Market Update (pot, bg, siri, msft, appl, amzn, sbux)
All indications for the market this morning are slightly higher following a must better than expected durable goods number, which may mean that the economy is either not as bad as what people think, or is starting to recover from the slowdown that started 9 months ago. We had a slew of positive earnings last night and this morning. Apple beat numbers but sandbagged guidance as they always do. Amazon beat earnings every so slightly. Starbucks missed and lowered guidiance whining about how the consumer is so bad, however other companies have not echod that sentiment. Potash demolished numbers and raised full year guidance from 9.50 to 10.50 up from 6.25 to 7.25. They also said that the best way for the world food to increase food supply is to increase fertilization….well no kidding! Bunge blew out their numbers earning 2.10 vs a 1.06$ estimate and raised their full year view to 7.10 to 7.40 up from 6.01 to 6.30.
Finally a very interesting note out of Citigroup today initiating Sirius as a buy with a 9$ price target. Note that this stock is currently trading at 2.82$. I find it hard to believe that anyone would stick their neck out and say a stock is going to tripple in the next 12 months without having hard data or some sort of inside information to base it upon. They also said that there is a 70% chance that the siri/xmsr merger goes through.
Look for MSFT earnings after the bell to be strong. The primary question that I have is, did Apple sell more macs because worldwide pc demand is growing, or because vista was so bad that people shifted from buying PC’s to buying Mac’s.
How do we want to play these stocks?
Appl - I would start building a long term position on any pull back in the 160 range. Jan 09 at the money calls should work quite well, especially with the premium deflating today based on getting little move after earnings.
Pot - You have to own it. The stock is going to split and it is going back to 200 again. This isnt about any type of commodity bubble, this is a play on third world countries and emerging market economies growing and becoming more wealthy causing their middle class to grow and demand a higher quality of food.
BG - You should own this as well for the same reasons as Potash, however Potash does have a higher upside.
Siri - I have seen people bet on this stock for 6 years now and get absolutely slaughtered. Eventually those people are going to be right, however how many times do you have to lose 40% on an investment for it to make sense to earn 300% on the upside? The correct answer is never, wait for the merger to be completed, and then dabble lightly. I do have a few Jan 09 XM 15 calls, which is still a good way to play them in my opinion, but i would not sink anything more than maybe 1 or 2% of your portfolio in this as it could very well be dead money as it goes through the drug out approval process.
Msft - This stock is almost always a buy. I would however own it into earnings as they should suprise to the upside similar to intel and IBM.
Amzn - I would stay away, retail just isnt where i want to be right now.
Sbux - This company is awful. Sell it, sell calls. They are dead money and arnt going anywhere. Their cost of sales is increasing and nobody wants their crappy coffee.
(POT: 58.05 +2.59 +4.67%, cap: 17.522B)
(BG: 32.908 +0.148 +0.45%, cap: 4.002B)
(AAPL: 80.13 -0.36 -0.45%, cap: 71.181B)
(SIRI: 0.148 +0.008 +5.71%, cap: 481.1M)
(MSFT: 18.68 +1.15 +6.56%, cap: 167.7B)
(AMZN: 36.20 +1.17 +3.34%, cap: 15.530B)
(SBUX: 7.235 +0.065 +0.91%, cap: 5.321B)
April 24th, 2008 at 10:12 am
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April 24th, 2008 at 7:31 pm
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