Day one of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Management Advisory Committees meeting: Purdue Pharma's NDA for Oxycontin.
Anadarko Petroleum (NYSE:APC) to report Q1 earnings; conference call Tuesday at 10:00am.
Tuesday, May 6
Day two of the two-day FDA Anesthetic/Life Support Drugs & Drug Safety/Risk Mgmt Advisory Committees meeting: Cephalon's (NASDAQ:CEPH) sNDA for Fentora.
Molson Coors (NYSE:TAP) to report Q1 earnings; conference call at 12:00pm.
After hitting a one-year high of $84.83 in June, the stock hit a one-year low of $56.20 in February. CEPH opened this morning at $64.94. So far today the stock has hit a low of $64.45 and a high of $66.18. As of 12:45, CEPH is trading at $65.27, up 1.05 (1.6%). The chart for CEPH is neutral and improving, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $55 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 7.5% return in just five weeks as long as CEPH is above $55 at May expiration. Cephalon would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
CEPH hasn't been below $56 at all in the past year and has shown support around $59 recently. This trade could be risky if the company's earnings (due out on 5/1) disappoint, but even if that happens, that position could be protected by support the stock might find between $55 and $60, where it bottomed out in the past two months. Brent Archer is an options analyst and writer at Investors Observer.
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 CEPH or MLNM.
MOST NOTEWORTHY: Allscripts, Supertel Hospitality, Cephalon, Limelight Networks and Financial Federal were today's noteworthy downgrades:
Allscripts (NASDAQ: MDRX) was downgraded to Neutral from Outperform at JP Morgan following its weak Q3 results and guidance.
Supertel Hospitality (NASDAQ: SPPR) was downgraded to Neutral from Outperform at Baird and to Market Perform from Outperform at JMP Securities following its disappointing Q3 report.
JMP securities downgraded Cephalon (NASDAQ: CEPH) to Market Outperform from Strong Buy citing uninspiring Q3 revenue growth.
Friedman Billings downgraded Limelight Networks (NASDAQ: LLNW) to Market Perform from Outperform citing the tough pricing environment, competition, and upcoming IPO lockup expiration on 12/5.
The firm also downgraded shares of Financial Federal (NYSE: FIF) to Underperform from Market Perform, as they expect the company to be impacted substantially from the slowing economy.
Cephalon Inc. (NASDAQ: CEPH) is actually a lucky company today. Shares are getting hit hard (down 4.26% as of 12:08), but this could have been much worse, and it might still if the original reports become worse. Then CEPH shares could see a lot more selling. Reuters reported on "Dear Doctor" letter the company has been sending, warning them about deaths related to its FENTORA pain drug. FENTORA is a pain management drug used by cancer patients.
The company has reportedly sent out two seperate letters about serious side effects and deaths that occurred in Fentora users. It says that the deaths were tied to improper patient selection or dosing, or from improper product substitution.
The bad news follows a string of good news for the company and the drug. Only in late August, the FDA granted an Orphan Drug Designation to TREANDA, the company's investigational treatment for Chronic Lymphocytic Leukemia. In mid-August, the company released positive data on FENTORA from its Pivotal Study of FENTORA in Opioid-tolerant patients with non-cancer breakthrough pain.
Valuation and debt levels pushed Unterberg to downgrade ON Semiconductor (NASDAQ: ONNN) to Market Perform from Buy.
William Blair downgraded shares of Amgen (NASDAQ: AMGN) to Market Perform from Outperform as they believe the CMS decision on ESA reimbursement guidelines is extremely restrictive regarding Aranesp use in oncology...
MOST NOTEWORTHY: Specialty pharmaceutical companies make up today's most noteworthy list:
The Bank of America initiated Shire plc (NASDAQ: SHPGY), Mentor Corp (NYSE: MNT), Alcon, Inc (NYSE: ACL) and Allergan, Inc (NYSE: AGN) with Buy ratings and initiated Cephalon, Inc (NASDAQ: CEPH), Forest Laboratories, Inc (NYSE: FRX), Sepracor Inc (NASDAQ: SEPR) with Neutral ratings. Bank of America's top pick is Shire plc as the firm expects the company to launch six products or product extensions by mid-2008, followed by Mentor Corp, as the conversion to silicone breast implants should drive a period of stronger-than-expected sales and earnings.
OTHER INITIATIONS:
Ford Motor Co (NYSE: F) was initiated at Buckingham with an Underperform rating and General Motors (GM) was started with a Neutral rating.
Nollenberger believes Under Armour, Inc (NYSE: UA), started with a Buy rating, is positioned to outperform the market based on the strength of its brand name and demand through the continued introduction of new products along with European growth.
Barr Pharmaceuticals, Inc (NYSE: BRL) was initiated with an Equal Weight rating and $53 target at Morgan Stanley.
MOST NOTEWORTHY: First Data Corp (FDC), Pinnacle Entertainment, Inc (PNK), Cephalon, Inc (CEPH) and Verint Systems Inc (VRNT) were some of today's downgrades:
UBS downgraded First Data Corp (NYSE: FDC) to Neutral from Buy following the acquisition by KKR.
Pinnacle Entertainment (NYSE: PNK) was cut to Hold from Buy at Matrix USA, as the firm believes post-hurricane reconstruction efforts are leading to significant capital expenditures, which limits upside.
Cephalon Inc (NASDAQ: CEPH) was removed from American Technology's Focus List with shares up 15% in three weeks as the approval of Nuvigil without a Black Box warning has passed.
JP Morgan cut shares of Verint Systems (NASDAQ: VRNT) to Underweight from Neutral, citing risks and costs associated from the Witness Systems' (WITS) acquisition.
OTHER DOWNGRADES:
Labor Ready, Inc (NYSE: LRW) was downgraded to Sell from Neutral at Goldman based on the slowdown in U.S. residential construction activity.
MOST NOTEWORTHY: Merrill Lynch & Co (MER), Kraft Foods Inc (KFT) and US Steel Corp (X) were today's noteworthy upgrades:
Goldman Sachs upgraded Merrill Lynch & Co (NYSE: MER) to Buy from Neutral with a $107 target, believing the sell-off in Merrill shares is overdone.
JP Morgan added Kraft Foods Inc (NYSE: KFT) to its Focus List with a $40 target, believing valuation reflects the overhang from Altria Group's (MO) share distribution.
Prudential upgraded shares of US Steel Corp (NYSE: X) to Neutral from Underweight citing synergies from the Lone Star acquisition and the increase in scrap prices.
OTHER UPGRADES:
Jefferies upgraded shares of Cephalon, Inc (NASDAQ: CEPH) to Buy from Hold and raised its target to $88 from $69 to reflect a favorable risk/reward profile and the imminent approval of Nuvigil following FDA approval of draft labeling for the drug.
Bank of America upgraded Sonoco Products Co (NYSE: SON) to Buy from Neutral with a $44 target.
Credit Suisse upgraded PG&E Corp (NYSE: PCG) to Outperform from Neutral with a $53 target citing valuation.
Matrix USA upgraded TJX Cos (NYSE: TJX) to Buy from Hold on relative valuation.
William Blair upgraded Blue Nile, Inc (NASDAQ: NILE) to Outperform from Market Perform citing near-term fundamentals, improved long-term cash flow, long-term growth potential and downside protection.
MOST NOTEWORTHY: Some of today's more notable upgrades include Nokia Corp (NOK), SanDisk Corp (SNDK), RealNetworks, Inc (RNWK) and Vertex Pharmaceuticals Inc (VRTX):
Oppenheimer upgraded shares of Nokia Corp (NYSE: NOK) to Buy from Hold citing increased emerging markets demand, valuation, and expectations for upcoming N76 and Barracuda.
Oppenheimer also upgraded SanDisk Corp (NASDAQ: SNDK) to Buy from Neutral with a $50 target, as the firm believes the worst of seasonal price declines has occurred and that 2007 Samsung royalty revenues appear intact.
Goldman Sachs upgraded shares of RealNetworks Inc (NASDAQ: RNWK) to Neutral from Sell, citing valuation.
Vertex Pharma Inc (NASDAQ: VRTX) was upgraded to Neutral from Sell at Bank of America, citing valuation.
OTHER UPGRADES:
American Technology added Cephalon, Inc (NASDAQ: CEPH) to its Focus List as the firm believes the recent pullback provides a buying opportunity. The brokerage believes it sees a significant near-term catalyst with Nuvigil's PDUFA date of March 31, 2007.
Lehman upgraded Xilinx, Inc (NASDAQ: XLNX) to Overweight from Equal-Weight. Goldman upgraded Amdocs Ltd (DOX) to Buy from Neutral with a $41 target; the firm expects Amdocs to benefit from the health 2007 telco fundamentals.
UBS upgraded J.C. Penney Company (NYSE: JCP) to Buy from Neutral on valuation.
Citigroup upgraded shares of Radian Group Inc (RDN) in conjunction with their upgrade of MGIC Investment Corp (MTG), to Buy from Hold, to reflect the planned merger.
MOST NOTEWORTHY: Ericsson (ERIC), Intel (INTC) and General Electric (GE) top today's upgrade list.
Ericsson Telephone Co. (NASDAQ:ERIC) was upgraded at RBC Capital Markets to Outperform from Sector Perform. The upgrade followed checks that indicated the mobile phone maker gained market share and improved its top-line metrics.
Intel Corp. (NASDAQ:INTC) and General Electric Co. (NYSE:GE) were added to Citigroup's Recommended List.
OTHER UPGRADES:
Cephalon, Inc. (NASDAQ:CEPH) was upgraded at CIBC to Sector Outperformer from Sector Performer citing expectations for strong Fentora and Provigil sales.
Hansen Natural Corp. (NASDAQ:HANS) was upgraded to Buy from Hold at Canaccord Adams and added to their Best Ideas List citing reduced Street expectations and valuation.
MOST NOTEWORTHY: International Game Tech (IGT), Cephalon (CEPH) and CVS Corp (CVS) top today's list of upgrades.
International Game Tech (NYSE:IGT) was upgraded to Buy from Hold at Soleil and to Outperform from Peer Perform at Bear Stearns. Both firms cited valuation as the reason.
Cephalon, Inc. (NASDAQ:CEPH) was upgraded to Strong Buy from Buy at First Albany following the news that the company was granted a composition of matter patent covering Nuvigil by the U.S. Patent & Trademark Office.
CVS Corp (NYSE:CVS) was added to Goldman Sachs Americas Conviction Buy List based on valuation.
OTHER UPGRADES:
American Tech upgraded EDO Corp (NYSE:EDO) to Hold from Sell based on valuation.
Dean Foods Company (NYSE:DF) was upgraded to Buy from Hold at A.G. Edwards based on valuation.
Finally, Broadcom Corp. (NASDAQ:BRCM) was upgraded to Outperform from Market Perform at Raymond James.
MOST NOTEWORTHY: Yahoo! (YHOO) and Lockheed Martin (LMT) top today's extensive list of upgrades.
Yahoo!, Inc. (NASDAQ:YHOO) was upgraded at Merrill Lynch to Buy from Neutral on valuation as the company heads into the seasonally-strong period.
Goldman Sachs upgraded Lockheed Martin Corp. (NYSE:LMT) to Buy from Neutral citing valuation, margin expansion and consistent execution.
OTHER UPGRADES:
Pacific Sunwear of California, Inc. (NASDAQ:PSUN) business is bottoming, according to J.P. Morgan. They believe a new CEO could help a recovery, prompting the firm to upgrade the retailer to Neutral from Underweight.
Cephalon, Inc. (NASDAQ:CEPH) was upgraded to Outperform from Market Perform at Leerink Swann. The upgrade was based on increasing confidence in their pain franchise, positive feedback from MEDACorp consultants and increased confidence in earnings power.
Finally, L-3 Communications Holdings, Inc. (NYSE:LLL) was added to Goldman Sachs' Americas Buy List. Goldman cited the above average organic revenue growth, new management strategy and defense contract opportunities.
I met recently in New York with the managers of the Quaker Capital Opportunity Fund (QUKTX). The large-cap fund hasn't hit it out of the park the past few years -- its returns are flat so far in 2006 and the fund slightly underperformed the S&P 500 in 2004 and 2005, gaining 16.3% and 9.2% respectively, according to Morningstar.
But fund managers Michael Barron and Charlie Knott have had the fund positioned defensively, given their concerns about the slowing economy and rising interest rates.
I asked them which stocks they like the best right now and was impressed with their picks. The list is made up of solid companies in the food, beverage, consumer staples and drug sectors. A couple are foreign-based firms, which could help cushion them from U.S. turmoil. If, like Barron and Knott, you want to stay in the market but your main goal is preserving your capital, these are six stocks to consider:
PepsiCo Inc. (NYSE: PEP). Recent earnings news has been good and the stock has climbed from $58 to $63.50 in the past three months.
Colgate-Palmolive (NYSE: CL). The stock is up nicely this year, but fell a couple of dollars recently as second-quarter earnings dropped from a year ago due to restructuring charges. Sounds like a near-term opportunity.
Staples Inc. (NASDAQ: SPLS). This stock hit hard times in May, but analysts are positive on it.
Diageo PLC ADS (NYSE: DEO). This liquor maker has done decently all year, but had a nice pop in just the past week.
Sanofi-Aventis ADS (NYSE: SNY). This large drug company has been very volatile this year (this is the riskiest of the bunch, I'd say). But its treatment to battle obesity has huge promise. It reports earnings on Aug. 2 and analysts expect it to earn 78 cents a share.
Cephalon Inc. (NASDAQ: CEPH). Another biotech, this one has drugs for sleep disorders, cancer and pain. It's down year-to-date, but up nicely since late June.
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Monday, May 5
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Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
