"Wall Street has recently been very negative about Texas Instruments (NYSE: TXN)," notes wireless sector expert Nikhil Hutheesing. In his Forbes Wireless Stock Watch, the advisor explains, "But things may not be as dire as they sounded last month and I think that with expectations down, the company will end up exceeding expectations in the second half of this year."
"One reason Wall Street has been negiative is that TXN's biggest wireless customer, Nokia, announced a fundamental shift, stating it would no longer depend mostly on Texas Instruments for its chips. Ericsson also said it had shifted to a multi-supplier strategy.
"Besides that, in April, at TXN's earnings conference, CEO Rich Templeton talked of a cloudy economy and said that his company had become become more conservative with its outlook for the second quarter.
"Meanwhile, I've spoken with a number of experts in the wireless area who tell me that orders for TI's chips are significantly higher for the second half of this year than they have been in previous years. These orders are even coming from Nokia. (So far, Nokia's muti-supplier strategy has not had an impact on Texas Instruments.)
MOST NOTEWORTHY: PFF Bancorp, Ericsson and TAL International Group were today's noteworthy upgrades:
B. Riley upgraded shares of PFF Bancorp (NYSE: PFB) to Neutral from Sell on valuation with the stock trading at 11% of the last reported tangible book value of $14.37 at December 31, 2007.
RBC Capital believes Ericsson (NASDAQ: ERIC) will benefit from network builds in North America and Asia. Shares were raised to Outperform from Sector Perform.
Baird upgraded TAL International Group (NYSE: TAL) to Outperform from Neutral based on solid container leasing demand, rising container costs, and more constrained capital conditions.
OTHER UPGRADES:
Deutsche Bank upgraded Telecom Italia (NYSE: TI) to Buy from Hold.
JP Morgan upgraded Dollar Tree (NASDAQ: DLTR) to Neutral from Underweight.
Goldman raised Marsh & McLennan (NYSE: MMC) to Neutral from Sell.
MOST NOTEWORTHY: Credit Suisse, Masimo and Marvell Tech were today's noteworthy upgrades:
Bear upgraded Credit Suisse Group (NYSE: CS) to Peer Perform from Underperform as they believe the company's balance sheet will stabilize and the company's Private Banking business is holding up well in difficult conditions. Goldman, which raised shares to Neutral from Sell, believes the worst is over regarding the market downturn.
Citigroup upgraded Masimo Corporation (NASDAQ: MASI) to Buy from Hold citing expectations of a strong Q1 report, expected FDA approval for hemoglobin monitoring in 2H08, and valuation.
Marvell Technology Group Ltd (NASDAQ: MRVL) was raised at Friedman Billings to Outperform from Market Perform based on valuation and improved business conditions.
After hitting a one-year high of $43.41 in July, the stock hit a one-year low of $17.04 in March. ERIC opened this morning at $20.82. So far today the stock has hit a low of $20.39 and a high of $20.83. As of 1:00, ERIC is trading at $20.59, up $0.20 (1.0%). The chart for ERIC looks neutral and improving, 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 a July bull-put credit spread below the $15 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 an 8.7% return in just three and a half months as long as ERIC is above $15 at July expiration. Ericsson would have to fall by more than 27% before we would start to lose money. Learn more about this type of trade here.
MOST NOTEWORTHY: RAM Holdings, State Street and Ericsson were today's noteworthy downgrades:
Banc of America downgraded shares of RAM Holdings (NASDAQ: RAMR) to Neutral from Buy as they believe the company could have increasing loss provisions related to RMBS and CDO exposure over the next several quarters.
State Street (NYSE: STT) was cut to Market Perform from Outperform at Keefe Bruyette on valuation and difficult comparisons in the second half of 2008.
HSBC downgraded Ericsson (NASDAQ: ERIC) to Neutral from Overweight and prefers Nokia (NYSE: NOK) at current levels.
If you thought holding a rally after a huge day was too much, you weren't too far off the mark. Many people ask over and over if this is a real bear market or not. By a classic definition that may still be up in the air, but this is what every bear market feels like. It also goes to show that you almost want to sell every time you feel good about things and then buy when you feel like everything couldn't get any worse. Hearing traders and market technicians say, "Sell the rallies" is becoming quite commonplace. Visa Inc. (NYSE: V) was the largest US IPO ever with its shares soaring after their unprecedented debut yesterday at $44 per share. Investors see promise in electronic payments as shares rose 33% on its IPO debut. Here's the drop for the major averages:
DJIA 12,099.66 (-293.00; -2.36%)
S&P 500 1,298.42 (-32.32; -2.43%)
NASDAQ 2,209.96 (-58.30; -2.57%)
10YR-TBond 3.362% (-0.089)
There were many names on the 52-week lows, but many formerly hot names you wouldn't have guessed. If you look at the major collapse that was seen in the commodity stocks (and commodity prices) that have been major leaders, you'd think they were almost exposed to CDO's too. Oil fell $6.02 to $102.48 per barrel, and that took down Exxon Mobil Corp. (NYSE: XOM) by more than 4% to $84.43; Gold fell down over $59.00 to $944.70 per ounce late in the day and that took Barrick Gold (NYSE: ABX) down 8.7% to $45.25. The Mosaic Co. (NYSE: MOS) was also a huge loser as traders took off more of their agriculture trades with a drop of 11% to $97.25
A slowdown in growth in the telecommunications equipment industry may result in a joint venture between Motorola Inc (NYSE: MOT) and Nortel Networks Corporation (NYSE: NT), that would have combined sales of about $10B, the Wall Street Journal reported.
The Wall Street Journal also reported that Yahoo! Inc's (NASDAQ: YHOO) board is planning to reject the Microsoft Corporation (NASDAQ: MSFT) bid of $31 per share, feeling that Microsoft would be taking advantage of a deteriorated Yahoo! share price. Sources said Yahoo! will not consider any offer under $40 per share.
Sony Ericsson, a joint venture between Sony Corporation (NYSE: SNE) and LM Ericsson Telephone Company (NASDAQ: ERIC), admitted that its business is weak in India, China, and the U.S. The joint venture has designated those three countries as priorities, the Financial Times reported.
WEB SITES:
According to a source, the Silicon Alley Insider reported that Yahoo! is expected to let go 1,000 employees or more during the week of February 12.
For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"Indeed, I now see Ericsson in a similar situation with my top pick last year, Nokia (NYSE: NOK), which has risen 67%. I am now seeing an almost identical situation unfolding with Sweden's Ericsson.
"But there are many more similarities than geography and industry affiliation. Let's take a look at some of the things I said about Nokia last year and compare them to Ericsson's situation today. Widespread skepticism among analysts: The knock against Nokia was that cell phones were becoming a saturated market. The skeptics also said Nokia would face competition from cheap upstarts in countries like China.
"The argument was that most folks who can afford phones already have them, and those who don't will probably end up buying cheaper ones than Nokia's models. Ericsson, in a slightly different way, is subject to similar skepticism. For example, analysts argue that Ericsson's telecom gear is more expensive than that of some of its upstart competitors and is therefore vulnerable to competitive pricing pressure.
"This is a valid point, but I can't imagine that the folks at Ericsson's headquarters haven't thought of all this and factored the issue of competition into the company's business plan.
"Meanwhile, Ericsson has a compelling valuation: The stock is trading at 14 times earnings and pays a 2% dividend yield. It is debt-free and consistently generates a healthy 20+% return-on-equity. Like Nokia, Ericsson will continue to benefit from booming global growth in mobile phone usage."
MOST NOTEWORTHY: Dick's Sporting, Ericsson and Deutsche Telekom were today's noteworthy upgrades:
Citigroup upgraded shares of Dick's Sporting (NYSE: DKS) to Buy from Hold based on valuation, margin expansion and increased visibility.
Ericsson (NASDAQ: ERIC) was raised to Buy from Hold at WestLB on valuation following yesterday's sell-off. The firm feels investors need to look beyond 2008.
Lehman upgraded shares of Deutsche Telekom (NYSE: DT) to Equal Weight from Underweight as they believe earnings momentum will be seen in the near-term.
MOST NOTEWORTHY: Ericsson, Circuit City and Hot Topic were today's noteworthy downgrades:
Societe Generale downgraded shares of Ericsson (NASDAQ: ERIC) to Hold from Buy after the company lowered its Q4 guidance. Goldman Sachs downgraded shares to Neutral from Buy on the company's lowered Q4 revenue outlook and the growing probability that the wireless infrastructure market will decline again in 2008.
Circuit City (NYSE: CC)'s rating was lowered to Neutral from Overweight at JP Morgan, as they believe the company's high cost turnaround will require a strategic partner or acquirer, which may not happen until after 2H08 and this year's holiday season.
Citigroup downgraded shares of Hot Topic (NASDAQ: HOTT) to Hold from Buy to reflect their pushed out expectations for an earnings recovery.
OTHER DOWNGRADES:
Office Depot (NYSE: ODP) was downgraded to Peer Perform from Outperform at Bear Stearns.
Lehman downgraded Telecom Italia (NASDAQ: TI) to Underweight from Equal Weight.
MOST NOTEWORTHY: Ericsson, Total SA, Research in Motion, MasterCard and Sun Microsystems were today's noteworthy upgrades:
Goldman upgraded shares of Ericsson (NASDAQ: ERIC) to Buy from Neutral and added the company to their pan-Europe Conviction Buy List, as they believe the factors that lead to the October earnings miss will be rectified and the company will report upside to Q4 estimates.
Credit Suisse upgraded Total SA (NYSE: TOT) to Outperform from Neutral based on valuation and expectations for a return in upstream volume growth in 2008.
Credit Suisse also upgraded Research in Motion (NASDAQ: RIMM) to Outperform from Neutral, citing RIMM's expanding international market share.
MasterCard (NYSE: MA) was raised to Buy from Hold at Deutsche Bank, as they believe the company's margin potential is yet to be fully priced into shares or Street estimates.
Citigroup raised shares of Sun Microsystems (NASDAQ: JAVA) to Buy from Hold to reflect the company's improving product line, restructuring, and share buyback. They find the risk/reward attractive and expect solid Q2 results.
OTHER UPGRADES:
Goldman added Oracle (NASDAQ: ORCL) to its Conviction Buy List.
"Ericsson (NASDAQ: ERIC) has the 'Swedish blues'," jests global expert Yiannis Mostrous, noting the stock fell sharply after issuing a warning. Nevertheless, he remains bullish.
In his The Silk Road Investor, the adviser explains, "Ericsson issued a warning for its gross and operating margins for the third quarter, which fell to 35.6% (43.0% last quarter) and 12.9% (19.4% previously). Promptly, the stock tumbled 24%."
He contends, "Although this is a severe blow to the stock price, the company remains one of the long-term holdings in the global infrastructure area."
The reason? He suggests, "Wireless telecom remains one of the best long-term growth stories. The beauty is that this growth story is applicable to both developed and developing economies. Emerging markets, in particular, are important because they continue to build huge wireless networks, with China and India at the forefront."
MOST NOTEWORTHY: eBay, Anworth Mortgage, Healthways, Coca-Cola and Mattel were today's noteworthy upgrades:
Soleil upgraded shares of eBay (NASDAQ: EBAY) to Hold from Sell following the Q3 results due to improving near term fundamentals with diversification of revenue streams.
JMP Securities raised estimates on Anworth Mortgage (NYSE: ANH) to Strong Buy from Market Outperform citing the lower cost of funding and the expected improvement in earnings.
Healthways (NASDAQ: HWAY) was upgraded to Buy from Neutral at Broadpoint, as they believe the company's guidance implies it is well positioned into FY09.
Gabelli upgraded shares of Coca-Cola (NYSE: KO) to Buy from Hold as they believe strong international demand and the company's ability to execute will lead to double digit growth in coming years.
Mattel (NYSE: MAT) was upgraded to Outperform from Neutral at Credit Suisse. The firm views risk/reward as compelling.
OTHER UPGRADES:
WestLB upgraded Ericsson (NASDAQ: ERIC) to Hold from Reduce.
Keefe Bruyette upgraded Thornburg Mortgage (NYSE: TMA) to Market Perform from Underperform.
Merrill Lynch upgraded Repsol SA (NYSE: REP) and Palm (NASDAQ: PALM) to Buy from Neutral.
MOST NOTEWORTHY: The software sector, Ericsson, Paccar, Eni SpA and Valueclick were today's noteworthy downgrades:
Bear Stearns downgraded the software sector to Underweight from Market Weight, citing valuations and increased risk to 2008 IT budgets.
Ericsson (NASDAQ: ERIC) was downgraded to Equal Weight from Overweight at Lehman and to Neutral from Overweight at JP Morgan following the company's Q3 profit warning.
Paccar (NASDAQ: PCAR) was downgraded to Underperform from Market Perform at Wachovia. The firm believes Street estimates are too high due to weaker-than-expected North American unit production.
ABN Amro downgraded shares of Eni SpA (NYSE: E) to Sell from Hold as they expect the company to invest significantly more in its upstream activities than guidance suggests due to cost pressures.
Oppenheimer downgraded ValueClick (NASDAQ: VCLK) to Neutral from Buy following the Q3 pre-announcement and guidance.
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