone market as it came into the limelight following Apple Inc.'s (NASDAQ: AAPL) recent offer of customizable ringtone. While Apple's customizable ringtones are indeed the cheapest, prices of ringtones, he says, are "insane," even Apple's. Perhaps, he wonders, music industry execs are behind it.
From among the stocks with its highest 5-star buy rating, Standard & Poor's selects a "stock for the week" for its The Outlook. The latest pick from the top-tier research firm is Intel (NASDAQ: INTC). S&P explains, "The semiconductor industry is in the early stages of an upturn. Stronger sales of PCs, competitive technological advances, and an enticing valuation should push the shares higher."
The analysts state, ""We think Intel has a key competitive advantage with its technology, which should lead to market share gains and better profitability. Essentially, we think that a very favorable demand environment, improving company fundamentals, and an enticing valuation are catalysts for the stock to outperform.
"Over the last couple of years, unit growth declined while mobile computers increased in popularity. Making matters worse, Intel was entrenched in a vicious price war with Advanced Micro Devices (NYSE: AMD) and ended up on the losing end for several quarters. Intel's desktop-segment market share fell from around 80% in early 2005 to 71% in late 2006.
"Against the ropes, the company shored up distributor relationships, priced chips more competitively, and attracted customers with its supply of new chips; it was thus able to turn the tide and improve its desktop segment market share to 72% in early 2007.
Looking back at recent company statements regarding earnings and guidance, there seems to be a big disparity in the type of companies reporting above average numbers to those reporting below average numbers.
If legendary mutual fund manager Peter Lynch's adage that higher stock prices follow higher earnings still holds true, then it is time to take a closer look at technology stocks.
CNBC's Jim Cramer still loving tech, says that component companies like Intel Corp. (NASDAQ: INTC) are thriving thanks to strong demand for PCs, led by Hewlett-Packard's (NYSE: HPQ) strong presence. If you are inclined to agree that Intel has a bright near-term future, then it could be a good time to get into a bullish hedged trade on INTC.
After hitting a one-year high of $26.52 in July, the stock has been quickly down and then back up near previous highs over the past six weeks. INTC opened at $25.60 and has hit a low of $25.26 and a high of $25.42 so far. As of 11:05, INTC is trading at $25.43, up $0.08 (0.3%). The chart for INTC looks bullish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.
If you agree with Cramer, then for a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $20 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.2% return in just five months as long as INTC is above $20 at January expiration. Intel would have to fall by more than 21% before we would start to lose money.
INTC hasn't been below $20 since April and has shown support around $23 recently. This trade could be risky if the tech sector gets caught up in the economic slowdown, but even if that happens, this position could be protected by the recent support the stock formed between $21 and $24 over the last 5 months, plus its 200 day moving average, which is currently at $22 and rising. Brent Archer is an options analyst and writer at Investors Observer.
MOST NOTEWORTHY: Select newspaper stocks and Dolan Media were today's noteworthy initiations:
Banc of America initiated six stocks in the newspaper sector with Neutral ratings: Gannett (NYSE: GCI) was started with a $51.50 target, citing a lack of clarity into the company's acquisition strategy; New York Times (NYSE: NYT) was started with a $21 target, reflecting a lack of clarity into the company's acquisition strategy; E.W. Scripps (NYSE: SSP) was started with a $43 target, as the firm feels the company's Interactive division is a "big question mark" that could drag down company growth; McClatchy Co (NYSE: MNI) was started with a $26 target, as the firm is positive longer-term, but sees downside risk to 2007 consensus estimates; Lee Enterprises (NYSE: LEE) was initiated with a $19.50 target; Gatehouse Media (NYSE: GHS) was started with a $12.50 target.
Dolan Media (NYSE: DM) was initiated with an Outperform rating and $24 target at Piper Jaffray. Piper believes DM's Q3 guidance is conservative given the default rates in July and August and notes the company processes defaults in two of the three highest default rate states. Dolan Media was also started with a Buy rating and $26 target at Merrill Lynch and with a Buy rating and $28 target at Craig-Hallum.
OTHER INITIATIONS:
Think Equity assumed coverage of Intel Corporation (NASDAQ: INTC) and Micron Technology (NYSE: MU) with an Accumulate rating and $26 target and a Buy rating and $18 target, respectively.
TheStreet.com's Jim Cramer is amazed by some stocks that just won't quit and looks at the practicalities of getting into these winners..gif){kind=logo}
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Intel Corp.
The concerns about whether the Microsoft ruling will begin a trend of judgments against US companies depends on one fairly simple question. Will the cases be decided on their merits or is there a bias against big business that would tend to say that large American companies will lose all at the end of these investigations?
Monster Worldwide Inc.
Interview with the head of Xerox's (XRX) Webster research lab
General Electric (GE) Q3 quarterly results preview
Foreclosures double again, another wave is coming
