Yesterday on the tech news site TechCrunch, it was reported that Google, Inc. (NASDAQ: GOOG) may be buying social news website Digg.com for up to $200 million. Now, Digg.com has come under acquisition rumors so far, but this is the most serious one. Google stands to keep its iron fist over the controlled flow of information with the purchase if, in fact, it is officially announced.
Digg.com, which has propelled itself into the limelight by having its members and readers publish links to news stories from around the globe and vote on them to let its customers choose "headlines," is no small potato.
Although Google was rumored to have been in the chase for the company back in March, it should go ahead and just make the announcement official. Integration of Digg.com into Google News (which is already an excellent product) would take Google's news aggregation product to the next level and would assist it solidifying its daily news position against the likes of Microsoft Corp. (NASDAQ: MSFT) and Yahoo, Inc. (NASDAQ: YHOO).
Digg.com would not be a good fit for Microsoft, however. While Microsoft continues to roll out web-based properties and products, many of its actions seem to be compelled by a "me too" attitude more than a corporate strategy, regardless of what the company says. Google, right now, has the cachet and the product breadth to continue steamrolling much of the competition -- and a Digg.com purchase would just make it stronger.
Stock futures were higher this morning, indicating stocks could have a positive start to the session as oil prices continued to decline, sinking below $127 a barrel. Weekly inventories numbers reported later today could have an impact on oil prices. Then there is continued optimism in the financial sector, which caused the rally Tuesday. Also, a bill aimed at helping the housing market will reach the House floor. But once again earnings will likely have investors' attention with Costco already giving a profit warning. Costco Wholesale Corp. (NASDAQ: COST) shares are plunging over 8% in premarket trading after the wholesale retailer warned its August-ending quarter's profit would miss analyst estimates. This is most surprising as Costco had been one of the retailer that seemed to have benefited from consumers trying to save and buy lower-cost items. But Costco blamed the lower profit on rising energy costs, saying it will earn less than $1 per share.
Washington Mutual Inc. (NYSE: WM) late Tuesday reported second-quarter results, posting a loss of $3.3 billion, was worse than analysts had anticipated. Excluding one-time items, WaMu lost $3.34 per share, much wider than the expected loss of $1.05 per share. Piper Jaffray downgraded WM shares from Neutral to Sell and Friedman Billings halved its target price on the shares from $8 to $4. Shares are off nearly 3% in premarket trading.
Yahoo Inc. (NASDAQ: YHOO) also reported profits and sales that came up short of estimates. Second-quarter profit fell 18% to $131 million, or 9 cents per share. Analysts had projected earnings of 11 cents per share in the most recent quarter, according to Thomson Financial. Revenue grew 6% to $1.8 billion, or $1.35 billion after subtracting commissions, also below estimates. Yahoo! shares, however, are up about 3% in premarket trading since investors were relieved the performance wasn't as bad as many had feared after Google (NASDAQ: GOOG) reported last week and disappointed investors. Also, Yahoo didn't dramatically lower its revenue outlook for the remainder of the year.
Apple, Inc. (NASDAQ: AAPL) reported stellar, above-expectations quarterly results yesterday after market close. One would have thought that this company, in the midst of U.S. economic uncertainty, would have reported a mediocre quarter at best, but that wasn't the case. Apple outpaced expectations by $0.11 per share, shipped more Mac computers than during any quarter in its history, and saw a 38% revenue jump from the year-ago quarter.
As a nice reward for such a stellar quarter, the market took Apple out behind the woodshed and gave it a sound whipping. The reason? Apple's murky guidance for the fourth quarter. This from a company that almost always shoots low with guidance only to blow the numbers away. Add that to ongoing concern over the health of CEO Steve Jobs and you have a 10% drop in AAPL shares before the market opened this morning.
Is Apple the victim of outsized expectations? You bet. Just like Google, Inc. (NASDAQ: GOOG) the other day -- which also reported a fantastic quarter but saw its shares pummeled right after results were announced -- Apple may be losing the ability to impress. In reality, both companies are doing excellent business in the face of gas and energy price spikes in addition to a six-month string of job losses in the U.S. Yet, the market slapped huge losses on both stocks based on what could be considered shaky speculation for future growth prospects.
Stock futures were higher this morning after Bank of America joined recent financials and topped Wall Street estimates. Also pushing futures higher is a deal in the pharma sector with Roche bidding nearly $44 billion for the rest of Genentech. However, both Merck and Schering-Plough said they'll postpone reporting their financial results after the close; Apple will also be reporting results then. Finally, oil prices came off a six-week low and are trading back above $130 a barrel due to escalating Middle East tensions. Higher oil prices could dampen the mood on the Street.
Bank of America Corp. (NYSE: BAC), the biggest U.S. consumer bank and home lender, said profit fell 41% to $3.41 billion, or 72 cents a share, much better than analysts estimates of 21 cents according to Bloomberg. The bank curtailed loan losses, adding $2.2 billion to loan loss reserves. The bank has completed the purchase of Countrywide Financial Corp. on July 1. With these results, BAC joins other big banks that have recently reported better-than-expected results. BAC shares are up 8.6% in premarket trading.
Roche Holding on Monday said it was offering $43.7 billion to take over the remaining 44.1% shares of Genentech Inc. (NYSE: DNA) for $89 per share, 8.8% above DNA's closing price Friday. DNA shares are up nearly 18% in premarket trading to $96.50.
Yahoo! Inc. (NASDAQ: YHOO) said Monday morning it settled its fight for control of the board with billionaire investor Carl Icahn. The board will expand to 11 members to include Icahn and the remaining two seats will be filled by the board upon the recommendation of its nominating and governance committee. In addition, Icahn, who owns about 5% on Yahoo common shares, agreed to withdraw his nominees for consideration at the annual meeting and to support the board's nominees. YHOO shares are declining 2% in premarket trading.
Again this week, in a list of earnings expectations for some prominent companies in a variety of sectors, we see an apparent optimism. That is, analysts are anticipating more earnings growth than earnings declines.
Analysts surveyed by Thomson Financial expect the following companies to report a rise in earnings when compared to the same period of the previous year.
So, the past few days have been cool ones for the Dow Jones Industrial Average Index. The market saw a nice uptrend. Click here and set the Dow to the one-month timeframe; that graph says it all. It looks like things may be okay from now on, right? Well, don't bet on it. CNBC.com reminds us about the dreaded bear-market rally. And I completely agree with the thesis: we are most likely headed back down once this market happiness runs its course.
It would simply be too easy for investors to have seen the bottom. No way, not with all the problems going on in terms of inflation and financial disasters. Oh yeah, oil has retreated, that's true, but I don't think the energy monster is in permanent hibernation. Not by a long shot. The problem with the past few days is that it plays with investors' emotions. It's played with mine, certainly. I haven't bought a stock in a while, and I really want to buy something. Maybe add to my General Electric (NYSE: GE) trade, my Coca-Cola (NYSE: KO) holding. I love the dip in Microsoft (NASDAQ: MSFT) and really want to get serious about grabbing shares in Mr. Softy. My 401(k) has a lot of money waiting to be put to work. I want to transfer some of those monies into one or two of the quality mutual-fund offerings at my disposal. I can't stand having money tied up in stable-value instruments.
I just can't make a move yet. I feel that lower prices will be upon us sooner rather than later. Already, many are talking about buying opportunities for oil futures, and I fear those who hold such opinion will turn out to be correct. When oil rises again, stocks will most likely fall, and this summer fun will be just another memory of a day at the beach. I'm not saying there aren't buys out there. Again, Microsoft is looking attractive. Value investing, however, isn't. It's not the style of the day. And when value investing isn't the style of the day, your only hope is to become a deep-value investor and pray that patience is eventually rewarded.
U.S. stock futures turned higher Friday morning after earnings from Citigroup that beat expectations offset disappointment from Merrill, Google and Microsoft. There was also some pressure from oil as prices rebounded to above $131 a barrel, following Nigeria cutting output.
Many on Thursday started wondering if we have seen the bottom. Stocks rallied for a second straight session as oil continued its price drop. Better -than-expected earnings for JPMorgan Chase (NYSE: JPM) again lifted banks. The Dow Jones Industrial Average gained 207.38 points, or 1.9%, the S&P 500 index rose 15.7 points, or 1.2%, and the Nasdaq Composite Index gained 27.45 points, or 1.2%.
Without any economic releases today, the market will continue to focus on earnings, and investors have a lot to mull, especially after Thursday's wave of financial results releases after the close, and with financials and techs being in the center of attention.
After JPMorgan Chase brought on some optimism with its results Thursday morning, Merrill Lynch (NYSE: MER) reported after the close a wider-than-expected loss of $4.65 billion, or $4.9 a share, on $9.7 billion of credit-market writedowns. The loss per share was larger than any analyst had expected according to Bloomberg survey. MER shares are declining over 4.8% in premarket trading.
Google Inc. (NASDAQ: GOOG)'s will report its second quarter earnings today after the market close. The search engine company will most likely meet or top hyped estimates once again. Literally, Google is becoming an unstoppable force in internet advertising. With more traditional media dollars flowing to the web and away from radio and print mediums, Google stands to grow ever taller.
In June, that sentiment was proven once again as Google's U.S. internet search market share neared 70%. We're talking 69.17% of all searches performed in the U.S. -- home and business -- belonging to Google and its various tentacles. The competition lost market share as Google gained it. Although the gains and drops were small, it's all relative. A 1% drop or gain can mean tens of millions of web searches (or more).
It's taken Google about two years to come from the 60% U.S. search market share level to near 70%, as it crossed the 60% level in July 2006. The company has only grown stronger since then, and Google's advertising inventory increases as its search engine is used -- and that's how Google makes almost all of its money. It can continue to grow its revenues if it continues taking search market share. If that slows down, Google will need to step up the monetization of its other products pretty swiftly. Therein lies the Achilles' Heel for GOOG investors.
Google (NASDAQ: GOOG) closed at $535.60 Wednesday.
GOOG is scheduled to report Q2 EPS on July 17. Cowen says: "We continue to expect GOOG to gain search share and monetize newer initiatives, such as YouTube and GOOG Apps, over time. We are maintaining our Outperform rating."
GOOG July 530 straddle is priced at $39. GOOG August 530 straddle is priced at $58. GOOG August option implied volatility of 47 is above its 6-month average of 38 according to Track Data, suggesting large price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Reuters reports that today is a big one for bank and technology earnings. It looks like Merrill Lynch (NYSE: MER) will lose big and will try to soften the blow with an announcement about selling its 20% of Bloomberg LP for $4.5 billion to its founder, New York mayor, Michael Bloomberg. JP Morgan Chase (NYSE: JPM) and a handful of big technology companies are expected to report profits. But will they be enough?
Meanwhile, how can we make sense of yesterday's 276 point rally on Wall Street? Nobody knows what happened, but theories abound: the price of oil fell -- possibly due to anticipation that the Fed would raise interest rates to deal with inflation that is roaring out of control. Higher interest rates would strengthen the dollar, which would drive down the price of oil since it's traded in dollars. But I think yesterday's market was a short-covering frenzy. With the SEC foolishly squeezing the shorts, they needed to cover their bets that financials would fall further. Of course good news from Wells Fargo (NYSE: WFC) didn't hurt.
Today's earnings -- with estimates courtesy of a Reuters analyst survey -- are likely to move the market. Here's a roundup:
Merrill Lynch is expected to lose $1.94
JPMorgan was expected to make $0.44, down 63% from 2007. At a Price/Earnings to Growth (PEG) ratio of 0.4 and a P/E of 12 on earnings forecast to grow 31% to $3.34 in 2009, it looks cheap. CNNMoney reports it made 54 cents -- well ahead of expectations and its shares are up 5% in premarket.
Microsoft Corp. (NASDAQ: MSFT) will earn 47 cents a share, a 21% increase from last year. At a PEG ratio of 1.1 and a P/E of 15 on earnings forecast to grow 14.3% to $2.16 in 2009, it looks reasonably priced.
U.S. stock futures edged higher Thursday morning, a day after market staged a big rally. Investors this morning are bracing for some housing data, but more importantly, a wave of earnings. Already better-than-expected earnings from J.P. Morgan Chase boosted stock index futures from earlier declines this morning.
On Wednesday, bulls finally came back in drove to but equity as oil price continued its decline and airlines and Wells Fargo (NYSE: WFC) reported results that Wall Street found encouraging, sending airline and financials stocks through the roof. The Dow Jones Industrial Average ended a three-day losing streak, jumping 276.74 points, or 2.5%. The S&P 500 climbed 30.45 points, or 2.5%, and the Nasdaq Composite gained 69.14 points, or 3.1%.
Still, all this sentiment might yet evaporate, or be seriously damped after housing data is released at 8:30 a.m. EDT. Building permits and housing starts for June are due out at that time. Also, weekly jobless claims will continue to paint the picture of the goings on in the labor market. At 10:00 a.m., the Philadelphia Fed index for July will be reported.
It would be interesting to see how the data and earnings play out. Already, J.P. Morgan Chase (NYSE: JPM) reported it profit sank 53% in the second quarter to $2.00 billion, or 54 cents per share. That beat estimates of 44 cents share. JPM shares are up over 5.5% in premarket trading.
Intel Corp. (NASDAQ: INTC) today reported better-than-expected second quarter results, allaying fears that the economic slowdown would hurt the world's largest chipmaker.
Net income rose 25% to $1.6 billion, or 28 cents and sales jumped 9.1% to $9.47 billion, beating analysts' expectations of profit of 26 cents on revenue of $9.33 billion. The company even gave robust guidance of $10 billion to $10.6 billion. Analysts surveyed by Bloomberg expected sales of $10.01 billion. Shares of the Santa Clara, Calif.-based company rose in after-hours trading along with other tech bellwethers such as Microsoft Corporation (NASDAQ: MSFT), Dell Inc. (NASDAQ: DELL) and Google Inc. (NASDAQ: GOOG).
"Intel had another strong quarter with revenue at the high end of expectations and earnings up substantially year over year," said Paul Otellini, Intel president and CEO, in the earnings release. "As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe."
After four years, a federal judge has finally ruled in the counterfeit goods case in which Tiffany & Co. (NYSE: TIF) sued eBay Inc. (NASDAQ: EBAY), demanding it create better polices on its auction site and assume responsibility for the goods traded there.
But the judge ruled in favor of eBay, saying that "the law is clear: it is the trademark owner's burden to police its mark. [...] Tiffany must ultimately bear the burden of protecting its trademark."
No doubt, this is a significant victory for eBay and all online retailers that, while agreeing to take fake merchandise off their sites, want to be alerted to it by the owners of the trademarks. This means e-tailers don't need to police their sites for counterfeit goods, something that would have been quite costly.
If this sounds a little odd to you, maybe that's because of a recent suit regarding copyrighted material on Google Inc. (NASDAQ: GOOG)'s YouTube. Viacom Inc. (NYSE: VIA) has sued the owner of the video sharing site for $1 billion in damages, accusing YouTube of enabling copyright infringement since users upload copyrighted material to the site.
Yesterday on the tech news site TechCrunch, it was reported that Google, Inc. (NASDAQ: GOOG) may be buying social news website Digg.com for up to $200 million. Now, Digg.com has come under acquisition rumors so far, but this is the most serious one. Google stands to keep its iron fist over the controlled flow of information with the purchase if, in fact, it is officially announced.
Stock futures were higher this morning, indicating stocks could have a positive start to the session as oil prices continued to decline, sinking below $127 a barrel. Weekly inventories numbers reported later today could have an impact on oil prices. Then there is continued optimism in the financial sector, which caused the rally Tuesday. Also, a bill aimed at helping the housing market will reach the House floor. But once again earnings will likely have investors' attention with Costco already giving a profit warning.
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