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Alex Cho

Here's What Actually Mattered on Wall Street Today

A lot of interesting research was sent my direction this morning, and like usual, I’m going to write about the stuff that actually happened on Wall Street versus the prototypical bickering among pundits and technical traders who get excited over technical levels. Of course, I only focus on technology, media, retail and finance names, so if you’re looking for insights beyond those key areas you probably won’t find those themes in this report.

Lululemon Athletica revised its outlook on sales while maintaining equivalent guidance on margin. Series of estimate raises occurred this morning by numerous investment banks (more on that in articles later today).

Apple tested the $100 level and fell right back below. Yeah, I was pretty sure it would re-test, but large investment managers took opportunities and exited right back out.

The market lightened up on stocks going into earnings, F/X themes are important to watch for, as it’s the primary driver behind the flat to negative EPS assertions on S&P 500 by investment banks. The bottom line, equities might struggle coming out of this earnings season until we see patterns of stabilization in F/X inclusive comps.

Credit Suisse released a series of reports, most noteworthy were the Facebook, Amazon, and Google reports. The company maintained its outperform on FB, but raised its PT on both Amazon and Google respectively. The PT on the three respective companies were $135, $800, and $900.

Morgan Stanley continued its cautionary stance on BlackBerry sees patterns of slowing software revenue and EPS deterioration. I’m not completely sold on the new software stream forecast from Morgan Stanley, but then again they’re very conservative here. Stock nosedives on today’s session by 2% I'll write more about this later today.

Oppenheimer Co. reiterates  outperform stance on ExOne, and anticipates 100% upside from current levels. Yeah, it seems a little stretched, but an improvement to its cash position through an infusion of capital may buy the company enough time to strategically execute. Makes sense, but the entire group has struggled and identifying winners has become difficult as multiples remain compressed even for the stalwarts.

RBC Capital maintains its PT but revises estimate on Citigroup earnings lower. The bank looks cheap, and the stock should be worth $65 according to them. They also reiterate their Intel $36 price target. This seemed a bit conservative as they anticipate PC market headwinds to drag on for a little while longer.

UBS conducts comprehensive FA survey the findings include: outflows from both fixed income and equities increased in second half, clients are more interested in active equity management strategies, advisers are holding onto more cash in client portfolios, investors are paying down securities based loans in anticipation of rate hikes.

Morgan Stanley raises rating on Ciena to overweight, but lowers PT from $25 to $23, build out of networks primary driver for long-term sales and earnings ramp. However, the industry view was cautious, which implies a high degree of selection criteria is required to approach the networking providers. I’ll have more on this later today, but the upgrade is driven by the relative value characteristics of Ciena when compared to peer group.

RBC Capital Markets reiterates its PC shipment unit forecast decline of 8% to 10%. This pertains to both desktop and notebook, and they also believe weak FY’15 figures will create a path for easier comps in FY’16.

UBS raises price target on Lululemon Athletica from $50 to $60 again this goes back to the management guidance raise, which I will write more extensively about in another article.

UBS also releases in a report that demand for the Apple Watch was tepid and maintains estimates of 19 million watch shipments for FY’16. I’ll write more about this later in the day.

Deutsche Bank releases a massive bank roundup, unfortunately I couldn’t read the entire 48-page report, I will write more about their bank research later today though. However, some key highlights from the report include: commercial and industrial loans a negative catalyst for some banks depending on credit exposure, however when averaged across industry the impact to EPS is 6%, which would mitigate some of the gains made by banks with interest rate hedges. Citigroup, JPMorgan, Wells Fargo, Goldman Sachs and Bank of America do have some exposure, but the impact to each banks balance sheet may vary.

Gartner anticipates global semiconductor CAPEX spending to shrink by 4.7% (could cause damage to names like Amphenol).

GameStop price target revision from $42 to $38 by Wedbush Securities, the stock tanked by 6% at time of writing. Michael Pachter cites weakness in software revenue, but maintains optimism on core fundamentals. Other analysts from PiperJaffray and R.W. Baird weighed in, but I think Pachter’s slight revision probably carried a little more weight as he’s one of the few guys banging his fist on the table over GME. Gamestop released a preliminary report on November and December sales and offered a tighter guidance range, which was below street consensus. I.e. GameStop ended up being the nuclear detonation I thought it was going to be.

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