Archives for Stocks

Goldman Sachs BDC (GSBD) –

Goldman Sachs is spinning off some of its secured debt business in the form of an initial public offering. The company is selling 6 million shares at a price range of $20 to $21. The specialty finance company formed in 2012 makes $36.9 million on revenue of $73.3 million.  The market cap if the stock prices at the midpoint of its range will be around $725 million.

IPO Analysis –

This is a closed end fund. The way these typically trade is for a $1 to $2 decline over the first few months and for the stock price to remain flat afterwards. This is only an investment for a specific type investor and for the general investor our Recommendation – Avoid.

Tantech Holdings Ltd. (TANH)-

This company manufactures bamboo-based charcoal products that are used in household heating, cleaning, purification, agricultural and industrial energy fields. It has both a domestic and international sales and distribution network, which generate net income of $11.8 million on revenues of $64.7 million. Tantech is offering 3.2 million shares at a price range of $4 to $6 per share. The underwriter is ViewTrade Securities and the offering will be on a ‘best efforts’ basis.

IPO Analysis –

This offering is too small for us to recommend with a market cap of just $108 million. We also shy away from any stock that can easy trade below $5 per share, making the security non-marginable at most brokerages and hurting liquidity. The fact that the offering is a ‘best efforts’ means the underwriter does not have to buy all the shares before the IPO, therefore a large percent of shares could be dumped on the market shortly after the offering. Recommendation – Avoid.

National Commerce (NCOM) –

National Bank of Commerce is a relatively small local bank with locations in Alabama and Florida. They are offering just 1.6 million shares at between $18.50 and $20.50 per share. Giving them a post offering market cap of $177.5. This bank has assets of just over $1.1 billion and pulls in a net income of $5.4 million on revenue of just $31.3 million.

IPO Analysis –

This is a very small bank in comparison to many others in the region and that makes this a riskier investment. I don’t see a huge first day pop happening and the company is not right for our portfolios, however nothing terrible stands out in its balance sheet and we don’t think it will lose a lot of value in the first few months of trading. Recommendation – Neutral. 

SteadyMed (STDY) –

SteadyMed is an early stage biopharma company based out of Israel. Its main product is called Trevyent and is for the treatment of pulmonary arterial hypertension. It also has two product candidates for the treatment of acute pain and a medical device called PatchPump which delivers those drugs. The company is offering 4.3 million shares at a price range of $12 – $14 per share, giving the company a market cap of around $160 million.

IPO Analysis –

SteadyMed has yet to generate revenue from its product sales, which is typical of a biopharma at this stage. These companies usually trade flat until they start to make deals with bigger pharmaceutical companies to finally get their drugs to market. They also usually go public when their primary product is still one to two years away from FDA approval, meaning we think there will be a better entry point into the security in the near future. Recommendation – Neutral.

Valeritas (VLRX) –

This company makes medical devices, with its commercial product being an insulin delivery system designed to help people with Type 2 diabetes maintain their target blood glucose levels. Last year the company had $13.5 million in revenue but ended up losing about $75 million in net income. It is offering 5 million shares at a price of $14 – $16 per share.

IPO Analysis –

While it is nice that the company has a product on the market that is making money, its high operating expenses mean it is likely to require additional outside capital in the future to keep its business going. We don’t recommend it at this time and we think there could be better entry points in the future. Recommendation – Neutral.

Activision Blizzard is working on the biggest gamble in the company’s existence. One of the most anticipated games of the year ‘Destiny’ gets released tomorrow and the company is expecting big numbers. The video game publisher claims to have dumped more than $500 million into the development of its latest project with Bungie. It would be the most money ever spent on a video game. Dwarfing Rockstar and Take-two Interactive’s Grand Theft Auto V’s $232 million price tag.

The company held an open Beta test over the summer which originally was only available to players who had pre-ordered the game. Because of the high demand, the beta test was then additionally opened to Xbox Live Gold and Playstation Plus subscribers. The total number of players that participated in the beta test according to Activision was 4.6 million. Although most companies don’t report beta test statistics, this was by far the biggest test on record.

Activision is in desperate need of a new triple-A franchise as its two most popular game series’ Call Of Duty and Madden NFL have plateaued in sales and are getting long in the tooth. Call of Duty is now in its 15th year and Madden has been leading the football simulation genre since 1989. Having a popular franchise game is essential to a publisher’s earnings as it allows the company to sell new versions every 1-3 years with a far lower development cost. For instance a new Madden NFL is released every year with only minor tweaks and player updates over the previous version and is still one of the most popular games in August.

That’s good news considering the huge upfront cost that Activision shelled out for Destiny. Another positive sign is Moody’s upgrading the company’s debt. Cheaper borrowing will help with the company’s promotions for the upcoming holiday season.

The stock itself has been looking very strong. Partially because comps from a year ago look so positive. In 2013 video game sales were abyssmal, but a large contributer to the poor performance was consumers simply waiting for the new game consoles from Microsoft and Sony. Video game software sales totaled $13 billion in 2013 and have already surpassed that number this year.

Industry analysts have predicted Destiny to ship between 8 and 16 million units in the first week of release. I believe it will do north of 10 million and anything at the top end of the range will cause a solid bump in the stock price. I expect Activision stock to be trading around the $27 level early next year after the company reports holiday sales.

Citigroup is releasing its second quarter 2014 earnings this Monday (June 14) before the opening bell. The current consensus estimate is for the company to earn $1.06 per share. Some analysts have the company earning as much as $1.14 a share. Citigroup did beat analyst expectations last quarter significantly, however the previous two quarters saw the company coming in lower than a lot of expectations.

Union Pacific Corporation (UNP)

The Board of Directors of the Union Pacific Corporation (UNP) have authorized a two-for-one split of the companies stock. Shareholders on record as of May 27th, 2014 will receive an additional share for every share they own, to be distributed as a dividend on June 6th. In the same announcement the company also said it will be distributing a cash dividend of 0.91 cents per share (0.455 post split) on its common stock. It’s the same amount that UNP paid last quarter and the company has now paid dividends on its stock for 115 years.

UNP Chart

UNP data by YCharts

Vivendi Selling Activision Stock

Vivendi S.A. filed a registration statement with the Securities and Exchange commission to sell nearly half in holdings of Activision (ATVI) stock in a public offering. The deal is set to close on May 28th and is a result of previous transaction agreements between the two companies. Activision will of course not receive any proceeds from the sale. Activision stock has been an excellent performer up around 25% year to date. However, it lost nearly two and a half percent on the announcement of the offering.

 ATVI Chart

ATVI data by YCharts

Google’s (GOOG) stock has had a significant run-up over the past year and continues to hit new 52-week highs. The company is constantly expanding into new areas in order to offset the continuing decline in the cost-per-click ad market. While the company doesn’t beat earnings every quarter, one thing is constant, the company always surprises. And not by a penny or two, but in two of the last four quarters the company surprised analysts by more than 13%. One of those quarters was on the upside and one a downside surprise. So with the market hovering around its recent highs and the economy on the road to recovery, will Google report much better than expected earnings on Thursday?……..Click here for the full articleWill Google Miss Earnings Estimates When It Reports Q2 2013 On Thursday?

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