Archives for May 2012

May 2012 - Page 7 of 15 - Money Morning - Only the News You Can Profit From

Facebook Stock Ready to Roll - But Where Will it Go?

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The Facebook IPO price was set and the stock is ready to start trading – but will it live up to its hype or sharply sell-off?

The social media giant priced at $38 a share, the company announced after market close yesterday (Thursday).

That makes Facebook the largest tech IPO in history, valued at $16 billion.

It's the third largest U.S. IPO ever, behind first place Visa at $19.7 billion and then General Motors, which raised $18.1 billion.

While the stock has created unrivaled investor frenzy, there is a wide range of predictions for how Facebook will do in its first trading day – and who the real winners will be.

"The ones who make out on IPOs are the early investors, venture capitalists, founders, and underwriters," said Money Morning Chief Investment Strategist Keith Fitz-Gerald. "The public almost always goes along for the ride…whether or not they get taken for a ride remains to be seen." The Facebook stock price will be determined when it starts trading today at 11 a.m.

Where the cutoff is for considering the IPO a success varies – with many thinking anything below 50% would be a disappointment.

"I think anything over 50 percent will be considered a successful offering – anything under that would be underwhelming, Jim Krapfel, an analyst at Morningstar, told Reuters. "A lot of retail investors are not concerned about valuation. That's what is going to drive the first day pop."

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Eurozone Descends into a Farce as "Grexit" Looms Large

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The elections on May 6 only made the Eurozone's problems even worse. The French and the Greeks have rejected sensible policies in favor of self-delusion.

Those elections, and the failure of Greece to form a government, have actually moved the Eurozone crisis one step further – from potential tragedy into a complete farce.

As investors, we can only watch horrified, knowing that a really bad outcome would seriously damage our own wealth.

But at this point, a Greek exit – or "Grexit" as it has come to be known – from the Eurozone would be the best thing that could happen.

Confusion Surrounds the "Grexit"

The Greek election produced a very confused result. But one thing was clear: the Greek electorate has decisively rejected the rescue plan the outgoing government had so painstakingly negotiated with the EU.

The previous ruling party's joint support declined to just 32% of the vote. That might be thought of as just retribution, since those parties produced Greece's appalling fiscal mess by lying for decades about the true position of Greece's public finances. (And let us not forget being abetted by Goldman Sachs in doing so).

However, the winners were not some new paragons of fiscal responsibility and free market government. They were anti-German Nazis (a peculiar combination when you think about it), communists and a truly unpleasant new leftist party, SYRIZA, led by the 37-year-old Alexis Tsipras.

SYRIZA's politics, in that one can fathom them, spell nothing but trouble.

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Investing in IPOs: Why You Should Think Twice About Facebook (Nasdaq: FB)

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Ever since the Dutch East India Company became the first to issue stocks and bonds to the public in 1602, investors have seen initial public offerings (IPOs) as the road to riches.

The current hype surrounding the Facebook IPO is just one example.

But investors tempted by Facebook (Nasdaq: FB) may want to think back to the dotcom craze of the late 1990 s. You'll remember it spawned a feeding frenzy among investors chasing after internet IPOs on an almost daily basis.

It wasn't long before investors on Main Street took the bait after watching hordes of new college graduates in Silicon Valley become instant millionaires.

But as companies with unproven business models executed massive IPOs with sky-high prices, every day investors who succumbed to the siren call got clobbered.

Pets.com for instance, raised $82.5 million in an IPO in February 2000 before imploding nine months later. And EToys.com stock went from a high of $84 per share in 1999 to a low of just 9 cents per share in February 2001.

In both cases, small investors were left holding the bag. The point is IPOs have always been high-risk, high-reward.

So, what is an IPO anyway? How do people get rich-and go broke– so fast? And, more importantly, should you invest in an IPO like Facebook for instance?

Here's what you need to know…

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Investing in Alternative Energy Stocks: Five Solar Power Winners

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It has been a tough year for solar power.

Solyndra famously imploded, the price of polysilicon dropped 60%, and a glut of natural gas has made it the "new" alternative energy source.

But make no mistake about it: alternative energy stocks are going to be long-term winners-especially for solar power investors.

For instance did you know that Germans are initiating a campaign valued at more than $260 billion to harness wind and solar power. It is already being called the biggest restructuring of the national energy landscape since the end of World War II.

Or that China plans to double its solar power capacity by installing three GW this year, according to China Daily.

And despite the recent declines, analysts expect European demand to rise again in 2012. UBS forecasts that solar power generation will rise from 21 GW in 2011 to 25 GW in 2012.

What's more, solar panel prices are expected to stabilize as a result of tighter inventories and improving demand.

That's increasing talk within the industry that pure-play alternative energy stocks could be gobbled up by oil companies or large-scale manufacturers.

With that in mind here are five solar power possibilities, including innovative companies, takeover targets, and companies that can compete on cost.

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Oil Prices and the Death of Greece

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As the Eurozone continues to show weakness, events last weekend in Athens may accelerate the situation. The downward movement in oil prices this week in both London and on the NYMEX testified to the rising concern.

The aftermath of the Greek elections propelled the new radical left party SYRIZA into the limelight as the second strongest party in the country. Given the adamant refusal by SYRIZA leadership to accept bailout reforms, the party's new brokering position means the crisis will continue.

Bitter austerity measures await the formation of a coalition government, since no party received a majority of the seats in parliament from the vote. The coalition is supported by both the New Democracy and socialist PASOK parties, which have taken turns ruling Greece for nearly four decades.

But the surprise showing of SYRIZA has thrown the possibility of an accord into disarray.
At best, this means a further delay and likely a new election.

On the other hand, Greece has little time left. Any further delay in forming a government, with no guarantee that a very angry population will vote any differently the next time around, puts the next tranche of the European Union bailout package in jeopardy.

It is now more likely that Greece will leave (or be pushed out of) the Eurozone, casting a greater uncertainty on both the currency and the southern tier of countries still in the zone.

Spain is the current focus of concern, but Italy is also exhibiting renewed weakness.

Unlike Greece, Spain and Italy have debt problems that dwarf the ability of any Brussels-led support package. These economies are simply too large to be "rescued" from the outside.

The concerns over contagion, therefore, may actually expedite a Greek departure earlier than most thought possible.

Including me.

It is true that any members leaving the Eurozone will have a negative effect upon currency strength and economic prospects. It is also unclear how the Greek departure will aid in shoring up either Spain or Italy. The problems in each of these economies are endemic; they are not primarily a result of "spillovers" from the situation in Greece.

All of which means, to borrow a phrase from former U.S. Secretary of Defense Donald Rumsfeld, there are a series of "known unknowns" now facing the EU. The credit and banking problems are essentially the "known" part of this equation. The extent of the fallout on the euro as a whole is the massive "unknown" flowing through the calculations.

This is accentuated by recent developments in the two major economies using the euro — Germany and France. No rescue package for any EU member is possible without the leadership of these two dominant European economies. To date, Paris has emphasized protecting its suspect banking sector, while Berlin has a strong political undercurrent demanding additional protection of German production and trade.

However, the recent French elections, in which a socialist has been elected president, and indications surfacing that the German economy may be facing a slowdown, will put continued support of a "bailout for austerity" approach to Greece in question.

Thus far, both major nations have led the EU-Greek approach, strongly arguing that the preservation of the euro demands it. The dramatic political events unfolding in Athens are rapidly undermining that support.

And this has impacted the price of oil.

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Wal-Mart (NYSE: WMT) Stock Jumps on Strong Earnings

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Wal-Mart Stores Inc. (NYSE: WMT) stock was up by more than 5% in trading today (Thursday) after the company reported stronger than expected earnings this morning following similar reports made yesterday by Target Corp.

Wal-Mart reported earnings per share of $1.09 compared to $0.97 per share in the same quarter last year. The average estimate for this quarter's earnings was $1.04 per share.

Increased sales were a major factor in the positive earnings report. Net sales rose 8.5% to almost $113 billion. Same store sales in the U.S. rose 2.6%, the biggest gain in three years for Wal-Mart in its U.S. market.

Wal-Mart "s earnings reports come as they wrestle with allegations of bribery in its fast-growing Mexico unit.

In a pre-recorded statement on Thursday, Wal-Mart's CEO Mike Duke commented on the ongoing Mexico bribery investigation saying, "We will take appropriate action if violations of the law or our policies occurred."

Same store sales in Mexico grew 5.6% this quarter, second only to Brazil's same store growth of 8.6%. Wal-Mart reported that customer traffic in Mexico increased by 2.3% while the average customer spent 3.3% more per visit.

The allegations appeared in a New York Times article on April 21, so it is hard to gauge how much impact the controversy will have as the numbers reported today go through April 30.

Wal-Mart's U.S. Growth Problems

Wal-Mart's earnings are a good measure of the retail economy in the U.S. The giant discounter draws almost 10% of all non-automotive spending in the U.S.

While Wal-Mart remains the leading discount retailer in the U.S. it has lost some of its advantage over other retailers. Throughout the recession Wal-Mart performed better than most companies due to its discount offerings but consumers are now either feeling more comfortable about increasing their spending or are turning to other discount retailers such as Target Corp. (NYSE: TGT).

Meanwhile, Wal-Mart is trying a new game with its U.S. stores.

Wal-Mart Express Stores

The Wall Street Journal reported today that Wal-Mart is in the pilot phase of introducing "Wal-Mart Express" stores. These stores are much smaller than the popular supercenter, normally around only 15,000 square feet.

Wal-Mart hopes these smaller stores located in urban areas will help accelerate its growth in the U.S. and help Wal-Mart compete with other discount and dollar-store chains.

Their competitors have already launched smaller locations in a much more aggressive manner than Wal-Mart. Dollar General, Dollar Tree, and Family Dollar Stores Inc. have opened nearly 2,000 locations in the past year.

Currently Wal-Mart has fewer than a dozen Express stores open.

Wal-Mart has had success with smaller stores outside the U.S. and hopes it can have similar results in the U.S. Last June at its annual meeting Wal-Mart's U.S. store chief Bill Simon said he would like Express Stores "to deliver the same experience that a supercenter can deliver, only in 15,000 square feet."

With fewer than a dozen Express stores open it seems that Wal-Mart is reluctant in its efforts to move away from the supercenter mentality.

Target plans to open three new "City Target" stores this summer in Chicago, Seattle and Los Angeles. Target's stock was up slightly yesterday on positive earnings.

While several other big-box retailers including Best Buy Co. Inc. (NYSE: BBY), Staples Inc. (Nasdaq: SPLS) and Barnes & Noble Inc. have closed stores, Wal-Mart has added or remodeled more than 120 supercenters last fiscal year.

The other good news is that...

The Facebook IPO Facts: The Good, The Bad and The Ugly

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Face it, you want it. It seems that everyone wants a piece of the Facebook IPO.

But, can you handle the truth? Will the hyped sensationalism be a boon or a boondoggle?

I'm not going to tell you what to do, whether you should buy Facebook sooner rather than later. That's up to you.

However, I will tell you that I won't be buying it right away, but, I will be buying it if…

First though, here's the good the bad and the ugly truth about the company, the IPO and owning "FB."

The Good News About the Facebook IPO

The good news is overwhelming if you're Mark Zuckerberg, any of the company's founders, executives, or venture capital backers, many of whom own Facebook stock (Nasdaq: FB) at a dollar a share.

So far, the target range the stock is expected to be priced at–which was originally $28-$35/share— has been raised to between $34-$38.

And it could very well go higher before tonight's pricing deadline. The amount of shares to be floated is being raised too.

That's all good news for the insiders, the underwriters and the company itself.

FB is causing its own IPO hype, partly because it will be the largest IPO in U.S. history, in terms of the value it will put on the company, which will likely approach $100 billion. However, Visa in 2008 and GM in 2010 will have raised more money on their IPO debuts. (I know, calling GM's IPO a debut is strange to me too.)

Facebook will raise at least $13 billion (at the lowest end of the price and share offering range) and bank some $9 billion in cash on its balance sheet. That's good news.

But better than that, the company will now have a huge hoard of stock as currency to use to buy up companies and technology to advance its master of the social media universe status.

The other good news is that...

Apple Inc.'s (Nasdaq: AAPL) "Store Within a Store" Strategy Bold But Risky

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Hoping to expand its reach, Apple Inc. (Nasdaq: AAPL) is testing a store-within-a-store concept with both Wal-Mart Stores Inc. (NYSE: WMT) and Target Corp. (NYSE: TGT).

Although both retailers have already been selling Apple merchandise, the new "micro-stores" will expand the current offerings (with the exception of Mac computers) and create a product experience more akin to an Apple Store.

Several dozen more micro-stores are planned, though the rollout will be gradual.

Piper Jaffray analyst Gene Munster said Apple's long-term goal isn't so much to stuff a micro-store into every Wal-Mart and Target, but to place them strategically in rural areas many miles from the mostly urban, wildly successful mall-based Apple Stores.

"We always talk about growth outside the U.S.," Munster said on CNBC recently. "The reality is, just look in our backyard. There's still a growth opportunity that no one's talking about, which is kind of outside the urban areas."

The allure for Wal-Mart and Target is the extraordinary foot traffic Apple products can generate. They're hoping that customers who come to shop for Apple products will stick around to buy other merchandise.

If the strategy works, both Apple and the big retailers win. But, as the saying goes, the devil is in the details.

In fact, Apple is no stranger to what can go wrong with the store-within-a-store concept.

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If I Owned Yahoo (Nasdaq: YHOO) Stock, I'd Be Pissed

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It's no wonder Yahoo! Inc. (Nasdaq: YHOO) investors are pissed. I would be too if I owned Yahoo – but I don't.

Why not?

Maybe it's the four CEOs in five years, the botched sale to Microsoft in 2008, or a Chief Executive Officer who can't be bothered to verify his own credentials in SEC filings.

Or maybe it's the dysfunctional board of directors and the erosion of massive amounts of shareholder value over the years.

Add it all up and you have an unmitigated disaster on your hands.

Activist shareholder Daniel Loeb, who owns 5.8% of the company through his hedge fund, Third Point, LLC, has every right to be angry and vocal about it.

The way I see things, Yahoo is following what I call the Christopher Columbus School of Management: it has no idea where it's going, has no idea where it's been and has no idea what to do when it arrives.

The Search for an Identity at Yahoo (Nasdaq:YHOO)

Yahoo was ostensibly a search engine in the beginning. The latest outgoing CEO, Scott Thompson, had been trying to rebuild the beleaguered Silicon Valley company into one more reflection of his own strengths in data personalization as opposed to the bloated advertising-driven business it has become.

Whether or not Thompson would have succeeded is now a moot point. Incoming interim CEO Ross Levinsohn has an advertising background. Talk about a conundrum.

Here's the thing…

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Facebook IPO Size Hits 421 Million Shares

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As it approaches, the Facebook IPO just got bigger as more early investors look to cash out.

Just after the Facebook IPO price range got a boost, Facebook investors raised the number of shares they are selling in the social network giant's initial public offering. While the company isn't selling any more, individual investors like Accel Partners, Goldman Sachs Group Inc. (NYSE: GS) and others will sell an additional 83.8 million shares.

That brings that total number of shares to be sold to 421.2 million, according to a new regulatory filing, and lifts the sale to as much as $16 billion.

While the news was welcomed by ordinary investors clamoring for shares as Facebook debuts, it's curious why more and more insiders are racing to sell part of their stake. The move may just be a signal of the IPO's astronomical demand – but could make some investors wary.

"If the demand wasn't there, they wouldn't have upsized the deal," Greenwood Capital's Walter Todd told Bloomberg News. "On the other hand, when you see insiders unloading their stakes, you start to wonder why. I could see it turning some institutional investors off."

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