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Posted on
5/16/2012
1:34 PM
Publication: "The Wall Street Journal"
Publication title: "Watch Out for Groupon's Stock Bounce"
Publication Date:
5/14/2012
KeyWords:
GRPN
Brief Summary:
Even though Groupon, Inc. (GRPN) surged some 40% from its all-time low after posting a first-quarter top-line rise last week, the stock could be headed for sour times. The author argues that despite its marketing budget dropping "to 21% of revenue in the first quarter from nearly 50% in 2011," the company "still doesn't generate net profit." In fact, the daily deals website's "guidance for the second quarter calls for just 2% growth in revenue compared with the first quarter."
From the columnist's perspective, the recent wave of short-covering activity could be a little hasty, as restrictions for insiders wanting to sell shares will be lifted on June 1. Given GRPN's overall fundamental and technical predicament, "Investors shouldn't step in front of a potential tsunami of selling."
Contrarian Takeaway:
The session after its well-received first-quarter earnings on May 14, GRPN bounced from its all-time low of $12.16 -- tagged on May 11 -- and pulled within pennies of the $15 mark. Coincidentally, this level represents approximately half its all-time high of $31.14, which was reached on the stock's first day of trading back in November. Since this post-earnings pop, the shares have dipped back below their downtrending 40-day trendline, and are struggling to find their footing in the $13 area. So far in 2012, GRPN is sitting on a 41% deficit.
In light of this downtrend, it's not surprising to see such a glut of negativity surrounding GRPN. Although short interest depleted by 25.3% over the past two reporting periods, it still accounts for 14.7% of the security's float. At GRPN's average pace of trading, it would take nearly eight days to buy back all of these pessimistic positions.
However, many analysts remain in the bulls' corner. For instance, the average 12-month price target sits at $19.22, which represents a roughly 58% premium to GRPN's closing price of $12.17 on May 15. Plus, there are six "strong buy" ratings, compared to 11 middling "holds," and two "sell" suggestions.
Compared to the broader equities market, GRPN has underperformed the S&P 500 Index (SPX) by 37.2% during the past 60 sessions. Should the stock extend its stint as a broad-market laggard, continued pessimism among short sellers, or a round of negative analyst notes, could spawn additional selling pressure.
Jim Cunningham (jcunningham@sir-inc.com)
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Posted on
5/8/2012
2:52 PM
Publication: "CNN Money"
Publication title: "You can be Sirius: Satellite radio is a good bet"
Publication Date:
5/1/2012
KeyWords:
SIRI
Brief Summary:
The author seems to be firmly entrenched in Sirius XM Radio's (SIRI) bullish camp, citing the company's better-than-expected first-quarter revenue rate right out of the gate. While the article points out that SIRI still sits far below the record highs it achieved in 2000, the stock has managed to bounce back after nearly flatlining in early 2009. In fact, analysts now expect the company's profits to grow at a rate of about 20% each year, according to Maxim Partners' John Tinker.
The piece goes on to note that advertising -- considered "a far more fickle revenue stream than monthly fees" -- makes up a mere 2.4% of SIRI's sales. What's more, the company's customer base rose to a record high of 22.3 million subscribers in the first quarter, even after price increases. Given SIRI's vast content offerings, the author suggests that the price hikes were justifiable. SIRI has also inked deals with a number of domestic and Japanese automakers to have its programming pre-installed -- a potentially profitable move, considering the recent rise in auto sales. The article does caution that the radio darling is currently embroiled in a dispute with Liberty Media over the controlling stake of the company, which could postpone any potential stock buyback plans. Still, the author concludes that with its growing clientele, SIRI should continue to come out on top, barring any major economic declines.
Contrarian Takeaway:
SIRI has certainly displayed some technical prowess lately, having advanced by more than 15% year-to-date. On the charts, the stock continues to trade above support at its 20-month moving average -- a trendline it has not breached, on a monthly closing basis, since December 2009.
Even so, the equity is still surrounded by a cloud of pessimism. Presently, SIRI's May and June series of options carry a host of put open interest. Specifically, the May and June 2 strikes hold peak put open interest of around 4,100 and 5,700 contracts, respectively. This area could translate into an additional layer of options-related support down the road.
Meanwhile, although short interest on the equity fell by 7.4% during the last two reporting periods, these bearish bets still account for nearly 8% of SIRI's available float -- or more than four days' worth of pent-up buying demand, at the stock's average pace of trading. This suggests that the security could still stand to benefit from a short-covering rally, which would provide a tailwind for SIRI.
Last but not least, although five of the nine analysts following SIRI have issued a "strong buy" endorsement, the remaining four have doled out "hold" or worse ratings. Moving forward, this leaves the door open for future upgrades, which could give the stock an additional boost.
Taking into consideration SIRI's technical strength -- as well as its latest earnings report and subscription growth -- the skepticism lingering toward the stock seems unfounded. Should the company continue on its current path, the equity's bullish bandwagon could become a lot more crowded.
Terri Stridsberg (tstridsberg@sir-inc.com)
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Posted on
5/2/2012
3:26 PM
Publication: "Kiplinger"
Publication title: "Stocks Back From the Bailout"
Publication Date:
5/1/2012
KeyWords:
AIG GM
Brief Summary:
This article takes a glass-half-full view of American International Group (AIG), which gained instant notoriety on Wall Street amidst the financial crisis of 2008. Despite the fact that Uncle Sam still owns a majority stake in the insurance giant, the author argues that AIG -- and fellow bailout recipient General Motors (GM) -- "are performing far better than investors think, yet they are loathed because of how they performed in the past." In fact, the article points out that additional buybacks from the Treasury could be a boon for AIG. Plus, the company has drastically reduced its exposure to risky financial derivatives, thereby lowering the chances of another catastrophic crisis in the future.
Contrarian Takeaway:
Nearly four years after AIG was reeled back from the brink of collapse by the U.S. government, the stock is performing shockingly well on the charts. Since the start of December, AIG has chugged steadily higher along the support of its 10-day, 20-day, and 40-day moving averages. The shares are up more than 10% over the past year, and they've added an impressive 48% so far in 2012 -- outpacing the broader S&P 500 Index (SPX) by a mile.
As the author indicates, a healthy amount of skepticism is still levied against AIG. Short interest ramped up by 24.6% during the most recent reporting period, as a fresh crop of bears tried to call a top to the stock's unlikely uptrend. Analysts also remain unconvinced, with only 40% offering up "buy" ratings.
In fairness, it's hard to blame investors for giving AIG a wide berth. However, given the general lack of enthusiasm with which the stock's robust year-to-date rally has been greeted, contrarians with healthy risk appetites may want to give the one-time scourge of Wall Street a second look.
Elizabeth Harrow (eharrow@sir-inc.com)
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Posted on
4/26/2012
1:15 PM
Publication: "MSNBC.com"
Publication title: "Analysts Like the Way Yoga Brand Lululemon Stretches"
Publication Date:
4/17/2012
KeyWords:
LULU
Brief Summary:
This article notes that analysts are optimistic about Lululemon Athletica (LULU), believing there is room for further growth for the Canada-based maker of yoga gear. Mainly, analysts are impressed with how LULU operates -- investing in "functions like distribution and information technology that can support a larger geographic footprint," opening smaller stores that "blend events and fitness resources into the retail experience," and expanding into other markets like men's apparel. Plus, a promising plan for future development "is already creating buzz in the investment community." LULU is working on something it calls "everyday technical apparel," which takes its garments "out of the yoga studio or running track" and into the casual apparel arena. Although some analysts are skeptical that shares of LULU could be "worth as much as a pair of its signature pants," most are encouraged by the company's performance, both on and off the charts.
Contrarian Takeaway:
Indeed, LULU has been quite an overachiever on the charts, enjoying a 54.2% upswing in 2012, and a 43.2% year-over-year gain. The $70-$72 region emerged as a technical floor back in early March, and has cushioned every daily settlement since that time. In fact, the shares are trading within a stone's throw of their all-time high of $77.13 -- which was reached in intraday action on April 5.
In light of this uptrend, LULU could grab the attention of the bearish analyst holdouts, as only 55% of the brokerages following the stock consider it worthy of a "buy" or better recommendation. Furthermore, the average 12-month price target rests at $79.94, not far from LULU's current range.
Elsewhere on the Street, it looks as though a number of traders believe LULU's ascent will be short-lived. Although short interest is down 3.7% over the past month, it still accounts for 11% of the equity's available float. At LULU's typical rate of trading, it would take nearly six sessions for all of these shorted shares to unwind, pointing to a healthy supply of sideline cash to fuel future gains.
The options pits are loaded with bears, as well. During the past 10 days, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.81 puts for every call on LULU. This ratio arrives just six percentage points from a pessimistic peak, signaling that traders on these exchanges have rarely bought puts over calls at a faster pace during the past year.
Should LULU's impressive price action persist, an about-face from any of the skeptical brokerages, or a capitulation among option bears or short sellers, could prompt additional buying pressure for the athletic wear retailer.
Jim Cunningham (jcunningham@sir-inc.com)
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Posted on
4/18/2012
12:23 PM
Publication: "The New York Times"
Publication title: "Daring to Cut Off Amazon"
Publication Date:
4/15/2012
KeyWords:
AMZN
Brief Summary:
This article takes a hatchet to Amazon.com (AMZN) and its business tactics, with the author contending that the online retail behemoth practices monopolistic ways. By purchasing a product from the distributor, discounting it, and passing the savings on to the consumer, AMZN's strategy basically eliminates the "middle man." What this really does, according to the author, is takes away income from other retailers who are trying to sell the same product for the "real" price, by fostering "a low-price mindset among consumers." In fact, AMZN recently encouraged shoppers to browse brick-and-mortar stores, but then return home to purchase the items through AMZN. While these bargain-basement prices may seem appealing to the consumer in the short term, the author contends that this business model is "unsustainable," with both longer-term pricing structures, as well as AMZN's bottom line, in jeopardy.
Contrarian Takeaway:
Despite AMZN's ethical woes, the stock has fared well in 2012, with the equity currently sitting on an 8.8% year-to-date gain. Furthermore, the security has found a solid foothold atop its 90-week moving average. This trendline has contained all but two of AMZN's weekly closes since December.
Even though AMZN has put forth a solid technical showing, the bullish bandwagon remains far from overcrowded. In the options arena, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.01 indicates that put open interest and call open interest are nearly equal among options set to expire within three months.
Members of the brokerage bunch are split, as well. For starters, the average 12-month price target of $217.26 represents a lackluster 13% premium to the stock's current perch. Plus, 21 analysts maintain a "buy" or better recommendation toward AMZN, compared to 12 "hold" suggestions. As the stock continues to tack on gains, any price-target hikes and/or upgrades from this tepid group could encourage additional buyers to the table.
That said, traders should keep an eye on AMZN's April 26 earnings release. In its past four reports, the retailer has topped bottom-line expectations twice, and fallen short on two other occasions -- leaving room for another surprise when AMZN unveils its first-quarter results.
Karee Venema
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Posted on
4/11/2012
10:50 AM
Publication: "CNN Money"
Publication title: "Avon banking on new CEO for change"
Publication Date:
4/9/2012
KeyWords:
AVP
Brief Summary:
The article seems to maintain a cautious outlook for Avon Products, Inc. (AVP) in light of the company's recent headlines. Specifically, the struggling cosmetics maven was recently the target of an unsolicited, $10-billion buyout bid by Coty, whose takeover offer was part of a strategic effort to expand its own product line beyond the fragrance market. AVP promptly rejected the bid, sending the shares soaring by almost 18%. As one investor commented, "The Coty approach was an indication if investors didn't see the value then someone else did."
However, investors were less enthusiastic about AVP's latest announcement that it has appointed former Johnson & Johnson head honcho Sherilyn McCoy as its new CEO. While the article notes that securing someone of her caliber bodes well for AVP, analysts are concerned that a significant turnaround could be slow going -- particularly if the company stays independent. The author also points out that AVP has struggled to meet earnings and revenue forecasts for more than a decade, and has lost profits due to litigation costs accrued during two Securities and Exchange Commission (SEC) investigations. The article concludes that analysts and shareholders alike are waiting to see if Coty will up the ante with a better offer, thus giving AVP an additional leg to stand on.
Contrarian Takeaway:
AVP has been a technical standout lately, boasting a year-to-date gain of about 30%, and besting the broader S&P 500 Index (SPX) by over 26% during the last two months. Thanks to the bid-related rally on April 2, the stock is now trading comfortably above its 200-day moving average, a trendline that had been largely out of reach since last July.
However, there still seems to be a fair amount of negative sentiment lingering toward AVP. Currently, the equity's April and May series of options hold a glut of put open interest -- particularly at the April 22 strike, which is home to peak put open interest of nearly 6,700 contracts. Moving forward, this area could translate into a layer of options-related support.
What's more, only four of the analysts following AVP have issued "buy" or better endorsements, while the remaining nine maintain tepid "hold" ratings. Also, Thomson Reuters pegs the equity's average 12-month price target at $24.10, which is just a slim premium to the stock's current perch. This leaves plenty of room for future upgrades and/or price-target hikes, which could provide an additional tailwind for AVP.
Considering AVP's newfound technical strength, speculators may end up reconsidering their bearish stances on the stock down the road. However, the article's cautious wait-and-see approach seems appropriate, given AVP's previous struggles as a stand-alone company.
Terri Stridsberg (tstridsberg@sir-inc.com)
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Posted on
4/4/2012
12:20 PM
Publication: "Barron's"
Publication title: "Best Buy Isn't Your Best Bet "
Publication Date:
3/29/2012
KeyWords:
BBY
Brief Summary:
This article approaches Best Buy Company (BBY) from a downbeat angle. Citing lower-than-expected fiscal fourth-quarter revenue, and a larger-than-expected dip in same-store sales, the author believes that BBY has a lot of work to do keep itself from extinction (a la Circuit City). Problems are mounting for the world's largest electronics retailer, as BBY has thrown into action a three-year, $800-million cost reduction plan. But as one analyst sees it, "They are trying to save their way to prosperity and that is hard for a big-box retailer." Even though BBY's CEO is looking for 2016 to bring a combined $8 billion in online sales from both the U.S. and China, the author suggests that a recent observation about the beleaguered business has remained an ugly truth: "Late last year, we warned that the retailer had become a showroom of sorts for people who check out items in person at Best Buy but ultimately shop at rivals like Amazon.com (AMZN), Costco Wholesale (COST), Target (TGT) and Wal-Mart (WMT)."
Contrarian Takeaway:
BBY has been stagnant on the charts during 2012, holding its head slightly above breakeven. Things look worse from a longer-term perspective, as the shares have suffered a roughly 18% 52-week drop. In fact, the stock has lagged the broader S&P 500 Index (SPX) by more than 13% over the past three months. Since mid-July 2011, BBY has bounced between support at the $22-$23 region, and resistance at the $28-$29 area.
In light of this lackadaisical price action, it's not surprising to see such a glut of negativity surrounding BBY. According to Zacks, 76% of analysts have slapped the stock with a "hold" or "sell" recommendation. To boot, short interest jumped 12.1% during the past two reporting periods, and now accounts for 17.1% of the equity's available float. At BBY's average pace of trading, it would take over two weeks for all these shorted shares to unwind.
Even the options pits are doused in pessimism. During the past two weeks, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.18 puts for every call. This ratio ranks above 79% of all other readings taken during the past year, suggesting that traders on these exchanges have bought bearish bets over bullish at a faster clip than usual during the past couple of weeks. Plus, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.29 is at an annual pessimistic peak, suggesting that short-term speculators have never been more negatively aligned toward BBY during the past year.
Considering BBY's lackluster fundamental and technical performance, this negativity seems appropriate. Unfortunately, in the near term, the bears will likely find little motivation to spark a change of heart toward the retailer.
Jim Cunningham (jcunningham@sir-inc.com)
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Posted on
3/29/2012
10:02 AM
Publication: "Bloomberg Businessweek"
Publication title: "The Hunger Games Is Just Lions Gate's Latest Hit"
Publication Date:
3/23/2012
KeyWords:
LGF
Brief Summary:
The author of this article waxes optimistic about Lions Gate Entertainment (LGF), and the studio's ability to emerge as "the big entertainment industry winner of 2012." How did Vancouver-based LGF accomplish such a feat? According to the author, by initially scooping up a host of hits -- such as the cult classic Dogma -- that were seen as "too controversial" for major U.S. studios. Co-chairman and CEO Jon Feltheimer continued with his shopping spree, acquiring a laundry list of assets that included Summit Entertainment, producers of the insanely popular Twilight movies. LGF's most recent piece de resistance is the first installment of The Hunger Games trilogy, which recently opened to record crowds. In addition to being in the business of producing, Feltheimer expanded LGF's credits to include the film libraries of studio stalwarts Trimark Holdings, Artisan Entertainment, and Mandate Pictures. The author notes that this large accumulation of assets -- with additional hits on the horizon -- make the stock appealing to investors.
Contrarian Takeaway:
On the technical front, LGF showed promise long before The Hunger Games release. The stock has tacked on more than 115% on a year-over-year basis. In fact, over the course of the past 60 trading sessions, LGF has outperformed the broader S&P 500 Index (SPX) by 52 percentage points, on a relative-strength basis. More recently, the security has set up camp in the $13.50 neighborhood -- an area that has emerged as support since mid-February.
Despite LGF's showing of technical might, sentiment surrounding the stock is mixed. In the options arena, traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 6.56 calls for every put over the past 20 trading sessions. However, with short interest accounting for 26.4% of the stock's available float, this recent uptick in call volume may simply be the result of short sellers picking up hedges on their pessimistic positions.
Should LGF continue with its upward momentum, a capitulation from some of these short sellers could give the stock a boost in the near term.
Karee Venema
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Posted on
3/23/2012
2:20 PM
Publication: "CNBC.com"
Publication title: "Why Have Boeing Shares Stalled?"
Publication Date:
3/19/2012
KeyWords:
BA
Brief Summary:
This article takes a skeptical look at The Boeing Company (BA), with the author observing that an improving fundamental backdrop -- including ramped-up production, a new labor contract, and support from the Obama administration -- "has done little to lift Boeing shares." So far in 2012, the stock has lagged both the Dow Jones Industrial Average (DJIA), of which it is a member, and the broader aerospace and defense sector. BA's underperformance is attributed in part to lingering concerns over 787 production, particularly as uncertainty remains regarding industry demand for new aircraft.
Contrarian Takeaway:
BA has definitely underwhelmed with its price action over the past year, with the stock managing a barely perceptible gain of 1.6% over the past 52 weeks. Since April 2010, in fact, the equity's rally attempts have consistently fizzled in the $75-$80 region. With BA once again in the process of pulling back from this technical ceiling, it seems that resistance here is firmly intact.
Nevertheless, Wall Street remains surprisingly upbeat toward this sluggish aerospace issue. Zacks tallies no fewer than 16 "buy" or better ratings from brokerage firms, compared to just six "holds" and one "strong sell." Likewise, short interest accounts for a slim 1.5% of the equity's float, and BA's Schaeffer's put/call open interest ratio (SOIR) of 0.92 registers in the 44th percentile of its annual range -- confirming a relatively complacent attitude among short-term speculators.
With the shares retreating from long-term resistance, BA could be vulnerable to an unwinding of bullish sentiment during the near term. A capitulation by any of the stock's fans could create a headwind for BA going forward.
Elizabeth Harrow (eharrow@sir-inc.com)
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Posted on
3/16/2012
10:49 AM
Publication: "SmartMoney.com"
Publication title: "Should You Sell Apple?"
Publication Date:
3/14/2012
KeyWords:
AAPL
Brief Summary:
Hardly a day goes by that Apple (AAPL) hasn't been in the headlines, on the minds of techies, or -- via its wildly popular gadgets -- in the hands of consumers worldwide. This article suggests that AAPL's impressive run higher, as well as its status as the world's alpha tech company, could be nearing a peak. Although the author admits that AAPL produced innovative devices that once cornered the market, he points out that this "substantive difference" is no longer discernible when comparing most competitors' products (unless you check out the price tag). The distinction, it seems, rests solely with the name: "If Apple is selling hot consumer products simply because of its brand name and aura, it is no longer just a technology company... It's a fashion company." To conclude this skeptical commentary, the author posits that this brand-name reliance could be why the iPad parent is teetering on the edge of a top: "The problem with fashions is that they change."
Contrarian Takeaway:
There's no doubt that AAPL has been exploding on the charts, rocketing more than 44% in 2012, and surging 75% over the past 52 weeks. In fact, this upswing pushed the shares to a new all-time high of $600.01 on March 15. This exceptional price action has garnered the stock an abundance of upbeat analyst ratings: Zacks tallies 34 "strong buys," three "buys," two "holds" and zero "sell" recommendations.
Echoing this optimism, relatively few traders are betting that AAPL will pull back anytime soon. Short interest decreased 7.5% over the past month, and these bearish bets now account for just 1.1% of the equity's float -- representing a rather meager supply of sideline cash. But, in light of AAPL's strength on and off the charts, it's not surprising to find such a glut of positivity surrounding the stock.
Elsewhere on the Street, though, pessimism is growing among options players. During the past two weeks, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 0.66 put for every call. This ratio is in the 74th percentile of its annual range, signaling that traders on these exchanges have bought bearish bets over bullish at a faster pace than usual during the past couple of weeks.
Plus, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.02 indicates that puts outnumber calls among options slated to expire within three months. This ratio rests two percentage points from an annual pessimistic peak, suggesting that short-term speculators have rarely been more skeptically aligned toward AAPL.
Should the shares extend their trek higher, an about-face from the options bears could provide an additional tailwind.
Jim Cunningham (jcunningham@sir-inc.com)
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