Sunday, October 21, 2012

Barron's Likes (C) Citibank - Pans (EBAY) - The Week Ahead

 (EBAY) eBay -  Barron's(10/22) A Return Visit To Earlier Stories: Hitting The Bid On eBay's Shares

      Shares of eBay hit an eight-year high last week, following a strong third-quarter earnings report. At $50, the stock is up 65% on the year -- and 131% since our bullish cover story three years ago ("Make a Bid," Aug. 3, 2009). Higher bids on the shares could be limited from here.
      At the time of our story, eBay's (ticker: EBAY) new CEO, John Donahoe, was trying to turn the online auctioneer into a broader retail play, buoyed by PayPal, its surging payment system.
      Donahoe has delivered. Fixed-price sales now make up 66% of the business on eBay's marketplace, and PayPal has 117 million active users across the globe.
      We revisited the e-tailer five months ago, arguing that PayPal was still underappreciated by investors ("Connecting the Dots at eBay," Apr. 30). We said the stock could rise 25%, to $50 or more, in a year or two. EBay now trades at 18 times next year's estimates, a multiple close to that of Visa (V) and MasterCard (MA), the powerful payment networks. PayPal's active user base jumped 14% in the third quarter, but the growth in per-user spending slowed for the fifth consecutive quarter, according to Susquehanna Financial Group.
      With a rich multiple and possibly slowing growth, eBay has lost much of its " Buy It Now" appeal.

(C) Citibank -  Barron's (10/22) The Striking Price: Playing Citi In The Post Pandit Era 

Citigroup's new chief executive faces very high expectations. So do the bullish options on the big bank's stock.
      Almost since the moment investors learned that Vikram Pandit was out as chief executive, and Michael Corbat, a Mr. Fix-It, was in, investors began aggressively buying bullish calls, in the expectation that the shares (ticker:C) would advance. Previously, they had been purchasing bearish puts.
      When the CEOnews was released Tuesday, Citi shares were around $36. Immediately, investors bought October $38 calls. They bet right. The stock hit a 52-week high of $38.48 Wednesday. Now, with the stock still trading around a one-year high, many traders are positioning for it to rise sharply higher in the next few months, by picking up calls that would increase in value if the shares  trade above $45. A further 30% gain might seem implausible, but Citi's changes come at an interesting time -- for the financial sector and for the bank.

 Notable Upcoming Earnings:

AT & T                    3Q        0.60     0.61    T
Lockheed Martin           3Q        1.85     1.99    LMT
EMC                       3Q        0.42     0.37    EMC
Procter  &  Gamble        1Q        0.96     1.03    PG
Biogen Idec               3Q        1.59     1.61    BIIB
Simon Property Grp        3Q        1.92     1.71    SPG
Dow Chemical              3Q        0.37     0.62    DOW
Franklin Resources        4Q        2.30     1.88    BEN
Nat'l Oilwell Varco       3Q        1.51     1.26    NOV
Dominion Resourcs         3Q        0.97     0.95    D
Occidental Petro          3Q        1.65     2.18    OXY                3Q       -0.08     0.14    AMZN
Celgene                   3Q        1.27     1.02    CELG
Apple                     4Q        8.85     7.05    AAPL
Altria Grp                3Q        0.58     0.56    MO
ConocoPhillips            3Q        1.19     2.52    COP
Colgate-Palmolive         3Q        1.38     1.31    CL
LyondellBasell NV         3Q        1.43     1.53    LYB
Comcast 'A'               3Q        0.46     0.33    CMCSA
Merck                     3Q        0.93     0.94    MRK

Economic Calendar:

Day   Time                                                 Consesus Est  Last Period

W   10:00   September New Home Sales              385,000      373,000
Th   8:30   September Durable Goods                 7.0%       -13.2%
F    8:30   Q3 GDP (p)                              1.8%         1.3%
     9:55   October Michigan Confidence (f)        83.0         83.1

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***DISCLOSURE: No Relevant Positions

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