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ORCL : NASDAQ : US$33.77
Oracle develops, licenses and services database and middleware software, applications software, and hardware systems worldwide. The firm is the world’s second largest application software firm, and a top five systems vendor. Oracle was founded in 1977 and is headquartered in Redwood City, CA.
Our research indicates that aggregate software demand improved sequentially from spring. However, there are treacherous pockets of weakness. We expect Oracle to navigate those challenges and post at least a consensus quarter.
However, it won’t surprise us if management takes the environment into consideration and guides conservatively for August. If our scenario plays out, the right strategy would be to wait to build a full ORCL position after its prints the quarter on Thursday night. Intermediate term, we expect a choppy summer for the world economy and stock market, and this typically means safe-port-inthe- storm stocks like ORCL outperform.
Estimates moved to in line with consensus for May quarter and below consensus for August. The May estimate change is primarily the impact of the sharp yen decline during the quarter, and the unguided August change reflects our view that management does not want to miss again after doing so twice in five previous quarters.
Intangible upside – what could unexpectedly pop ORCL shares. Several of Oracle’s large cap tech peers have materially increased their dividends or announced substantial repurchases (MSFT, CSCO, INTC and IBM). We believe Oracle should do the same, but we have heard nothing that indicates that such a move is imminent. However, Oracle could surprise everyone with a balance sheet/capital allocation move, in which case our suggestion to wait until ORCL prints its quarter would be late as the stock would likely pop.
Posted by jackbassteam on June 18, 2013
SPRD : NASDAQ : US$18.95
Spreadtrum is a fabless semiconductor company that designs, develops and markets baseband processor solutions for the wireless communications market
REVENUE GUIDANCE; UPGRADING TO BUY
Investment recommendation: Spreadtrum significantly raised its Q2/13 sales guidance well above its prior guidance and above our expectations
driven by continued strength in affordable smartphone sales in China.
We believe Spreadtrum’s 2.5G and EDGE design wins with Samsung, strong ongoing sales of single-core TD-SCDMA chipsets to affordably priced smartphones selling in tier 3 to tier 6 cities in China, ramping sales of recently launched dual-core solutions, and expanding product portfolio contributed to the increased guidance. With an expanding portfolio combined with accelerating low-end smartphone growth in emerging markets, we believe Spreadtrum should post strong sales growth through 2014 despite increased TD-SCDMA competition and a secular decline in the global feature phone market. We increase our price target to $29 from $24 and upgrade to BUY from HOLD.
Spreadtrum significantly raised its Q2/13 revenue guidance to sales between $270M-$278M, well above its prior $220M-$228M guidance and our $224M estimate. While April is typically the strongest sales month during the June quarter, we believe Spreadtrum’s sales remained strong throughout the quarter, resulting in the increased guidance.
We believe affordable smartphone solutions supplied by Spreadtrum and other competitors have resulted in extremely strong smartphone sales growth trends in tier-3 to tier-6 cities in China. Given the strong mix of local Chinese brands, Spreadtrum’s customers in these markets, we believe Spreadtrum is well positioned for strong growth trends through 2014. With new multi-core and WCDMA smartphone solutions ramping in H2/13, we anticipate solid longer-term sales growth with slightly higher sales in the September quarter from the strong June guidance.
Due to our increased sales assumptions, we increase our 2013 pro forma EPS estimate from $2.63 to $2.91 and 2014 from $2.71 to $3.24. Valuation: Our $29 price target (was $24) is based on shares trading at roughly 9x our 2014 pro forma EPS estimate.
Posted by jackbassteam on June 14, 2013
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MKTO : NASDAQ : US$22.09
Marketo provides a cloud-based suite of marketing automation applications for inbound marketing, relationship marketing, and lead conversion. The
platform is purpose-built to enable organizations ranging from SMBs to large enterprises to execute, manage and analyze the results of online, social and offline marketing activities and customer interactions. Marketo was founded in 2006 and is headquartered in San Mateo, CA
With an upside bias to quarterly results, we expect MKTO’s stock price to outperform the market over at least the next few quarters as the firm scales revenues and gradually reduces losses. Initiate with a BUY and $25 target.
Next generation technology and an enormous addressable opportunity. Marketo provides a marketing automation platform that tackles efforts
from pipeline building, to lead nurturing and scoring, to revenue conversion. Conservatively measured, this is a $20B+ annual opportunity.
Competitive landscape changing, but plenty of room for several winners. The platform firms have entered the marketing fray with CRM’s
acquisition of ExactTarget last week and ORCL buying Eloqua late last year. We continue to believe that this space can support several billion
dollar businesses, and Marketo appears well positioned to be a contender. Rapid revenue growth, FCF breakeven likely in C2016. With TTM revenue growth of 80% and projections for 45%+ this year, MKTO is one of thefastest growing public companies in all of software.
Upward estimate revisions and rapid growth likely to overshadow gradual multiple compression. With MKTO shares currently trading at 7.5x EV/C2014 revenues, it’s hard to argue that the stock is cheap. We’d own shares on the bet that upward estimate revisions and 45%+ nearterm
revenue growth outweigh the impact of any modest multiple compression.
Valuation and price target
Our $25 price target is based on 7.1x C2015E revenues of $135M plus roughly $85 in prospective net cash and considers 41.9M fully diluted shares outstanding. Our target assumes modest compression of MKTO’s current C2014 multiple applied to C2015 estimates, to which we believe there is likely upside.
Posted by jackbassteam on June 12, 2013
HPV/LSIL On Pap Smear ThinPrep liquid-based Pap. Normal squamous cells on left; HPV-infected cells with mild dysplasia (LSIL) on right. See also File:Low-Grade SIL with HPV Effect.jpg – Another example of LSIL with HPV changes. File:High-Grade SIL.jpg – High-grade squamous intraepithelial lesion (HSIL). (Photo credit: Wikipedia)
HOLX : NASDAQ : US$20.98
Hologic is a women’s health company that offers medical imaging, diagnostic and therapeutic products to hospitals, imaging clinics, private practices, and labs through a 625-rep direct sales force as well as select independent distributors. The company develops and markets products that address a range of women’s health concerns, including breast cancer, cervical cancer, menorrhagia, osteoporosis and preterm birth and others.
APTIMA HPV GETS ENDORSEMENT
Reiterating BUY following Thursday’s announcement that Hologix and Quest Diagnostics entered into a five-year, non-exclusive agreement for
women’s health testing. Quest, already a user of ThinPrep, looks to add HPV, CT/NG, and Trich.
Better late than never for Aptima HPV. We view the Quest agreement as a strong endorsement for the HOLX Aptima HPV test and believe it should serve as a testament to other labs.
Possible lateral implications to competitive landscape. We believe Quest may look to standardize tests and suppliers under its Invigorate program, possibly resulting in HOLX capturing more CT/NG and HPV business at the expense of BDX and QGEN,
No change to estimates. We estimate another six months for Quest to offer Aptima HPV. Given, we already model 2014 HPV sales of $55M, +90%, our estimates stay intact for now. However, additional contracts could spur upside to estimates.
Aptima HPV offers fewer false positives. Recall that the Aptima HPV test (CIN3=95.7%) showed sensitivity similar to HC2 (95.3%) while
superior to cytology (73.3%). Specificity for Aptima (CIN3=90.3%) compared with cytology (90.8%), while HC2 was lower (84.9%).
Our $26 price target assumes a 16.8x multiple on our C2013E EPS of $1.55.
Posted by jackbassteam on June 11, 2013
English: Barefoot female in public being shooed away by NYC police (ostensibly for panhandling). (Photo credit: Wikipedia)
SHOO : NASDAQ : US$47.67
Steven Madden, Ltd., together with its subsidiaries, designs, sources, markets and sells fashion-forward footwear for women, men and children. The company was founded in 1990 and is headquartered in Long Island City, New York. SHOO has a portfolio of brands that reaches globally among all economic tiers. SHOO offers products through wholesale partners, an e-commerce platform and its own retail stores.
SHOO’s success is predicated on continual turnover in fashion and its ability to deliver on those new trends. After previewing fall ’13 product and the bustling traffic in its showroom, we believe this season should be no different for Madden. Booties continue to sell at breakneck velocity,
particularly the Troopa in updated prints and materials (e.g., floral and macramé at $129). The bootie’s success has caused it to go on autoreplenishment in 3 colors to meet insatiable demand. The next iteration bootie is an ankle bootie with a stacked heel, continuing the underlying theme and supporting solid category growth in H2/13, we believe.
Gold accents remain a key trend (e.g., gold chain mail, buckles, and zippers) although in a more subtle manner than before. Interestingly, the dress
category is showing signs of life at SHOO retail as the $99.95 Marlenee has become the third fastest shoe to sell 1M pairs. While retailers are not
committing to the trend just yet, the data is positive, and we note that SHOO usually leads these trends by 6-12 months. We reiterate our BUY.
Madden Girl is the standout brand as the repositioning at M doors is driving solid reorders, while at TGT both private label and Mad Love are also performing well. Conversely, the sneaker trend appears to be winding down as distribution is maxed and the category is approaching saturation.
Sandal inventory across the industry remains heavy despite the recent weather-driven uptick in traffic. As such, retailers have broken price on the category and we fear further price reductions are to come should sandals not accelerate by July 4. While SHOO’s sandal inventory is in control, we believe the need to maintain promotional pace with others will subject it to unnecessary markdowns. That said, this is embedded in guidance and thus we do not see any risk to our Q2 numbers
Posted by jackbassteam on June 10, 2013
Apple iPhone 3GS, Motorola Milestone and LG GW60 (Photo credit: Wikipedia)
RFMD : NASDAQ : US$5.20
RF Micro Devices is a leading supplier of power amplifiers, front end modules and other RF components for mobile devices (handsets, smartphones, tablets) and communications infrastructure.
FLAGSHIP SMARTPHONE PLATFORMS AND LEVERAGE FROM COST SAVINGS INITIATIVES
We believe RFMD is well positioned to deliver strong growth in C2013/14 driven by share gains in flagship LTE smartphone platforms including Samsung, Nokia, BlackBerry, and Apple. Further, given RFMD’s strong position in mid- and low-tier smartphones driven by its broad GaAs- and CMOS-based portfolio, we believe RFMD is well positioned to benefit from elastic smartphone demand in emerging markets including China.
Overall, we believe RFMD should grow faster than the RFIC market in F2014/15 and reduced costs due to facilities management, improved fab capacity utilization, and redesigned CMOS products should drive margin leverage. We reiterate our BUY rating and $7.50 price target.
Given RFMD’s improved LTE portfolio including Phenom PAs and antenna switching solutions, we believe RFMD is well positioned to gain content share in flagship smartphone platforms including the Samsung Galaxy S4, Nokia Lumia and Asha series, BlackBerry Z10 and Q10, and potentially Apple’s next generation iPhone programs.
In addition, we believe RFMD is less vulnerable to softer near-term iPhone sales where RFMD’s competitors have greater exposure.
Further, our market analysis indicates ramping sales of affordable 3G smartphones from Chinese OEMs powered by Qualcomm QRD, MediaTek, and Spreadtrum turnkey solutions, and we believe RFMD has strong share, particularly in TD-SCDMA smartphones.
Finally, we believe the closure/sale of RFMD’s UK switch facility, increased utilization at the Greensboro, NC production facility, and the transition Amalfi CMOS products to lower-cost designs should expand gross margin and drive leverage from increased sales. In fact, we believe management’s target of 300-400bps gross margin improvement exiting F2014 is achievable given these initiatives.
We maintain our above-consensus F2014/15 pro forma EPS estimates of $0.43 and $0.68, respectively.
Our $7.50 price target is based on shares trading at roughly 11x our F2015 pro forma EPS estimate.
Posted by jackbassteam on June 10, 2013
Pain Sorrow (Photo credit: larryosan)
GWPH : NASDAQ : US$8.88
GWP : AIM
GW Pharmaceuticals is focused on discovering, developing and commercializing cannabinoid pharmaceutical-grade drugs. Lead product Sativex is an oromucosal spray to treat MS symptoms, cancer pain, and neuropathic pain, now approved in the EU and other ex-US territories, and in Ph3 program for cancer pain. It has two product candidates in Ph2 trials in diabetes and inflammation, and earlier stage programs for epilepsy and psychiatric illness.
Initiating on GW Pharmaceuticals with a BUY, $13 target on Sativex’s potential in cancer pain in the US. We think Sativex could be a future key non-narcotic add-on treatment for moderate/severe cancer pain. We expect Ph3 data due mid-2014 will be positive, support US approval and
drive market uptake. We estimate peak sales of $2.0B in the US and $1.5B in the EU. We also think Sativex has potential in MS spasticity, for
which it is already approved in the EU. We estimate EU peak sales at $29M, and US at $80M. Our $13 ADS target is based on a sum of the
parts analysis of a pipeline pNPV and EU Sativex DCF.
We see Sativex as very promising potential add-on therapy for chronic cancer pain. We think Sativex Ph2a data supports Ph3 success. Data from the 1st of 3 Ph3 trials will read out mid-2014.
The 2 pivotal trials use the same Complete Proportion of Responders (CPR) primary endpoint as the Lyrica and Cymbalta Ph3 trials. We think more societal receptiveness to the clinical benefit of cannabinoids bodes well for FDA approval/rational DEA scheduling. We forecast $2.0B US peak sales and $1.5B EU peak sales.
We think Sativex also has meaningful potential in MS spasticity. We see EU approval of Sativex for MS spasticity as positive precedent for US Ph3 and commercial success. We think peak MS spasticity sales could reach $80M in the US and $29M in the EU.
GW has a solid pipeline of proprietary cannabinoid drug candidates derived from its cannabinoid technology platform. We think GW will generate more rational drug candidates for unmet needs (e.g.Ph2 GWP42004 for T2DM; GWP42003 for ulcerative colitis). We think they may generate good POC data and lead to rich partnerships.
Posted by jackbassteam on June 5, 2013
lululemon athletica (Photo credit: aliciagriffin)
LULU : NASDAQ : US$77.81
lululemon athletica Inc. is a designer and retailer of technical athletic apparel operating owned retail stores primarily in North America and Australia. The company offers a range of performance apparel and accessories for women, men and female youth. Its apparel assortment, including items such as fitness pants, shorts, tops and jackets, is designed for healthy lifestyle activities like yoga, running and general fitness.
BACK IN BLACK; LUON PANTS HAVE RETURNED: REITERATE BUY
Weekend store checks confirm LULU has begun restocking stores with the Astro and Groove yoga pants – two of the three styles that were recalled in mid-March (the Wonder Under crops have yet to be restocked). This timing is consistent with our note from April 22 (“Sheer today, gone tomorrow”) in which our supply chain checks indicated LULU would be restocking the recalled Luon pants in early June. As such, we continue to believe Q2 comps will benefit from pent-up demand. Not only is the impact to the brand from the recall expected to be negligible, we believe LULU benefitted from increased traffic and substitute purchases. As such, we expect to see upside to our Q1 estimates when the company reports Q1 results on June 10. We reiterate our BUY and are raising our target to $92 from $87 based on a 35x P/E multiple that is more consistent with its growth rate.
LULU will report Q1 earnings on June 10 AMC. We expect our 6.5% comp and 30c EPS estimate (vs. guidance of 5%-8% and 28c-30c) will prove conservative, particularly as the seemingly worst-case scenario impact to comp and earnings has not materialized.
Our long-term growth thesis that rests on LULU increasing its production capacity to better meet demand remains intact, particularly now that the Luon recall is nearing complete resolution.
Our new $92 PT is an avg. blend of 35x 2014E EPS/20x EBITDA/DCF.
Back to Index
Posted by jackbassteam on June 3, 2013
AVGO : NASDAQ : US$34.43
Avago Technologies Limited is a designer, developer and global supplier of analog semiconductor devices. Avago offers products in three primary target markets: wireless communications, wired infrastructure, and industrial and automotive electronics. Applications for Avago products include smartphones, connected tablets, consumer appliances, data networking and telecom equipment, and enterprise storage and servers.
UNEXPECTED INDUSTRIAL GROWTH DRIVES BEAT; ANTICIPATE H2 WIRELESS RECOVERY
Avago reported solid Q2/F2013 results above low expectations due to a modest recovery in Industrial division sales and strong Wireless division sales to Samsung and other LTE smartphone OEMs that helped offset the iPhone transition at largest customer Foxconn (Apple). Further, Avago guided to strong sequential growth in all 3 divisions for the July quarter. We anticipate strong Wireless sales growth in 2H/F2013 due to strong FBAR filter demand for new LTE smartphone programs at leading smartphone customers such as Apple, Samsung and others.
Further, we believe Avago’s proprietary technologies, strong IP portfolio, and diverse customer base in several growth markets position the company for strong long-term growth and industry-leading margins. We reiterate our BUY rating and $42 target.
Q2/F2013 sales of $562M and pro forma EPS of $0.61 were above our $552M/$0.57 estimates due to strong sales of FBAR filters into ramping
LTE smartphone programs and surprising 4% Q/Q sales growth in the highest-margin Industrial division – versus guidance for low single digit
decline – driven by a broad increase in distributor sell-though. Solid Wireless sales despite the Apple product transition were consistent with our surveys indicating strong LTE smartphone sales, including the Galaxy S 4, as Samsung was a 10% Avago customer for the first time.
Avago management guided to a 6%-9% Q/Q increase in revenue for the July quarter driven by solid Q/Q growth in all divisions, including highsingle- digit Q/Q growth in Wireless due to the initial sales ramp into new smartphone programs at Apple.
Our bullish H2 Wireless outlook remains unchanged, though we slightly increase our F2013E pro forma EPS from $2.73 to $2.74 and our F2014
estimate from $3.19 to $3.21 due to a modestly increased outlook for Avago’s Industrial division.
Our $42 price target is based on shares trading at roughly 13x our F2014 pro forma EPS estimate.
Posted by jackbassteam on May 31, 2013
Patient Recognition Month Poster (Photo credit: Army Medicine)
AEGR : NASDAQ : US$60.74
Aegerion is a biopharmaceutical company focused on the development and commercialization of treatments for patients with severe lipid disorders. Its lead therapeutic is Juxtapid, an oral small-molecule inhibitor of MTP approved in the U.S. and currently pending regulatory review in the E.U. for the treatment of patients with homozygous familial hypercholesterolemia (HoFH). Aegerion was founded in 2005 and is headquartered in
Cardiologists a key untapped source of patients; drug awareness is high:
Physicians estimate that 34% of HoFH patients are referred from cardiologists (43% from PCPs), with cardiologists possibly representing a larger source of patients (1/3 of respondents estimate that >75% of HoFH patients are in cardiologists’ offices; 1/3 estimate 25%-50%; 1/3 estimate <25%). Most clinics have completed REMS for Juxtapid and Kynamro (57% each) and met with sales reps from AEGR and SNY (71% and 86%, respectively). While no clinics use genotyping to diagnose HoFH, they do use untreated LDL levels (>220-400 mg/dL) family history, physical attributes (xanthomas) and LDL levels on max therapies (>180-250 mg/dL).
Physicians anticipate off-label use and see a differentiated profile for Juxtapid:
In the next 12 months, physicians anticipate prescribing Juxtapid to patients with HeFH (43%), statin intolerance (29%) or LPL deficiency (14%). The primary concern is injection site reactions with Kynamro (average score of 7/10), while it is GI toxicity for Juxtapid (6.2 vs. 2.7 for Kynamro).
Posted by jackbassteam on May 30, 2013