Through The Fly's Eyes: Premiere Global Services

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Premier Global Services and the art of eCommunications

One of the nicest things about the Internet is that it allows such a wide array of business communications possibilities. Often, though, it can be difficult to know just how to take advantage of those possibilities. Fortunately, there is an experienced firm in Atlanta, Georgia that is ready to get you going.

Premiere Global Services (PGI) develops communication technology solutions applicable to such business needs as conferencing, document sharing, marketing and notifications. The firm's Conferencing and Collaboration unit provides teleconferencing and Web-conferencing services, including Internet-based document sharing tools. The Data Communications segment automates functions like invoice distribution, appointment scheduling, eMarketing and collections. The company has a customer base of about 60,000 corporate accounts, including nearly 80% of the Fortune 500.

Premiere Global pleased the Street last week when it reported Q4 EPS of 17 cents and revenues of $127.1 million. Analysts had been expecting 16 cents and $123.5 million. Management also guided FY07 revenues to $520.17-$531.10 million, versus consensus of $517.10 million. Roth Capital subsequently upgraded the shares to "buy." The issue popped on the news and then passed into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, the brokerage community recommends the shares with one "strong buy," two "buys" and three "holds." Analysts see a 28 percent growth rate through the next year. The PGI Price to Sales ratio (1.53), Price to Book ratio (2.40) and Price to Free Cash Flow ratio (18.41) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 80% of the outstanding shares. Over the past 52 weeks, the stock has traded between $6.83 and $10.85. A stop-loss of $9.05 looks good here.

Through The Fly's Eyes: I-trax, Inc.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












I-trax: Keeping Track of Worker Health

Corporations are increasingly concerned about creating environments that promote healthier employee lifestyles. There is a firm in Chadds Ford, Pennsylvania that understands the business-worker healthcare relationship and helps to fulfill needs on both sides.

I-trax, Inc. (DMX) operates more than 200 on-site, employer-sponsored health care centers for over 100 firms in the manufacturing and financial sectors. Services include primary care, pharmacy care and occupational health functions. The company also offers telephone and online wellness and disease management services. The I-Trax client list includes Deutsche Bank (DB), Eastman Chemical (EMN), Toyota Motor (TM) and UnumProvident (UNM).

The company pleased investors last week, when it topped Wall Street estimates with its Q4 top line results and essentially matched analysts on the bottom line. Management also issued solid upside guidance for FY07 revenues. The Chairman mentioned "commitments for 21 additional sites to be opened during 2007," in support of the favorable FY07 view. The news popped the shares out of a January/February "cup" into the late February "handle" of a Cup & Handle formation. The price appears to be defining the bottom of the "handle" and is expected to complete the pattern with a bullish rise.

Brokers recommend the shares with three "strong buys," two "buys" and one "hold." Analysts see an 83% growth rate, through the next year. The DMX Price to Sales ratio (1.23) and Price to Book ratio (2.34) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 33% of the outstanding shares. Over the past 52 weeks, the stock has traded between $2.39 and $4.33. A stop-loss of $3.45 looks good here.

Through TheFLY's Eyes: Verizon

from Joseph Lazzaro of Theflyonthewall.com

Verizon's Left-Hook: Fiber Optic Broadband

During his career, boxing great and former heavyweight champion Joe Frazier reversed -- and ended -- many bouts in his favor with a nearly imperceptible but devastating left-hook that usually left his opponent on the boxing ring's mat.

While the broadband era remains in its infancy with no doubt many permutations and evolutions up ahead, it looks like Verizon (NYSE: VZ) has landed a left-hook on cable company broadband providers with the roll-out of its FiOS fiber optic Internet service.

The Frazier fight analogy is appropriate here because like Frazier's opponents, cable companies such as Cablevision (NYSE:CVC) and Comcast (NASDAQ:CMCSA) had taken the lead over the telecom companies with cable's faster-speed Internet technology, in some cases more than five times as fast as telecom's best product, enhanced DSL. Subsequent cable company bundling of preferred broadband/cable TV/phone services -- the triple play -- gave cable companies an even larger lead in the broadband bout by lowering per-item service prices.

But like that dreaded Frazier left-hook, Verizon's FiOS could leave the cable companies reeling. That's because VZ's fiber optic network is expected to offer Internet speeds that are substantially faster than cable networks, with improved reliability. What's more, Verizon's FiOS will also offer those residents with cable TV service another plum: Fiber optic television. In some U.S. markets this will give consumers their first line-based competition and alternate service provider for cable television. [Verizon's shares traded 58 cents higher to $37.21 Wednesday afternoon, while Cablevision gained 89c to $29.43, and Comcast rose 36 cents to $25.66.]

Further, most economists would argue that, with few exceptions, monopolies, even if publicly regulated, do not represent the market-based system at its best, from a consumer standpoint, and the cable TV sector has done little to undermine this thesis. Inadequate customer service and large fee increases have been among the complaints voiced by consumers, who had few other service options, particularly if their house or apartment could not accommodate satellite TV service. To be sure, the free enterprise system is characterized by fits and starts, but in general, when competition is present, consumers benefit with improved services and products and more-attentive suppliers; single-source providers tend to delay this process.

Now consumers will have a viable choice with VZ's fiber optic system, and not only for cable television but for high-speed Internet service as well.

The cable sector may offer a service response to a telecom-based fiber optic network. But that response may be a considerable time away, as they may need a little time to wake up, operationally-speaking, from that left-hook that put them on the mat.

Through The Fly's Eyes: HSBC

from Theflyonthewall.com








Two Sharp Investors Recommend Getting Into HSBC Holdings

With market volatility jumping up in China, it might provide a good entry point to get into HSBC Holdings (HBC), the old Hong Kong Shanghai Bank.

David Herro, the long-time successful international fund manager at Oakmark, recommended the stock a few weeks ago in Barron's at $89 per share. The stock is now down to $86 on yesterday's global sell off. Herro liked the stock as a more conservative play on Asia and its many emerging markets.

Chuck Allmon, long-time investor and publisher of Growth Stock Outlook investment newsletter, also likes HSBC. In an inteview with Kate Welling at Welling@Weeden, Allmon mentioned he liked the world's fourth largest bank because it has balanced exposure to North America, Europe and Asia. Allmon also liked HSBC's 4% yield and only 11x earnings valuation.

As the lemmings panic over a much needed correction in China, yesterday's selloff provides the level-headed investors with an opportunity to get into this stock.

Through The Fly's Eyes: Sirius Satellite Radio

from Theflyonthewall.com











Sirius is not XM

Sirius (SIRI) is simply eating XM's (XMSR) lunch. Mel Karmazin continues to plow forward while XM management wanders aimlessly.

Karmazin reiterated targets set in late 2006, expecting revenue to jump from $637 million in 2006 to $1.0 billion in 2007. Sirius also genereated free cash flow, after capital expenditures, of $30 million for the 4th quarter--a big accomplishment.

Karmazin also said, once again, that Sirius' growth from nascent business to $1.0 billion in revenue is the fastest growth in radio history.

What is more impressive is that while XM backed away from virtually all of its guidance for 2007 and pushed out much of its OEM growth to 2008, Sirius did not do the same. Chrysler will install Sirius in 40% of cars, Ford goes from 4 models to 22 models and Mercedes will install Sirius in two-thirds of its autos.

Not everything will be rosy. Sirius warned that data coming out regarding January 07 comparisons with January 06, as year-over-year comps will be weak due to such strong comparisons last year due to net adds resulting from Howard Stern. Starting in February, the comps will begin to improve.

Also churn will jump up to 2.0%-2.4% as some OEM deals anniversary, up from 1.6%.

All told, stay focused on Sirius. Content of Stern, NBA, NASCAR plus lots of other stuff appears to be driving subscriber adds. Do not run away from this industry due to XM's weak results.

Through The Fly's Eyes: Texas Roadhouse

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Texas Roadhouse: Got your supper right here, partner

When you gotta get out for supper and the plate's gotta be full, there is an outfit headquartered in Louisville, Kentucky offering portions so large they say their tables do the tippin'. Certainly, their customers rank 'em high.

Texas Roadhouse Inc. (TXRH) operates a full-service, casual dining chain of 257 restaurants in 44 states. Outlets are decorated in a southwestern theme and feature steaks, ribs, chicken, and seafood. The chain is ranked 38th on the Forbes Best 200 Small Companies List and is ranked first in the Pub/Grill category by readers of Consumer Reports.

The firm pleased investors last week, when it essentially matched Street estimates of Q4 revenues and topped the average analyst EPS view. Management also offered FY07 EPS guidance that "at least" matched consensus. JP Morgan subsequently upgraded the stock to "overweight." TXRH shares popped on the news and have since been consolidating the gain in a bullish "flag" pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, brokers recommend Texas Roadhouse with six "strong buys," three "buys" and three "holds." Analysts see a 22% average annual growth rate, through the next five years. The stock's Price to Sales ratio (1.91) and Sales Growth rate (29.73%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 57% of the outstanding shares. Over the past 52 weeks, TXRH has traded between $9.16 and $17.24. A stop-loss of $13.00 looks good here.

Through The Fly's Eyes: Real Estate

from Theflyonthewall.com













Do As I Feel, Not As I Think

When people fail to make money from investing, it is because they do what feels good. Unfortunately to invest successfully, you have to do what feels bad. An old investment strategist once wrote, if your stomach isn't churning when you make an investment, it mostly means you are going to lose money.

Tom McManus, the very fine investment strategist from Bank Of America, wrote this to his clients this week:

Demand for open-end funds concentrating in Real Estate equities slowed a little in the latest week, but still set an all-time record for any week other than the previous two. Net inflows amounted to +$511M, down from the average of $686M seen over the prior two weeks, but sharply higher than the +$30M weekly average seen during February 2006. Total assets of open-end REIT funds have increased +50% in the past year to $77B, and represent about 20% of the equity market capitalization of the REIT sector. By contrast, technology sector mutual funds controlled about $170B of assets at the top in March 2000, less than 4% of the equity market capitalization of the sector.

As McManus writes, investor enthusiasm for real estate remains high despite horrible fundamentals in the residential business and investors are chasing the performance of the office building space.

Investors are following The Blackstone Group's lead, which paid a big price for Equity Office Properties a few weeks back.

It feels good to invest in what is going up and what is popular. But just remember, Sam Zell, Equity Office Properties owner, is selling out. When did he buy: when the real estate sector was in the dumper. Zell was thinking, not feeling.

Through The Fly's Eyes: XM Satellite Radio

from Theflyonthewall.com










Stay Away From -- Too Many Unanswered Question

SLOPPY is an accurate description of yesterday's conference call. The company shifted subscriber growth expectation out to 2008, saying XM Satellite Radio (XMSR) is focused on the auto OEM and not the retail market. OEMs will begin to ramp XM Satellite services in greater numbers in 2008, management claimed.

Pushing growth out to 2008 for a so-called growth company in a so-called growth industry is not good. Also, converting customers from promotional periods to paying customers, or gross adds to net adds, remains low. Which has always been difficult to figure out in this industry.

It also came across that more and more of XM's success is based upon closing the deal with Sirius Satellite Radio (SIRI). Although management attempted to say otherwise.

Management also went into some rambling about how it will always take care of customers that own older radios -- which was nice, but unclear as to why management emphasized this during the call. What are you going to do -- hang your customers out to dry?

Also, the top management change made last year appears not to be having the intended consequence. After XM started showing weakness in maintaining and getting subscribers in 2006, the satellite company brought in Nate Davis to get the company going again, but his arrival has done little to improve the outlook for this company.

Sirius releases earnings this morning. This Fly has been recommending buying Sirius on weakness and staying away from XM for a long time. Hopefully, Sirius does not push its growth targets out till 2008. We will see.

Through The Fly's Eyes: Natus Medical

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Natus Medical: Looking after your child's health

Any parent knows that one of the most distressing things in the world is finding out that your baby is not altogether well. There is an outfit in San Carlos, California that provides products specially designed to get small folks off the sick list.

Natus Medical, Inc. (BABY) makes products for the detection, treatment, monitoring, and tracking of common medical disorders in babies. Ailments addressed involve hearing impairments, neurological dysfunctions, epilepsy, sleep disorders, newborn jaundice and metabolic disorders. In addition, the company makes neonatal oxygen delivery hoods and heatshields. It also provides software that collects and reports newborn screening data to health labs and disease control centers.

The firm pleased investors last week, when it reported Q4 EPS of 13 cents and revenues of $28.8 million. Analysts had been looking for 12 cents and $27.8 million. Management also guided Q1 EPS to 7-8 cents (8 cent consensus), Q1 revenues to $25.5-$26.0 million ($25.60M consensus), Q2 EPS to 10-11 cents (11 cent consensus), Q2 revenues to $27.5-$28 million ($27.28M consensus), FY07 EPS to 49-52 cents (50 cent consensus) and FY07 revenues to $115-$117 million ($115.22M consensus). The CEO noted a positive response to the introduction of the firm's Cool-Cap system for the treatment of hypoxic ischemic encephalopathy and indicated that it was a significant factor leading to the solid guidance figures. BABY shares popped through 30-day, 50-day and 90-day moving average resistance on the news and have since been consolidating the gain in a bullish "flag" pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend Natus Medical with two "strong buys," three "buys" and one "hold." Analysts see a 43% average annual growth rate, through the next five years. The stock's PEG ratio (0.76), Price to Book ratio (3.60) and Sales Growth rate (128.57%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 86% of the outstanding shares. Over the past 52-weeks, BABY has traded between $9.89 and $22.50. A stop-loss of $14.05 looks good here.

Through TheFLY's Eyes: IPO & Syndicate Preview

from Joseph Lazzaro of Theflyonthewall.com















IPO & Syndicate Preview - week of Feb. 26, 2007


Wall Street's equity market continues in light-schedule mode this week, with just 2 IPOs and 2 Secondaries on the docket.

Those deals tentatively scheduled to price include:

IPOs:

Tuesday

Churchill Ventures (CHV), a 12.5M-share IPO for this special purposes corporation. The Bank of America is the lead manager. Filing price: $8.00.

OncoGenex Technologies (OGXI), a 4.5M-share IPO for this anti-cancer medicine company. RCB Capital Markets is the lead manager. Filing range: $10.00-$12.00.


Secondaries:

Tuesday

Rosetta Genomics (ROSG), a 3.75M-share Secondary for this gene-based medical company. CE Unterberg is the lead manager. ADR

Friday

Mylan Laboratories (MYL), a 21.5M-share Secondary for this pharmaceutical company. Merrill Lynch and JP Morgan Chase are the lead managers.

- -

For the latest market intelligence on IPOs, Syndicate, and after-market trades, check out TheFLY Syndicate at www.theflyonthewall.com. [Subscription required.]

Through The Fly's Eyes: Apple Inc.

from Laurie Pasternack of Theflyonthewall.com

















Apple iPhone Campaign Begins

Last night, a commercial break during the 79th Academy Awards featured an ad spot for Apple's (AAPL) long-awaited-and-much-discussed iPhone. The 30-second ad, screened during the first break and several breaks thereafter, began with images of old-fashioned phones and moves to clips of 31 assorted film and television characters saying "Hello," including Lucille Ball, Marilyn Monroe, Clark Gable, Michael J. Fox and Mr. Incredible from Pixar's "The Incredibles." The spot ended with an image of the new iPhone and the word "Hello." Of course, it also said "Coming in June," so any rumors of an April arrival is probably out of the question right now.

The ad was in good taste, meaning there was no bashing of any of Apple's rivals (ahem, Microsoft (MSFT)). Having a good relationship with Tinsel Town can't hurt either.

If you want to watch it for yourself, click here.

Through The Fly's Eyes: The Economy

from Theflyonthewall.com

Mixed Signals Means Take Some Money Off Of The Table

Last week, commodity and company earnings sent some seriously mixed signals.

Gold, historically a pretty good indicator of excess money flowing through the economy, took off, jumping over $20 an ounce. Gold has been in a tight trading range the past year or so, a sign that Fed policy was correct by halting rate increases. However, it is tough to read what last week's rally was all about.

Housing data, conversely, an important component of the overall economy, are simply awful. Reports from the home improvement retailers--Home Depot and Lowe's--were exceptionally weak, with same store sales down 5% to 11% depending upon the month you wanted to look at.

However, macro data such as employment and wage growth remain good, but employment is a lagging, not a leading, indicator.

With that said, besides gold, a lot of other commodities took off during the week.

In the tech world, semiconductors, one of the most hypersensitive economic indicators, fundamentals have been deteriorating since November 2006 and there is little evidence this market has bottomed.

Signals are too confusing to be comfortable with the market. Most indexes have had great rallies since the fall. It is time to take some money off of the table. There is little evidence that 1st quarter earnings will be that good.

In addition, another consideration is a seasonal factor. The Fed tends to add more money to the economy in the second half of the year and slows down money supply growth in the first half of the year. This is a reason why the market's performance tends to be weakest during the April through September time period and stronger from October through March.

These mixed signals mean start pruning your portfolio. We are in for a bumpy ride and it will be nice to have some cash on the sideline to do some buying when market volatility and investors' fear increases.

Through The Fly's Eyes: Lowe's Companies

from Theflyonthewall.com









Clarity On Same Store Sales

Lowe’s (LOW) provided very clear guidance on same store sales. After same store sales declined 5% in the recently reported quarter, Lowe's guided to 2% to 4% same-store declines this quarter.

The reasons cited for the improving outlook are better comparisons due to the anniversary of the major hurricanes of the past few years and a solid economy.

Lowe's said in the 4th quarter of 2006, it had serious price deflation for lumber and plywood due to decreased demand from hurricane reconstruction.

Lowe's guidance follows Home Depot (HD) saying it believes the declines in same store sales were bottoming and should improve. However, Home Depot did not provide the level of detail of Lowe's.

As a reminder, while same store sales at these two companies were very weak, both of these companies still show very good growth. They added new stores, both domestically and internationally, they are under leveraged and generate a lot of cash for shareholders.

When same store sales turn positive, the cash generation of these home improvement companies will be enormous. Start looking at these stocks again.

Through The Fly's Eyes: Netgear

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Hook Yourself Up with Netgear

When you want to network a big business, there are any number of firms that would be glad to help you. If you only want to connect a few systems, though, there is a company in Santa Clara, California that has what you need to do it yourself.

Netgear (NTGR) provides networking products that address the specific needs of small businesses and home users. The company's hubs, routers, switches, servers and interfaces enable customers to share Internet access, peripherals, files, digital multimedia content and applications among multiple personal computers and other Internet-enabled devices. The firm sells through distributors, to retailers, to service providers and through its online store. Netgear uses third-party manufacturing contractors in China and Taiwan to produce its equipment.

The company surprised the Street last week, when it reported Q4 EPS of 43 cents and revenues of $164 million. Analysts had been expecting 37 cents and $158.6 million. Management also guided Q1 revenues to $160-$165, versus consensus of $159.56 million. The CEO attributed success to the introduction of twelve new products in the fourth quarter and to a solid growth rate of revenue from service providers. NTGR shares completed a "double bottom" formation on the news, popping through 50-day and 30-day moving average resistance into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside. The 30-day curve now appears to be offering support to the pennant.

Brokers recommend the shares with two "strong buys," four "buys," six "holds" and one "sell." Analysts see a fifteen percent average annual growth rate, through the next five years. The NTGR Price to Sales ratio (1.67), Price to Book ratio (3.26), Sales Growth rate (34.65%), EPS Growth rate (59.26%) and Return on Investment (15.51%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $16.85 and $31.31. A stop-loss of $25.10 looks good here.

Through The Fly's Eyes: A Quick Look Ahead

from Eric Buscemi of Theflyonthewall.com












Highlights For Next Week


Monday February 26

* XM Satellite Radio (XMSR) to report Q4 earnings; conference call at 10am. Analysts will review XM's overall subscribers, new subscribers, retention rates, average monthly fees, pricing plans, new broadcast content agreements, marketing strategy, operating costs, sector position, and margins. Equally significant, Wall Street will also pay very close attention to management's operational posture moving forward, in light of its proposed merger agreement with Sirius (SIRI).

Tuesday February 27

* Sirius Satellite Radio (SIRI) to report Q4 earnings; conference call at 8am. The concerns for Sirius mirror the previously mentioned concerns for XM.

Wednesday February 28

* PDUFA Date for Novartis's (NVS) Galvus, an innovative oral therapy for people with type 2 diabetes.

Thursday March 1

* Echostar (DISH) to report Q4 earnings; conference call at 12pm. Analysts will focus on Echostar's success at adding value to its offerings, amid intensifying competition from digital cable and communications companies offering TV services.
* PDUFA date for New River Pharmaceuticals (NRPH) and Shire's (SHPGY) Vyvanse, for the treatment of Attention Deficit Hyperactivity Disorder [ADHD].
* PDUFA date for Merck Serono's (SRA) Serostim, a treatment for AIDs wasting.

Friday March 2

* THQ Inc (THQI) to hold analyst meeting in San Fransisco, CA.

Through TheFLY's Eyes: Nordstrom

from Joseph Lazzaro of Theflyonthewall.com















The Nordstrom Mystique

The bar has been set high for Nordstrom (NYSE:JWN) when it reports earnings Monday February 26 after the market closes, but look for the quintessential upscale retailer to meet those expectations, and more.

For the record, analysts surveyed by Reuters expect Nordstrom's Q4 revenue to increase more than 12% to $2.62 billion and EPS to rise better than 30% to 90 cents.

Those are gaudy projections for a trader/investor to try to get out in front of with a new position, but a review of JWN's chart shows a stock and company that Wall Street senses has its better days [and quarters] ahead of it, even as it experiences enviable levels of success at present. After a summer consolidation period, Nordstrom's stock has risen about 90% in 6 months, yet its P/E is at an un-stratospheric 19.

With the above in mind, a Q4 revenue/earnings underperformance would surprise many on Wall Street and undoubtedly would also spark a sell-off, but going against JWN is considered by many to be a daring position at this juncture: calculating against Nordstrom now is a little like taking a position against US Steel (NYSE:X) in the 1950s. Not prudent.

For the unfamilar, Nordstrom's success can seem to be a bit of a mystery. After all, large store competitors exist [ Bloomingdales (NYSE:FD), Neimen Marcus ], and trendy, pricey clothes shops abound, yet Nordstrom has managed to enscribe itself in the minds of Americans, and others, as the undisputed leader in upscale shopping.

How did they do it? A look at a Nordstrom store is telling. Upon entering the Nordstrom at the Westchester Mall in Westchester County, N.Y., north of Manhattan, the shopper is soon enveloped by the delightfully obvious: quality. Quality everywhere. And therein lies the secret: Nordstrom offers a consistent upscale shopping experience throughout its store.

In other words, rare is the day that you bring home a gift from Nordstrom for that significant other, and that person is disappointed. And that's no small reason why Nordstrom's stock chart is very healthy right now.

Through The Fly's Eyes: Responses & Comments Welcome

from Theflyonthewall.com

















Well-thought Out Responses Welcome

Firemeg provide this well-thought out response to a blog this Fly wrote on eBay (EBAY). Firemeg makes some interesting points:

FireMeg said:
In its current state, I would never buy ebay stock to hold onto. The numbers you have given are straight from eBay's mouth.220 million users? I have about 30 eBay ID's, how many unique users are there and how many new unique members were there in 2006, and how many of them were active on the site? - Those numbers mean a lot more than the number of users.171 mil Skype users? Same here, how many signed up as paying customers? Since subscriptions were $15 or $30 for the year, and only $65 million was generated in the Q4, it's obvious that most users did not subscribe (especially when you figure that part of that revenue was generated in per minute calling).Shopping.com is a very low traffic site without very good user reviews.Right now eBay is deriving much of its growth from fee increases and listing sales. Add the Skype subscriptions to the listings sales and fee increases and subtract them from the revenue and I'd bet you would see a loss.

It would be better if the response could avoid some hyperbole. Most users have multiple accounts, but having 30 user accounts seems a bit unusual.

Regarding Skype, applying annual subscription fees to $15 to $30 per year and applying that to only $65 million in revenue (or $250 million annualized) brings you to about 8.3 million paying users--well below the 171 million registered users that eBay management cited. However, management said during the conference call that it has not done a good job monetizing Skype yet. And it will be an area of focus more in 2007. So there is upside here. Skype is very much in the early stage of evolving.

And regarding eBay's growth being due to increased fees and listing sales, that was a clearly a defined management strategy during 2006--to keep the more profitable sellers and squeeze out the marginal ones, or money losing seller. Success in this strategy should be seen in margins, which was the case in the December quarter results.

Please keep the comments coming. We will see who proves correct by eBay's stock performance during the next twelve months.

Through TheFLY's Eyes: Sears Holdings

from Joseph Lazzaro of Theflyonthewall.com



















Could Sears Holdings Become The Next Berkshire Hathaway?

Could Sears Holdings (NYSE:SHLD) become the next Berkshire Hathaway (NYSE: BRK.A), a big, long-term gainer as the postmodern industrial age begins?

For those less familiar Berkshire Hathaway, under the leadership of Warren Buffett the company has averaged a 25% return on equity for more than 25 years. BRK.A shares, which have never split, traded Friday at mid-day at about $107,2700. Anyone who purchased even 1 share for a child at the start of that span has essentially earned a large enough return to pay for child's college education. Well, maybe not at Harvard or Yale, but you get the point.

Is Sears in that category? Could SHLD, led by hedge fund and investment veteran Eddie Lambert, become Wall Street's next great value adder, akin to BRK.A. and the magnificent run of Microsoft (NASDAQ:MSFT)?


The argument for:

-SHLD's extensive land holdings stemming from Sears' store locations. [Remember, the company's name is now "Sears Holdings," not just "Sears."]

-The continued expansion of the retail brands Sears (2,000 department stores) and KMart (1,400 discounts stores) into emerging markets.

-Eddie Lampert's creative ability to build value for shareholders long-term, particularly in ways the organization had not considered before.


The argument against:

-Formidable competition on the inventory / price / marketing fronts from Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and the revitalized JC Penney (NYSE:JCP).

-Lingering - and in some cases growing - protectionist sentiment in several regions of the world that could delay [even sidetrack] the growth of international trade, and all of its economic benefits.

-The oil wild card. A retail executive once told me, "A retail executive ignores the price of oil only at his/her peril." A telling observation: oil shocks destroy the disposable incomes for many, which sinks retail sales.


The verdict: On balance, stick with Lampert. He'll figure out a way to generate revenue in the best of times, or the worst of times. Buy 5 shares of SHLD, a roughly $1000 investment, for your son's or daughter's trust fund.

Through The Fly's Eyes: Ditech Networks

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Ditech Networks cleans up your telephone calls

As telephone users, most of us have come to take clear connections pretty much for granted. Our service providers can't do that. One of the outfits that helps them clean up the quality of our calls is headquartered in Mountain View, California.

Ditech Networks Inc. (DITC) supplies voice processing equipment for telecommunications networks. The firm's voice enhancement and echo cancellation products enable communications providers to regulate the distracting echoes that can occur in long distance, satellite and cell phone calls. Its Voice over Internet Protocol products deliver dependable service across network security boundaries, without network restructuring. Verizon Communications Inc. (VZ) and Sprint Nextel (S) are among the Ditech's principal customers.

The firm pleased investors last week, when it reported Q3 EPS of nine cents and revenues of $22.1 million. Analysts had been expecting seven cents and $22.1 million. Management also guided Q4 revenues to $23.2 million ($22.8M consensus) and predicted gross margins of 67 percent. DITC shares jumped through 90-day and 200-day moving average resistance on the news and have since been consolidating the gain in a bullish "flag" pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy," two "buys" and two "holds." Analysts see an average annual growth rate of 25%, through the next five years. The DITC Price to Sales ratio (3.19), Price to Book ratio (1.29), Sales Growth rate (57.86%) and EPS Growth rate (0.00 to 0.09 yr/yr) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 74% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 12 months, it has traded between $6.59 and $11.44. A stop-loss of $7.10 looks good here.

Through The Fly's Eyes: aQuantive Inc.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













aQuantive helps you make that online sale

The online retailing market is one of the fastest growing in the world, but it's a specialized medium requiring expert help. One of the industry's most successful digital marketing companies is headquartered in Seattle, Washington.

aQuantive Inc. (AQNT) aims to help clients acquire, retain and grow customers across all digital media. Its Digital Marketing Services segment provides web site development, interactive marketing, creative development and branding. The Digital Marketing Technologies unit offers advertisers online campaign management, search engine marketing and web site optimization tools. The Digital Performance Media branch buys blocks of online media advertising to resell on a targeted basis.

The firm surprised Wall Street last week, when it announced Q4 EPS of 23 cents and revenues of $133.4 million. Analysts had been looking for 17 cents and $119.7 million. Management also guided Q1 revenues to $118-$123 million ($121.22M consensus) and FY07 revenues to $550-$570 million ($538.67M consensus). Four brokerages subsequently declared the stock a "buy" and boosted their price targets to $32-33. The issue jumped above 30-day moving average support on the news and moved into a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Altogether, the brokerage community recommends the shares with four "strong buys", ten "buys", and eleven "holds". Analysts see a 30% growth rate through the next year. The AQNT Price to Book ratio (3.78), Sales Growth rate (52.53%), EPS Growth rate (53.33%), Operating Margin (18.06%), Net Profit Margin (12.20%), Return on Assets (7.39%) and Return on Investment (10.81%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, aQuantive has traded between $19.56 and $29.16. A stop-loss of $24.30 looks good here.

Through The Fly's Eyes: Newmont Mining

from Theflyonthewall.com







Gold Up Big: Stay With Newmont Mining

Yesterday, gold was up over $23 in trading, hitting a seven month high. A CPI report of 2.7% helped send gold flying.

The concern is that with energy and home prices having declined since the spring of 2006, that the CPI would be close to zero or even negative by now. Yesterday's data show there is still plenty of liquidity in the economy to keep it going and rate decreases are going to be pushed out for a while. The possibility of an increase or two exists if growth ticks up a bit too much.

We blogged in October about the merits of investing in Newmont Mining (NEM). Our rationale was the huge correction in its stock price and the discount it sold for relative to the value of its gold reserves. The value of its gold reserves are estimated to be 20% to 50% higher than its stock price.

Newmont reports earnings today, not that it really matters since it trades relative to the price of gold price. But it would be worth a listen.

There are a number of factors which favor the outlook for gold. Most countries have floating currencies or have their currencies backed by floating currencies. Central banking mistakes will lead to higher levels of inflation--and we know that central banks will make mistakes.

Newmont is a good hedge in a world of floating currencies and awash with cash.

Through The Fly's Eyes: Whole Foods

from Theflyonthewall.com










Holy Clarity

This Fly has never read an earnings release from Whole Foods Market (WFMI) prior to last night. I recommend those who have read plenty of them to read this one. The clarity and transparency is refreshing.

In particular is the table which breaks down the age of stores, their comp growth rate and the return on invested capital. For example, for stores open for 11 years, Whole Foods stores show a same-store-sales growth rate of 3.8%, which is pretty good for a store open that long.

More impressive, however, is the ROIC for stores open eleven years is 77%.

Whole Foods' stock peaked at $78 in December 2005. It is now around $46, a big correction. Despite increased competition in the organic food space, Whole Foods has built a powerful brand name. In addition, its acquisition of Wild Oats is not a bad idea. Wild Oats has been restructuring the past few years and should not require too much work to integrate these stores.

It is time to do more work on Whole Foods. This looks like a good growth stock selling at a low valuation.

Through TheFLY's Eyes: Six Flags

from Joseph Lazzaro of Theflyonthewall.com











Six Flags: Will It Amuse This Year?

Six Flags (SIX) is just about set to enter its focus period.

That's because Wall Street will begin to turn its eyes to SIX to evaluate whether its capital investment, new efforts to attract families and improve the typical park attendee's experience are bearing fruit.

Revenue for Six Flags, the world's largest regional theme park operator engaged solely in the theme park business, is expected to increase about 9% to $1.1 billion in 2007, according to the Reuters consensus estimate.

Wall Street will scrutinize key metrics for park attendance, average day fares, and revenue per attendee. But equally significant will be channel checks that evaluate the overall consumer experience at SIX's parks: in short Wall Street wants to see that families, not just teenagers, are attending in large numbers, that both the kids and parents are happy, and that families in particular come away from the day's experience feeling that they received a good entertainment value from SIX and that they'd visit the park(s) again.

SIX's stock price, which traded 15 cents higher Wednesday afternoon to $6.25, has meandered between $4.50 and $6.50 for the better part of a year, which is indicative of Wall Street's lack of a conclusion regarding the stock.

But as the warmer weather starts to arrive, outdoor activities increase, and Wall Street will learn relatively quickly whether Six Flag's efforts have placed a smile on both kids' and investors' faces this year.

Through TheFLY's Eyes: JC Penney

from Joseph Lazzaro of Theflyonthewall.com















Suddenly, JC Penney Is No Longer Passe

It looks like the JC Penney (JCP) restructuring and repositioning is about set to move from the grade of "qualified success" to "success."

Stung by the flight of upper-middle-income shoppers to more-upscale retailers like Nordstrom, Lord & Taylor and, of course, to niche & specialty apparel boutiques, JCP commenced a restructuring plan to offer competitive / fashionable clothes, improve store environments, and cut costs in order to appeal to a slightly wider demographic.

The results? So far, very good, with 9-month F2007 sales up 4.7%. While Wall Street awaits JCP's Q4 F2007 report, analysts surveyed by Reuters expect JC Penney to post F2007 revenue of $19.9 billion, up about 5.8%. Even better, analysts surveyed by Reuters expect F2007 EPS to increase 26% to $4.95. On Wednesday, JC Penney's shares moved 38c higher to $86.60.

Further, a funny thing happened to JC Penney on the way to rediscovering its market: the "Roaring 90s" ended - at least regarding the spending patterns of some of those departed shoppers - and some upper-middle-income shoppers rediscovered JCP, at least for certain items.

An illuminative data point would be a journalism colleague and friend here in New York who favors men's suits by Armani, Giorgio Valentini, and Baroni (classic line), but who returned to shop at JC Penney for cotton dress shirts. "There was a difference in the finer-fabric shirts, like silk, but regarding all-cotton Oxfords, there was no difference between the $55 Oxfords at the tailor and the $25 Oxfords at JC Penney," he said.

[Technical analysis-agnostics stop reading here. Others, continue...]

Technically, JCP's chart is strong and bears the signs of increasing sales, earnings, and a generally favorable evaluation of operations by Wall Street. Trading at about $85, JCP's stock has remained above the critical 50-day moving average, with only one corrective breech, for about 5 months. Its P/E is healthy, but not overpriced at about 15, and after breaking through key resistance at the $69 mark, JCP's chart has displayed a constructive advance, followed by mild correction, pattern.

And provided JCP's management continues to calibrate correctly regarding product style, quality, and price, even more professionals - in the city that never sleeps, and elsewhere - may rediscover JCP as the decade progresses.

Through The Fly's Eyes: Cisco Systems

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Get networked and rediscover Cisco Systems

Internet networking is essential to the successful operation of businesses, governments, educational institutions and many of the other major forms of modern human endeavor. The world's leading provider of networking hardware is headquartered in San Jose, California.

Cisco Systems (CSCO) provides IP-based networking products and related devices used to transport data, voice, and video around the world. Its main offerings are routers and switching systems. The former interconnect computer networks and the latter connect end users, servers and workstations. Other products include remote access servers, IP telephony equipment, optical networking components and security systems. Primary customers are large enterprises and telecommunications service providers. Cisco has strategic alliances with numerous major technology companies.

The firm pleased the Street earlier in the month, when it announced Q2 EPS of 33 cents and revenues of $8.44 billion. Analysts had been expecting 31 cents and $8.28 billion. Management also guided Q3 revenues to about $8.71-$8.79 billion, versus consensus of $8.56 billion. Six brokerages subsequently declared the stock a "buy" and upgraded their price targets to points in the low to middle-$30s. The news popped the shares out of a January "cup" into the February "handle" of a Cup & Handle formation. The price is now showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".

Brokers recommend the issue with four "strong buys", nineteen "buys" and ten "holds". Analysts expect a seventeen percent growth rate, through the next year. The CSCO Price to Free Cash Flow ratio (19.35), Sales Growth rate (27.32%), EPS Growth rate (38.62%), Operating Margin (24.32%), Net Profit Margin (20.27%), Return on Assets (16.20%), Return on Investment (21.99%), Return on Equity (26.13%) and Net Income per Employee ($129.64k) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about two-thirds of the outstanding shares. The stock is one of those used to calculate the S&P 100 Index, the S&P 500 Index, the Nasdaq 100 Index and the AMEX Internet Index. Over the past twelve months, it has traded between $17.10 and $28.99. A stop-loss of $24.00 looks good here.

Through The Fly's Eyes: Dionex

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Dionex measures up

Whether you are involved in drug discovery, pollution testing, chemical process control, or measurement of the nutritional content of food, you need precise and efficient ways of preparing and analyzing your samples. There's an outfit in Sunnyvale, California that makes machines that give you the right answers to a broad array of analytical questions....and they are automated!

Dionex Corporation (DNEX) manufactures chromatography systems for chemical analysis. The company's devices are used to identify contaminants and impurities in a range of materials from foods and beverages to industrial chemicals. They are also used by life science investigators to separate and identify biological molecules such as amino acids, carbohydrates and proteins. The Dionex sales force is active throughout North America, Europe and Asia.

The firm pleased the Street late last month, when it reported Q2 EPS of 65 cents and revenues of $83.5 million. Those figures topped analyst expectations of 57 cents and $78.7 million. Management also guided Q3 EPS to 53-56 cents (55 cent consensus), Q3 revenues to $78-$81 million ($78.04 million consensus), FY07 EPS to $2.18-$2.24 ($2.13 consensus) and FY07 revenues to $312-$320 million ($311.36 million consensus). The CEO said that the Q2 sales and earnings figures were both new records for the company, growth coming from both instrumentation and consumables. The optimistic view forward derived from sales trends in the life science, chemical/petrochemical, electronics and power markets. DNEX shares jumped on the news and are now consolidating the gain in a bullish "pennant" pattern. Equities frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with three "holds." Analysts see a 20% average annual growth rate, through the next five years. The DNEX Price to Free Cash Flow ratio (28.60), EPS Growth rate (27.58%), Operating Margin (19.67%), Return on Assets (15.02%), Return on Investment (19.63%) and Return on Equity (20.14%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 91% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $45.76 and $64.83. A stop-loss of $55.50 looks good here.

Through The Fly's Eyes: Hewlett-Packard

from Theflyonthewall.com













Hewlett-Packard may Pull Back

Cost discipline and revenue growth go hand in hand, said CEO Mark Hurd during Hewlett-Packard's (HPQ) conference call last night. HP emphasized its unit volume growth for the quarter.

* Notebook units up 57%; 40% revenue growth
* Printer hardware units up 18%; revenue up 7%
* Personal system group, in total, was up 19% in units, with revenue up 17%

HP was able to gain market share gains while improving margins. The margin improvement in such a competitive market was impressive, as GAAP operating margin increased to 7.3% up from 6.6%.

However, the balance sheet and cash flow statement metrics showed signs which historically preceded difficult times for the PC business. Guidance was a bit weak and inventory has jumped up. In addition, there was concern about the apples to apples comparisons of gross margin due to the Mercury acquisition. In addition, there was some concern about sources and uses of cash. Particularly about $1.48 billion cash outflow for rebates and other uses--also a signal of a weakening PC business.

HP is a stock you do not have to rush into. There are warning signs that this stock might run into a couple of quarters of weak results. Stay on the sidelines for now.

Through The Fly's Eyes: Home Depot

from Theflyonthewall.com














Home Depot Holds Up Despite Awful Results

The Home Depot (HD) declined a mere $0.37 in trading yesterday despite reporting awful results. Same store sales were down 6.6% for the quarter and in one month were down 11%--that is pretty bad.

However, despite these tough results, management appeared to be confident that the weakness is manageable and measurable. It appears the worst might be hitting Home Depot currently and the poor operating performance could bottom in the first half of 2007.

While Home Depot's supply business rolled over, the real concern appears to be its decision to enter the electronics appliance business. Home Depot mentioned this business was very disappointing. This could be a business line they exit.

Due to the relatively good stock performance following such awful results, investors need to start looking at this stock again. Home Depot will most likely be a Fed stock -- meaning when there is enough evidence that the Fed might start dropping rates, Home Depot stock might be off to the races.

The other thing to look for is a bottoming in its same store sales decline.

Through The Fly's Eyes: Garmin Ltd.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Garmin keeps you on track

From the global positioning system (GPS) handhelds used by troops in battle to the GPS hardware in your portable digital assistant, there's a Cayman Islands firm ready to provide equipment that tells you just where you stand.

Garmin Ltd. (GRMN) manufactures a variety of products enabled by GPS technology. The firm's Consumer segment offers instruments used in automotive navigation, general recreation and business applications. The Aviation segment provides a panel-mounted product line that facilitates flight navigation, very high frequency communications and instrument landings. Boat manufacturer Ranger and airplane maker New Piper use Garmin equipment in their vehicles. The company's consumer products are sold through such retailers as Best Buy (BBY) and Wal-Mart Stores (WMT).

The firm pleased investors last week, when it reported Q4 EPS of 75 cents and revenues of $611 million. Analysts had been looking for 58 cents and $524.9 million. Gross and operating margins came in at 50 percent and 31 percent, respectively. Management also guided FY07 EPS to points above $2.70 ($2.37 consensus) and FY07 revenues to amounts over $2.5 billion ($2.22B consensus). GRMN shares jumped on the news and have since been consolidating the gain in a bullish "flag" pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with four "strong buys", one "buy", fifteen "holds" and two "sells". Analysts expect an 18 percent growth rate, through the next year. The GRMN PEG ratio (1.36), Sales Growth rate (91.43%), EPS Growth rate (106.67%), Operating Margin (31.26%), Net Profit Margin (28.98%), Return on Assets (31.55%), Return on Investment (37.72%) and Return on Equity (37.87%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 32 percent of the outstanding shares. The stock is one of those used to calculate the Nasdaq 100 Index. Over the past 52 weeks, it has traded between $31.83 and $59.30. A stop-loss of $48.75 looks good here.

Through The Fly's Eyes: International Auto Stocks

from Theflyonthewall.com













International Auto Stocks Are Expected To Do Well

David Herro, of Harris Associates and long-time international investor, is upbeat about auto stocks. Not U.S. auto stocks but international auto stocks, according to this weekend's Barron's interview.

While Toyota (TM) has been a great performer, other multinational auto stocks have not performed as strongly but are poised to do well. Herro likes DaimlerChrysler (DCX), BMW (BMW in Germany) and Honda (HMC). Daimler is about 50% undervalued, BMW about 45% and Honda 20%, according to Herro.

Global economic expansion is the reason cited for Herro liking auto companies that have strong franchise names. Herro said some three-fifths of the world's population is now entering the global economy.

Mercedes margins have increased from 1%-to-2% range to 7%, a huge improvement for an auto company. Daimler is also doing better on the commercial side of the business.

BMW's case is that it earns double-digit returns on capital and grows units around 6% per year--that is a big number for the auto industry.

Herro referred to Honda as a BMW for the mass market, with management focused on profitability and return on investment.

Investing in large auto companies does not sound exciting, but Herro has a great track record at picking stocks. Might as well go along for the ride.

Through The Fly's Eyes: JetBlue Airways

from Theflyonthewall.com










Oddity Of The Airline Industry Comes Home To Roost

If you invest in turn around situations, you will have spent a lot of time focused on airline stocks during the last five years.

When interviewing airline executives, they universally say the same thing: the airline industry is different than other industries, as you grow there is point at which your costs substantially increase as a percent of sales. The old concept of economies of scale does not work the same way in the airline industry.

This appears to be happening at JetBlue (JBLU). When asking airline executives about JetBlue as a competitor, many said that at some point its costs are going to have to go up.

The JetBlue irony is that the start-up airline is having trouble when legacy airlines are actually raising prices. There is no price war going on.

What are the reasons cited for JetBlue's blues? Regulation, as pilots need to follow federally established rest rules; poor communications -- a big expense; failed reservation systems -- very expensive; employees are in locations where they are unable to provide a helping hand -- more expenses.

JetBlue appears to have reached a size where it needs massive infrastructure investment. It will be interesting to hear if management comes clean on how much all the investments will cost.

The airline had scheduled 600 flights for Presidents Day, more than the 550 to 575 flights on a typical Monday. So far, 139 flights have been canceled.

Through TheFLY's Eyes: IPO & Syndicate Preview

from Joseph Lazzaro of Theflyonthewall.com
















IPO & Secondary Preview - Schedule for the Week of Feb. 19, 2007

Wall Street's equity market offers a very light schedule next week, with just 3
Secondaries on the docket.

Those deals tentatively scheduled to price include:


IPOs:

No IPOs scheduled.


Secondaries:

Thursday

Burger King (BKC), a 20M-share Secondary for this international fast food chain. JP Morgan Chase, Goldman Sachs & Morgan Stanley are the lead managers.


Friday

Aviza Technology (AVZA), a 4M-share Secondary for this semiconductor manufacturer. Needham & Co. is the lead manager.

MVC Capital (MVC), a 5M-share Secondary for this business financing operation. UBS
Investment & Bear Stearns are the lead managers.

- -

For the latest market intelligence on IPOs, Syndicate, and after-market trades,
check out TheFLY Syndicate at www.theflyonthewall.com. [Subscription required.]

Through The Fly's Eyes: A Quick Look Ahead

from Eric Buscemi of Theflyonthewall.com












Highlights For Next Week


Monday February 19

* Markets closed for President's Day holiday

Tuesday February 20

* Wal-Mart (WMT) to report Q4 earnings; conference call at 7:30am. Analysts will review Wal-Mart's same store sales, overall traffic, new products displayed, overall product mix, employee retention rates, sector position, and margins, along with Wal-Mart's overall global new store opening timetable, including store square footage expansion targets.
* Hewlett Packard (HPQ) to report Q4 earnings; conference call at 5pm. Analysts will be focusing on HPQ's overall revenue, the performance of their various divisions, and any comnent's HP makes about the effect of the launch of Microsoft (MSFT) Vista on sales.
* Caremark RX (CMX) had scheduled a special shareholder meeting regarding the CVS Corp (CVS) merger today. It was postponed until at least March 9 by the Delaware Chancery Court to allow more time for dissemination of information.

Wednesday February 21

* Nokia (NOK), Sprint (S) and Qualcomm (QCOM) to hold press conference, according to PhoneNews.com, which speculated that the conference could be the end of patent disputes between Nokia and Qualcomm, meaning Nokia may announce a return to CDMA handset distribution, with EV-DO chipsets.

Thursday February 22

* BEA Systems (BEAS) to report Q4 earnings; conference call at 5pm. Note that BEA Systems just concluded a stock options review that did not result in a breakup in management, which Pacific Crest Securities believes removes an overhang on the company.

Friday February 23

* CVS Corp had scheduled a shareholder meeting today, but it has been postponed in light of the Delaware Chancery Court's decision to enjoin the February 20, 2007 shareholder meeting of Caremark Rx.

Through The Fly's Eyes: LCA-Vision

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












LCA-Vision helping clients see the light

It's not immediately obvious that shining a laser beam into a person's eye might help correct their vision. That's how it happens, though, when a trained ophthalmologist is working the beam. If you need help along that line, there is a firm in Cincinnati, Ohio that would be glad to show you the light.

LCA-Vision (LCAV) operates sixty laser vision centers for the correction of nearsightedness, farsightedness and astigmatism. Procedures treat vision problems by reshaping the cornea with computer-guided excimer lasers. The firm also offers photorefractive keratectomy, another corrective procedure. The centers are staffed by ophthalmologists, who perform the procedures, and optometrists, who carry out the pre-procedure evaluations and post-procedure follow-ups. LCA-Vision expects to open twelve to fifteen new centers this year.

The firm pleased investors earlier in the week, with word of solid quarterly numbers. It reported Q4 EPS of 34 cents and revenues of $58.8 million. The Street had been expecting 25 cents and $58.5 million. Management then predicted FY07 EPS of $2.05-$2.15 ($2.02 consensus). The share price popped on the news and has since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys", two "buys" and four "holds". Analysts expect a 21 percent average annual growth rate, through the next five years. The LCAV PEG ratio (1.27), Sales Growth rate (26.09%), Operating Margin (22.18%), Net Profit Margin (14.91%), Return on Assets (22.94%), Return on Investment (25.43%) and Return on Equity (27.30%) compare favorably with industry, sector and S&P 500 averages. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $29.90 and $58.25. A stop-loss of $40.65 looks good here.

Through TheFLY's Eyes: Ford

from Joseph Lazzaro of Theflyonthewall.com














Whither Ford? Not Just Yet

Can Ford rebound? The Totally Informal Economics Roundtable [TIER] - comprised of yours truly and my three astute economist friends from graduate school - think so.

The TIER agreed that Ford, which traded Friday afternoon up 10 cents to $8.69, an buy some time toward the objective of regaining its status as a force in the auto industry, if one of the following occurs:

Oil price decline - A substantial, sustained decline in the price of gasoline via a crude oil decline will steer some gas-conscious consumers, who otherwise have abandoned Ford, back to F's showrooms. This would not be a floodtide of showroom traffic, but it would boost revenue slightly, and at this stage Ford will take all the feet in its showroom it can get.

Technology - If Ford can deploy a new technology quickly - for example a new, consumer-attracting feature, a driving/safety feature, or an increase in the aforementioned fuel economy, that would also boost sales. The TIER agreed that one thing Ford should do is deploy its next-generation, more fuel-efficent transmission technology and composite [weight reducing] technology immediately.

Cost Structure - If Ford's current restructuring substantially cuts cost to the point where showroom prices were reduced by 20%-30% that would represent a de facto increase in value. Again, the TIER agreed, it would attract more buyers on tighter budgets.

'Must Have' Car(s) - Finally, the TIER agreed that Ford can increase the likelihood that its turnaround will succeed by designing and deftly introducing what analysts call the magnet: the "must have" car. Ford has done it twice before, with the Thunderbird (1950s) and the Mustang (1960s), and to a lesser extent with the Taurus (1980s). The car must be powerful, stylish, durable, safe, incorporate the most-sought options, and equally significant, must appeal to younger buyers. In other words, it must have a cool factor of 8 on a 10 scale.

The TIER agreed: If Ford can achieve any of the aforementioned, it will gain time to complete its restructuring and place the company on a better financial footing as the 21st century global auto era continues.

Through The Fly's Eyes: Agilent Technologies

from Theflyonthewall.com






Solid Quarter For A Solid Company

Agilent (A), the tech equipment company that was spun-off from Hewlett-Packard (HPQ), reported solid results yesterday. While they might not drive the stock higher, it is a good stock to keep up to date with and buy on a market correction.

• Handset test measurement business was weak, which should not be a surprise since we have been blogging about weakness in the handset market for the past three or four months.
• Bio-analytical business is doing very well, having a "blow-out" quarter. Revenue was up 22% year-over-year. Operating profit in this business was up 69%. Sales to China and India were up 33% and 38%, respectively.

Many of the people who made HP into a great company decade after decade are with Agilent. The company is a strong product innovator and also is run increase shareholder value.

Keep an eye on Agilent and jump in during market sell-offs. Agilent has a strong balance sheet and good product innovation to be around for a long time.

Through The Fly's Eyes: Chipotle Mexican Grill

from Theflyonthewall.com














The McDonald's Of 2007

What Ray Kroc was to hamburgers, Steve Ells is to Mexican food. Ells, Chipotle Mexican Grill's (CMG) founder, has created a stock to buy and put away. This company is too early in its growth phase to be ignored. There is a long way to go with this stock.

Highlights for full year 2006 as compared to full year 2005 include:

• Revenue increased 31.1% to $822.9 million
• Comparable restaurant sales increased 13.7%, compared to 10.2% in 2005
• Restaurant level operating margins increased 240 basis points to 20.9%
• Income from operations approximately doubled to $62.0 million
• Diluted earnings per share were $1.28, compared to $0.66 in 2005

There could be some negatives. Chipotle needs to invest heavily to get employees. Growing rapidly in a tight labor environment is extremely difficult. It will also have to deal with higher food costs and higher costs to open up new stores as it enters more expensive markets.

Through TheFLY's Eyes: Caterpillar

from Joseph Lazzaro of Theflyonthewall.com

















Big CAT Could Be On The Prowl Again

Caterpiller (NYSE:CAT) Thursday announced that it plans to buyback another $7.5 billion in stock over the next five years. CAT said it would start the program after the initial $6.4 billion program is completed in the next few months.

There are two saliant financial points regarding Caterpillar's announcement. First, CAT expects to complete its first $6.4 billion authorization 1 1/2 years ahead of schedule, no mean feat. Second, although a stock buyback is fundamentally a wash for a company from a balance sheet standpoint - a company gains stock but also lowers its cash position - psychologiacally it's often considered a positive.

That's because many market participants often interpret the action as "the company believes its shares are undervalued" or "the company believes its shares are a bargain at the current price."

Add one other point, which can be deduced from the above: the comapny anticipates that better days are ahead, operationally. And, in fact, Caterpillar confirmed the above by citing confidence in its long-term growth prospects and cash-flow generation.

Caterpillar's shares surged Thursday on the news, up $1.42 to $67.58 in afternoon trading.

An early-buyback completion. Another major buyback announced. An executive team that's confident in the organization's long-term growth and cash-flow prospects.

To be sure, there have been worse circumstances for a company.

Through The Fly's Eyes: Blue Coat Systems

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Blue Coat Systems Polices your e-business

Access to the internet extends the reach of business into new and exciting channels, but with the privilege come dangers. There is an outfit in Sunnyvale, California that secures web communications and accelerates business applications across the distributed enterprise.

Blue Coat Systems Inc. (BCSI) helps organizations make Web use safe and productive. Blue Coat proxy appliances provide control of Web communications to protect against risks and inefficiencies from spyware, web viruses, inappropriate web surfing, instant messaging, video streaming and peer-to-peer file sharing. Blue Coat has installed more than 30,000 appliances worldwide and is ranked number one by IDC in the Secure Content and Application Delivery market. Customers include the National Institutes of Health, Merck & Co., Inc.(MRK) and the US Air Force.

The firm pleased investors last week, when it issued preliminary net revenue results for its fiscal third quarter. Management now sees sales of $45.5-47.5 million. That was an improvement on its previous estimate of $40-45 million and topped the consensus Street estimate of $43.8 million. The news boosted the share price out of a January "cup" into the February "handle" of a Cup & Handle formation. Now, the price is showing signs of completing the pattern with a bullish rise from the right-hand side of the "handle".

Brokerages recommend the issue with one "strong buy", three "buys" and two "holds". Analysts expect a 188 percent growth rate, through the next year. The BCSI Price to Sales ratio (3.15), Price to Book ratio (3.75) and Sales Growth rate (26.46%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 59% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past fifty-two weeks, it has traded between $12.86 and $32.22. A stop-loss of $27.50 looks good here. Note that the firm is expected to announce Q3 results on March 8th, after the close.

Through The Fly's Eyes: Coca Cola

from Theflyonthewall.com


















Getting Cheaper, But Not There Yet

Coca Cola (KO) has been dead money for years. After reporting solid results yesterday, the stock may be due for a good 15% rally.

Coke had a great 10-year run which ended 1998, when a bear market in value stocks began. When Warren Buffett built his position in the late 1980s, the stock sold for $4.50 per share, according to Yahoo's new charts. By 1998, the stock peaked at $89, an almost twenty-fold gain.

Since peaking in price in 1998, the stock has declined almost 50%. By 1998, the P/E on Coke exceeded 40 x earnings, a high-tech type valuation. Today, the P/E is at 19x. Getting cheap, but not very cheap.

Coke grew revenue 7% for the most recent quarter and its operating profit improved 10%, very solid for this $112 billion company. With the market rallying, these results will force large institutions to own this stock. Coke most likely has a good 10% to 15% rally ahead. But after that, take profits. Coke's valuation is not cheap enough to be a big winner yet.