After hitting a one-year high of $23.00 in August, the stock hit a one-year low of $16.13 in January. This morning, AMAT opened at $17.32. So far today the stock has hit a low of $17.25 and a high of $18.06. As of 12:25, AMAT is trading at $17.654, down 70 cents (-3.8%). The chart for AMAT looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $22 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 7.1% return in three months as long as AMAT is below $22 at October expiration. AMAT would have to rise by more than 24% before we would start to lose money. Learn more about this type of trade here.
AMAT hasn't been above $22 since last August and has shown resistance around $21 recently. This trade could be risky if the company's earnings (due out in mid-August) are a positive surprise, but even if that happens, this position could be protected by resistance AMAT might find at its 200 day moving average, which is currently around $19 and falling.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AMAT.
With the high fuel prices over the past year, solar stocks have been making some nice gains. But there are some signs that they may not be as safe as they appear. Investors' interest in solar companies increased due to soaring crude futures, but there are some factors to take into account before investing money into solar.
The current BusinessWeeklooks at stocks such as First Solar (NASDAQ: FSLR), SolarWorld and Evergreen Solar (NASDAQ: ESLR), which have been facing increased volatility based on contract deal news or the lack thereof.
A major impact came in May, with speculation that Germany would lower subsidies given to companies and individuals who install alternative energy equipment. But the cut was not as deep as expected and stocks rebounded nicely.
MOST NOTEWORTHY: UBS AG, KLA-Tencor and Level 3 Comm were today's noteworthy downgrades:
Keefe Bruyette downgraded shares of UBS (NYSE: UBS) to Underperform from Market Perform as they expect as they expect further write-downs to erase profits in 2008.
Oppenheimer downgraded shares of KLA-Tencor (NASDAQ: KLAC) to Underperform from Perform after checks indicated Intel (NASDAQ: INTC) has chosen Applied Materials' (NASDAQ: AMAT) reticle inspection tool for its entire 32nm node after a long period of evaluation against KLA-Tencor. Oppenheimer believes this represents a $300M shift from KLA-Tencor's dominant market share in reticle inspection.
Jefferies cut Level 3 Communications (NASDAQ: LVLT) to Hold from Buy as they see limited opportunity for near-term share appreciation given the company's integration challenges and the added uncertainty from recent management changes.
OTHER DOWNGRADES:
Keefe Bruyette downgraded Credit Suisse (NYSE: CS) to Market Perform from Outperform.
Kroger (NYSE: KR) was downgraded to Underweight from Neutral at JP Morgan.
Applied Materials Inc. (NASDAQ: AMAT) shares are rising after the market has gotten some positive news for companies connected to LCD TVs. Circuit City (NYSE: CC) CEO Philip Schoonover predicted in an interview with the AP that 2008 will see high growth in TV sales as a result of the FCC's mandate that broadcasters switch to digital format in February 2009. This could be good news for AMAT, which makes equipment to fabricate thin film transistor LCDs for televisions. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on AMAT.
After hitting a one-year high of $23.00 in August, the stock hit a one-year low of $16.13 in January. AMAT opened this morning at $20.28. So far today the stock has hit a low of $20.23 and a high of $20.45. As of 12:15, AMAT is trading at $20.35, up 26 cents (1.3%). The chart for AMAT looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $16 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. This particular trade will make an 11.1% return in just four and a half months as long as AMAT is above $16 at July expiration. Applied Materials would have to fall by more than 21% before we would start to lose money.
AMAT hasn't been below $16 at all in the past year and has shown support around $19 recently. This trade could be risky if the economic situation continues to worsen, but even if that happens, this position could be protected by the support the stock might find at its 50-day moving average, which is around $18 and rising.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in AMAT or CC.
AMAT is scheduled to report Q1 EPS after the market close on February 12.
Deutsche Banc says: "Expecting stronger F1Q08 results, weaker outlook." DBAB has a Hold rating and a $19 price target on AMAT.
AMAT February straddle 18 is priced at $1.10. AMAT March option implied volatility of 42 is above its 26-week average of 36 according to Track Data, suggesting larger movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
MOST NOTEWORTHY: Sonus Networks, Kenexa, Canadian Pacific, Applied Materials and Powerwave Tech were today's noteworthy upgrades:
Merriman upgraded Sonus Networks (NASDAQ: SONS) to Neutral from Sell following its win at BT Group (NYSE: BT) for its ASX platform, which the firm believes endorses the company's technology.
Cantor upgraded Kenexa (NASDAQ: KNXA) to Buy from Hold. The firm finds the stock being 40%+ off due to the 3Q weak earnings report as quite an overreaction and believes there is more than enough upside to advise buying shares. Management announced a 2M share buyback program.
Shares of Canadian Pacific (NYSE: CP) was upgraded to Sector Outperformer from Sector Performer at CIBC, as they believe the strong Canadian Dollar and the delay in STB approval of the DM&E acquisition is priced into shares.
Applied Materials (NASDAQ: AMAT) was upgraded to Outperform from Neutral at JP Morgan and to Buy from Hold at Citigroup; Citigroup expects capex revisions to start to reverse in mid-08 and views solar as a free option.
Piper Jaffray raised its rating on Powerwave Technologies (NASDAQ: PWAV) to Outperform from Market Perform on valuation and seasonally strong Q4 capex trends.
OTHER UPGRADES:
eBay (NASDAQ: EBAY) was upgraded to Outperform from Market Perform at Piper Jaffray.
Morgan Joseph upgraded Perini (NYSE: PCR) to Buy from Hold and Shuffle Master (SHFL) to Hold from Sell.
Applied Materials Inc. (NASDAQ: AMAT) is higher this morning after the Semiconductor Industry Association announced today that global semiconductor sales rose 2.2% in July. The company also introduced a new line of solar energy modules over the weekend. If you think this means that AMAT won't slip too much in the coming months, then now could be a good time to look at a bullish hedged trade on the stock.
After hitting a one-year high of $23.00 in early August, shares fell sharply back to previous support levels just above $20. AMAT opened this morning at $21.49. So far today the stock has hit a low of $21.40 and a high of $21.92. As of 11:25, AMAT is trading at $21.91, up $0.55 (2.6%). The chart for AMAT looks bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an October 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 9.1% return in just 7 weeks as long as AMAT is above $20 at October expiration. Applied Materials would have to fall by more than 8% before we would start to lose money.
AMAT hasn't been below $20 by more than a few cents since early June and has shown support around $20.50 recently. This trade could be risky if the tech market turns bearish, but even if that happens, this position could be protected by its 200 day moving average, which is around $19 and rising. Plus, AMAT is not scheduled to report earnings again until November, which is after expiration.
This morning, Novellus Systems Inc (NASDAQ: NVLS) announced that it anticipates second quarter bookings, shipments, revenues and earnings per share to come in at the low end of the guidance range it previously provided on May 31st. The semiconductor equipment maker previously forecast Q2 results of 42c-45c/$410M-$420M vs. Reuters consensus of 44c/$415.61M.
The company, which makes equipment to help turn silicon wafers into computer chips, believes its earnings will be lower because of a weak semiconductor market. Novellus said theses industry declines will lead to cost cutting initiatives in the second half of the year, including a reduction in executive salaries for the rest of the year and company shutdowns in the third and fourth quarters.
Novellus is one company among several that have lowered expectations for the rest of the year. Due to a surplus in chips, companies have had to cut prices. Applied Materials Inc (NASDAQ: AMAT), for example, also predicts declines in global chip sales growth for the rest of 2007.
In the technology sector this morning, the profit warning from Novellus was offset by an upgrade of Intel Corporation (NASDAQ: INTC) by Lehman Brothers.
MOST NOTEWORTHY: Limited Brands, Inc (LTD), Applied Materials, Inc (AMAT), Williams-Sonoma, Inc (WSM) and Texas Instruments Inc (TXN) were some of today's noteworthy downgrades:
Limited Brands Inc (NYSE: LTD) was downgraded to Neutral from Buy at Banc of America, to Neutral from Accumulate at Buckingham, to Hold from Buy at Citigroup and to Market Perform from Outperform at Wachovia following the news of selling a majority interest in its Express brand and announcing the intent to explore strategic options for the company.
Elsewhere, Cowen downgraded shares of Applied Materials (NASDAQ: AMAT) to Neutral from Outperform due to Q3 order guidance and limited visibility. American Technology removed Applied Materials from its Focus List.
Williams-Sonoma (NYSE: WSM) was cut to Market Perform from Outperform at Piper Jaffray on concerns about mall traffic trends at the end of Q1 for both Pottery Barn and Williams-Sonoma brands.
Texas Instruments (NYSE: TXN) was cut to Sector Performer from Outperformer at CIBC on valuation...
MOST NOTEWORTHY: Three food companies, TiVo Inc (TIVO), Circuit City Stores, Inc (CC) and AutoZone, Inc (AZO) were today's most noteworthy downgrades:
Deutsche Bank downgraded Groupe Danone (NYSE: DA), Unilever (NYSE: UL) and Nestle (OTC: NSRGY) to Hold from Buy as the firm believes the three food producers will suffer from rising prices for agricultural commodities.
SMH Capital downgraded shares of TiVo (NASDAQ: TIVO) to Sell from Hold on valuation as the firm believes the market has already priced in considerable penetration of the new TIVO/Comcast bundled DVR into Comcast's (CMCSK) core digital sub base.
Matrix downgraded Circuit City Stores (NYSE: CC) to Strong Sell from Hold as the firm believes increasing competition is leading to lower selling prices and decreasing profits.
BMO Capital cut AutoZone (NYSE: AZO) to Underperform from Market Perform on expectations that higher gas prices will be a drag on discretionary product sales...
Applied Materials Inc (NASDAQ: AMAT) was upgraded this morning to Buy from Neutral with a $25 price target by Bank of America. Solar powered semiconductors were cited as a reason for the upgrade.
We blogged last weak about the merits of going green and the demand for solar powered semiconductors that are being produced by SunPower Corporation (NASDAQ: SPWR). Although mentioned during Applied's February conference call as a source of growth, management was hesitant to quantify revenue from the solar business. It appears from BOFA's report this morning, Applied Materials is beginning to provide some size and scope to this business, indicating solar contracts in fiscal year 2007 could be in the $400M-$500M range, above original guidance of $200M.
Add the rapid growth of NAND memory products, or Flash, and strong demand for dual-core microprocessors and it appears Applied Materials is set to break out of its tight trading range.
In its February call, equipment orders were guided to be up 2% to 7%, as Michael Splinter, Applied's CEO, said logic, foundry and display businesses should be bottoming during the next few quarters. 90% of orders are 300 millimeter as semiconductor equipment buyers continue to push toward using newer technologies.
Applied Materials has huge share buyback in place and dividend increases are also coming. Applied Materials is a very powerful company in a very important industry. I believe it is time to own this stock.
MOST NOTEWORTHY: BHP Billiton (BHP), Applied Materials, Inc (AMAT), Advanced Micro Devices (AMD) and Oracle Corp (ORCL) were some of today's noteworthy upgrades:
Prudential upgraded shares of BHP Billiton (NYSE: BHP) to Neutral from Underweight with a $50 target to reflect capacity expansion in uranium mining and increasing demand for iron ore from China.
Bank of America upgraded Applied Materials Inc (NASDAQ: AMAT) to Buy from Neutral with a $25 target as the firm believes the company's solar power equipment market is accelerating faster than estimates and guidance.
Advanced Micro Devices Inc (NYSE: AMD) was upgraded to Neutral from Reduce at UBS citing limited downside to the shares.
Oracle Corp (NASDAQ: ORCL) was upgraded to Buy from Neutral at Goldman Sachs, where its coverage was transferred to another analyst.
OTHER UPGRADES:
Credit Suisse added Rite Aid Corp (NYSE: RAD) to its U.S. Focus List.
Morgan Stanley upgraded O2Micro International Ltd (NADAQ: OIIM) to Overweight from Equal-Weight based on the company's announcement of a settlement with Samsung.
Wachovia added Lehman Brothers Holdings (NYSE: LEH) to its Focus List. Due to Lehman's record banking fee backlog of $1.03 billion in Q1, the firm believes their banking estimate is "quite conservative."
Continental Airlines, Inc (NYSE: CAL) was upgraded to Buy from Neutral at FTN Midwest citing the surprisingly strong March unit revenue growth for the upgrade.
Bear Stearns upgraded Vodafone PLC (NYSE: VOD) to Peer Perform from Underperform.
Applied Materials Inc. (NASDAQ:AMAT), the semiconductor equipment powerhouse, appeared to show signs that the semiconductor equipment market is close to bottoming during its conference call Tuesday night. Equipment orders were guided to be up 2-7%, a good sign for the industry. AMAT shares gained 70 cents to close $18.89 today, up 3.85%.
Michael Splinter, AMAT's CEO said the logic, foundry and display businesses should be bottoming during the next few quarters. Splinter sees strong memory purchases, as about 20 memory fabs are due to be constructed to meet the growing demand for new products, such as NAND, which are being used more often as a substitute for disk drives.
What is becoming more and more clear while listening to AMAT's conference calls and meetings with the investment community is just how powerful this company is: 90% of orders are 300-millimeter, as semiconductor equipment buyers continue to push toward using newer technologies. This allows AMAT to build a bigger and bigger moat to fend-off competition.
AMAT generated free cash flow of $322 million, which is at the lower end of its free-cash-flow generation cycle. AMAT expects free cash flow generation to move higher from here. The stock buyback is huge and dividend increases are also coming. AMAT is a very powerful company in a very important industry. Moreover, AMAT is making the case that it is time to start chipping away at this company, from an investment standpoint.
MOST NOTEWORTHY: FedEx Corp (FDX) and Applied Materials Inc (AMAT) were today's notable upgrades:
Morgan Keegan upgraded FedEx Corp (NYSE: FDX) to Outperform from Market Perform. The firm said recent data indicates that the company's core business segments are well-positioned for operational improvements given current initiative; data also indicates that we may have reached a bottom in the economy and can potentially expect a soft landing.
Applied Materials Inc (NASDAQ: AMAT) was upgraded to Buy from Hold with a $25 target at First Albany and Stanford, as they believe the company's memory cycle is better than investors may think.
OTHER UPGRADES:
Coca-Cola Enterprises Inc (NYSE: CCE) was upgraded to Market Perform from Underperform at Bernstein because the firm no longer sees any major negative catalysts ahead.
Apria Healthcare Group Inc (NYSE: AHG) was upgraded to Hold from Sell with a $30 target at Deutsche Bank. The firm said Apria reported a solid fourth quarter and near-term momentum was more clear.
JP Morgan upgraded King Pharmaceuticals inc (NYSE: KG) to Neutral from Underweight on valuation and the potential of a prolonged delay of generic Skelazin.
Citigroup upgraded Ciena Inc (NASDAQ: CIEN) to Buy from Hold, but still considers JDS Uniphase Corp (NASDAQ: JDSU) their top pick for capacity exposure.
Jefferies raised Applebee's Int'l Inc (NASDAQ: APPB) to Hold from Underperform to reflect the company's decision to seek strategic alternatives.
Prudential upgraded Nasdaq Stock Market Inc (NASDAQ: NDAQ) to Neutral from Underweight with a $30 target.
JMP Securities upgraded KB Home (NYSE: KBH) to Outperform from Market Perform with a $60 target.
Applied Materials (NASDAQ: AMAT) shares are falling today after an analyst at Citi downgraded the stock to "Hold" from "Buy" and cut their price target on the stock to $20 from $25, citing a decline in semiconductor orders from chip-makers. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on AMAT.
With the high fuel prices over the past year, 
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