At the conclusion of each week, VFC's Stock House examines some news items, stocks and stories that made headlines during the previous trading week, but may also make headlines or influence trends during the upcoming week as well. First thoughts again go to those who are still pulling themselves or their loved ones together after the wrath of Hurricane Sandy.
Finally, the politics may be winding down. Undoubtedly, Tuesday's US presidential election results will be the story of the week after an extremely long campaign season that has over-saturated the news media outlets and Facebook discussions for the better part of a year. Once the results are in on Tuesday, hopefully everyone can take a deep breath, lose some bitterness and all move forward together because - after all - we all play for the same team.
The markets will look to rebound from a sell-off on Friday that saw the DOW, Nasdaq and S&P all drop by just about a percentage point. Those results reversed an early-day bullish trend after an encouraging jobs report revealed that more jobs were created than expected during the month of October. The unemployment rate, however, jumped to 7.9% as more people started looking for work. With the presidential race reaching its culmination point, this report stood as the last real economic data release before Tuesday's election and was predicted to potentially influence the final outcome. The trends of the report, however, were not notable enough to have any real bearing on the election since each party could spin the numbers however they want, while the movement in numbers was not likely significant enough to change anyone's mind anyway. It's also a given that most have absorbed the fact that this earnings season is a weak one, so the recent sell-off should be seen as a relative non-factor to the political drama and not as a vote of confidence one way or another.
This week, though, the situation could reverse itself to where we see the election results influencing the markets, not the markets potentially influencing the results. Traders and investors don't like uncertainty and since the race is still pretty much a toss-up right now, the markets could start to react on Wednesday to the new-found certainty of an elected President - assuming there is a clear winner.
As such, we could potentially be in store for another round of volatility as the political side-show completely plays out. Regardless of how it all ends, this should be the week where America gets her commercial breaks back, the talk show guys can return to being funny again (and not so political), Facebookers can re-friend all of those they un-friended during the campaign season, and the near-comical bitterness of all of our major media outlets can start taking a chill pill and get back to what they should be doing - reporting the news.
While the majority of attention will be paid to the White House, look for developing events across the pond in Europe to potentially play a factor in the global markets, too. The European economy is far from safe, especially with Greece continuously on the verge of bankruptcy as the government attempts to implement huge rounds of austerity measures in order to keep bailout money flowing. Pushed to the side for the better part of a month, now, it's still worth keeping an eye on news from Europe - especially relating to the Greek and Spanish economies.
In the meantime, there's always a few stocks and stories to keep an eye on - here's just a few of them...
Starbucks (SBUX): As the broad markets dropped on Friday, Starbucks shares jumped by over nine percent with triple the normal trading average following an enthusiastic earnings release that bucked the trend for the season. Some had tempered expectations for the Starbucks report, given the still-sluggish global economy, but the company proved that consumers still have the confidence - and free cash flow - to spend on their daily dose of quality coffee. Perhaps most-encouraging was the increase in consumer traffic to the company's stores - another strong sign of consumer confidence - and also enough to spark company officials to boost revenue forecasts for the coming year. Also resulting from the positive report was a twenty-four percent boost in the SBUX dividend rate. Moving forward, Starbucks will look to take advantage of a growing economy and revenue generated by its single-serving coffee machine to spur future growth.
In an earnings season that has proven disappointing, Starbucks emerged as one of the bigger winners and - given the revised guidance to the upside - there could be more to come.
Dendreon (DNDN): Dendreon also proved an earnings winner on Friday while the broad markets tanked as shares spiked by as high as over thirty percent on huge volume before closing the day a full sixteen percent to the upside. The catalyst for the DNDN spike may not have been so much the twenty seven percent revenue spike for Provenge over the same previous-year quarter, but more for the stability in sales from "community oncologists" and the predicted savings from cost-cutting measures implemented earlier in 21012. Dendreon officials expect the savings from such measures to reach $150 million annually, when fully implemented.
Although up from the previous year's same quarter sales numbers, Provenge revenue was down modestly from the second quarter of this year. So, while the rebound story may be taking shape after a relatively distraction-free earnings report, investors will now be looking for a renewed growth trend by the next report or the reinvigorated enthusiasm surrounding DNDN trading could be quickly lost. The expanded coverage by Aetna (AET) - as announced during the closing days of September - should help the short term prospects for growth - especially if other insurers follow suit - while the potential for an ultimate European Provenge approval provides longer-term potential.
In the meantime, the signs are there that DNDN is still positioning as a solid rebound play, although there will be continued concerns from analysts and investors about potential competition from Medivation's (MDVN) Xtandi, Sanofi's (SNY) Jevtana, and Johnson & Johnson's (JNJ) Zytiga.
At least for the time being, however, Dendreon looks to have investors convinced that the worst is finally behind the company.
Amarin Corporation (AMRN): Looking forward, Amarin Corp is slated to report its quarterly earnings on Thursday, November 8. Investor focus on this report will not be geared towards numbers, but rather towards hints of a plan - any plan - for the commercialization of Vascepa in the treatment of very high triglycerides. Since Vascepa's approval this summer it's been widely speculated that the company would go the buyout/major partnership route, but distractions surrounding the yet-to-be-decided New Chemical Entity (NCE) designation by the FDA for Vascepa have overshadowed all else as investors grow increasingly impatient with the silence from the company. Amarin has strengthened its position, regardless, with the announcements of numerous new patents covering Vascepa over the past few months and some may read the silence as evidence that discussions with potential buyers are ongoing behind the scenes.
As previously discussed, this situation is highly reminiscent to that of Human Genome's in the lead-up to that company's ultimate deal with GlaxoSmithKline (GSK). Drama, buyout rumors, and investor impatience persisted in that scenario, too, before a buyout finally materialized - although for far less than where early expectations had placed the potential value of a deal.
Given the uncertainty surrounding NCE, predicted valuations may be tempered and it could be wise to expect a buyout to occur for less than the mid-$20 price range previously anticipated. That said, investors will be looking for signs of anything on Thursday in regards to the way-ahead for the Vascepa launch. It's probable, too, that the company will not be any more forth coming this week than it has in the recent past.
Spectrum Pharmaceuticals (SPPI) will be another hot earnings story to watch this week after shares have fallen significantly from their summertime highs to close Friday at under eleven dollars again. Spectrum was riding a wave of good news on the earnings front during the first half of 2012 - based mainly on increasing sales of FUSILEV in the treatment of colorectal cancer - before short interest took over and pushed the share price south. Investors riding that wave may have bailed with significant profits as expectations persist that a boost in generic manufacturing of leucovorin will soon eat away at FUSILEV profits. The leucovorin shortage could widely be viewed as the spark that ignited the FUSILEV sales rush and - although the company is taking measures (including discounting) to maintain the gained market share - many predict that the shortage will prove only temporary. Proof that the company is still generating revenue in line with expectations - including modest growth for the company's second product, Zevalin - could help shares to rebound.
Aside from the previous quarter's sales numbers, investors will also be looking heavily at guidance moving forward. Last week Spectrum announced a "strategic" reshaping of its sales force in the US to better support the sales growth of its lead products - to include FOLOTYN, which was recently-added to the portfolio through an acquisition of Allos Therapeutics (ALTH) - while also reducing expenses associated with a growing force by "streamlining structures" and improving efficiencies.
Short interest is still extremely high for Spectrum shares, so volatile moves in either direction pose as a consistent threat to SPPI trading, but with that said, any news that looks better-than-expected could spark a rally based on short covering. On the other hand, any disappointments would likely allow the shorts to push shares further downwards.
One of the hotter stories in the sector to watch this week.
Also of earnings note this week, look for reports from Capstone Turbine (CPST) and Cummins Inc (CMI) in the industrial sector. Cummins has largely recovered from a mid-month dip to below ninety bucks while Capstone will look to prove that recent trends of growing revenue, backlog and margins are enough to keep investors interested in the company's prospects for eventual profitability.
Walt Disney Co. (DIS): Even with all the late-week political headlines stealing the show, Disney may have trumped them all by announcing that the company had completed a deal worth just over four billion dollars to purchase Lucasfilm and the Star Wars franchise. Not wasting any time, Disney has already announced that it is planning on bringing Episodes seven, eight and nine to market, with Episode 7 slated for 2015. Disney has already proven that it could turn big-splash acquisitions into global successes and earnings victories - as evidenced by the pick-ups of Pixar and Marvel - and although some of the Star Wars crowd may look at this deal skeptically, there should be little doubt that the hype surrounding the next trilogy could quickly make this another successful blockbuster of a deal for Disney, too.
Shares slipped to below fifty dollars on the news on increased volume, and some may look for a further pullback in share price following the expenditure of so much cash and the issuance of new shares in conjunction with the deal, but over the long run Disney is continuously building an entertainment juggernaut that cannot be ignored. In fact, it's almost not fair now.
Iron Man vs. Vader - coming up. Snow White vs. Leia vs. The Black Widow? Money.
DIS is also reporting earnings this week, with an expected release after the market close on Thursday.
Facebook (FB): Facebook made some noise earlier in the month following an earnings report that not only beat the street estimates, but demonstrated potential in the key mobile market, from which it was revealed the company drew fourteen percent of its revenue. Shares reached nearly twenty five bucks on more than quadruple the normal trading action following the encouraging report, but this week's news came when shares quickly fell back closer to twenty amid reports indicating that insiders were taking advantage of lock-up period expirations to sell. The expirations-related sell-offs were no surprise - such moves led to price declines earlier in the year, too - but they still attracted the attention of some high-profile headlines, nonetheless, possibly because there are still lock-up periods in effect.
According to a Bloomberg report, "Two lockups will expire for an additional 960 million shares by the end of the year, followed by one for 47.3 million in May 2013."
Although the swift decline in price following the earnings spike may offer investors who still hold a positive outlook for the company moving forward, it's still possible that the best time to buy will be on the other side of those billion-plus shares being sold - assuming they are eventually sold.
It's possible, however, that the lock-ups could become a moot point if the company can continue to generate earnings strength through mobile. Analysts and investors alike believe that revenue generated from applications on mobile platforms is the wave of the future - if not the present - and that will likely be the most-watched number regarding Facebook earnings moving forward.
In the meanwhile, investors will still be eyeballing these lock-up expirations.
Healthcare, Biotech, Pharmaceutical:
MRI Interventions (MRIC): Shares of MRI Interventions continued to hover around the two dollar mark during the storm-shortened trading week and volume has tailed off a bit of late, too. The current levels mark the lower end of a trading range established after the announcement of a stock offering pulled shares back from the five dollar level earlier this summer and may offer investors an attractive buying point, given recent developments that could have the company positioned for significant growth. As noted last month, MRIC has managed to make impressive strides in revenue growth through the 'disposable items' associated with its ClearPoint procedures. ClearPoint - and MRIC's ClearTrace, too - are MRI-enhancing systems that provide medical professionals with real-time imagery during complicated procedures on the brain and heart, respectively. The company banks revenue on sales of the system itself, but can continue generating revenue from that system through the said 'disposables.'
This is particularly noteworthy now - as the share price trades at the lower end of its range - since the CEO recently announced that it is in the process of boosting its sales force in order to spur quicker growth. Also according to the interview, all progress thus far has been accomplished with a minimal sales team, indicating that MRIC is still only in the early stages of growth - especially considering that the healthcare industry as a whole is looking for new equipments, measures and procedures that could lead to less-invasive and more effective procedures. ClearPoint and ClearTrace fit that bill and the technology is also hitting the European market, too, offering another potential avenue for revenue growth.
Just as recently as one month ago MRIC hit the three dollar mark, emphasizing the quick moves that can materialize inside the stock's trading range. Financing should not be a concern until the mid-way point of 2013.
Synergy Pharmaceuticals (SGYP) continued its downward momentum last week, too, as the broad markets dropped, but the slide may be looked at as an opportunity for those maintaining a positive outlook regarding a late year catalyst that could prove to be the most significant milestone met to date for this still-developing company. It expected that by the end of December the company will announce results from the recently-completed Phase IIb/III Plecanatide trial in the treatment of chronic idiopathic constipation (CIC). Barely a month ago SGYP was trading for nearly five dollars in anticipation of these results - with credit for the higher prices also deserved for Ironwood Pharmaceuticals (IRWD), who received approval for Linzess in September. Linzess uses the same mechanism-of-action as Plecanatide and its approval provided additional validation to Plecanatide in the eyes of investors.
It's highly possible that SGYP could be in a position to rebound leading into the results release.
For one, companies in this sector tend to see their share prices appreciate in value leading into key events, such as the release of late-stage trial data, but SGYP could also be benefiting from increased institutional interest. When the company announced a merger with Callisto Pharmaceuticals (CLSP) earlier in the year, it nullified the fact that Callisto held a forty-percent position in SGYP - a rather large position by one entity and a factor generally regarded as roadblock to attracting institutional interest. With that roadblock all but removed (the deal is expected to be finalized within the current quarter) institutions and funds could look to get in now before the key date later this year.
If that's the case, then these sub-four prices could be just as attractive to the bigger players as they are to the smaller investors looking to play the catalyst. With numerous analysts still maintaining price targets significantly higher than the current levels, SGYP continues to be one of the hotter stories to watch for the duration of the quarter.
Lpath, Inc. (LPTN) on Friday announced that it had filed a shelf registration statement with SEC that will offer the company the opportunity to "offer and sell, from time to time, up to $20 million of securities consisting of its Class A common stock, warrants and units, or any combination thereof."
Also according to the release, the shelf will enhance the company's ability to better "respond to business opportunities."
Friday's news is the latest chapter of an up-and-down year that began with a temporary trial halt - that was unrelated to the efficacy or safety of leading product candidate iSONEP in the treatment of Wet AMD - and culminated last month in a reverse stock split after the iSONEP trial had been re-started.
Lpath is a recognized leader in the field of lipid-based therapeutics and its ImmuneY2 technology is being developed to target various ailments, including Wed AMD and cancer. The company has already landed a partnership with Pfizer (PFE), although the deal does not cover full development, hence the need for Lpath to raise funds from time to time.
There will likely be more news forthcoming in relation to the shelf announced this past Friday and given the potential of Lpath's ImmuneY2 pipeline, any resulting dips that may materialize could offer a decent accumulation point with an eye towards 2013 trial results and the potential for Pfizer - which also holds a first right of refusal for ASONEP - to take a larger stake in the company.
Explosive Trace Detection (ETD) / Global Defense:
Implant Sciences (IMSC): It's crunch time for Implant Sciences in regards to the ongoing validation by the Transportation Security Laboratory's (TSL) of the company's QS-B220 explosives and narcotics trace detector which is being positioned for potential use in air cargo screening - especially given 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 - but business continues to move forward on the international front, too, as indicated by a Friday announcement of a further push into Nigeria. According to the release, Implant has sold three more QS-H150 handheld explosives trace detectors to a corporate customer in Nigeria, marking the fifth order to that country in the last six months.
As discussed earlier in the year, Nigeria's security situation is alarming, with businesses constantly operating under the consistent threat of terrorist attacks, and Implant has found a niche foothold in that market. Multiple deals have also been signed this year in the Middle East and Europe, but the holy grail - at least according to most investors - would be the TSA validation of the products that would potentially enable to company to land government contracts in the US and in other countries that model their own approvals after those of the US TSA.
Friday's announcement is encouraging when gauging the potential for international growth, but most investor discussions will be based on the TSA outcome.
Technology, Products, Services:
Sirius XM Radio Inc. (SIRI) traded higher by over three percent on Friday - on a broad-market down day - and renewed investor enthusiasm that the stock would soon breach the three dollar barrier. The company reported earnings last week and there were few surprises, given the enthusiastic prequel by CEO Mel Karmazin during Liberty Media's (LMCA) analyst meeting earlier in the month, although the company did report better-than-expected revenue growth. Earnings were seen as off, but the company continues to pay down and retire existing debt with its free cash pile. SiriusXM also predicts 1.8 million total net subscriber additions for the full-year and maintains an enthusiastic outlook as Liberty Media approach de-facto control of the company.
The real question investors were asking themselves leading into this report revolved around the leadership position once Karmazin leaves in February, as reported late last month, and whether or not the stock is still a buy, or even a hold, when the three dollar mark is breached.
It's likely that the new CEO will end being a Malone lackey - it is perceived personality conflicts by a couple of huge egos in the industry that led to Karmazin stepping down - while some analysts still predict that SIRI is a four dollar stock. With such a strong following, many of the SIRI faithful will likely hold, and not sell a dime, while others will predict a rapid pullback following such impressive gains over the past year, but the truth may lie somewhere in the middle.
SIRI is soaring with a recovering auto industry, and strength in that sector should continue to do SIRI well, especially considering the strong and exclusive content offered by the SatRad provider. The future buy/sell value of the company, however, will inevitably lie in the hands of Malone - assuming FCC approval of the deal - and his vision for the company's future. At some point subscriber growth will slow in the US, so other avenues of growth may have to be entertained, whether it's expanding or combining technologies with existing offering or it may even be time to take this business international - which - of course - will mean more satellites and up-front cash investment, but there's definitely a global market waiting.
The North America isn't the only continent with growing traffic problems.
Roundup: With a full slate scheduled - including US elections, earnings reports and key economic news from overseas - this will be anything but a dull week. Market volatility should be considered a near-certainty as attention again shifts to Europe after the US elections are over. Trading opportunities could be a-plenty, but so can buying opportunities for those that prefer to take the buy and hold route. And any dip in DIS could turn out to be money - it's likely that the $4 billion investment in the Star Wars series will be paid back well before Episode 9 makes its rounds.
And here's to the would-be marathoners who decided - once the race was cancelled - to make the trip to Staten Island and help clean up. Closing thoughts again go to all of those still recovering and reeling from tragedy - not just here, but in all the world's flashpoints, too many of which go unnoticed.
Go vote. Not only is it the right thing to do, but it's a freedom granted to too few on this earth. It's also a duty that goes unappreciated by too many of those that have it.
Disclosure: Long DNDN, AMRN, IMSC, CPST, SGYP.
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