Friday, May 27, 2016 - 3:56pm
Public Domain

Shares of GameStop Corp. (NYSE: GME) were trading down roughly 3.7 percent on Friday afternoon following the announcement of the company’s first-quarter financial results and second-quarter guidance. EPS of $0.66 beat estimates by $0.05, while revenue of $1.97 was in line with expectations; however, management guided for a 4 to 7 percent decline in comps over the second quarter and EPS of $0.23 to $0.30, below the Street’s $0.31 consensus.

Following the earnings report, Piper Jaffray analysts Michael J. Olson and Yung Kim reiterated an Overweight rating and $41 price target on shares of the omnichannel video game retailer. So, let’s take a look at their comments.

Related Link: Pacific Crest Says "Difficult To Recommend" GameStop Following Q1 Earnings; Stock Slumps 6%

As per the research note, the strong first quarter results were a results, among other things, of robust sales of Ubisoft’s 'The Division' “and non-core related revenue streams (mobile & CE, collectibles, etc.), offset by below consensus revenue for New Hardware (-29 percent y/y).”

While the company did not buy back stock over the first quarter, management said it expects to repurchase a large amount ($75 to $125 million in stock) before the end of the year. “The console cycle continues to have a strong trajectory with >40 percent faster uptake of new gen consoles vs. the first 10 quarters of the prior cycle, which is positive for GameStop and the publishers,” the analysts added. However, GameStop is clearly feeling the impact of surging digital software sales, they concluded.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.


Friday, May 27, 2016 - 3:51pm
Public Domain

BMO prefers Qorvo Inc (NASDAQ: QRVO) over Skyworks Solutions Inc (NASDAQ: SWKS) on valuation metrics, while initiating coverage of Skyworks at Market Perform with a $69 price target.

"Along with Broadcom Ltd., and Qorvo, Skyworks is one of the 'three horsemen' in the RF semi space," analyst Ambrish Srivastava wrote in a note.

Skyworks' Appeal

Skyworks has a reputation of more consistent execution in an industry where the carriers and handset makers "look to provide smartphones with high data throughput bounded by limited wireless spectrum."

"The operating margin structure is very akin to an analog model. However, given the customer concentration issue, we do not see shares of SWKS breaking into the realm of the valuation occupied by the diversified analog companies in our coverage," Srivastava said.

Qorvo's Cutting Edge

As a result, the analyst find Skyworks fairly valued and prefers Qorvo over Skyworks, as "we find QRVO's valuation more attractive, its positioning better and see upside to the company's operating margin."

"Specifically on a P/E, EV/Sales and EV/FCF basis, we find QRVO more attractive," Srivastava highlighted.

Woburn, Massachusetts-based Skyworks is a leading provider of RF solutions for mobile and broad market applications.

Expectations And Justification

In the mobile market, the analyst said Skyworks "has increased its mix of mobile integrated systems over time (40 percent in FY13 to 52 percent in FY15) and lowered its mix of discrete power amplifiers."

"The company believes its broad markets total available market (TAM) opportunity will be $10 billion over a two to three year period and the analyst believes Skyworks can grow Broad Markets at greater than 20 percent over the long term.

"In FY15, the company had one greater than 10 percent customer at 44 percent of total sales, which we believe was Apple Inc. (NASDAQ: AAPL). For CY15, when including both Samsung and Apple, Skyworks has roughly 54 percent exposure to these two customers, respectively," the analyst stated.

Skyworks has a $4.5 billion run rate target, $8.00 EPS target and 2017 EPS of $6.42.

At the time of writing, shares of Skyworks were up 0.39 percent at $66.43, while Qorvo was up 0.18 percent at $50.62.


Friday, May 27, 2016 - 3:42pm
Public Domain

Tesla Motors Inc (NASDAQ: TSLA) has finally announced when the much anticipated gran opening of its Gigafactory will be. The event is scheduled for Friday, July 29, at the company’s facility right outside of Reno, Nevada, an email sent to select customers said.

Following the announcement, Global Equities Research’s Trip Chowdhry assured that traditional automakers like General Motors Company (NYSE: GM), Ford Motor Company (NYSE: F), Mercedes, Toyota Motor Corp (ADR) (NYSE: TM), Honda Motor Co Ltd (ADR) (NYSE: HMC) and BMW, among several others, “are completely clueless and are about to experience their own Blackberry and Nokia moment.”

Related Link: Chowdhry: Everyone Wants To Be A Tesla Supplier

According to the analyst, unlike the companies mentioned above Tesla is not an automaker; it’s “a complete industry — made of tightly coupled sub-ecosystems.” But, what does he mean by that?

Well, he said, it’s important to notice that like no other auto company out there, Tesla has:

  • Its own gas stations
  • The Gigafactory (which could be seen as an equivalent of an oil refinery)
  • Its own retail stores
  • Its own service stations
  • Its own cloud and over the air updates system

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.


Friday, May 27, 2016 - 3:38pm
Public Domain

Longbow has downgraded EMC Corporation (NYSE: EMC) to Neutral from Buy on valuation as the shares reached the brokerage's target price of $28.

"Valuation has expanded as confidence grew in Dell's ability to raise the required capital to acquire EMC, through new debt raises and asset sales. Consequently, there is little remaining upside to capture," analyst Joe Wittine wrote in a note.

Related Link: Should Investors Shift Away From Old Tech Legacy Stocks

In October, Dell agreed to buy EMC for $67 billion. The U.S. regulators have approved deal in February.

At the time of writing, shares of EMC were down 0.09 percent to $27.82.


Friday, May 27, 2016 - 3:34pm
Public Domain

Shares of Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ: ULTA) soared 11 percent and touched a new 52-week high after reporting better-than-expected first-quarter results and raised its full-year outlook.

Quarterly Results

The company earned $1.45 per share on $1.07 billion in revenue. Analysts had expected earnings of $1.29 a share on revenues of $1.03 billion.

Comparable store sales rose 15.2 percent versus an increase of 11.4 percent in the first quarter of fiscal 2015. The 15.2 percent same store sales increase was driven by 11 percent growth in traffic and 4.2 percent growth in average ticket.

Retail comparable sales increased 13.9 percent and e-commerce sales grew 38.8 percent to $61.0 million.

Related Link: Cramer Is Watching Ulta Salon And Time Warner Today

"In an envt where modestly positive comps are hailed, 15 percent lies on another plane," Nomura analyst Simeon Siegel wrote in a note.

Siegel, who has a Buy rating on the stock, said, "ULTA continues to gain awareness and share in a growing pie, amid a category that has been generally ecomm defensible with a tight control on distribution."

"Comps and GMs posted meaningful upside, which we expect will persist and although valuation is clearly the pushback, it has been so for the past $100 of share price," Siegel added.

Expectations And Justification

For the second quarter of fiscal 2016, the company currently expects net sales in the range of $1,041 million to $1.058 billion. Comparable sales for the second quarter of 2016, including e-commerce sales, are expected to increase 11 to 13 percent. EPS is estimated to be in the range of $1.32 to $1.37.

The company also raised its fiscal 2016 sales and earnings per share guidance. The company plans to achieve comparable sales growth of approximately 10 to 12 percent versus previous guidance of 8 to 10 percent. It sees total sales to rise in the high teens percentage range, compared to prior estimate of mid to high teens percentage range.

The company expects fiscal 2016 EPS growth in the low twenties percentage range, higher than previous guidance of 18 to 20 percent. The analyst raised FY16 EPS view to $6.19 from $5.98 and FY17 EPS estimate to $7.63 from $7.16.

Siegel also increased price target on the stock to $244 from $215.

The stock touched a new 52-week high of $237.53 and at time of writing is up 8.38 percent to $231.59.


Friday, May 27, 2016 - 3:28pm
Public Domain

Shares of Ionis Pharmaceuticals Inc (NASDAQ: IONS) lost 39.42 percent on Thursday after the company announced that GlaxoSmithKline plc (ADR) (NYSE: GSK), which has the option to license the company’s IONIS-TTRx — currently undergoing a Phase 3 trial, has decided not to initiate a Stage 3 trial for CARDIO-TTR until there’re data from the NEURO-TTR and investigator-sponsored Phase II aTTR cardiomyopathy studies available.

Following said event, BMO Capital Markets analyst Do Kim decided to downgrade the stock from Outperform to Market Perform, while trimming the firm’s price target from $55 to $26, as the experts lower their sales projections for TTR-Rx on the back of “a potentially weaker competitive profile.” Also impacting on BMO’s decision was the expectation of a “lower probability of success to TTR-Rx and volanesorsen commercialization given increased regulatory risk.”

Related Link: Cowen Downgrades Ionis After Thrombocytopenia Issues

As per a research note issued Thursday, the analysts believe that the detection of thrombocytopenia cases in the Phase III volanesorsen studies further overshadows the underlying cause of platelet reduction.

While analysts at BMO anticipate the volanesorsen trials will increase their platelet monitoring and remain on schedule, they think “the uncertainty increases the risk for FDA intervention,” the report stated.

Upside risks to the firm’s Market Perform rating include a faster-than-expected approval of nusinersen in infants, a sooner-than-anticipated start to the CARDIO-TTR trial, and encouraging data from Ionis’ mid-stage pipeline – especially FXI-Rx, GCGR-Rx and DMPK-2.5Rx.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.


Friday, May 27, 2016 - 3:25pm
Public Domain

MB Financial Inc (NASDAQ: MBFI) disclosed Friday that its Board has declared a cash dividend of $0.19 per share, up from $0.17 per share paid in recent quarters. On an annualized basis, the dividend worked out to $0.76 a share. The dividend offered a yield of 1.9 percent, which was higher than the five-year average dividend yield of 1.3 percent.

MB Financial said that the dividend would be payable on June 30 to holders of record of the Company's common stock as of June 15.

The latest dividend payout ratio worked out to be approximately 32 percent, which was higher than the five-year average dividend payout ratio of 23.0 percent. The company has been boosting its dividend rate for the four straight years. As a result, the five-year average dividend growth pace was 120.48 percent.

At time of writing MB Financial was up 1.18 percent.

MBFI, News, Dividends

Friday, May 27, 2016 - 3:22pm
Public Domain

Global Equities Research analyst Trip Chowdhry sees the cloud services provided by Amazon.com, Inc. (NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT) as the end of the road for Palo Alto Networks Inc (NYSE: PANW). According to Chowdhry, Palo Alto simply won’t be able to compete with its larger rivals in the long term.

“Basically, in the world of SuperClouds — Amazon.com AWS and Microsoft Azure, Palo Alto Networks [has] zero play… secular growth is absent in PANW,” Chowdhry explained.

Related Link: Benzinga Breakdown: Analysts Give Palo Alto More Mixed Reviews Than "Batman V Superman"

Chowdhry went on to describe a cloud computing environment that will ultimately be very unkind to the smaller players and their shareholders.

“Amazon.com’s AWS and Microsoft Azure are creating completely new ecosystems comprising Software Developers, Testers, Cloud Service Providers, PaaS Providers and SaaS Providers,” he noted.

Secular Negatives

Chowdhry sees the increasing dominance of Microsoft and Amazon as a “secular negative” for Palo Alto and the following:

  • NetApp Inc. (NASDAQ: NTAP)
  • Cisco Systems, Inc. (NASDAQ: CSCO)
  • Juniper Networks, Inc. (NYSE: JNPR)
  • Arista Networks Inc (NYSE: ANET)
  • Rackspace Hosting, Inc. (NYSE: RAX)
  • VMware, Inc. (NYSE: VMW)
  • Teradata Corporation (NYSE: TDC)
  • Akamai Technologies, Inc. (NASDAQ: AKAM)
  • Pure Storage Inc (NYSE: PSTG)
  • F5 Networks, Inc. (NASDAQ: FFIV)

Palo Alto shares are down more than 12.0 percent in Friday’s session after the company issued weaker-than-expected forward guidance.

Disclosure: The author holds no position in the stocks mentioned.


Friday, May 27, 2016 - 3:13pm
Public Domain

Canaccord Genuity said Splunk Inc (NASDAQ: SPLK) shares are poised for a break out after a strong quarter.

Quarterly Results

Splunk reported a strong quarter as revenue, operating margins and FCF came in ahead of expectations. The company recorded 318 orders over $100K, up 41 percent from last year and ASPs came in at the high end of the expected $40–50K range. The company is able to post this numbers is in a quarter that is seasonally weak for large deals.

"Investors are gradually coming around to our supposition that Splunk 1) is the leader in a comparatively less competitive segment, 2) the security push should keep revenue growth above 30 percent," analyst Richard Davis wrote in a note.

Related Link: Morgan Stanley Raises Target On Splunk From $53 To $58

"In our experience buying a software stock for less than1.0x EV/FCF/G is frequently a precursor to above market stock price returns," Davis added.

Rating, Estimates And Justification

The analyst estimates an EV/FCF of about 26x on C2017E, which is less than 1.0x the firm's growth rate.

Davis, who has a Buy rating on the stock, said Splunk "has marked time since late September 2014, the company has grown, and the multiple has compressed to an attractive level."

"Investors understandably move on and lose interest during these adjustment periods, but we believe the company and stock are worth looking at, and well, buying again," Davis noted.

Splunk raised its full-year revenue guidance by $16 million to $896 million (at the high end). Despite the revenue increase, non-GAAP operating margins were maintained at 5 percent, which represents a 120bps improvement year-over-year.

Related Link: Bangladesh Hackers Target More Asian Banks

Operating cash flow is still expected to be roughly 23 percent of revenue for the year, or $206 million based on the revised high-end of guidance. Davis expects over 400 bps of FCF margin improvement in F2018 as FCF returns to more normalized levels.

The analyst has raised his price target by $5 to $65.

"Splunk is now one of our favorite mid-cap growth names, and we'd use any derivative-driven weakness (PANW) as an opportunity to add to positions. Reiterate BUY," Davis highlighted.

At the time of writing, shares of Splunk were up 2.24 percent to $56.16.


Friday, May 27, 2016 - 3:05pm
Public Domain

T-Mobile US Inc (NASDAQ: TMUS) said that it was getting ready in advance to get its network to face a challenging hurricane season. The company pointed out that the National Hurricane Center at NOAA (National Oceanic and Atmospheric Administration) released its 2016 Atlantic Hurricane Season Outlook, and it‘s anticipating more activity than the country has been witnessing for years with 10–16 tropical storms and 4–8 hurricanes, with up to four major hurricanes.

Related Link: Barclays Maintains Overweight On T-Mobile US, Raises PT To $49.00

T-Mobile Chief Technology Officer Neville Ray said, "We know how critical it is to stay connected with the people you care about — especially in an emergency. Day in and day out, this team works incredibly hard to deliver the best possible network experience to our customers. And, when the weather turns nasty, we go into overdrive to keep our network running and keep you connected when you need it most."

The telecom service provider said that In advance of any hurricane forecast to make landfall in the United States, it sets up an engineering command center near the expected area of impact and could deploy response teams to ensure interruptions to service that are kept at a minimum.

Additionally, the company's Geo-Redundant Network Operation Centers (NOCs) closely manage network traffic and further coordinate any response to an event like the aftermath of a hurricane.

At time of writing, T-Mobile was down 0.38 percent.