Stocks in the News — week of August 5, 2013 (August 9th update)

 

Goodfellow LLC’s “Stocks in the News”

seen on Townhall Finance, heard on Ransom Notes Radio

 

Priceline Second Quarter Pleases the Street

Priceline.com (PCLN, $968.89) reported 44% international bookings growth in the second quarter and total revenues up 27%, with earnings per share coming in slightly above consensus estimates.  Morgan Stanley said, “We are impressed by Priceline’s ability to outperform amidst tempered European macro conditions and have higher conviction in its competitive positioning.”

Earnings growth projections have increased to 25, 21, and 20 percent over the next three years and the PE is 25.  Wall Street is raising estimates again today.

Priceline shares are up 41% since we began recommending them to Ransom Notes Radio listeners in February.  The stock broke out of another trading range on Monday and rose rapidly.  We would wait for a price pullback before accumulating more shares.  Goodfellow LLC Rating: Hold, Aggressive Growth, Value.  (08/09/13)

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Financial Woes Cause BlackBerry to Consider Going Private

The stock of smartphone maker BlackBerry Ltd. (BBRY, $9.76) is up today on rumors that the company is considering going private.  There are no buyers in sight as of yet, but with large annual net losses inevitable in the foreseeable future, the company is contemplating financial strategies which they were formerly unwilling to consider.

We told Ransom Notes Radio investors to sell BlackBerry stock, formerly called Research in Motion, three times this year through late June, at which time the price plummeted again.  There is no fundamental reason to own shares in a company that’s consistently losing money.  Goodfellow LLC Rating: Public, Volatile, Sell.  (08/09/13)

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MS Drug Tecfidera Surpassing Revenue Estimates 

Biogen Idec Inc.’s (BIIB, $212.35) new multiple sclerosis drug, Tecfidera, continues to experience robust sales above Street estimates since receiving FDA approval in March.  Citi Research says, “The current level of new [prescription] starts is still very robust” and that Biogen has a “deep pipeline that could offer upside surprise.”

Earnings per share growth estimates have increased repeatedly this year, now at 31, 28, and 19 percent over the next three years.  The PE is 25.”

The stock rose $50 per share after we recommended it Ransom Notes Radio listeners in March, at which point we said “hold” while it consolidated.  It’s time to buy Biogen Idec again for immediate upside.  Expect it to trade between $213 and $235 in the short-term.  Goodfellow LLC Rating: Accumulate, Aggressive Growth, Value, Volatile.  (08/09/13)

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Costco July Same-Store-Sales Up 4% 

Membership warehouse retailer Costco Wholesale Corp. (COST, $117.39) reported July same-store-store sales up 4%, and total sales up 7%.  Results were aided by higher prices at its gas stations, and harmed by foreign exchange rates.  Costco has locations in North America, Mexico, the U.K. and the Far East.

Earnings projections have increased since we last reported on Costco in March, to 15%, 11% and 11% in the next three years.  Citi Research says, “Costco is the best-positioned company in the warehouse club industry to gain market share.”  S&P adds, “We think the company is well-positioned to generate long-term earnings growth.”

The stock price is up 14% since our buy recommendation on Ransom Notes Radio in March, and still climbing, although the PE is quite high at 26.  We would hold our shares and accumulate more during market corrections.

Goodfellow LLC Rating: Public, Growth. (08/08/13)

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Mondelez Reports Second Quarter, Share Buyback, Dividend Increase

Snack food company Mondelez International (MDLZ, $32.70), which was spun off from Kraft Foods Group last October, announced a new $6 billion share repurchase program, a dividend increase, and that it will build a Cadbury manufacturing plant in India.  The company also reported second quarter earnings of 37 cents per share, beating the consensus estimate of 34 cents.

Current investment spending is expected to improve revenue growth and expand margins in the coming years.  Earnings are projected to grow 10-12% per year for the next three years.  The PE is 21, and the new dividend yield is 1.7%.

Mondelez stock has been rising this year, and appears ready to break out; trading between $28 and $32 since March.  Again, like CostCo, the stock has good earnings growth and a bullish chart, but a high PE.  We would accumulate shares on price dips.

Goodfellow LLC Rating: Public, Growth & Income. (08/08/13

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Groupon Management & Strategy Solidifies

Groupon Inc. (GRPN, $10.60) named co-founder Eric Lefkofsky as the new CEO, as the company gains momentum with its new e-commerce strategy and overseas focus.  Groupon reported good second quarter revenue growth, and announced a new $300 million share repurchase program, but more importantly, Wall Street is showing confidence that the company and the stock price are done floundering.

EPS are projected to grow 31%, 71% over the next two years.  The PE is 65.  The stock fell dramatically after its 2011 IPO, and began a distinct recovery in May.  While the chart is bullish, we caution investors to use stop-loss orders on this aggressive-growth stock.  We would accumulate shares on pullbacks under $10.

Goodfellow LLC Rating:  Aggressive Growth, Public, Volatile. (08/08/13)

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“The Lone Ranger” Causes Isolated Loss in Disney Fourth Quarter

The Walt Disney Company (DIS, $65.91) reported third quarter earnings above consensus, but warned of a fourth quarter writedown for losses incurred by The Lone Ranger.  The company reported higher costs and lower ad revenue at the ABC television network, and strength in affiliate fees, ESPN ad sales, and resorts & theme parks.

Projected annual earnings growth in the mid-teens is coming primarily from resorts & theme park performance, and the Lucasfilm acquisition.

On May 8, we told Ransom Notes Radio listeners that the chart was overextended, and that new investors should buy on a pullback below $62.  The stock immediately peaked and has been trading sideways for several months, with the chart recently turning bullish.

Goodfellow LLC Rating: Strong Buy, Growth, Value.  (08-07-13)

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Tesla to Report Second Quarter Loss

Tesla Motors Inc. (TSLA, $134.23) is expected to report revenues down about 31% and a net quarterly loss, after its first-ever quarterly profit earlier this year.  Ironically, first quarter profits came from selling green-car credits to other automakers, and loan repayments, but not from selling profitable cars.

Previous projections for a full-year profit have come up short; the company is now expected to lose money again this year.  Tesla and the U.S. government continue to subsidize the purchase and lease of its money-losing electric cars via tax credits and repurchase guarantees.

We told Ransom Notes Radio listeners twice this year to avoid Tesla shares.  Frenzied gamblers have driven the stock price to ridiculous, unsustainable highs.

Goodfellow LLC Rating: Public.  (08-07-13)

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Time Warner Earnings in the Limelight 

Media conglomerate Time Warner Inc. (TWX, $63.84) beat third quarter expectations, and increased full-year earnings projections, boosted by hit movies “Man of Steel” and “The Great Gatsby”, HBO’s “Game of Thrones”, and basketball ad revenue.  Even the publishing division performed better than expected.

Earnings are expected to grow 15-16% per year over the next three years.  The dividend yield is 1.76%.

Time Warner expects to spin-off Time Inc. in the fourth quarter, which includes Time magazine, People, and Sports Illustrated.  We recommended Time Warner shares three times this year to Ransom Notes Radio listeners.  Now that we’ve seen competitor News Corp. spin off 21^st Century Fox, which brought immediate profit to shareholders, we think Time Warner shareholders will be equally well-rewarded.

Goodfellow LLC Rating: Strong Buy, Growth, Growth & Income, Value.  (08-07-13)

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Poor Sales Cause GM to Slash Price on 2014 Chevy Volt

(GM, $36.10, down 65 cents midday)

General Motors Co. announced today that it will cut the price on the 2014 Chevy Volt by $5000, in order to encourage sales of the electric hybrid.  Federal tax credits bring the total purchase price down another $7500, to a final cost of $27,500.  While year-to-date sales of electric vehicles in the U.S. have more than doubled, Volt sales experienced only a 9% increase this year.

GM’s earnings growth projections have recently increased to 5% this year, then 34% next year.  The PE is 10.6.

In early May, we told Ransom Notes Radio listeners that the stock appeared ready to rise into the low-to-mid $30’s.  That happened immediately, and now the stock is pushing up against resistance at $38.  We still like Ford shares better, because the company is thriving without government assistance.

Goodfellow LLC Rating: Hold, Public.  (08/06/13)

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OfficeMax Misses Estimates, Again

(OMX, $11.25, down 19 cents midday)

OfficeMax Inc. reported another disappointing quarter, with earnings and margins below expectations, and revenue down 4.6% year-over-year.  Citi Research says there’s increased competitive pressure, and a lack of catalysts for OfficeMax achieving their operating margin goals.

Full-year 2013 earnings are projected to fall 27%.

On May 7, we told Ransom Notes Radio listeners to avoid OfficeMax shares.  The company is currently awaiting regulatory approval for acquisition by Office Depot, another company with profitability problems.  We see no reason to own shares in struggling companies.

Goodfellow LLC Rating: Sell, Public. (08/06/13)

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Michael Kors Overdelivers, Again

(KORS, $70.42, up $2.54 midday)

Upscale accessories maker Michael Kors Holdings Ltd. reported first quarter earnings of 61 cents per share, blowing away analysts’ estimates of 49 cents, and exceeding expectations for revenue, gross margins, expenses and inventory control.  Growing brand awareness and new store openings led to a 144% increase in European sales this quarter.

The company raised full year estimates to reflect 36% year-over-year earnings growth.  The PE is 27.

Morgan Stanley Research says, “KORS remains Retail’s best growth story.”  Michael Kors stock has been climbing and resting steadily since going public in late 2011.  The stock is up 9% since we recommended it to Ransom Notes Radio listeners in late May, and the share price is on an uptrend.

Goodfellow LLC Rating: Buy, Aggressive Growth, Volatile.  (08/06/13)

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Facebook Finally Surpasses IPO Price

(FB, $39.00, up 95 cents midday)

Facebook Inc. shares surpassed their 2012 IPO price of $38 per share on Friday, reaching higher again today.  The social network icon surprised investors in late July when reporting a rapid and successful transition from desktop to mobile advertising.  Earnings projections for the year have increased dramatically in recent weeks.  Wall Street now expects earnings to grow 31 – 34% per year over the next three years.

The share price is up 36% since we told Ransom Notes Radio listeners to buy Facebook on May 2, and it’s up 14% since we reiterated the buy recommendation on July 25.  The stock could easily rise significantly from here, based on irrational exuberance, but shareholders should use stop-loss orders in preparation for eventual price volatility.

Goodfellow LLC Rating: Hold, Growth, Public.  (08/05/13)

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Post Spin-off Update:  News Corp.

(NWSA, $16.00, down 34 cents midday)

We urged Ransom Notes Radio listeners to buy News Corp. shares repeatedly this year, in anticipation of the late June separation of 21^st Century Fox and News Corp.  The stocks have been trading separately for five weeks now, and investors have made 27% profit since our first recommendation in February.

News Corp. shares now represent media interests, including news, sports, digital real estate services, book publishing and pay TV.  Earnings are projected to be flat to slightly-down over the next two years.

The stock price broke out of a trading range on August 1.  Shareholders should keep News Corp. shares for addition price appreciation, and await the announcement of the first dividend.

Goodfellow LLC Rating: Hold, Public.  (08/05/13)

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Post Spin-off Update:  21st Century Fox 

(FOXA, $31.42, down 11 cents midday)

News Corp. shareholders also received shares in 21^st Century Fox Inc. in late June.  The Fox shares represent film, cable, broadcast t.v., pay t.v. and satellite assets.  Fox is the distributor of the new hit movie “The Wolverine”.

The company will report fourth quarter results tomorrow after the market closes.  Earnings are projected to grow 14 and 24% in the years 2014 and ‘15.  The PE is 23.

FOXA shares broke out of a trading range on Friday and are reaching new highs again.  Growth stock investors should jump in now.

Goodfellow LLC Rating: Buy, Growth.  (08/05/13)

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