Minyanville Professor Sean Udall dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit www.minyanville.com.
The earnings report from Applied Materials, Inc. (Nasdaq: AMAT) was not solid but the stock sure is, which is what happens when the market starts looking at enterprise value beyond a quarterly EPS report. The stock has been cheap for some time with only the solar catalyst providing occasional lift. Contrary to other noteworthy opinions, I have not heard AMAT call a bottom or "trough" in the cycle for many a quarterly call. It has called for a reduction in the decline in certain product lines, while calling for strength in others. But as far as a broad cyclical "trough" this is the first I heard them utter that since 2005 -- and at that point the company was half right and half wrong.
Lam Research Corporation (Nasdaq: LRCX) had the best report I've seen in the sub-group. If the (SOX) keeps showing strength then I presume the group may be led by the high quality semi-caps possibly through the first quarter of 2009.
Cree, Inc. (Nasdaq: CREE) report was also noteworthy as the shares have really been hammered of late. The company beat and raised revenue guidance by a touch. However, the thing that has kept me out of CREE for more than just an occasional trade is the lack of EPS traction it seems to have, even on higher revenues. And next quarter's guidance is more evidence of that. From time to time CREE can ramp, and when it does, it's usually a compelling move. So I mainly keep the name on the radar as a technical trading vehicle. If CREE were to back fill to the mid $19's I may add a partial.
MOST NOTEWORTHY: SunPower, Evergreen Solar and Abbott Lab were today's noteworthy initiations:
Citigroup believes SunPower (NASDAQ: SPWR) is faced with high cell production costs, its silicon cost and installation cost advantages are increasingly commoditized and finds the risk/reward even at current levels. Shares were initiated with a Hold rating and $105 target.
Citigroup believes Evergreen Solar (NASDAQ: ESLR) faces significant financing requirements over the next few years, making it difficult to see a sustained period of EPS growth beyond the $1 range. The firm sees downside to $5/share. Shares were assumed with a Sell rating and $8 target.
UBS started Abbott Lab (NYSE: ABT) with a Buy rating and $61 target. The firm is positive on Humira potential growth and expects Xience to drive vascular operating margins to positive.
Shares closed mostly higher today, although this was more of a mixed day between the haves and the have-nots. Boeing Co. (NYSE: BA) managed to keep earnings inline with estimates and were not bad considering the weak airline sector, so its 4.4% gain to $82.09 was a huge relief for the DJIA today. Below are the unofficial closing levels for major US index levels:
Ambac Financial Group, Inc. (NYSE: ABK) posted losses that were wider than expected. It showed losses of $1.7 billion and $11.69 per share and a $3.1 billion in subprime charges. The company sells insurance policies that repay bondholders if issuers default. The 52-week range is $4.50 - $96.10. Shares hit a new low today, and traded down over 40% at $3.45 in the final minutes of trading.
MBIA Inc. (NYSE: MBI) dropped dramatically after Ambac's worse-than-expected earnings report. The rivals are expected to be hit hard by the wave of defaults it insures due to the subprime credit crisis. The two have been struggling to raise capital to cover losses and have suffered downgrades to their credit ratings. MBI shares were down 32% at $9.00 in the final minutes today.
Target (NYSE: TGT) reported Q3 net earnings of $483 million. TGT is down .92 to $52.98. TGT says: "Our third quarter earnings were disappointing due to soft sales in our higher margin categories, leading to lower-than-expected gross margin in our core retail operations." TGT call option volume of 30,415 contracts compares to put volume of 18,212 contracts. TGT December option implied volatility of 47 is above its 26-week average of 35 according to Track Data, suggesting larger risk.
Cree (NYSE: CREE), a manufacture of semiconductors for solid state lighting, is recently down 59c to $21.26. CREE has been frequently mentioned as a buyout target over the last five months. CREE December call option implied volatility is at 57; puts are at 73; above its 26-week average of 48 according to Track Data, suggesting larger price fluctuations. CREE puts are priced higher than calls because CREE is difficult to borrow.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
One of our readers asked about three stocks that have not been covered by BloggingStocks, or at least not that I can remember during my tenure. After reviewing the three it is understandable why not, although they are fair size companies. Philips being a large cap stock valued around $47 billion while the other two would be mid-caps valued between $2 and $5 billion.
My review of these companies is on the superficial side from the perspective that they are not very familiar to me and they are not in industries that I would consider investing in at this time. From that perspective I have high-lighted a few of the metrics that stand out to me and why.
The first was Cree Inc. (NASDAQ: CREE) a maker of blue, green, and near-ultraviolet LEDs -- made from silicon carbide (SiC) and gallium nitride (GaN) that are used by companies in products such as dashboard lights, market tickers, and video screens.
Highlights: On the positive side Cree has no debt and earns a healthy 14% profit margin. Unfortunately the downside seems to be all too clear. Cree has negative growth this past year of 7%, when many tech companies have seen significant growth to the plus side. That cannot support the very high current P/E ratio of 44, along with below average ROE, ROA and ROIC. There is no dividend and there is high volatility with a beta over 2.8. Except for option plays insiders have been selling. Investors can find better opportunities elsewhere.
The second company is Koninklijke Philips Electronics (NYSE: PHG) as the name implies makes consumer electronics, including TVs, VCRs, DVD players, and fax machines. But it also makes light bulbs (#1 worldwide), electric shavers (#1) and other personal care appliances, picture tubes, medical systems, and silicon systems solutions.
MOST NOTEWORTHY: Rockwell Automation, Barclays, F5 Networks, Foundry Networks, AMR Corp., and Red Hat were today's noteworthy downgrades:
JP Morgan downgraded Rockwell Automation Inc (NYSE: ROK) to Neutral from Overweight based on valuation, as the firm believes the recent credit market turbulence could make a material recapitalization less likely.
Bear Stearns downgraded shares of Barclays (NYSE: BCS) to Underperform from Peer Perform on valuation and expectations for losses in the company's Capital division.
Nollenberger downgraded shares of F5 Networks Inc (NASDAQ: FFIV) to Neutral from Buy, as they believe the company is transitioning from a "beat and raise" story to a "meet and maintain" story given the recent disruptions in the financial services sector and slowing growth in active web hosts on the net. The firm also downgraded shares of Foundry Networks Inc (NASDAQ: FDRY) to Neutral from Buy on valuation, seeing a well balanced risk/reward profile at current levels.
Soleil downgraded shares of AMR Corporation (NYSE: AMR) to Hold from Buy to reflect the company's deteriorating revenue and non-fuel cost outlook.
Red Hat Inc (NYSE: RHT) was downgraded to Neutral from Outperform at Credit Suisse, citing lack of progress in execution.
OTHER DOWNGRADES:
LDK Solar (NYSE: LDK) was downgraded at CIBC to Sector Performer from Outperformer.
GYI, a creator and distributor of visual content, was recently down 34 cents to $27.28. Goldman Sachs Group, Inc. (NYSE: GS) says "GYI's business model remains in transition." GSCO went on to say "we see no rush to own shares." GYI October option implied volatility of 40 was above its 26-week average of 33 according to Track Data, suggesting larger risk.
JUPM, a provider of online information, images & research, was recently up a cent to $6.18. JUPM is expected to report earnings per share on November 8th. JUPM over all option implied volatility of 74 was above its 26-week average of 55 according to Track Data, suggesting larger risks.
Cree, Inc. (NASDAQ: CREE) option volume and volatility was elevated as CREE rallied 7%.
Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
I have known Cree Corp. for years as my previous investment banking-research boutique firm followed this company and I hosted the management of Cree in Europe a few years back. I have not written about Cree because it has been inconsistent over these past couple of years, always taking two-steps forward, then one or two steps back.
It's a shame because the industry that Cree plays in is getting hotter than hot. Cree makes semi-conductor materials for the next generation of lighting systems employing proprietary LEDs (light emitting diodes). Cree has many applications from automotive to industrial and commercial lighting projects. I looked very hard at Cree as a possible candidate for the top 25 stocks for the NEXT 25 years. I felt strongly that next-generation lighting is becoming a mainstream industry with the lucrative residential market right on the horizon.
Changewave Investing, with its well-known editor Toby Smith, is recommending Cree (NASDAQ: CREE) as a play on "the secular shift to solid-state lighting" which he considers an emerging "green" trend.
He explains, "This sector -- a promising play on clean energy -- is growing by leaps and bounds, and we don't want to hold off any longer on buying LED solid-state lighting component manufacturer Cree."
Toby Smithe notes that the transformation from commodity LEDs for cell phones to broader market opportunities has gone slower than expected for the company. However, he adds, "With a key new acquisition and mandates around the world for the elimination of incandescent bulbs, I believe the time is right to buy shares."
He notes, "Our thesis about the transformation of lighting from 90% inefficient incandescent bulbs to 80% efficient solid-state is playing out exactly as we forecast -- and there is no turning back."
Once consumers see the difference in durability (50,000 hours versus 1,000) and the quality of light for LEDs vs. compact fluorescent bulbs (night and day, he states that he expect light bulbs to "go the way of the dodo bird."
MOST NOTEWORTHY: Dreamworks Animation (NYSE: DWA), BlackRock (BLK), Mariner Energy (ME) and Franklin Resources (BEN) and RightNow Technologies (RNOW) were today's noteworthy initiations:
Stifel expects Dreamworks Animation's (NYSE: DWA) fundamental outlook for film to improve given a more accommodating home entertainment market, while next-gen DVD format adoption and the introduction of 3D exhibition in theaters creates incremental opportunities for film studios. The firm started shares off with a Buy rating.
Wachovia believes BlackRock (NYSE: BLK) is one of the best-positioned managers in both product and geographic perspectives and initiated shares with an Outperform rating.
BMO Capital believes Mariner Energy (NYSE: ME) has a number of catalysts that could push shares higher, but feels current trading levels are not attractive. BMO started shares with a Market Perform rating.
William Blair views Franklin Resources (NYSE: BEN) as a premier global firm with an advantage in many attractive international markets and started shares with an Outperform rating.
Cantor believes RightNow Tech's (NASDAQ: RNOW) transition creates significant execution risk, initiated shares with a Hold rating...
OTHER INITIATIONS:
China Sunergy (NASDAQ: CSUN) was initiated with a Neutral rating at Cowen.
Banc Of America initiated shares of The Stanley Works (NYSE: SWK) with a Neutral rating.
Yamana Gold (NYSE: AUY) was started with a Buy rating and Credit Suisse.
Deutsche Bank initiated Cree (NASDAQ: CREE) with a Hold rating.
ROO Group (NASDAQ: RGRP) was initiated with a Buy rating and a $3.75 target at Think Equity, which believes RGRP is positioned to capitalize as the Internet continues to grow as a broadcast medium for video.
Soleil initiated shares of Accuray Inc. (NASDAQ: ARAY) with a Buy rating and $30 target. The company is Soleil's top pick in radiation oncology.
Soleil also initiated shares of TomoTherapy Inc. (NASDAQ: TTPY) with a Buy rating and $25 target, as the firm believes all-in-one imaging and radiation oncology system in HiArt could become the new standard of care.
OTHER INITIATIONS:
Elan Corp (NYSE: ELN) was initiated with an Outperform rating and $40 target at Leerink Swann, which added shares to the firm's Focus List as it is positive on the Tysabri opportunity.
Cree Inc (NASDAQ: CREE) was initiated with a Buy rating and $50 target at Amtech, as the firm believes the time for LED adoption has finally arrived and will accelerate in the future.
Nollenberger initiated shares of ZipRealty (NASDAQ: ZIPR) and Move, Inc (NASDAQ: MOVE) with Neutral ratings.
CIBC World Markets initiated shares of Whole Foods Market Inc. (NASDAQ: WFMI) with a Sector Underperformer rating and $38 target, expecting the company to be impacted by increasing competition.
BMO Capital Markets initiated shares of Intel Corp. (NASDAQ: INTC) with an Outperform rating and $10 target.
Minyanville Professor Sean Udall dares to share the kind of keen insight and actionable information you won't find in any prospectus. For more original thought, visit 
.gif){kind=logo}
Here are some highlights from this past week's 
Target.gif){kind=logo}
Getty Images, Inc.
Rumors are circulating around various trading desks that 
The week in preview: Chicken soup (or a doughnut) for the recession-weary soul?
Comfort Zone Investing: Oil's down, which is a start, but not good enough
Stocks have their worst week in six years
