Minyanville's Sean Udall dares to share the kind of keen insight and actionable information you won't find in any prospectus. Here he answers a reader's burning question about "green" stocks. For more original thought, visit www.minyanville.com.
Professor Udall,
Do you have any opinions on Zoltek Companies, Inc. (NASDAQ: ZOLT)? My wife wants me to buy everything "green". Her last "green" company idea was General Electric (NYSE: GE). I know, right? I bought a little just to quiet the noise level. I'm into a little SunPower(NASDAQ: SPWR) and Evergreen Solar (NASDAQ: ESLR). Does Zoltek have legs?
Thanks,
Minyan L.
Minyan L.,
First, that's hysterical. Second, a word of caution: Going all green, or all of any one thing, is something I'd never advocate. If you do, you do so at your own risk, as nothing in the market is ever as obvious as it seems, especially when it seems totally obvious.
While today was a mixed day, overall it was far better than it could have been. Financial stocks saw a bit of a rebound as Lehman's world didn't look like it was coming to an end. Ben Bernanke gave a speech today but showed his concerns that rising health care costs are a huge concern for the economy. The NAHB also gave a low builder sentiment reading of 18, which matches recent lows. Oil did hit a new high despite the Saudi's pledge to boost production, but that was on the dollar and it did manage to come off of highs. These are unofficial index level closing prices:
Chiquita Brands International Inc. (NYSE: CQB) was the disaster of the day as shares were down some 29% in the final minutes after this mornings warning that cost hikes were going to create a wide earnings miss.
SunPower (NASDAQ: SPWR), a manufacturer of solar systems, is recently down $3.30 to $79.70 in pre-open trading.
Calyon says: "The German solar feed-in tariff (FIT) is under fire, as lawmakers are considering an accelerated digression that would reduce rates 25% by 2010 versus 15% under current law."
SPWR over all option implied volatility of 60 is below its 26-week average of 70 according to Track Data, suggesting decreasing risk. SPWR puts are priced higher than calls because SPWR is difficult to borrow.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
SunPower (NASDAQ: SPWR) is recently up $2.56 to $96.14. Credit Suisse raised its estimates and price target to $100 from $77. SPWR June call option implied volatility is at 82, puts are at 95, above its 26-week average of 74 according to Track Data, suggesting decreasing risk. SPWR puts are priced higher than calls because SPWR is difficult to borrow.
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.
Cypress Semiconductor Corporation (NYSE: CY) stock is falling this morning after an analyst at Credit Suisse downgradedSunPower Corp. (NASDAQ: SPWR), in which CY has invested, to "Neutral" from "Outperform." There are also analyst comments out there today about CY that could be hurting the stock. 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 CY.
After hitting a one-year low of $16.72 last January, the stock hit a one-year high of $42.79 in November. This morning, CY opened at $26.23. So far today the stock has hit a low of $24.68 and a high of $26.23. As of 11:05, CY is trading at $25.30, down $1.41 (-5.3%). The chart for CY looks bearish and steady, 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 a March bear-call credit spread above the $40 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. This particular trade will make a 4.2% return in 2 months as long as CY is below $40 at March expiration. Cypress would have to rise by more than 21% before we would start to lose money.
CY hasn't been above $40 for more than a few day at a time in the past year and has shown resistance around $30 recently. This trade could be risky if the company's earnings next week impress investors, but even if that happens, this position could be protected by resistance CY might find around $40, where the stock topped out twice since October.
Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in CY or SPWR.
"I can't believe I won," cried Jordin Sparks, winner of last year's American Idol. Within seconds, industry and non-industry drones alike began formulating ways to attach themselves to her in some way, crazy in anticipation of the inevitable riches.
Months later, several Wall Street types were overheard saying, "I can't believe oil keeps going higher, alternative energy stocks are going to be hot, hot, hot," and thousands of investors went wild buying shares of the dozen or so solar stocks, crazy in anticipation of the inevitable riches.
Each industry has its stars: Kelly Clarkson, Carrie Underwood and Clay Aiken -- as determined by album sales -- for American Idol, First Solar (NASDAQ: FSLR), Sunpower (NASDAQ: SPWR) and MEMC Electronic Materials (NYSE: WFR) -- as determined by stock performance -- for the solar industry.
MOST NOTEWORTHY: The restaurant sector, American Semiconductor and First Solar were today's noteworthy initiations:
Friedman Billings resumed coverage of Cheesecake Factory (NASDAQ: CAKE) and Yum! Brands (NYSE: YUM) with Outperform ratings and a $30 target and a $46 target and Applebee's (NASDAQ: APPB) with a Market Perform rating and $25.50 target.
American Superconductor (NASDAQ: AMSC) was initiated with a Buy rating and $33 target at Jefferies, as they believe repeat orders for wind turbine electrical systems could drive rapid revenue growth from 2008-2010.
CIBC resumed coverage of First Solar (NASDAQ: FSLR) with a Sector Performer rating, as they believe shares are already pricing in the company's 2009 EPS potential.
OTHER INITIATIONS:
Morgan Stanley resumed coverage of Cablevision (NYSE: CVC) with an Underweight rating.
US Steel (NYSE: X) was initiated with a Sector Performer rating and $117 target at CIBC.
JP Morgan started SunPower (NASDAQ: SPWR) with an Overweight rating and Evergreen Solar (ESLR) with a Neutral rating.
MOST NOTEWORTHY: Apollo Group, Zoran, AmSurg Corp, Apple and Tribune Co were today's noteworthy upgrades:
Baird upgraded shares of Apollo Group (NASDAQ: APOL) to Outperform from Neutral based on positive enrollment and revenue trends, margin improvement, and a strategic international announcement.
CIBC upped its rating on Zoran Corporation (NASDAQ: ZRAN) to Sector Outperformer from Sector Performer following strong Q3 results and guidance.
Jefferies upgraded shares of AmSurg Corp (NASDAQ: AMSG) to Buy from Hold as they believe the new CEO is preparing to drive earnings growth through acquisitions.
ThinkEquity continues to expect Apple (NASDAQ: AAPL) to outpace the industry in growth. The firm upgraded shares to Buy from Accumulate.
Barrington upgraded shares of Tribune Company (NYSE: TRB) to Market Perform from Underperform on valuation, as they believe the current price significantly discounts the risks of the going private transaction getting done.
MOST NOTEWORTHY: The U.S. clean energy sector, MGI Pharma, Apple and Kosan Biosciences were today's noteworthy initiations:
Morgan Stanley initiated the U.S. clean energy sector with an Attractive view. The analyst assumed coverage of First Solar (NASDAQ: FSLR), Fuel Tech (NASDAQ: FTEK) and SunPower Corporation (NASDAQ: SPWR) with Overweight ratings and EnerNOC, Inc (NASDAQ: ENOC) with an Underweight rating.
Banc of America started shares of MGI Pharma (NASDAQ: MOGN) with a Buy rating and $45 target, as they expect sales growth in 2008 to be driven by Aquavan, which they view as an underappreciated asset, and potential survival data for Dacogen.
Soleil believes Apple (NASDAQ: AAPL) could nearly double its PC market share to between 5.5% and 6% over the next five years. The firm started shares with a Buy rating and $200 target.
Roth Capital initiated Kosan Biosciences (NASDAQ: KOSN) with a Buy rating and $10 target, as they are positive on the company's Hsp90 program and expect an NDA filing as early as 2009 in the relapsed-refractory settings.
There's a bold flag flying above the solar energy camp, and I like the dialog coming from at least one of the men raising that flag. T. J. Rodgers, CEO of Cypress Semiconductor Corp. (NYSE: CY), laid it on the line recently when he stated his opinion regarding CEOs like General Electric's (NYSE: GE) Jeff Immelt, Wal-Mart's (NYSE: WMT) Lee Scott, and Peter Darbee of PG&E. Rodgers was quoted by CNN Money as saying, "Every one of the names you just mentioned would flunk his ass in the most rudimentary test about global warming."
It's not necessarily that I agree with what Rodgers said, but any man who has stuck with a viable manufacturing concept for as long as Rodgers has stuck with the truth of solar electrical generation, and then has the gumption to call into question the motives of his peers in pursuing a similar path, gets a nod of respect from me. It's not about what he said, it's about why he said it.
MOST NOTEWORTHY: SuperValu, SunPower, LKQ and Charter Comm were today's noteworthy initiations:
Banc of America started shares of SuperValu Inc (NYSE: SVU) with a Sell rating and $34 target as they believe the company will struggle to modernize its store base and reset its pricing to more competitive levels over the next 12 months.
William Blair initiated SunPower (NASDAQ: SPWR) shares with an Outperform rating, citing the company's large market opportunity and strong technology/market positioning.
LKQ (NASDAQ: LKQX) was started at Deutsche Bank with a Hold rating and $35 target. The firm believes the company's growth projections are priced into shares.
JP Morgan initiated Charter Communications (NASDAQ: CHTR) with an Overweight rating, as they expect the company to be able to refinance its maturing debt over the next five years and generate attractive returns.
MOST NOTEWORTHY: Southwest Airlines, AMR Corp, ConocoPhillips, Comcast and Time Warner Cable were today's noteworthy downgrades:
Citigroup downgraded shares on both Southwest Airlines (NYSE: LUV) and AMR Corp (NYSE: AMR) to Hold from Buy to reflect elevated risks from continued high fuel prices and relative valuations.
Deutsche Bank lowered shares of ConocoPhillips (NYSE: COP) to Sell from Hold on valuation noting that 13 out of the past 15 years, integrated oils have underperformed during the period October 1st to December 5th. They also believe the company's 3rd October trading statement could raise concerns over Q4. on valuation noting that 13 out of the past 15 years, integrated oils have underperformed during the period October 1st to December 5th. They also believe the company's 3rd October trading statement could raise concerns over Q4.
Soleil downgraded shares of Comcast Corporation (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) to Hold from Buy due to concerns about the company's prospects in a weakening economy.
MOST NOTEWORTHY: Genentech, HSBC Holdings, Suntech Power, SunPower and Force Protection were today's noteworthy initiations:
UBS is positive on Genentech Inc's (NYSE: DNA) leading industry franchises and potential upside from development projects and started shares with a Buy rating and $101 target.
HSBC Holdings (NYSE: HBC) was assumed with a Reduce rating at WestLB, as the firm believes subprime concerns may hold back shares in the near-term.
Jefferies initiated shares of SunTech Power Holdings (NYSE: STP) with a Buy rating and $45 target. The firm believes the company is positioned to beat 2007 and 2008 expectations by ramping manufacturing capacity and production faster than expected.
Jefferies also resumed coverage of SunPower Corporation (NASDAQ: SPWR) with a Hold rating and $90 target, citing valuation, but believes the stock's higher multiple is justified given the company's superior growth potential.
Force Protection Inc (NASDAQ: FRPT) was initiated with a Market Perform rating and Friedman Billings, as they believe near-term production expectations are too high given emerging DOD funding issues.
OTHER INITIATIONS:
Lehman started shares of Arcelor Mittal (NYSE: MT) with an Overweight rating.
Wall Street "takes a break from its summer break" to price several equity deals this week, with 8 IPOs and 1 secondary on the docket.
Those deals tentatively scheduled to price include:
IPOs:
Wednesday
Bladelogic (BLOG), a 5M-share IPO for this data center automation company. Morgan Stanley and Merrill Lynch are the lead managers. Filing range: $12.00-$14.00.
Monotype Imaging (TYPE), an 11M-share IPO for this text imaging company. The Bank of America is the lead manager. Filing range: $13.00-$15.00.
Rex Energy (REXX), a 14.7M-share IPO for this oil and gas company. KeyBanc Capital Markets is the lead manager. Filing range: $11.00-$13.00.
Validus (VR), a 15.7M-share IPO for this reinsurance services company. Goldman Sachs and Merrill Lynch are the lead managers. Filing range: $24.00-$26.00.
ImaRx Therapeutics (IMRX), a 3M-share IPO. Maxim Group and I-Bankers Securities are the lead managers. Filing price: $5.00.
Minyanville's Sean Udall dares to share the kind of keen insight and actionable information you won't find in any prospectus. Here he answers a reader's burning question about "green" stocks. For more original thought, visit www.minyanville.com.
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