VFC's Stock House Weekly Stock Watch, Week of 19 November
This week's stock watch list of hot stocks to watch includes: AAPL, GE, GOOG, JPM, C, BP, WMT, ANF, HD, SKS, KORS, LOW, BBY, CMG, MCD, YUM, ONTY, DNDN, ONVO, IMSC, PFE, UTHR, AMRN, SGYP, CLSP
This week the emphasis is on earnings, the fiscal cliff and potential rebound plays.
A full version of this week's report is available at: http://VFCsStockHouse.com
Newsmakers: Some big companies, such as Apple (AAPL), General Electric (GE) and Google (GOOG) made headlines last week - and could still this week - due to their respective share price declines during the latest market dip and for their potential to quickly rebound once the market turns around, while others were making the news for having to pay out huge sums of cash to settle ongoing drama. JP Morgan Chase (JPM) and Credit Suisse, for instance, agreed last week to pay a combined near-$500 million in fines to settle a case with the SEC over mortgage securities packaged and sold prior to the crash of 2008/09. The deal was announced without either firm admitting guilt, but JPM shares fell to below forty bucks again for the first time since mid-September, although that drop could more be attributed to the down market.
Also in the banking sector, Citigroup (C) agreed to pay $360 million to the brokerage estate of Lehman Brothers over a dispute relating to the Lehman bankruptcy in 2008. Citi also announced early this week that it plans to cut 300 sales and trading jobs over the course of the next year in an effort to streamline its banking operations.
Wal-Mart Stores (WMT): Retailers gained momentum last week when Abercrombie & Fitch (ANF) and Home Depot (HD) 'beat the street' while others like Saks (SKS) and Michael Kors Holdings (KORS) were well in line with expectations, but Wal-Mart - generally regarded as a stalwart of the sector - could not join the party. Although sales and revenues were up for the most recently-completed quarter, profit margins were down since the company offered steep discounts throughout the quarter to attract shoppers. Additionally, the company guided lower for the current quarter, noting that the discounts would continue (and maybe even go lower) in order to keep store traffic flowing. Such actions will kill profit margins even more, but could retain the consumer traffic necessary to spark and eventual earnings rebound. While the likes of ANF were jumping by thirty percent, WMT shares dove by four percent on the revised guidance. There's little doubt that Wal-Mart could rebound, as the third quarter did mark a turnaround in a trend that saw revenue declining for nine consecutive quarters, but the company is also slated to deal with some legal and union drama, too, coming up, which may make some investors nervous.
Oncothyreon (ONTY): Oncothyreon posted its third quarters earnings report last week, but like most developmental companies in the health care sector with key trial catalysts pending, investors were more concerned with updates on pipeline development than they were with the actual earnings numbers - especially since such companies have no earnings to report, only losses.
Organovo Holdings (ONVO): Organovo also reported earnings last week and has been gaining attention in the 3D printing and regenerative medicine sectors, two potentially very lucrative sectors. The company's NovoGen MMX Bioprinter uses live human cell samples to generate 3D "bioprints" of human tissue. Once generated, these 3D prints can be used as disease models that enable therapeutic drug research, discovery and development and - further on down the road - could potentially be used in generating organs for patients awaiting transplants.
Still considered a developmental company, investors - as with Oncothyreon - were more concerned with company updates regarding its Bioprinter than with the earnings numbers themselves, although the company did post a one hundred percent increase in revenue this year over the same period of the year prior thanks to grant money and revenue generated from research agreements. Aside from the National Institutes of Health, Organovo also has deals with Pfizer (PFE) and United Therapeutics (UTHR) that have already generated over a million dollars in cash, in total, and both have the potential to turn into something more lucrative - with key focus on the Pfizer deal since it is scheduled to expire at the end of this year.
Also during the quarter, Organovo received two key patents and re-located to a new research facility in San Diego that tripled its laboratory space.
Zacks.com initiated coverage of the company earlier this year with a rating of 'Outperform' and a price target of $3.25, based on the progress made thus far and on the business plan moving forward. The price target materialized fairly quickly, with ONVO reaching nearly $3.40 at one point last month before retreating back towards two, while last week's quarterly report indicates that the company is positioning itself to more aggressively push its 3D bioprinting technology into the field of regenerative medicine.
Shares slipped further towards two as the week progressed.
Other earnings stories to watch during the coming week will be Lowe's Companies (LOW) - especially following Home Depot's enthusiastic report last week; Best Buy (BBY), to see if it, too, can take advantage of a rebound in consumer confidence; and Chipotle (CMG), to see if this one will follow the trend of McDonald's (MCD) sub par earnings report earlier in the quarter or Yum Brands (YUM) enthusiastic report. Investors will be eyeballing CMG to gauge whether or not it's a safe buy-in, but many consider BBY as having hung on by a thread for too long, so disappointing numbers could lead to a significant drop.
Implant Sciences (IMSC): All attention these days for Implant Sciences revolves around the advancement of the company's Quantum Sniffer (QS) explosives trace detection (ETD) technology through the TSA certification process while also boosting international sales in high-threat areas. A couple of new international deals were announced last week, underlining the potential for future growth with or without the TSA qualification, and highlighting the versatility of the QS technology as threats of terror increase around the globe, while progress was made on the earnings front, too. In last week's quarterly earnings report, revenue for the reported quarter was 37% higher than the same quarter of the previous year.
The most pressing milestone that could go a long way towards solidifying the long case for Implant Sciences, however, would be the validation by the Transportation Security Laboratory's of the B220, which is being positioned for potential use in air cargo screening. Pending validation, which is still expected to come soon, according to comments made by company officials over the past couple of weeks, Implant will look to capitalize on the key December 3rd deadline imposed by the TSA stating that all inbound-US air cargo on passenger airliners will be screened for explosive traces.
Being in the "ramp up" stage of development and growth, investors will be keeping a keen eye on future earnings numbers, especially if the TSA certification comes through in the short term.
Healthcare, Biotech, Pharmaceutical:
Amarin Corporation (AMRN): Amarin shares were all over the place last week. Following an overseas rumor last month identifying AstraZeneca (AZN) as a potential buyer of Amarin, reports surfaced last week, too, that that Teva Pharmaceuticals (TEV) is interested. Shares spiked roughly a buck on that news before they retreated later in the week as another FDA delay regarding Vascepa's New Chemical Entity (NCE) kept some investors edgy. While the NCE status is not a show-stopper for a commercial launch, nor a show-stopper for a potential partnership or acquisition deal, it holds enough weight over Vascepa's future to put everything on hold until an outcome is known. With that said, it's crunch time for Amarin to decide whether to take any deal that may be on the table now from a potential buyer, launch the product on its own or continue to wait on the FDA. The company has previously noted that Vascepa would be launched in the first quarter of 2013, so any more waiting may either postpone that date or cause enough concern for investors that some may begin to sell - for those that haven't already - so waiting may not be the best option. With holiday season upon us, government agencies are primed to become even more ineffective and unproductive than they already are, so really who knows when a decision will be forthcoming on the NCE.
Synergy Pharmaceuticals (SGYP): Synergy Pharmaceuticals has made quite a bit of noise lately with a swift drop from near the five dollar mark to just over three, but as mentioned during the dive, those depressed prices may attract some significant buyers with the pending Plecanatide trial catalyst due during the first week of January. Some reasoning behind that thought process revolved around the recent announcement of a merger with Callisto Pharmaceuticals (CLSP), given that Callisto held a forty-percent position in SGYP previous to the deal and the merger would eliminate that roadblock to attracting new interest.
Synergy did end up attracting a pretty significant buy during that drop, notably from an insider as Chairman Gabriele Cerrone jumped in at right around the $3.60 mark. The buy took place right in the middle of SGYP's rapid recover, as shares moved from a low of $3.05 to a high of $4.40 in just four trading days.
It's also worth noting that volume for the upswing was higher than that of the downturn, indicating buyers took advantage of the drop.
Canaccord also initiated coverage with a 'Buy' rating and a price target of seven bucks earlier in the month, a move that also may have boosted investor confidence. Plecanatide results can now be measured in weeks, not just month, so SGYP could receive its fair share of attention through the holiday season.
Happy Trading and Happy Thanksgiving!!! Remember what's important.
Disclosure: Long AMRN, IMSC, SGYP.
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