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July 17, 2014
12:15 EDTSNDK, FIO, NTAP, EMC, HILLSanDisk plummets after Q3 revenue outlook disappoints
Shares of flash memory manufacturer SanDisk (SNDK) are sinking after the company’s third quarter revenue outlook trailed analysts’ consensus estimates. WHAT'S NEW: Last night, SanDisk reported second quarter adjusted EPS of $1.41 and revenue of $1.63B, beating estimates of $1.39 and $1.6B, respectively. The company said Q2 adjusted gross margin came in at 48%. President and Chief Executive Officer Sanjay Mehrotra commented that SSD solutions comprised 29% of Q2 revenue, compared to 16% in the year ago quarter, "demonstrating strong progress in driving our strategic priorities." Mehrotra said the Q2 results positions the company to deliver a record year in 2014. WHAT’S NOTABLE: SanDisk forecast Q3 revenue of $1.675B-$1.725B, below consensus estimates of $1.74B. The comapny also guided Q3 adjusted gross margin at 47%-49%. On the company's earnings conference call, management said it expects the second half of 2014 to be "somewhat supply constrained." The company expects the Fusion-io (FIO) deal to close in Q3, and sees it being accretive to earnings in the second half of fiscal 2015, though initial synergies will be "modest." SanDisk sees fiscal year 2014 cash capital expenditures of approximately $600M and is still targeting returning 100% of free cash flow to shareholders. ANALYST REACTION: This morning, analyst commentary was mostly positive. Research firm Piper Jaffray said SanDisk’s post-earnings pull back represents a buying opportunity. The firm, which reiterated an Overweight rating with a $110 price target, believes favorable trends for 2015 remain intact. BofA/Merrill reiterated its Buy rating and $125 price target on the shares. Conversely, Summit Research said it believes SanDisk's valuation is stretched and priced to perfection. The firm believes margins have peaked and 3D NAND issues remain a concern. PRICE ACTION: In early afternoon trading, SanDisk fell $13.72 or about 12.64%, to $94.20 on nearly four times its average daily trading volume. Despite today’s pull back, the stock has gained approximately 59% over the past twelve months, and 34% year to date. OTHERS TO WATCH: Other companies that produce memory include NetApp (NTAP), EMC (EMC) and Dot Hill Systems (HILL).
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July 22, 2014
06:56 EDTEMCElliot Management to consider activist options for EMC, NY Times reports
Elliot Management is expected to consider a push for the breakup of EMC (EMC) and spinoff VMware (VMW), reports the New York Times. Citing people briefed on the matter, the hedge fund is expected to meet with EMC executives this week after the company reports its quarterly earnings to determine whether to undertake a full-bore activist campaign. Reference Link
July 21, 2014
16:22 EDTEMCOn The Fly: Closing Wrap
Stocks on Wall Street began the trading day in negative territory and remained there through nearly the whole session. The market action was influenced more by the geopolitical events in Russia and Israel than by the upcoming avalanche of earnings scheduled for release throughout the week. Despite the weak open and subsequent drop during the first hour of trading, the market drifted off its lows and managed to pare its losses, even turning mixed for a short time. The averages dipped again heading into the bell, though they closed well of their worst levels. ECONOMIC EVENTS: In the U.S., the Chicago Fed's National Activity Index dipped to 0.12 in June from a reading of 0.16 in May. COMPANY NEWS: Allergan (AGN) rose $3.74, or 2.23%, to $171.14 after the company's Q2 results and its FY14 outlook beat expectations. The company, which is working to fend off a proposed acquisition by Valeant Pharmaceuticals (VRX), also announced plans to cut its workforce by 13%, or about 1,500 employees, as part of a broader restructuring effort. In related news, Valeant announced it has contacted both the SEC and Canadian financial authorities regarding Allergan's "apparent attempt to mislead investors and manipulate the market for Valeant common shares by continuing to make false and misleading statements regarding Valeant's business." Later in the day, Bill Ackman of Pershing Square, who is partnering with Valeant in its attempt to buy Allergan, called the restructuring a "Valeant light" effort and said Valeant does not need to raise its bid for Allergan. Ackman explained that he believes that shares of Valeant will rise around $10 should the Allergan board engage in takeover talks with the company and that a $10 share rise would boost Valeant's bid for Allergan by $8 per share. MAJOR MOVERS: Among the notable gainers was Extreme Networks (EXTR), which rose 69c, or 15.79%, to $5.06 after the company raised its Q4 earnings per share outlook and narrowed its Q4 revenue view. Also higher were shares of EMC (EMC), which advanced $1.35, or 5.0%, to $28.33 after the Wall Street Journal reported, citing sources, that activist investor Elliott Management has taken a stake of over $1B in the data-storage company and plans to push it to break itself up and spin off VMware (VMW), which is 80% owned by EMC. Shares of VMware fell $2.36, or 2.48%, to $92.95 following the Journal's report. Among the other noteworthy losers was Monster Beverage (MNST), which fell $3.07, or 4.53%, to $64.74 after Morgan Stanley downgraded the stock, citing slowing U.S. trends and balanced valuation. Also lower were shares of Yum! Brands (YUM), which fell $3.29, or 4.25%, to $74.13 after Associated Press reported that the company's KFC brand and McDonald's (MCD) were sold expired beef and chicken in China from food supplier Husi Food. Shares of McDonald's, which is scheduled to report on its quarter before tomorrow's market open, slid $1.44, or 1.45%, to $97.55. INDEXES: The Dow fell 48.45, or 0.28%, to 17,051.73, the Nasdaq dropped 7.44, or 0.17%, to 4,424.70, and the S&P 500 declined 4.59, or 0.23%, to 1,973.63.
12:10 EDTEMCOn The Fly: Midday Wrap
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10:42 EDTSNDKOptions with decreasing implied volatility
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10:23 EDTEMCEMC rallies, levels to watch
The shares are up 3.6% to $27.95 at time of writing, just off the new 52-week high set at $28.32 today. Resistance above that high is at $29.25. Support is at $27.41.
09:10 EDTEMCOn The Fly: Pre-market Movers
HIGHER: Allergan (AGN), up 0.5% after Q2 results, FY14 outlook beat expectations and the company announces plans to reduce workforce by about 1,500 employees as part of restructuring. Also, Valeant (VRX) announced it has contacted both the SEC and Canadian financial authorities regarding Allergan's "apparent attempt to mislead investors and manipulate the market for Valeant common shares by continuing to make false and misleading statements regarding Valeant's business"... Extreme Networks (EXTR), up 13% after raising Q4 EPS, revenue view... Gas Natural (EGAS), up 6% after confirming it rejected $13 per share unsolicited offer from Algonquin Power... EMC (EMC), up 4.5% after the WSJ says Elliot Management took a stake of over $1B in the firm and plans to push the company to break itself up... GoPro, (GPRO), up 2.8% after initiated at several firms including Citigroup, Barclays and JPMorgan... Kandi Technologies (KNDI), up 6% after China Daily said China will not to waive a sales tax on electric cars made by foreign companies. Tesla (TSLA) is down 1% following the report. UP AFTER EARNINGS: Halliburton (HAL), up 0.5%... LOWER: Reynolds American (RAI), down 2.3% after a Florida jury hit the company with $23.6B in punitive damages in a lawsuit filed by the widow of a longtime smoker. Shares of fellow tobacco companies also fell after the jury decision, as Lorillard (LO) fell 2% and Altria (MO) slid 1.6%... Yum! Brands (YUM), down 2% after AP reported that a Shanghai TV station said a food supplier sold expired beef and chicken to the company's KFC brand in China along with to McDonald's (MCD), which is down 0.7%. DOWN AFTER EARNINGS: PetMed Express (PETS), down 2.4%... Hasbro (HAS), down 1.3%.
08:35 EDTEMCEMC shares poised to advance, says Cantor
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06:27 EDTEMCElliott Management to push EMC to break up, WSJ reports
Elliott Management has taken a stake of over $1B in EMC (EMC), according to sources, and plans to push the data-storage company to break itself up, the Wall Street Journal reports. Elliott reportedly believes EMC's stock would get a boost from spinning off VMware (VMW), of which it owns an 80% stake. Reference Link
06:02 EDTEMCEMC volatility expected to move on activist investor stake & Q2
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July 18, 2014
11:25 EDTSNDKOptions with decreasing implied volatility
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July 17, 2014
16:52 EDTSNDKOn The Fly: Closing Wrap
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13:18 EDTSNDKOn The Fly: Midday Wrap
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12:15 EDTSNDK, NTAP, EMC, FIO, HILLSanDisk plummets after Q3 revenue outlook disappoints
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11:54 EDTSNDKStocks with call strike movement; SNDK STX
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11:12 EDTSNDKOptions with decreasing implied volatility
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09:32 EDTSNDKSanDisk valuation priced to perfection, says Summit Research
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09:16 EDTSNDKSanDisk weakness an overreaction, says BofA/Merrill
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09:15 EDTSNDKOn The Fly: Pre-market Movers
HIGHER: Dresser-Rand (DRC), up 15.5% after Manager Magazin says Siemens (SIEGY) preparing bid for the company. Other oil equipment companies with a market cap similar to Dresser-Rand's include Dril-Quip (DRQ) and Oil States (OIS)... Microsoft (MSFT), up 3.4% after announcing restructuring, including plans to cut up to 18K jobs. UP AFTER EARNINGS: Morgan Stanley (MS) up 1.5%... Sherwin-Williams (SHW), up 3%. DOWN AFTER EARNINGS: Mattel (MAT), down 7.3%... Sandisk (SNDK), down 7%... Yum! Brands (YUM), down 2.5%. LOWER: Orbitz (OWW), down 3% after results, 34M share spot secondary offering of stock priced at $8.25... Benefitfocus (BNFT), down 1% after 2.5M share Secondary priced at $38.50.
07:37 EDTSNDKSanDisk revenue guidance may impact short term sentiment, says UBS
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05:44 EDTSNDKSanDisk post-earnings pullback a buying opportunity, says Piper Jaffray
Piper Jaffray recommends using the post-Q2 earnings pullback in shares of SanDisk as a buying opportunity. The firm believes favorable trends for 2015 remain intact and it reiterates an Overweight rating on the stock with a $110 price target.
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