Stocks quoted in this article:
Publication: "The Wall Street Journal"
Publication title: "Watch Out for Groupon's Stock Bounce"
Publication Date:
5/14/2012
Brief Summary:
Even though Groupon, Inc. (GRPN) surged some 40% from its all-time low after posting a first-quarter top-line rise last week, the stock could be headed for sour times. The author argues that despite its marketing budget dropping "to 21% of revenue in the first quarter from nearly 50% in 2011," the company "still doesn't generate net profit." In fact, the daily deals website's "guidance for the second quarter calls for just 2% growth in revenue compared with the first quarter."
From the columnist's perspective, the recent wave of short-covering activity could be a little hasty, as restrictions for insiders wanting to sell shares will be lifted on June 1. Given GRPN's overall fundamental and technical predicament, "Investors shouldn't step in front of a potential tsunami of selling."
Contrarian Takeaway:
The session after its well-received first-quarter earnings on May 14, GRPN bounced from its all-time low of $12.16 -- tagged on May 11 -- and pulled within pennies of the $15 mark. Coincidentally, this level represents approximately half its all-time high of $31.14, which was reached on the stock's first day of trading back in November. Since this post-earnings pop, the shares have dipped back below their downtrending 40-day trendline, and are struggling to find their footing in the $13 area. So far in 2012, GRPN is sitting on a 41% deficit.
In light of this downtrend, it's not surprising to see such a glut of negativity surrounding GRPN. Although short interest depleted by 25.3% over the past two reporting periods, it still accounts for 14.7% of the security's float. At GRPN's average pace of trading, it would take nearly eight days to buy back all of these pessimistic positions.
However, many analysts remain in the bulls' corner. For instance, the average 12-month price target sits at $19.22, which represents a roughly 58% premium to GRPN's closing price of $12.17 on May 15. Plus, there are six "strong buy" ratings, compared to 11 middling "holds," and two "sell" suggestions.
Compared to the broader equities market, GRPN has underperformed the S&P 500 Index (SPX) by 37.2% during the past 60 sessions. Should the stock extend its stint as a broad-market laggard, continued pessimism among short sellers, or a round of negative analyst notes, could spawn additional selling pressure.
Stocks quoted in this article:
Publication: "CNN Money"
Publication title: "You can be Sirius: Satellite radio is a good bet"
Publication Date:
5/1/2012
Brief Summary:
The author seems to be firmly entrenched in Sirius XM Radio's (SIRI) bullish camp, citing the company's better-than-expected first-quarter revenue rate right out of the gate. While the article points out that SIRI still sits far below the record highs it achieved in 2000, the stock has managed to bounce back after nearly flatlining in early 2009. In fact, analysts now expect the company's profits to grow at a rate of about 20% each year, according to Maxim Partners' John Tinker.
The piece goes on to note that advertising -- considered "a far more fickle revenue stream than monthly fees" -- makes up a mere 2.4% of SIRI's sales. What's more, the company's customer base rose to a record high of 22.3 million subscribers in the first quarter, even after price increases. Given SIRI's vast content offerings, the author suggests that the price hikes were justifiable. SIRI has also inked deals with a number of domestic and Japanese automakers to have its programming pre-installed -- a potentially profitable move, considering the recent rise in auto sales. The article does caution that the radio darling is currently embroiled in a dispute with Liberty Media over the controlling stake of the company, which could postpone any potential stock buyback plans. Still, the author concludes that with its growing clientele, SIRI should continue to come out on top, barring any major economic declines.
Contrarian Takeaway:
SIRI has certainly displayed some technical prowess lately, having advanced by more than 15% year-to-date. On the charts, the stock continues to trade above support at its 20-month moving average -- a trendline it has not breached, on a monthly closing basis, since December 2009.
Even so, the equity is still surrounded by a cloud of pessimism. Presently, SIRI's May and June series of options carry a host of put open interest. Specifically, the May and June 2 strikes hold peak put open interest of around 4,100 and 5,700 contracts, respectively. This area could translate into an additional layer of options-related support down the road.
Meanwhile, although short interest on the equity fell by 7.4% during the last two reporting periods, these bearish bets still account for nearly 8% of SIRI's available float -- or more than four days' worth of pent-up buying demand, at the stock's average pace of trading. This suggests that the security could still stand to benefit from a short-covering rally, which would provide a tailwind for SIRI.
Last but not least, although five of the nine analysts following SIRI have issued a "strong buy" endorsement, the remaining four have doled out "hold" or worse ratings. Moving forward, this leaves the door open for future upgrades, which could give the stock an additional boost.
Taking into consideration SIRI's technical strength -- as well as its latest earnings report and subscription growth -- the skepticism lingering toward the stock seems unfounded. Should the company continue on its current path, the equity's bullish bandwagon could become a lot more crowded.
Stocks quoted in this article:
Publication: "Kiplinger"
Publication title: "Stocks Back From the Bailout"
Publication Date:
5/1/2012
Brief Summary:
This article takes a glass-half-full view of American International Group (AIG), which gained instant notoriety on Wall Street amidst the financial crisis of 2008. Despite the fact that Uncle Sam still owns a majority stake in the insurance giant, the author argues that AIG -- and fellow bailout recipient General Motors (GM) -- "are performing far better than investors think, yet they are loathed because of how they performed in the past." In fact, the article points out that additional buybacks from the Treasury could be a boon for AIG. Plus, the company has drastically reduced its exposure to risky financial derivatives, thereby lowering the chances of another catastrophic crisis in the future.
Contrarian Takeaway:
Nearly four years after AIG was reeled back from the brink of collapse by the U.S. government, the stock is performing shockingly well on the charts. Since the start of December, AIG has chugged steadily higher along the support of its 10-day, 20-day, and 40-day moving averages. The shares are up more than 10% over the past year, and they've added an impressive 48% so far in 2012 -- outpacing the broader S&P 500 Index (SPX) by a mile.
As the author indicates, a healthy amount of skepticism is still levied against AIG. Short interest ramped up by 24.6% during the most recent reporting period, as a fresh crop of bears tried to call a top to the stock's unlikely uptrend. Analysts also remain unconvinced, with only 40% offering up "buy" ratings.
In fairness, it's hard to blame investors for giving AIG a wide berth. However, given the general lack of enthusiasm with which the stock's robust year-to-date rally has been greeted, contrarians with healthy risk appetites may want to give the one-time scourge of Wall Street a second look.
Stocks quoted in this article:
Publication: "MSNBC.com"
Publication title: "Analysts Like the Way Yoga Brand Lululemon Stretches"
Publication Date:
4/17/2012
Brief Summary:
This article notes that analysts are optimistic about Lululemon Athletica (LULU), believing there is room for further growth for the Canada-based maker of yoga gear. Mainly, analysts are impressed with how LULU operates -- investing in "functions like distribution and information technology that can support a larger geographic footprint," opening smaller stores that "blend events and fitness resources into the retail experience," and expanding into other markets like men's apparel. Plus, a promising plan for future development "is already creating buzz in the investment community." LULU is working on something it calls "everyday technical apparel," which takes its garments "out of the yoga studio or running track" and into the casual apparel arena. Although some analysts are skeptical that shares of LULU could be "worth as much as a pair of its signature pants," most are encouraged by the company's performance, both on and off the charts.
Contrarian Takeaway:
Indeed, LULU has been quite an overachiever on the charts, enjoying a 54.2% upswing in 2012, and a 43.2% year-over-year gain. The $70-$72 region emerged as a technical floor back in early March, and has cushioned every daily settlement since that time. In fact, the shares are trading within a stone's throw of their all-time high of $77.13 -- which was reached in intraday action on April 5.
In light of this uptrend, LULU could grab the attention of the bearish analyst holdouts, as only 55% of the brokerages following the stock consider it worthy of a "buy" or better recommendation. Furthermore, the average 12-month price target rests at $79.94, not far from LULU's current range.
Elsewhere on the Street, it looks as though a number of traders believe LULU's ascent will be short-lived. Although short interest is down 3.7% over the past month, it still accounts for 11% of the equity's available float. At LULU's typical rate of trading, it would take nearly six sessions for all of these shorted shares to unwind, pointing to a healthy supply of sideline cash to fuel future gains.
The options pits are loaded with bears, as well. During the past 10 days, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.81 puts for every call on LULU. This ratio arrives just six percentage points from a pessimistic peak, signaling that traders on these exchanges have rarely bought puts over calls at a faster pace during the past year.
Should LULU's impressive price action persist, an about-face from any of the skeptical brokerages, or a capitulation among option bears or short sellers, could prompt additional buying pressure for the athletic wear retailer.
Stocks quoted in this article:
Publication: "The New York Times"
Publication title: "Daring to Cut Off Amazon"
Publication Date:
4/15/2012
Brief Summary:
This article takes a hatchet to Amazon.com (AMZN) and its business tactics, with the author contending that the online retail behemoth practices monopolistic ways. By purchasing a product from the distributor, discounting it, and passing the savings on to the consumer, AMZN's strategy basically eliminates the "middle man." What this really does, according to the author, is takes away income from other retailers who are trying to sell the same product for the "real" price, by fostering "a low-price mindset among consumers." In fact, AMZN recently encouraged shoppers to browse brick-and-mortar stores, but then return home to purchase the items through AMZN. While these bargain-basement prices may seem appealing to the consumer in the short term, the author contends that this business model is "unsustainable," with both longer-term pricing structures, as well as AMZN's bottom line, in jeopardy.
Contrarian Takeaway:
Despite AMZN's ethical woes, the stock has fared well in 2012, with the equity currently sitting on an 8.8% year-to-date gain. Furthermore, the security has found a solid foothold atop its 90-week moving average. This trendline has contained all but two of AMZN's weekly closes since December.
Even though AMZN has put forth a solid technical showing, the bullish bandwagon remains far from overcrowded. In the options arena, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.01 indicates that put open interest and call open interest are nearly equal among options set to expire within three months.
Members of the brokerage bunch are split, as well. For starters, the average 12-month price target of $217.26 represents a lackluster 13% premium to the stock's current perch. Plus, 21 analysts maintain a "buy" or better recommendation toward AMZN, compared to 12 "hold" suggestions. As the stock continues to tack on gains, any price-target hikes and/or upgrades from this tepid group could encourage additional buyers to the table.
That said, traders should keep an eye on AMZN's April 26 earnings release. In its past four reports, the retailer has topped bottom-line expectations twice, and fallen short on two other occasions -- leaving room for another surprise when AMZN unveils its first-quarter results.