Thursday, February 27, 2014

3 Key Takeaways From Cabot Oil & Gas Corporation's Earnings


In reporting its fourth quarter results, Cabot Oil & Gas Corporation (NYSE: COG  ) again confirmed the high quality of its assets, but the report also highlighted a lingering problem. Cabot continues to produce monster wells in the Marcellus shale, yet it can't get market prices due to infrastructure snags. Similar to other firms, Cabot is reducing the projected 2014 capital spending budget while improving performance. In addition, the company is holding back on further expanding the Marcellus drilling program to seven rigs due in part to lack of infrastructure forcing the company to curtail growth efforts.

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 




Ocean Rig: Premium Rigs For a Premium Market


In the face of what is supposed to be a difficult offshore deepwater drilling market, Ocean Rig (NASDAQ: ORIG  ) produced a very impressive quarter. The CEO downplayed any weak market conditions in the premium rig area, suggesting that upcoming contract announcements would provide a clear price point for premium units.

The results bode well for a deepwater driller loaded with new, premium rigs that has seen its stock stagnate since originally going public and trading around this same $17 level. The news is promising for Pacific Drilling (NYSE: PACD  ) that has an even more premium fleet, yet has a few rigs lacking contracts for 2014. It also questions some of the concerns originally brought up by Noble Corp (NYSE: NE  ).

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Wednesday, February 26, 2014

Rocket Fuel: Only Taking Off

Last week, both Rocket Fuel (NASDAQ: FUEL  ) and Millennial Media (NYSE: MM  ) confirmed that the fourth quarter was a strong period for programmatic digital ads. While Millennial Media suggested the automotive sector might have pulled some revenue forward to the fourth quarter from the start of 2014, the general indication is that digital ads will increasingly move to programmatic platforms due to growing complexity.

Read the full article here.


Disclosure: Long FUEL and MM. Please review the disclaimer page for more details. 



Tuesday, February 25, 2014

Facebook: A $19 Billion Signal That It Has More Than A Teenage Problem

One thing is for sure regarding Facebook's (FB) purchase of WhatsApp: it signaled a desperate move regarding the future of social media. The social media giant is now faced with not only a teenage problem, but also a clear indication that it is unable to design the next hip app. The Q413 earnings call less than a month ago focused heavily on the Messenger product that it has now spent $19 billion to replace. Facebook is now stuck buying hot apps in an area where a new one might pop up every week considering the large prize on the line.

Read the full article at Seeking Alpha.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Chesapeake Energy: Hunting Value, Not Land


The recent surge in natural gas prices isn't benefiting investors in natural gas producer Chesapeake Energy (NYSE: CHK  ). The stock actually declined during the polar-vortex winter. Even though natural gas inventory levels have fallen below the lows of the last five years, the futures price for the fuel source used to generate electricity hasn't moved much. In essence, the market still isn't convinced that a long-term structural change has occurred in the natural gas market.

Chesapeake Energy remains one of the largest natural gas producers despite a move to focus on greater oil production. The company projects approximately $5.4 billion in capital expenditures during 2014, which will be nearly completely funded via operating cash flow. Other energy producers including Halcon Resources (NYSE: HK  ) and SandRidge Energy (NYSE: SD  ) are encountering the same issues of capital efficiency not leading to stock gains.

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Monday, February 24, 2014

Walter Energy: Bullish on Met Coal But It Might Not Matter


After weak met coal guidance from Alpha Natural Resources (NYSE: ANR  ) and Arch Coal (NYSE: ACI  ) , Walter Energy (NYSE: WLT  ) surprised the market with bullish commentary on the coal needed for steel production.

Walter Energy is the largest pure-play met coal miner trading on the domestic stock exchanges. After closing another thermal coal mine, the company expects to only produce 300,000 tons of thermal coal this year, leaving the sole thrust on met coal. Other domestic coal miners produce met coal along with sizable amounts of thermal coal used for electricity production.

Read the full article here.


Disclosure: Please review the disclaimer page for more details. 



Friday, February 21, 2014

3 Takeaways From Zillow's Earnings


Now that Zillow (NASDAQ: Z  ) has sold off to the tune of 10% following competitor Trulia's (NYSE: TRLA  ) earnings, investors need to refocus on the solid takeaways from Zillow's own strong earnings.

Zillow and Trulia are battling in the rapidly developing online real estate market with Realtor.com operator Move (NASDAQ: MOVE  ) . By total traffic metrics and market capitalization, Zillow is the leader in the sector, but the competitors are spending heavily in an attempt to close that lead. The key takeaways from the fourth-quarter earnings report is that Zillow continues to expand the leadership position in traffic to real estate sites.

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Thursday, February 20, 2014

Why Are Activists Targeting Williams Companies Inc?


The news came out last Friday that activists had raised their stake in Williams Companies (NYSE: WMB  ) . The activist firms of Corvex Management and Soroban Capital Partners had previously claimed a 5% position back in Dec. in hopes of pushing the large pipeline operator into consolidating the industry to spur growth.

The firms are so adamant that Williams has more potential that combined they've spent an astronomical $2.5 billion to build a near 10% position. The firms spent the previous week amassing around 1.2 million shares per day with limited impact to the stock. From a potential investor's standpoint, what strikes an interesting cord is that Williams doesn't appear to offer much value from the outside.

Read the full article here.


Disclosure: No position mentioned. Please review the full disclaimer page for more details. 




Delta Air Lines: Cash-Flow Machine Despite Headwinds?


Don't look now, but the airlines have become massive cash-flow generators. Delta Air Lines (NYSE: DAL  ) is leading the industry, and it's forecasting an incredible operating cash flow for 2014 of over $5 billion. Most investors see cash flow as the ultimate financial indicator of corporate success, as it accurately shows how the business is performing over time. Companies can't mask the shifts in cash balances like they can with income statements; therefore, looking at cash flow provides a cleaner view of how the company is actually operating.

The amazing part about the airlines is that their vast cash flows are being generated despite high fuel costs and a sluggish economy. Delta isn't exactly experiencing roaring passenger demand, but the industry as a whole is benefiting from improved operational efficiency and reduced capacity due to mega mergers, including the recently finalized one that created American Airlines Group (NASDAQ: AAL  ).

Read the full article here.


Disclosure: Long AAL. Please review the disclaimer page for more details. 



Wednesday, February 19, 2014

Halcon Resources Corp: Management Potential Can't Overcome High Debt Load


As Halcon Resources (NYSE: HK  ) gets prepared to report earnings on Feb. 26, a few key points will pique investor interest. The oil exploration and production company holds plenty of promise due to the experienced management team that sold Petrohawk Energy to BHP Billiton for $12.1 billion, yet the balance sheet, loaded with $3.3 billion of debt, has constrained its growth prospects.

While debt can be used to grow a company faster if it can produce more cash than the interest costs, in many cases a large debt load can reduce growth rates below maximum potential. With Halcon Resources, the growth rate has constantly been scaled back due to the divestiture of non-core assets. Unfortunately, the sell-off of assets often creates a downward spiral in production, even though the proceeds from the sales can be utilized to fund core asset growth.

Read the full article here.


Disclosure: No position mentioned. Please review the disclaimer page for more details. 



Tuesday, February 18, 2014

C&J Energy Services Inc Expanding Despite a Weak Market


Despite a weak operating environment for domestic oil services, C&J Energy Services (NYSE: CJES  ) undertook an aggressive expansion plan for 2013. That strategy culminated in several deals during the fourth quarter and further plans for 2014. The reported financials continue to disappoint due to higher costs for expansion, but the company might be set up to take advantage of suddenly sparse natural gas inventories.

The domestic hydraulic fracturing specialist has spent the last couple of years expanding the business line and, surprisingly, building new equipment. Now with natural gas inventories plunging to five-year lows, C&J Energy is positioned to take advantage of a market where utilization is already firming.

Read the full article here.


Disclosure: Long CJES. Please review the disclaimer page for more details. 



Friday, February 14, 2014

Pacific Drilling: Still Struggling to Gain Momentum


The longtime promises of Pacific Drilling's  (NYSE: PACD  ) ultra-deepwater drillships continue to get investors nowhere fast. The stock went public at the end of 2011 to quickly jump to the $10 level. Pacific Drilling has gone virtually nowhere over the last couple of years as it builds its fleet.

Pacific Drilling is focused on providing global ultra-deepwater drilling services to the oil and natural gas industry through the use of high-specification drillships. The company took delivery of its first drilling ship at the end of 2010 and now operates five ships with three more under construction.

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



SodaStream Investors Need to Calm Down

SodaStream (NASDAQ: SODA  ) released preliminary full-year 2013 numbers prior to the recent ICR XChange Conference that sent the stock crashing. The company ran into some headwinds in the U.S. market along with currency fluctuations that affected sell-in prices and increased costs. The combination worked to smash the gross margin during the domestically important fourth quarter, but there are several reasons for investors to calm down and think long term.

Read the full article here.


Disclosure: Long SODA and SHLD. Please review the disclaimer page for more details. 



Wednesday, February 12, 2014

WPX Energy Still Lacks Growth, Leading to Low Valuation


Several years after a promising spinoff from Williams Companies (NYSE: WMB  ) , WPX Energy (NYSE: WPX  ) is still struggling to build a growing production base. The E&P has hit some prolific wells in the Niobrara Shale, yet issues in the Marcellus combined with declining legacy fields have left the company bumping along the bottom. At the time of the spinoff, WPX Energy reached production levels of 1,308 MMcfe/d and forecasted that the 13% annual production growth would continue.

The guidance for 2014 again shows a natural gas producer stuck in its tracks. This is in contrast to Range Resources Corporation (NYSE: RRC  ) , which continues to produce higher volumes and ramp up proven reserves in the very region where WPX Energy is having the most problems.

Read the full article here.


Disclosure: Long WPX. Please review the disclaimer page for more details. 



Monday, February 10, 2014

Are Sharks Really Circling Clean Energy Fuels?


In a couple of recent articles (I, II) it was presented that Clean Energy Fuels (CLNE) had sharks circling for the great demise of a failing provider of natural gas for transportation fuel. While the stories provide tons of details regarding a market preference for compressed natural gas, or CNG, the articles fall far short in explaining that Clean Energy already has a focus on CNG. The big point of the articles was the flawed build out of America's Natural Gas Highway (ANGH) based on liquefied natural gas, or LNG. While possible, investors need to remember that Clean Energy is the leader in both CNG and LNG with no preference in the fuel to use other than economics. Did it leverage the business on a flawed concept or is it possible that competitors in the fueling industry lack the same level of knowledge and made mistakes?

Interested parties should review the video from Clean Energy discussing the reason for choosing LNG for the highway network and review why an alternative fuel transportation expert such as United Parcel Service (UPS) would utilize LNG from Clean Energy. More importantly, investors should read the market update from Clean Energy on Monday.

Read the full article at Seeking Alpha.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Buying Alongside Apple's Record Buyback


Apparently Apple (AAPL) has somewhat taken the advice of Carl Icahn by accelerating the stock buyback after the stock slumped following reporting holiday sales. According to the Wall Street Journal, CEO Tim Cook revealed during an interview that the company had purchased a whopping $14 billion worth of stock in the two weeks since the earnings results sent the stock plummeting below $500.

Remember that the number is impressive in size alone considering Apple generated $22.7 billion in operating cash flow during the December quarter. The company has previously spent over $40 billion on returning capital to investors, but the $14 billion spent in a couple of weeks is a major step up in spending.

Read the full article at Seeking Alpha.


Disclosure: Long AAPL. Please review the disclaimer page for more details. 



Friday, February 7, 2014

Buying Alongside Apple's Record Buyback

Apparently Apple (AAPL) has somewhat taken the advice of Carl Icahn by accelerating the stock buyback after the stock slumped following reporting holiday sales. According to the Wall Street Journal, CEO Tim Cook revealed during an interview that the company had purchased a whopping $14 billion worth of stock in the two weeks since the earnings results sent the stock plummeting below $500.

Remember that the number is impressive in size alone considering Apple generated $22.7 billion in operating cash flow during the December quarter. The company has previously spent over $40 billion on returning capital to investors, but the $14 billion spent in a couple of weeks is a major step up in spending.

Read the full article at Seeking Alpha.


Disclosure: Long AAPL. Please review the disclaimer page for more details. 



Thursday, February 6, 2014

Deepwater Market Divide Is an Opportunity for Atwood Oceanics, Inc.


In the middle of rehashing the same short-term weakness story in the deepwater drilling sector, Atwood Oceanics (NYSE: ATW  ) actually admitted that the weakness in the market was only impacting the old rigs. The company, while being cautious the whole earnings conference call, actually admitted that the bifurcation in the market is an opportunity and not a threat.

The call started with the general theme of the Noble Corp. (NYSE: NE  ) report calling for a pause that would refresh the market. Atwood Oceanics discussed slowing demand, which would hamper old rigs that might be cold stacked eventually. Atwood Oceanics hasn't actually seen any slack in demand for the high-specification rigs it is building. The report generally backs the ongoing theme of SeaDrill (NYSE: SDRL  ) that new deepwater rigs will continue to command strong prices through at least 2020.

Read the full article here.


Disclosure: Long ATW. Please review the disclaimer page for more details. 



Wednesday, February 5, 2014

SeaDrill Sees Robust Demand Through 2020


With Noble Corporation (NYSE: NE  ) reporting a pause in deepwater drilling demand and an influential analyst predicting plunging demand in the sector, it's a good time to review the long-term case in the sector. Last week, SeaDrill (NYSE: SDRL  ) attended the SEB Nordic Seminar and reiterated a very bullish long-term case for offshore rigs. With the company's stock down over 20% in a few months, investors should consider the stock if one believes in the bull case.

SeaDrill is a leader in the deepwater drilling segment focused on building out a high specification fleet and returning large amounts of capital to investors. The company's stock currently yields over 10%.

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



InvenSense: Leading the Always-On Revolution to Profits


Already a leader in motion sensing and tracking technology used in smartphones and game consoles, InvenSense (NYSE: INVN  ) recently released some intriguing chips for the "always-on" revolution. The company has been a promising technology stock for a couple of years, based on speculation that it would add Apple to an already-strong customer base including Samsung (NASDAQOTH: SSNLF  ) , LG Electronics, and Nintendo, among others. The latest chip releases suggest InvenSense could leap into the wearable market and unleash years of growth without obtaining Apple as a customer.

Read the full article here.


Disclosure: Long INVN. Please review the disclaimer page for more details. 




Tuesday, February 4, 2014

Will Weatherford Ever Steer Operations Straight?


Only last week, Schlumberger (NYSE: SLB  ) produced solid results based on a strong operating environment in the international segments. Those results would generally present a positive background for other international focused oil-service stocks such as Weatherford International  (NYSE: WFT  ) . Unfortunately, though, Weatherford did its typical pre-announcement of bad results regardless of the operating environment.

Weatherford spent the last couple of years dealing with accounting and tax issues that were about to become part of its past. After reporting solid third-quarter results, investors had expected the smallest of the oil-service majors to finally produce solid results for investors. Instead, the company came out with preliminary earnings in a range of $0.05 to $0.08, partially hit by an effective tax rate of 50%. Analysts had expected earnings to grow sequentially from $0.23 reported in the third quarter.

Read the full article here.


Disclosure: Long WFT. Please review the disclaimer page for more details. 



Monday, February 3, 2014

1 Follow-On Offering to Buy For Long-Term Gains


After large gains following a successful IPO, it is typical for the company to do a follow-on offering allowing for pre-IPO shareholders to cash out. While this may appear to be the insiders cashing out at the top, the reality is that the top stocks doing these secondary offerings tend to move even higher.

Recent hot stock Rocket Fuel (NASDAQ: FUEL  ) announced plans to sell at least 5 million shares following the release of preliminary fourth-quarter 2013 earnings. The company provides a leading programmable advertising solution based on artificial intelligence, or AI.

Read the full article here.


Disclosure: Long FUEL. Please review the disclaimer page for more details. 



Sunday, February 2, 2014

Noble Corp: What Investors Are Missing


After reporting earnings on Jan. 22, investors continue to sell off shares of Noble Corp  (NYSE: NE  ) due to fears of a cyclical downturn in the previously robust offshore drilling market. The company is busy completing a newbuild program that will modernize the fleet while at the same time spinning off the older standard assets into Noble Spinco. The spinoff will help focus the company into two separate companies with different objectives to benefit shareholders, but the old assets might lose significant value in a cyclical downturn.

The stock sold off on the news of an industry pause, but people appear to be missing the extreme valuation and the limited slowdown forecasted by management of Noble. In addition, the suggested pause probably has a different impact on companies with a young fleet of premium, high-specification rigs such as SeaDrill (NYSE: SDRL  )  as opposed to companies with older fleets such as Transocean (NYSE: RIG  ).

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Zynga: Don't Be Shaken Out


The recent downgrade by Sterne Agee on Zynga (NASDAQ: ZNGA  ) apparently shook out many investors, considering that the company's stock plunged roughly 12% that day. The interesting news about the analyst report is that it provided virtually nothing in the way of news to investors who were paying attention.

Zynga continues to be a leading social gaming platform that is struggling to complete a turnaround under new CEO Don Mattrick. While Mattrick came to Zynga from Microsoft (NASDAQ: MSFT  ) with a ton of promise, he has yet to place his stamp on the company. Zynga has coffers stuffed with $1.5 billion in cash and a strong lineup of game franchises, yet it hasn't done much to innovate in the last year. The company has recently made some moves, including agreeing to accept Bitcoins and releasing an interesting slots game, but investors expect much bigger things out of a heavy hitter like Mattrick.

Read the full article here.


Disclosure: Long ZNGA. Please review the disclaimer page for more details. 



Potash Pricing Floor Doesn't Signal a Recovery


The recent potash deals with China provided the market some hope for a floor in pricing, but investors shouldn't confuse that with a recovery. The pricing for potash slumped during 2013 due to a disagreement between the Belarusian partners of Belaruskali and OAO Uralkali. The high margins afforded North American potash producers were smashed, sending shares of PotashCorp  (NYSE: POT  ) , Mosaic (NYSE: MOS  ) , and Intrepid Potash (NYSE: IPI  ) down to multi-year lows.

Last week, agreements from both Canpotex (the North American marketing partnership between Potash, Mosaic, and Agrium) and Uralkali were for 700,000 metric tons of potash in the first half of 2014 at market prices. Canpotex didn't disclose the price, while Uralkali accepted a settlement of $305 per metric ton. The pricing possibly provides for a global floor for potash prices, but it in no way indicates any recovery in pricing.

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details. 



Saturday, February 1, 2014

Will 20% Sector Growth Support the Outrageous Multiples of 3-D Printing Stocks?


A recent report by the Feedonia group is bullish on 3-D printing growth through 2017, but industry numbers make one question the valuations of 3-D printing stocks. Typically, investors are willing to pay up for fast-growing stocks, but in certain scenarios the price paid can rob growth from future years. Review the Internet bubble years and see how even the top stocks spent years -- if not the next decade -- with revenue growing and the share price flat to down.

In this case, the top 3-D printing stocks -- 3D Systems (NYSE: DDD  ) , Stratasys (NASDAQ: SSYS  ) , and ExOne (NASDAQ: XONE  )  -- trade at earnings and revenue multiples suggestive of explosive growth. In reality, industry demand is expected to grow around 20% according to Feedonia through 2017, or at about the same rate as the last five years. Other widely respected industry resources, such as Wohlers, place the growth at higher rates. Either way, the market growth is solid and supportive of strong stock valuations, but the gains in this sector in 2013 have priced in years of substantially higher growth.

Read the full article here.


Disclosure: No positions mentioned. Please review the disclaimer page for more details.