May 19, 2008

Monday, May 19, 2008

Turning to the equity market, Microsoft (MSFT: sentiment, chart, options) has reopened talks with Yahoo! (YHOO: sentiment, chart, options) about a deal that would not involve a full acquisition. The move comes just days after billionaire investor Carl Icahn said he would seek to oust Yahoo's board. In a statement Sunday, Microsoft said it "has raised with Yahoo an alternative that would involve a transaction with Yahoo but not an acquisition of all of Yahoo." However, the company did not specifically rule out a full acquisition.

Also in Monday merger activity, Electronic Arts (ERTS: sentiment, chart, options) is expected to extend its offer for Take-Two Interactive Software (TTWO: sentiment, chart, options) after a hostile tender offer failed to get majority support, The Wall Street Journal reported. The original $2-billion offer expired on Friday at 11:59 p.m. Take-Two management and some of the company's shareholders say the company deserves a higher offer, especially following record sales results of Grand Theft Auto IV, which have exceeded $500 million since its launch.

In broker activity, Goldman Sachs upgraded Amazon.com (AMZN: sentiment, chart, options) to "buy" from "neutral," and added the firm to its conviction buy list. Goldman cited strong revenue growth prospects, as it expects Amazon.com's investor base to widen as growth-oriented investors begin to take note of the shares. "We believe that a long recession could hurt Amazon's stock but help its business model, by removing offline retail capacity and pushing consumers to shop online," the broker added.

Finally, Lowe's Companies (LOW: sentiment, chart, options) reported that fiscal first-quarter earnings slid to $607 million, or 41 cents per share, from $739 million, or 48 cents per share, a year earlier. Analysts, on average, predicted earnings of 40 cents per share for the quarter. Net sales for the quarter fell to $12.01 billion from $12.17 billion a year ago, as same-store sales declined 8.4%. The company expects to open about 23 new stores in the second quarter. In addition, Lowe's expects second-quarter total sales to grow about 1% and same-store sales to fall 6% to 8%.

Opening View: Yahoo! and Take-Two Interactive Targeted for Takeover

Pre MArket Trading Inidications

Gapping down in reaction to disappointing earnings/guidance: NEXC -40.7% (very light volume following resumption of trading), LOW -3.6%, CPB -1.0%...

Other news: MPG -8.6% (confirms it has replaced President and CEO with Nelson Rising), BCE -7.9% (NY Times reports BCE buyout is in trouble), RBS -7.6% (following weakness in overseas trading after target cut at tier 1 firm), FEED -4.8% (Barron's comments on AgFeed consultant), ETFC -3.7% (sells stake in India-based financial services firm - NY Post), MTW -3.7% (revises its offer to acquire Enodis plc for $2.4 bln), GNK -3.3% (commences public offering of primary and secondary shares of its common stock), UN -3.0% (still checking), HD -2.1% (down in sympathy with LOW), RTP -1.6% and BHP -1.5% (still checking for anything specific)...

Analyst downgrades: TRA -4.1% (initiated with Sell at tier 1 firm), HOLX -3.4% (downgraded to Hold at Soleil), AKAM -2.6% (downgraded to Hold at Citigroup), GRMN -2.0% (downgraded to Hold from Buy at Needham), AEO -1.9% (downgraded to Underperform at FBR), CAL -1.6% (downgraded to Underweight at JPMorgan), BUCY -1.3% (downgraded to Hold at Keybanc), JOYG -1.2% (downgraded to Hold at Keybanc), DIS -0.7% (downgraded to Neutral at Pali Research).

Gapping up in reaction to strong earnings/guidance: PWRD +2.2%...

Select solar stocks showing continued strength: SOLF +10.0%, CSUN +8.5%, ASTI +6.0%, JASO +3.7%, ESLR +2.5%, YGE +2.3%, SPWR +2.1% (announces third Solar-Cell Fab), FSLR +1.2%...

Select stocks showing strength with slightly higher spot prices: GOLD +2.7%, AUY +2.1%, AEM +2.0%, ABX +1.5%...

Other news: MTZ +11.7% (Cramer makes positive comments on MadMoney), BTRX +8.9% (SAC Capital discloses 6.3% stake in 13G filing), CPST +6.0% (still checking), SCMP +4.6% (New AMITIZA phase III studies demonstrated overall symptom improvement in adult women with irritable bowel syndrome with constipation), BIDZ +2.1% (acquires $23.9 million lot of finished jewelry from bankruptcy auction), AZN +1.9% (still checking), PKG +1.6% (Cramer makes positive comments on MadMoney), NOK +1.6% (wins contract from TIM in Brazil to supply wireless network - Bloomberg), EMC +1.6% and INTC +1.2% (still checking)...

Analyst upgrades: NCC +4.8% (upgraded to Buy at Citigroup), AMZN +3.1% (hearing coverage assumed with Buy at tier 1 firm), TXN +2.2% (upgraded to Buy at Citigroup), CPWR +2.1% (upgraded to Buy at BofA), AAUK +1.2% (upgraded to Buy at Citigroup).

Gapping up: MTZ +11.7%, BTRX +8.9%, PWRD +3.8%, AMZN +3.1%, PKG +1.6%, EMC +1.6%, ABX +1.5%, YHOO +0.8%...

Gapping down: RBS -5.7%, TRA -3.2%, LOW -3.2%.