CNBC Stock Blog
- Thursday, 28 Jul 2011 10:57 AM ETBy: Margo D. Beller
Goldman Sachs raised its 12-month price target on Cisco Systems by 34 percent to $21 Thursday, and upgraded the company to "buy" from "neutral" based on the analysts' expectations of higher earnings in coming quarters.
Goldman's target is based on a price/earnings ratio of 11 times Cisco's calendar-year non-GAAP earnings estimate of $1.90 a share.
"Cisco is not a 'broken' franchise," the analysts said, based on conversations with customers. The analysts also said that "leading surveys suggest that Cisco’s customer franchise is still solid. Moreover, the structural issues it faces are largely contained to the switching business, which drives just one-third of sales."
Goldman sees Cisco [CSCO Loading... ()
] earnings rising over several quarters after "four consecutive guide-downs and 43 percent under-performance" against the S&P 500 over the last 12 months. Goldman expects fiscal 2012 earnings of $1.80 and 2013 earnings at $1.96, both higher than Wall Street expectations.Goldman's analysts said the Street has been "under-modeling" Cisco’s cost-cutting actions, which they believe can add 5 percent to 10 percent to fiscal 2012 estimates. The company said last week it would will cut 9 percent of its workforce, or 6,500 jobs, in an effort to boost profits.
The Goldman analysts think Cisco’s sales growth will hit bottom in the current quarter and "re-expand toward what we consider its normalized longer-term growth rate" of 5 percent to 7 percent year on year into fiscal 2012, "even assuming a declining switching business, as we estimate the growth rate of its remaining portfolio at 8 percent to 9 percent."
Click here for another view on Cisco.
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Disclosures:Disclosure information was not available for the Goldman analysts but the company does and seeks to do business with companies covered in its research reports.
- Wednesday, 27 Jul 2011 7:32 PM ETBy: Katie Little
As the price of crude oil has surged in the last year, several big oil stocks have followed suit. The next quarter will likely deliver good news again for these stocks, said one analyst—while another suggested examining how companies react to oil's rise before investing in them.
"I think one of the things to keep in mind is next quarter, we're probably looking at good numbers once again," said Blake Fernandez, a research analyst for Integrated Oil and Independent Refiners.
Several of the big oil companies have posted big gains because of the rise in oil prices. So far this year, ConocoPhillips [COP Loading... ()
] is up 34 percent, Exxon Mobil [XOM
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] has risen 37 percent and Chevron [CVX
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] has increased 40 percent."When I look at analyst expectations for crude prices, whether it be for WTI or Brent, I think they're well below spot [current] prices," Fernandez said.
He added that he expects upward revisions for analysts' third-quarter numbers, which would create a "nice uplift" for equities.
Fadel Gheit's View: Buy...Carefully
When deciding which oil companies to buy, investors should look at how companies react to oil's rise instead of merely purchasing any oil companies solely based on the rise, said Fadel Gheit, a managing director and senior analyst for Oppenheimer.
"It's the catalyst that's really going to move the stock—whether the company will increase production, will increase dividends," Gheit said. "You just don't buy the stock because oil and gas prices are moving higher. It's already priced in it. You look for a company that has a catalyst."
Gheit added that he thought ConocoPhillips was priced cheaply right now and could rise 20 percent in the next year.
Fernandez's stock picks for big oil were Exxon Mobil and Royal Dutch Shell [RDS.A Loading... ()
]. He said Shell was a standout from an operational standpoint and predicted growth upstream for the company between 2009 and 2012.He said Exxon offered investors "very nice share repurchase" of about $5 billion per quarter, which adds up to 4 to 5 percent of the share base annually.
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Disclosures:Both Fadel Gheit and his family own stocks that he discussed.
Disclaimer - Wednesday, 27 Jul 2011 4:39 PM ETBy: Pete Najarian
Traders were looking for Staples to ratchet back up after the office-supply retailer fell close to its 52-week lows yesterday.
SPLS [SPLS Loading... ()
] opened near the lows of the session but ended up gaining 2.32 percent to close at $16.32. Option activity picked up as the price climbed, and several large blocks of the August 16 calls were bought for $0.50, followed by more at $0.60 and then $0.65. More than 11,000 options traded overall in the company, but those August calls were the most aggressive strike on the board, with almost 8,000 trading against open interest of 2,481 contracts. Total calls in the name outnumbered puts by almost 4 to 1 yesterday, which reflects the bullish tone.
Staples is scheduled to report earnings results on Aug. 17.
—Najarian has no positions in SPLS.
More Options Tips from Pete Najarian
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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.
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- Tuesday, 26 Jul 2011 2:01 PM ETBy: Katie Little
As patents expire, will health-care stocks plunge?
In the next 14 months, patents for the top 20 drugs in the U.S. are set to expire. Although makers of top-selling drugs, such as Lipitor and Plavix, will no longer have a monopoly on these drug formulas, pharmaceutical stocks will be able to weather the loss of these patents, two health-care analysts say.
The upcoming patent expirations are built into the prices of health-care stocks, with many of them trading at massive discounts to the S&P 500, Seamus Fernandez, a managing director at Leerink Swann, told CNBC.
"Honestly we're starting to look at these stocks, and we think investors are looking at these stocks on post-cliff valuations—what we call the patent cliff, which we are really weathering a pretty major storm in 2012," Hernandez added. "But prospects are improving; pipelines are starting to look better. We actually think that this is an interesting time to take a look, but to take a selective approach."
Catherine Arnold, a managing director and senior research analyst at Credit Suisse, echoed this optimism about the sector.
"The industry's been bracing for this for a long time," she said. "We've been talking about this ad nauseum for an extended period of time. The growth does slow, but then you start to see it pick up as you move towards 2015."
Although the health-care sector is projected to lose about $90 billion from 2011 to 2015, which Arnold said would be hard on gross margins, she still sees potential in health-care stocks.
Arnold named two stocks in particular that she liked—Forest Labs [FRX Loading... ()
] and Pfizer [
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], which she called "underappreciated" and said would be releasing four additional drugs this year. Pfizer is also currently undergoing a restructuring effort.Fernandez's picks included Allergan [AGN Loading... ()
], which he said had "great growth in the near term," and Sanofi-Aventis [SNY
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], a stock he said that has a multiple that does not reflect its post-cliff growth.______________________________
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Disclosures:Disclosure information was not available for Seamus Hernandez, Catherine Arnold or their companies.
- Tuesday, 26 Jul 2011 11:05 AM ETBy: Hilary Kramer
NEW YORK —Once a seemingly unstoppable force, the U.S. consumer continues to face challenges like unemployment, weak real estate markets and high oil prices. In other words, it can be tough to think about buying retail stocks. After all, last week Borders announced that it will be completely liquidated.
Hilary KramerBut the sector is huge, and not all spending has dried up. If you look around, you’ll see there are definitely opportunities for investors.
Let’s take a look at 3 top retail stocks to consider right now even though conventional wisdom is leading investors away from the sector:
Casual Male Retail Group [CMRG Loading... ()
]: The company serves the niche of providing apparel for big and tall men, with brands like Nautica, Cutter & Buck and Ralph Lauren. Actually, it's the largest player in the category, with about 500 stores. Over the past couple months, the shares have been increasing at a steady rate. Then again, Casual Male looks poised to benefit from a couple positive trends. First of all, I think the economy will have a stronger back-half, which should mean improved job growth and income.
Next, Casual Male has been making investments in its new format, which is called Destination XL. A store ranges from 6,000 to 12,000 square feet, which provides for more selection. The result should be higher operating margins and sales volumes.
Keep in mind that the Casual Male addresses a market of about $6 billion. Yet the company has only a 7 percent share. In other words, there is much room for growth.
Wet Seal [WTSLA Loading... ()
]: The company, which operates 542 stores, sells discount apparel for women and teens (the two brands include Wet Seal and Arden B). While it has struggled for a couple years, the company appears to be making a turnaround. For example, it posted a healthy 7.3% increase in same-store sales in June. Wet Seal also has taken actions to lower its cost structure, so the cash flows have been strong. In fact, about 35% of the market cap is in cash.
Finally, Wet Seal should benefit from the experience of its new CEO, Susan McGalla, who was president of American Eagle [AEO Loading... ()
]. Abercrombie & Fitch [ANF Loading... ()
]: This is the symbol of youth coolness. While it’s a lucrative business, it is still incredibly hard to sustain, especially with premium pricing. But the company’s CEO, Michael Jeffries, is a top-notch retailer. Basically, as the economy continues to grow – even at a moderate rate – this should help juice revenues and profits. At the same time, the company has been aggressive with international markets.
Abercrombie & Fitch is also building a strong web business. Actually, the company operates four websites, which include brands like Abercrombie kids, Gilly Hicks and Hollister.
—Hilary Kramer has positions in CMRG and WTSLA stock.
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Hilary Kramer has 20+ years of experience on Wall Street, first as an analyst, then as a portfolio manager, investment banker and hedge fund manager. She is editor of GameChangers, Breakout Stocks Under $5 and High Octane Stocks. You can learn more about her stock picks as well as her latest buy and sell recommendations here.
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- Tuesday, 26 Jul 2011 10:31 AM ETBy: Margo D. Beller
APGoldman Sachs raised its 2011 through 2013 earnings estimates on Netflix in anticipation of higher prices after company separates its DVD-by-mail and streaming video plans.
New subscribers who want both services will have to buy separate plans totaling at least $16 per month, starting in September. Currently prices start at $10 a month.
Goldman analyst Ingrid Chung said in a report she expects 2011 earnings of $5.12 per share, 2012 earnings of $7.69 per share and 2013 earnings of $10.80 per share. She also reiterated the "buy" rating on Netflix [NFLX Loading... ()
] stock and set a six-month price target of $330 a share."Given management's experience over the last two weeks, Netflix expects roughly half of its subscriber base to remain 'hybrid' subscribers paying 20 percent to 60 percent more than their previous plans," Chung wrote.
She said the company "is being sufficiently conservative" in its estimate of 740,000 in net third-quarter subscriptions "as we believe that the vast majority of cancellations resulting from the U.S. pricing increase have already occurred." Netflix announced its plan on July 12.
Chung added that "we believe that we are still in the early innings of the international growth story and of seeing the true earnings power of the company."
Netflix reported second-quarter earnings that beat expectations although it missed on revenue.
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Disclosures:Disclosure information was not available for Ingrid Chung but Goldman Sachs has a financial relationship with NFLX.
- Monday, 25 Jul 2011 7:40 PM ETBy: Katie Little
As the Aug. 2 deadline to raise the country's $14.3 trillion debt ceiling
![[cnbc explains]](http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/_News/_CNBC_EXPLAINS/_IMAGES/CNBC_explains_icon1.gif)
approaches, investors should expect a downgrade—although it will probably only have a minor impact, said Thomas Lee, JPMorgan's chief U.S. equity strategist. Of the sovereign states that have been placed on ratings watches, 58 percent of these were subsequently downgraded, he said.
Because of this potential downgrade, policymakers appear to be losing credibility in the minds of equity investors, Lee said.
"I almost think what's happening is investors are starting to trust companies more than they are trusting governments," he said.
As state and local governments cut back on their spending, the corporate share of the U.S.' GDP is on the rise. In the second quarter, companies grew revenues five times faster than the broader economy.
After the Aug. 2 deadline has passed, Lee said he expects a "beta chase," in which investors return their money to markets. He also predicts a potential move of the S&P 500 toward 1400, an increase that he thinks will be fueled by industrials, basic materials, energy and tech.
In a June 11 appearance on CNBC, Lee predicted the stock market would rally during the summer and that economic data would start turning upward, beginning in July.
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Disclosures:Disclosure information was not available for Thomas Lee or his company. - Monday, 25 Jul 2011 6:04 PM ETBy: Andrea Ludtke
With the slight dip in the markets attributed to the stalled talks to raise the U.S. debt ceiling and the possibility of a default after the Aug. 2 deadline, analysts were split on whether the U.S. will default and how to play the market if it does, they told CNBC Monday.
Jamie Cox, managing partner at Harris Financial Group, said as long as earnings continue to hold up, the markets will hold up: "We were supposed to have economic Armageddon today and it hasn't happened yet."
Art Cashin, director of floor operations at UBS Financial Services, says the market isn't scared yet because it knows the stalls in the debt talks are a lot of "political posturing."
Cox thinks there will be a deal to raise the debt ceiling before the Aug. 2 deadline.
Brian Battle, director of Performance Trust Capital Partners, believes that even if the U.S. does default on its debt, the U.S. will make its Treasury bill bond payments. He said that the real concern should be over a potential downgrade. Battle said since Treasurys are often used as collateral, this will ignite a "collateral call."
"It's the monster in the room and all we can do is wait," said Battle.
In the event of a major sell-off in the market, Cox said it would be "the buying opportunity of the century... you want to buy when everyone else is running away."
Battle disagreed, saying "it'd be very difficult to stick your neck out now," citing a six-month high in the unemployment rate of 9.2 percent, a "huge housing overhang," and the uncertainty of the U.S.'s creditworthiness as ratings agencies have warned the U.S. of a potential downgrade of its AAA rating.
"You might have to wait until this tactical thing is over," said Battle. "Then you can start making some fundamental invesments."
Among the stocks Cox likes are McDonald's [MCD Loading... ()
], Merck [MRK
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], Eli Lilly [LLY
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], AT&T [T
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], Verizon [VZ
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], Deutsche Telecom [DT
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], and China Mobile [CHL
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Disclosures:Disclosure information was not available for the analysts mentioned or their companies.
- Monday, 25 Jul 2011 3:03 PM ETBy: Margo D. Beller
Tony Zabiegala doesn't want his clients up at night worrying about market volatility.
So to help them sleep well, the managing partner at Strategic Wealth Partners advises them to buy defensive, dividend-paying stocks, he told CNBC Monday.
"We feel that defensive stocks that are going to pay a nice healthy dividend will be a big part of total returns over the next several years," he said. That's why Zabiegala's picks include Bristol-Myers [BMY Loading... ()
], Altria [MO
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] and Duke Energy [DUK
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]."The thing these companies have in common is the healthy dividend. They have been outperforming the rate of inflation," he said.
In the same interview, Dan McMahon, director of equity trading at Raymond James, said this is "one of the strongest earnings seasons on record in recent history." He's "cautiously optimistic" going forward because the "market is being driven and directed by macro events in Europe and Washington D.C."
McMahon's picks are three Standard & Poor's sectors: S&P 500 Technology [.GSPF Loading... ()
], S&P 500 Energy [.GSPE
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] and S&P 500 Financial [.GSPF
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].Why the underperforming financial sector? These stocks have been beaten down, but still provide a good return, he said.
"This earnings season, most [financials stocks] have beat analyst estimates," McMahon said. "So it seems that, absent any debacles, people are growing a lot more comfortable owning them and we think we’ll see some loan growth."
Click here for a different view of investing in financial stocks.
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Disclosures:Disclosure information was not available for Dan McMahon, Tony Zabiegala or their companies.
- Monday, 25 Jul 2011 1:12 PM ETBy: Katie Little
As Netflix prepares to release its second-quarter earnings after the bell on Monday, one analyst told CNBC the company's Latin American expansion and subscription price hikes could boost its earnings outlook.
Mark Mahaney, Citigroup Investment Research's U.S. Internet Analyst & Research Director, outlined two key issues that he expects Netflix [NFLX Loading... ()
] to clarify in its guidance today.The company's stock, which is up about 167 percent in the last year, has been inching toward Mahaney's $300 price target; Citi has a "buy" rating on the stock.
One issue Mahaney discussed is how the company's recent price increase will affect domestic operating margins. He said it was "very hard to tell" how this change would affect the company's outlook.
"What they're doing is getting more and more people to move to streaming," he said. "They were already moving there anyway, but you move to streaming and it's a higher-margin business for Netflix. My guess is that it will lead earnings estimates to go up."
Netflix's expansion to Latin America could also affect the company's earnings outlook. The continent currently has about 35 million to 45 million broadband subscribers, Mahaney said.
He expects the company to have 50 percent year-over-year revenue growth this quarter, with streaming acounting for much of this growth.
"This is the fastest growth rate they've seen in five years," Mahaney said. "No particular reason why video streaming wouldn't be just as interesting a market, just as large, just as fast-paced in Latin America or in Europe as it is here."
He added that he views Apple [AAPL Loading... ()
] and Amazon [AMZN
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] as Netflix's two biggest long-term competitors.Not all analysts have been as optimistic as Mahaney regarding the future growth of Netflix's stock. Tony Wilbe, an analyst at Janney Montgomery Scott, recently said he has a "sell" rating and a $170 price target on the company. Wilbe told CNBC he was concerned that the company might not be able to attract enough new customers to cover its off-balance-sheet obligations.
WATCH: Mahaney discusses Netflix jacking up subscriber prices.
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Disclosures:Mahaney's firm has a stock ownership in Netflix of more than 1 percent.
Disclaimer
- Monday, 25 Jul 2011 11:20 AM ETBy: Margo D. Beller
Whatever comes out of the debt ceiling talks in Washington, the U.S. is headed toward a period of austerity, BlackRock Chief Equity Analyst Robert Doll told CNBC.
"We’re debating where and how much but we’ll get there. None of us will like the way we’re getting there but we’ll get there," he said. Congress and President Obama have until Aug. 2 to come up with a plan for raising the debt ceiling or the U.S. will default on its obligations.
Doll, who said he has sold "zero stocks" as a result of the uncertainty over the debt ceiling
, said his position remains unchanged. "We’re going to have a massive circus," he said. "It’s not going to be fun. In the 12th, maybe 13th hour we’ll get something done and we move on. Hopefully, it will be something substantial. If not, we’ll have to do something substantial down the line."
He added, "When Ma and Pa are watching their televisions sets and seeing...the chaos in Washington, it just doesn’t engender confidence."
However, as far as the market is concerned, it has been "a fantastic week for corporate earnings," with revenue growth up in the high single digits, he said. "That’s not so bad."
Click here for BlackRock's [BLK Loading... ()
] current strategy on equities.______________________________
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Disclosures:Disclosure information was not available for Robert Doll or his company.
- Friday, 22 Jul 2011 6:50 PM ETBy: Andrea Ludtke
With the rising price of oil putting the spotlight on energy, BlackRock Managing Director Dan Rice gave his top energy investment picks to CNBC on Friday.
Crude oil settled at $99.87 a barrel Friday, its highest since June 9, but Rice said his long-term focus on commodities means he is not looking at "where crude oil is going to be next week, but where it’s going to (be) two or three years down the road."
Rice said there is a "really good chance" crude oil could climb as high as $120 a barrel in the next two years, "if the world economies do not go into a recession.”
Rice said China is "the number one driver right now," noting the country currently demands 800,000 of the 1.3 million barrels of oil in the world.
He also said natural gas is a viable fuel source if the price of crude oil stays above $70.
Rice's Energy Picks:
Coal stocks rank high with Rice, namely Alpha Natural Resources [ANR Loading... ()
] and Consol Energy [CNX
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]. "The coal story isn’t a U.S. story—it’s a U.S. export story. So we’ve doubled exports of coal in the United States to satisfy world demand, which is growing substantially," especially with the power plant growth in China and India, Rice said.
He also likes Range Resources [RRC Loading... ()
]: "We think the stock is worth, as a stand alone, $70, but they’re limited in how much they can spend and how much value they can create on their balance sheet."He also thinks Plains Exploration and Production [PXP Loading... ()
] is undervalued, because of its "great positions in shale plays" and a deep water property in the Gulf of Mexico it will be financing.______________________________
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Disclosures:BlackRock owns a significant number of shares in one or more of the companies mentioned in this article.
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