(FB) Implodes on Barrons Cover Piece - Core Short Position Still On

 https://www.youtube.com/watch?v=qEkbqEge4fY


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 ***DISCLOSURE: SHORT (FB)


 This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Barron's Cover - Facebook Is Worth $15 - Still Too Pricey

 Barron's Cover

 | SATURDAY, SEPTEMBER 22, 2012

Still Too Pricey

By ANDREW BARY 

Facebook has a business model in need of a radical change and a still-rich $61 billion market value. What's not to "like"? Plenty.

Facebook's 40% plunge from its initial-public-offering price of $38 in May has millions of investors asking a single question: Is the stock a buy? The short answer is "No." After a recent rally, to $23 from a low of $17.55, the stock trades at high multiples of both sales and earnings, even as uncertainty about the outlook for its business grows.
The rapid shift in Facebook's user base to mobile platforms—more than half of users now access the site on smartphones and tablets—appears to have caught the company by surprise. Facebook (ticker: FB) founder and CEO Mark Zuckerberg must find a way to monetize its mobile traffic because usage on traditional PCs, where the company makes virtually all of its money, is declining in its large and established markets. That trend isn't likely to change.

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Success in mobile is no sure thing. The small screens on these devices don't give Facebook much room to configure ads without alienating users. And the way that mobile users access Facebook, through applications on iPhones, iPads, and Android devices, may diminish the time users spend at the Website while handing greater power to Apple (AAPL) and Google (GOOG), which dominate the apps business.
AT ITS CURRENT QUOTE, Facebook trades at 47 times projected 2012 profit of 48 cents a share and 36 times estimated 2013 earnings of 63 cents. Compare that with Google and Apple, two proven technology growth stories, which both trade for about 16 times estimated 2012 earnings. Facebook is valued at $61 billion, or $53 billion excluding its estimated $8 billion in cash. That's more than 10 times estimated 2012 revenue of $5 billion. Google trades for half that valuation.
What are the shares worth? Perhaps only $15. That would be roughly 24 times projected 2013 profit and six times estimated 2013 revenue of $6 billion, still no bargain price. Wall Street's consensus estimate for 2013 shows earnings rising 31%, to 63 cents a share.
That pro forma number is generous because it ignores Facebook's very significant stock-based compensation. The company has been issuing gobs of restricted stock to engineers and other key employees in the hot Silicon Valley job market to prevent them from being lured away to the next hot tech start-up—the next Facebook.
Facebook issued $1.4 billion of restricted stock in 2011, or nearly $500,000 per employee. So far this year, the company has doled out $1 billion of restricted stock. Facebook's reported stock-based compensation expense—based on the amortization of several years of stock grants—could total 20 cents a share next year. Subtract that from the 2013 consensus earnings number, and the shares trade at 50 times earnings. At $15 they would still be valued at a rich 35 times earnings.
TECHNOLOGY IS THE ONLY MAJOR industry where companies routinely encourage analysts to ignore stock-based compensation expense—and most comply. This dubious approach to calculating profits is based on the idea that only cash expenses matter. That's a fiction, pure and simple. As Warren Buffett has said, companies could take this to the extreme, pay all their expenses in stock and claim to have no costs.
Facebook's restricted-stock grant was so large last year that it may have exceeded its cash compensation costs. CEO Mark Zuckerberg seems to have a cavalier attitude, saying in a recent interview that "the way we do compensation is that we translate the amount of cash that we want to give you into shares" and give more stock to employees as the price declines.
Ours is admittedly an outlying view on the stock. Only one of the almost 40 Wall Street analysts covering Facebook, Dan Salmon of BMO Capital Markets, has a price target of $15. Most are in the high $20s or $30s. Many of these firms initiated coverage of Facebook with price targets in the $40s.
Barron's, it bears noting, never bought into the pre-IPO hype. We published two skeptical stories on Facebook, first when it filed for its IPO in February, and again right before it went public in May ("Mad About Facebook!" May 14). Our take was that the stock looked very richly priced at $35 to $40 and that investors should consider Apple and Google instead. (Both are up about 25% since then.) "Connect with your friends on Facebook. Stay away from the stock," is how we concluded the article.



THE BULL CASE FOR Facebook is that Zuckerberg & Co. will find creative ways to generate huge revenue from its 955 million monthly active users, be it from mobile and desktop advertising, e-commerce, search, online-game payments, or sources that have yet to emerge. Pay no attention to depressed current earnings, the argument goes. Facebook is just getting started.
Facebook now gets $5 annually in revenue per user. That could easily double or triple in the next five years, bulls say. In a recent interview at the TechCrunch Disrupt conference, Zuckerberg said, "It's easy to underestimate how fundamentally good mobile is for us." His argument, coming after Facebook's brand-damaging IPO fiasco and a halving of the stock, was something only a mother, or a true believer, could love. This year Facebook is expected to get 5% of its revenue from mobile. "Literally six months ago we didn't run a single ad on mobile," Zuckerberg said. Facebook executives declined to speak with Barron's.
"Anyone who owns Facebook should be exceptionally troubled that they're still trying to 'figure out' mobile monetization and had to lay out $1 billion for Instagram because some start-up had figured out mobile pictures better than Facebook," says one institutional investor, referring to Facebook's April deal for two-year-old Instagram, whose smartphone app for mobile photo-sharing became a big hit (and at the time had yet to generate a nickel in revenue).

Facebook's initial profit report in July didn't cheer Wall Street, as second-quarter revenue rose 32% to $1.18 billion while expenses, excluding stock-based compensation, were up 60%. The company projected similarly large expense gains in the final two quarters of the year, as it ramps up infrastructure and other undisclosed spending.
That surprised many investors who figured Facebook's business model was so powerful that it would generate operating leverage, meaning revenue growth would outpace expense growth. The Street now projects that Facebook may not hit $1 a share in profit until 2015. And that doesn't reflect heavy stock-based compensation. And who knows if that $1 a share estimate, which may require a doubling of revenue, is even achievable.
"I don't understand management teams that don't explain how they are going to spend shareholder money," says Michael Pachter, an analyst at Wedbush and a Facebook bull. "Facebook is saying, 'Trust us.' Investors don't need to know about every pencil, but they want to know the strategy." So far, Facebook has said little, and the company lacks the credibility and track record of Google, Apple and Amazon.com (AMZN).
FACEBOOK GENERATES almost 85% of its revenue from advertisements, much of it from ads on the right side of the screen when users visit the site on PCs. Ads are likely to remain its mainstay for some time to come. But in a troubling sign, last week online research firm eMarketer, after cutting its estimate of Facebook's revenue, projected that Google would top Facebook in online display-ad revenue this year.
Facebook conceivably could charge modest subscription fees to its users of, say, $1 a month and generate $5 billion or more of annual revenue, even with significant user attrition, but the company has ruled that out. "It's free and always will be," the Facebook log-in page says.
Facebook's chief operating officer, Sheryl Sandberg, has acknowledged the company's ad "challenge." On the July earnings conference call, she said, "That's mainly because we're a completely new kind of marketing. We're not TV. We're not search. We're a third medium."
It's not easy to measure the effectiveness of this third medium because its ads are often more about brand building than transactional. "Facebook's jumble of activity centers on communications with a roster of friends, a core activity where commercial intervention may be less welcome," writes Paul Sagawa of Sector & Sovereign Research.
As Facebook was trying to win over sometimes skeptical advertisers with desktop ads, its users were moving to mobile devices. Facebook's response has been advertisements that it euphemistically calls "sponsored stories" based on products or services recommended by a user's Facebook friends. Yet these ads, which appear in the user's "news feed"—comments, pictures, and videos from friends—may be alienating users and driving them away from the Website. Some appear again and again, stating that a particular friend "likes" Wal-Mart or Target. A recent lawsuit actually challenges this practice, arguing users ought to be compensated as paid spokesmen or allowed to opt out and not have their names attached to sponsored stories.

"If the mobile ads were well targeted and creative, that would be a good thing, or at least not an annoying thing. But the ads seem untargeted and not very creative," says Rich Greenfield, an analyst at BTIG in New York. "Facebook seems to be proud to have the biggest and most disruptive ads on mobile devices. I struggle with the idea that bigger is better. It's not a great user experience. If consumers are upset with this, it could result in a reverse spiral down."
Greenfield, who now has a Neutral rating on the stock after urging investors to avoid it at the IPO, says Facebook's mobile strategy has him "getting more concerned, not less" about its outlook. He points out that 11% of Facebook users accessed the site only through their mobile devices in June, up from 9% in March. That percentage is likely to grow.
Most of those mobile-only users probably are under 25, and it's within that group that Facebook is seeing reduced usage on PCs. Evercore Partners analyst Ken Sena estimates that domestic PC users spent 12% less time in August on Facebook than they did in the same month a year earlier. His estimate is based on data from comScore, which measures U.S. Internet traffic. Sena's analysis shows that the declines were sharpest among users aged 12 to 17 and 18 to 24, which saw drops of 42% and 25%, respectively. Time spent on Facebook by PC users aged 55 and older was up sharply.

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An aging demographic isn't good with a youth-focused ad industry. Will young people continue to be attracted to a social networking site frequented by their mothers and grandmothers? Some of the decline in desktop usage is being offset by mobile access, but it's not easy to assess the combined impact.
Paul Sagawa says Facebook's mobile problems go beyond the small screen size. "The paradigm shift to the app model is unequivocally bad for Facebook," he wrote in a recent report. "Facebook is designed to be open all the time, to be visited in the gaps of the day or as a platform in its own right, bridging to a variety of activities related to the social network." The app model, he says, disrupts this approach. Users open a mobile app for a reason and close it as soon as they are finished. "Why use Facebook to play a game, read an article, manage your photos, stream music, or shop," he wrote, "when you can select a specialized app directly." Moreover, Apple and Google, which control most mobile operating systems, siphon away some of the revenue from Facebook apps.
The app model may favor more specialized sites like Twitter, Pinterest, Yelp (YELP), LinkedIn (LNKD), and Trulia (TRLA), the real-estate Website that had a hot IPO last week. Facebook, Sagawa says, ought to create more specialized apps, like Instagram by Facebook, Facebook chat, or Facebook messaging tied together by a common user name and password.

IN COMING MONTHS, FACEBOOK'S share price could be depressed by significant sales by holders subject to expiring lock-up restrictions established at the time of the IPO. Already, co-founder Dustin Moskovitz has sold 7.5 million shares, or 5% of his stake, and early investor and director Peter Thiel has sold 20.1 million shares, or 80% of his holding (see table, Major Insider Sales Since IPO).
Some 234 million shares (including options and restricted stock) become available for sale on Oct. 29, followed by another 777 million on Nov. 14. That's a lot relative to the current float of as much as 692 million shares, representing the 421 million sold at the IPO and another 271 million shares on which lock-up restrictions already have expired. The total share count is 2.65 billion.
Zuckerberg's recent decision not to sell any of his 504 million shares for at least a year reduced the potential flood of shares, but his decision shouldn't have been seen as a surprise. As CEO and controlling shareholder, Zuckerberg would have had a hard time selling any stock without a serious negative market reaction.
Even with the sharp drop in its share price, Facebook remains a richly valued bet on the company's ability to wring a lot of revenue from a huge and potentially fickle user base. Facebook's mobile woes aren't likely to go away. Stay away from the stock. It could be heading to the mid-teens.






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 ***DISCLOSURE: WATCHING (FB) EARLY PRE MARKET FOR SHORTS

 This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Todays Post Lunch You Tube Update

https://www.youtube.com/watch?v=G09J7yZm_4s



Thanks for checking - Feel free to contact me regarding trading services, education and access to my daily guest appearance broadcast. Tim@affinitytrading.com ***DISCLOSURE: This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

(QCOR) Capitulates down over $20.00 - Webcam video from September 19, 2012 1:36 PM

 https://www.youtube.com/watch?v=WAgH7UhN1q8

 
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***DISCLOSURE: LONG (HCN)


This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Pre Market game plan video - FB on the radar

 http://www.youtube.com/watch?v=5VlKbVJWcdY



Thanks for checking - Feel free to contact me regarding trading services, education and access to my daily guest appearance broadcast. Tim@affinitytrading.com ***DISCLOSURE: This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Barron's Highlights - Stocks to Watch Tomorrow

 (MW) Men's Wearhouse, Jos. A. Bank share could see further gains, Barron's says

With slim-fit trends in mens suits and the demand for smart work clothes boosting sales, and strong plans for growth, shares of men's clothiers Men's Wearhouse (MW) and Jos. A. Bank (JOSB) look 'dressed for success', Barron's reports. Additionally, signs of an improving U.S. labor market are fattening
prospects for men's specialty retailers. In the near term, shares of each of these specialty retailers may be a little 'frothy', however, Barron's contends that each should remain on investor watch lists.

(FDX) FedEx's stock could be 'grounded' for now, Barron's contends

FedEx's (FDX) underperformance may continue up to the Sept. 18 release of earnings and into October, when the company is expected to detail a planned restructuring on top of fleet changes already announced, Barron's reports. FedEx stock has historically traded at a 10% premium to the S&P 500. However,
Jefferies analyst Peter Nesvold -- who has a Hold rating and a $103 price target on the stock -- cautions that cyclical stocks look cheap when earnings are near a peak. With no clear catalyst for improvement in the global economy, in demand for goods or in profits, investors may want to consider FedEx stock
?grounded? for now.

(BZH) Barron's(9/10) Raise High The Roof Beam, Carpenters

The U.S. housing market's looming recovery apparently was news on Wall Street even before it hit Main. In the past year Standard & Poor's index of home- building stocks rallied 140%, far more than the broader market, as earnings, orders, and housing starts picked up across the industry.
Among the group, Lennar (ticker: LEN), D.R. Horton (DHI), and Beazer Homes USA (BZH) look best positioned to deliver fat investment gains.

(KR) Kroger's stock could rise more than 30%, Barron's contends


 Kroger's (KR) overall business has fared better than some peers amid fierce competition from big-box stores like Target (TGT) and Wal-Mart Stores (WMT). Kroger continues to throw off free cash and has been buying back shares while increasing its dividend. The current yield is 2%. On average, analysts see
Kroger shares headed to about $26, though bulls think the stock could reach



Thanks for checking - Feel free to contact me regarding trading services, education and access to my daily guest appearance broadcast. Tim@affinitytrading.com

 ***DISCLOSURE:  No Relevant Positions


This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

(SWHC) Got Guns? Smith and Wesson blows out earnings forcast - Big upgrades

(SWHC) Smith & Wesson --- Northland Securities Reiterated OUTPERFORM - Price Target: 17 (from 14)
(SWHC) Smith & Wesson price target raised to $13 at Benchmark Co.
(SWHC) Smith & Wesson raises FY13 EPS view to 85c-90c, consensus 63c
(SWHC) Smith & Wesson prelim $0.28 vs $0.18 Capital IQ Consensus Estimate; revs $136.0 mln vs $129.43 mln Capital IQ Consensus Estimate


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***DISCLOSURE: Long (SWHC) Pre market $11.00 - Long (BAC) on the futures impulse down following the jobs data - $8.37

This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Coming Weekly Earnings & Economic Calendar

  
Coming Earnings

 Day                    Quarter  Consensus   Year   Ticker
                                  Estimate    Ago
M
Hi-Tech Pharm             1Q       $0.68    $1.05    HITK
T
Contango Oil  &  Gas       4Q       0.00              MCF
Calavo Growers            3Q        0.53     0.18    CVGW
Smithfield Foods          1Q        0.45     0.69    SFD
Quanex Building Prod      3Q        0.22     0.30    NX
Pep Boys                  2Q        0.16     0.21    PBY
Campbell Soup             4Q        0.38     0.43    CPB
W
Verifone Systems          3Q        0.70     0.49    PAY
ABM Industries            3Q        0.42     0.51    ABM
Block (H  &  R)           1Q       -0.39    -0.57    HRB
Korn/Ferry Int'l          1Q        0.18     0.33    KFY
SWS Grp                   4Q       -0.01     0.00    SWS
NCI Building Systems      3Q       -0.04    -0.71    NCS
Matrix Service            4Q        0.20     0.21    MTRX
Sigma Designs             2Q       -0.31    -0.44    SIGM
Men's Wearhouse           2Q        1.12     1.11    MW
Aerovironment             1Q       -0.03     0.01    AVAV
Th
UTi Worldwide             2Q        0.23     0.24    UTIW
Quiksilver                3Q        0.05     0.06    ZQK
Cooper Co                 3Q        1.29     1.15    COO
F
Brady 'A'                 4Q        0.52     0.58    BRC
Casey's Gen'l Stores      1Q        0.95     1.03    CASY
Kroger                    2Q        0.49     0.41    KR

(Earnings are diluted and report dates are tentative. All forecasts and historical numbers exclude extraordinary items by accounting definitions.)

Source: Thomson First Call

                         

Economic Calendar Consensus Estimate

                                                 Consensus Est  Last Period

T   10:00   July Construction Spending              0.4%         0.4%
    10:00   August ISM Manufacturing               50.0         49.8
W    8:30   Q2 Productivity                         1.8%         1.6%
F    8:30   August Nonfarm Payrolls               125,000      163,000
     8:30   August Unemployment Rate                8.3%         8.3%

Unless otherwise indicated, times are Eastern. f-Final; p-Preliminary; r-Revised

 

Thanks for checking - Feel free to contact me regarding trading services, education and access to my daily guest appearance broadcast. Tim@affinitytrading.com 

***DISCLOSURE: No Relevant Positions

This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.

Got Silver?!? Off and running - Breaking a one year downtrend on holiday trading

http://www.cmegroup.com/trading/metals/precious/silver.htmlhttp://www.cmegroup.com/trading/metals/precious/silver.html


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***DISCLOSURE: LONG SILVER - LONG GOLD - LONG COPPER


This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by Legend Trading or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs.