Trading for the Masses

GOOG up, no down, no up. So this should be the continued play of the day of whippy expiration action all day. Not a day I enjoy trading too much. I will be attending a VC conference in town today for our TV show and trying to get some nice interviews wrapped up with the folks in the VC world. Hope everyone had a great week and let’s see where they take em today. New lows or higher highs?

After Hours Summary: SNDK up 3%, GOOG up 0.8%, AMD up 0.3% on earnings/guidance; TIE up 6.6% (will replace Bausch & Lomb in S&P 500)
Companies moving in after hours trading in reaction to earnings: Trading Up: PMCS +10.2%, TPX +7.2%, ISRG +5.7%, CREE +5.2%, INFA +3.6%, WAL +2.5%, KTR +1.8%, OMCL +1.4%, KG +1.2%, CAMD +1.1%, GOOG +0.8%, AMD +0.3%… Trading Down: NANX -9.8%, SNDK -3.0%, RHI -1.2%, CERN -1.2%, COF -1.1%… Companies trading in after hours on news: Trading Up: TARR +16.7% (completes additional $91 mln of property sales) and TIE +6.6% (will replace Bausch & Lomb in S&P 500)… Trading Down: MNOV -27.5% (clinical study failed to achieve statistical significance in its primary endpoint of reducing Wake After Sleep Onset), SUF -2.3% (files for a 9.08 mln share common stock offering by selling shareholders) and PTR -2.3% (Buffett says Petrochina stake sale “100%” based on valuation).

S&P futures vs fair value: -7.3. Nasdaq futures vs fair value: +3.0.
Futures continue to point to a mixed opening. McDonald’s (MCD) third quarter earnings came in at $0.83 per share, which was in-line with the consensus estimate
AMGN Amgen: Insurer delivers a setback to Amgen - LA Times (56.71 )
LA times reports this month Aetna (AET) quietly changed its reimbursement guidelines for the company’s anemia drugs, echoing Medicare’s new tighter reimbursement policy for the medicines. Aetna is the largest private insurer to do so, and analysts expect others to follow soon. That could seriously harm the co’s financial outlook because payments by private insurers account for half of the company’s sales among cancer patients. “Aetna is likely to be the first of many insurers to change their guidelines,” said Bear, Stearns & Co. biotech analyst Mark Schoenebaum. Aetna’s new policy is slightly less restrictive than Medicare’s but severe nonetheless. Aetna is likely to face a backlash over its decision. Another insurer, Blue Shield of California, attempted to change its policy this summer to restrict dosages of the anemia drugs but partially reversed itself weeks later after complaints from members and some doctors. Aetna said it had no plans to rescind its decision.

HPQ Hewlett-Packard: Enterprise printing benefiting from investment; tgt raised to $62 at Cross Research (52.87 )
Cross Research notes they talked with S.V.P of I.P.G’s Worldwide Enterprise Sales for an update on HPQ’s enterprise printing strategy, especially focused on its solutions and services business. The firm remains very positive on the opportunity for this division of HPQ which they believe the co is just starting to leverage. They raise their tgt to $62 from $54. They believe investors will be willing to pay a higher multiple for HPQ with upside opportunity from earnings, continued solid performance from IPG and strength in PC’s.

NFLX Netflix expected to post generally in-line Q3, with possibility of modestly raising guidance - Cantor (56.71 )
Cantor notes that NFLX is set to report Q3 results on 10/22, and they expect the co to post generally in line results and maintain, if not modestly increase, existing guidance ranges, given a slightly improved competitive landscape. Firm estimates revs of $287 mln and GAAP EPS of $0.15/share. Firm suspects that much, or all, of this potential news is already in NFLX’s stock, given the surge it has experienced in recent weeks.

SPWR Sunpower tgt raised to $114 from $80 at Needham (97.01 )
Needham raises their tgt on SPWR to $114 from $80 following earnings and saying SPWR is attractive for the following reasons: 1) It is addressing the solar cell & module market expected to grow in sales at a cagr 25%+; 2) Firm believes SPWR will gain market-share based on their very competitive photovoltaic cell with P.V efficiency 50% above the industry average; 3) SPWR’s access to polysilicon which is in short supply covers 100% P.V cell sales in 2008-2010 and 4) SPWR is a gross margin expansion story.

ISRG Intuitive Surgical: Impressive Q3 earnings, but some concerns lie beneath the surface - CIBC (256.44 ) -Update-
CIBC notes that ISRG’s Q3 was solid on the surface, with sales and EPS handily exceeding ests. However, firm says Q3 was balanced by: 1) slowing U.S. unit growth again, up only 24%; 2) light procedure volumes/guidance for procedure growth was unchanged for the first time in years; 3) declining q/q utilization in the U.S.; and 4) dVP penetration now nearing a noteworthy 50% level. At a time when valuation is at record levels relative to past years, firm thinks this becomes a point of great concern.

CHINA CDC Corp files second lawsuit against Mgame in Korea (7.45 )
Co announces that it has filed a lawsuit in the courts of Korea against Mgame, the developer of Yulgang. The lawsuit is for breach of contract and alleges that Mgame has breached contractual obligations owed to CHINA by failing to provide certain financial and operating data and other information which Mgame is required to provide to CHINA as a shareholder of Mgame.

MVIS Microvision initiated with a Buy at Maxim- tgt $7 (4.54 )
Maxim initiates MVIS with a Buy and a $7 tgt saying the co’s innovative technology and initial product demos have brought worldwide attention to its differential and advanced idea of display portability. While still in its early stages with product launches not expected until 2H08/1H09, the firm says credibility from Motorola’s partnership and other notable companies’ interests are fueling this growth story. Firm says as with many early-stage companies though, MVIS is generating losses and is expected to remain unprofitable in the near term. Consequently, shares will likely trade on its potential via news flow, milestone achievements and partnership/design win announcements.

AMD Advanced Micro recommends rejection of “Mini-Tender” offer from TRC Capital Corporation (14.55 ) -Update-
Co says it has been notified of a “mini-tender” offer by TRC Capital to purchase up to 5 mln shares of the co’s common stock, which represents approx .90 percent of its outstanding shares. AMD cautions its stockholders that TRC’s unsolicited “mini-tender” offer of $13.25 per share was more than 5% below the $14.02 per share closing price of AMD stock on Oct 10, 2007, the day before the “mini-tender” offer was commenced and approx 9% below the $14.55 per share closing price of AMD stock on Oct 18, 2007. AMD recommends against tendering shares in response to this unsolicited “below-market offer.”

Bond Watch: Still Buying
The market has picked up a bit of a lead again this morning as risk aversion remains the predominant flow. Topping the list is fresh lows for the dollar, new highs in oil, more poor earnings reports & an assassination attempt in Pakistan. While there is no shortage of catalysts to fuel the flight to quality, bonds are also getting a boost out of gradually shifting policy expectations that favor a rate cut, possibly by Oct 31. The 2-10-yr yield spread is a little flatter at 57.7. Bond prices in the EuroZone & Japan are getting pulled higher by the shift in investor sentiment out of equities. Beyond the flight, treasuries have little to work with today. Data takes the day off but there is some Fed speak. The team has been pretty good at keeping mum on what they’re thinking heading into the next FOMC meeting so expectations for anything other than the data dependency mantra are low. Mostly trade will look to protect gains & square up positions into the weekend while keeping an eye on equity gyrations. Another bout of dollar selling hit the currencies overnight, propelling the euro to fresh lifetime highs around 1.4320. The yen, meanwhile, remains generally bid as market jitters lead to a little unwinding of the carry trade. Spot gold is up at 769.49 (+1.29) while crude oil is up at 89.85 (+0.3 after notching levels just above 90.00 early on. Chief Bernanke & St. Louis’ Poole talk on the economy at 10. The euro is at 1.4288 & the yen is at 115.4350 while the 10-yr is +04/32nds yielding 4.471%.

BOJ is committed to raising interest rates, Muto says - Bloomberg
Bloomberg reports the Bank of Japan remains committed to raising interest rates as the world’s second-largest economy extends its expansion, Deputy Governor Toshiro Muto said. “The Bank of Japan will gradually adjust the level of interest rates in accordance with the pace of improvements in the economy and prices and check risk factors,” Muto said at an annual meeting of Japanese credit cooperatives today in Tokyo.

Gapping up: SHOO +16.7%, PMCS +9.2%, ISRG +7.2%, TIE +5.8%, INFA +4.4%, NYX +4.2%, GIGA +4.0%, GOOG +2.4%… Gapping down: LF -8.6%, SLT -3.8%, SLB -3.0%, HANS -2.9%, SNDK -2.9%, WB -2.3%, AZN -2.3%, CAT -2.1%.

TRB Tribune deal is mired in FCC rift over cross-ownership rules - Latimes.com (27.92 -0.73)
Latimes.com reports that the $8.2-billion deal to take TRB private has become entangled in a newly inflamed debate over media ownership rules at the FCC that could pose problems for the transaction. TRB needs FCC waivers to complete the deal because it owns newspapers and TV stations in Los Angeles and four other markets in violation of rules that prevent such cross-ownership. Now, trying to capitalize on TRB’s push to complete the deal by year’s end and its support from some key lawmakers, FCC Chairman Kevin Martin has indicated that he won’t grant any waivers pending a vote on major revisions to the commission’s media ownership rules, agency officials said. “He’s tying the fate of the TRB deal that he wants to a large proceeding on media ownership,” said FCC Commissioner Michael Copps, a Democrat who opposes loosening the rule. “To say we have to change the media ownership rules so we can get the Tribune deal done does not strike me as . . . a good way to make public policy.” A Dec 18 vote could come too late for TRB, which has long pushed for lifting the cross-ownership ban. The co needs 20 days to complete the transaction after FCC approval. To go private by the end of the year in a deal led by real estate mogul Sam Zell, the co needs the FCC by mid-Nov either to grant temporary waivers or to lift the cross-ownership ban, said Shaun Sheehan, TRB’s Washington vice president. Failure to do so would mean significant financial penalties. “I have enormous concern,” Sheehan said. The deal probably would die if it was not approved by May 31, when financing commitments expire. Copps is unlikely to approve the waivers, but it’s unclear how the FCC’s other Democrat, Jonathan Adelstein, may vote. Both oppose greater media concentration.

ACI Arch Coal misses by $0.08, beats on revs; guides FY07 EPS in-line; coal market is improving (35.83 )
Reports Q3 (Sep) earnings of $0.19 per share, $0.08 worse than the Reuters Estimates consensus of $0.27; revenues fell 1.8% year/year to $599.2 mln vs the $580.1 mln consensus. Co issues in-line guidance for FY07, sees EPS of $1.10-1.20 vs. $1.17 consensus. Co says the “US coal market fundamentals improved in Q3, and momentum appears to be increasing as we move through Q4 due to positive trends in key demand and supply factors…Almost all signs support our view that coal markets will continue to improve throughout 2008.”

AAPL Apple: IDC numbers indicate Mac units will not be a blowout - Morgan Keegan (173.50 )
Morgan Keegan notes that Research firms Gartner and I.D.C. released their preliminary findings for worldwide and domestic computer shipments on Wednesday evening. Firm says I.D.C. estimates Apple’s US shipments grew +15.9% Y/Y, versus 30%+ growth for the 4 previous quarters. The firm’s worldwide Q3 Mac shipment growth estimate is +33%. Firm says that in essence, if IDC is right, Apple will need substantial growth internationally to hit their shipment forecasts for the Mac (+62% Y/Y, +37% sequentially). However, they note that Gartner estimates Apple shipped substantially more PCs in the US, so if Gartner is correct, their estimates look much more reasonable. They say the other interesting takeaway from the data is that Hewlett Packard (HPQ) and Toshiba actually grew faster than Apple in PCs on a Y/Y basis with both vendors growing +17% vs. Apple’s +16%.

OSTK Overstock.com beats by $0.19, beats on revs (29.65 )
Reports Q3 (Sep) loss of $0.20 per share, $0.19 better than the Reuters Estimates consensus of ($0.39); revenues rose 3.2% year/year to $161.9 mln vs the $155.3 mln consensus. “In Q3, we generated positive EBITDA for the first time in a non-Q4 quarter. I believe this validates our view that a profitable business model is emerging, particularly in light of our de minimus capital expenditures ($316K during Q3). We also returned to positive (albeit modest) top-line growth despite halving our marketing expenses. A year ago, I said that we had a laundry list of projects we were working on to improve our marketing efforts. Since then, our marketing dollars have become twice as efficient. We are about one-third of the way through the list; I do not know what the remaining two-thirds will bring. Expenses are drum tight, product selection is strong, operations are humming, and customer satisfaction is extraordinary. We are superbly positioned for the holiday season.”

S&P futures vs fair value: -6.7. Nasdaq futures vs fair value: +5.5.
Futures point to a mixed opening. Google (GOOG), Advanced Micro Devices (AMD), Sandisk (SNDK), Harley-Davidson (HOG) and 3M (MMM) topped their earning expectations. Meanwhile, Honeywell (HON), Caterpillar (CAT) and Wachovia (WB) missed their earnings estimates. Crude oil is pushing towards $90 a barrel, and is weighing on the market.

ISRG Intuitive Surgical tgt upped to $325 at HSBC (256.44 )
HSBC raises their ISRG tgt to $325 from $198 following “beat and raise” 3Q07 driven by strong systems growth. They note that stronger 3Q07 da Vinci robotic system sales were driven by growth in international markets. The firm raises their sales and EPS forecasts for 2007 through 2009.

DAL Delta Air Lines: TheDeal.com discusses Delta’s potential acquisition targets (19.96 )
TheDeal.com reports after CEO Richard Anderson’s comments this week on DAL’s earnings call that consolidation “could make sense for Delta if it’s done thoughtfully from a position of strength.” He said he expects Delta to be an acquirer, and not a target, saying “we want to be in control.” Rumors have started swirling of who are the potential targets. UAUA is unlikely as a potential target. NWA could be a potential target though due to the Anderson’s connection to the co and the joint venture DAL has with AKH. A holding co structure would allow Northwest and Delta to preserve their brand, an important fact given Delta’s strong loyalty in the Southeast and Northwest’s long history in the Midwest and trans-Pacific, and could provide political cover to a deal by not eliminating any of either airline’s hub cities. Alaska Air Group (ALK) could also be appealing for Delta. Seattle-based Alaska would help Delta quickly fulfill its ambition to rebuild its presence on the West Coast, where Delta is currently attempting to regrow its Los Angeles presence years after it largely abandoned the city and the hub it acquired there through its 1987 acquisition of Western Airlines.

GOOG Google tgt raised to $775 from $600 at Citigroup (639.62 )

GILD Gilead Sciences: Color on qtr (43.51 )
Wachovia notes that GILD reported Q3 revs of $1.06 bln, higher than both their est of $1.03 bln and consensus of $1.04 bln. Firm says growth was largely driven by Atripla as well as non-retail channel sales of Truvada. The firm raises their ‘07 and ‘08 estimates. With the proposed Atripla label in Europe, they estimate uptake will be much more gradual than originally anticipated due to preferences for protease inhibitors as front-line therapies in France and Italy. Nevertheless, they think Truvada sales should pick up the slack… Rodman & Renshaw say the upside surprise was largely a result of US and international sales of Truvada and excellent cost mgmt. Altogether, the firm says the upside in the HIV franchise along with in line royalties from Roche has resulted in a solid quarter for GILD… FBR says based on their ests, GILD’s ‘09-’11 rev CAGR is 14%; based on this growth, they think the stock is fairly valued trading at roughly 24x the consensus 2008 EPS est of $1.82. The firm says risk to the pipeline may lie ahead; GS 9137’s Phase III program is going head-to-head with Merck’s Isentress. With HIV franchise growth slowing, the firm says these products need to step up to keep GILD on track for 14% annualized growth.

CTSH Cognizant Tech assumed with an Outperform at Credit Suisse- tgt $53 (41.57 )
Credit Suisse assumes coverage of CTSH with an Outperform and a $53 tgt saying with its robust fundamentals amidst continuing strong demand for offshore services, they believe Cognizant will continue to shine in the year ahead

SNDK SanDisk: Color on Quarter (50.31 )
PiperJaffray is raising their Q4 estimates from EPS of $0.45 to $0.63 and revs to $1.3 bln from $1.2 bln, saying their checks are showing growing consumer interest in music-enabled and data-oriented phones that should drive continued growth in NAND flash demand. Firm says while recent NAND spot pricing trends suggest the approach of a seasonally-weaker 1Q08, they believe such pricing is primarily driven by production cost declines rather than cyclical weakness in demand… Thomas Weisel says they remain bullish on SNDK’s prospects for continued market share gains and improving margins in 2008. They note that rev growth in international regions continues to outpace that of North America as the SNDK extends brand strength into new geographic markets. Additionally, firm notes that NAND industry bit growth rates for 2008 appear to be relatively mild, compared to more than 150% y/y in 2007. The reduced bit growth rates gives firm confidence of an improved supply/demand balance and thus of improved relative pricing conditions. Firm raises their ‘08 EPS to $2.57 from $2.47… Bear Stearns says SNDK reported solid Q3 results, exceeding their above consensus estimates, and for 1Q08, firm believes seasonality could possibly be less pronounced than in past years, driven by a continued increase in handset card penetration, and for SNDK specifically, seasonality could also be softened by further international share gains. Firm believes investors should look beyond 1Q08 seasonality as they believe upside potential for the stock - driven by better 2008 industry fundamentals versus 2007 - significantly exceeds downside risk.

Wachovia lowers retail co estimates
Wachovia discusses the retail sector, saying gleaning from mgmt commentaries out of the conference, coupled with their own proprietary channel checks, they believe Fall inventory is backing up into Holiday flows. They say this is not only impairing Q3, but is potentially enough now to put Q4 estimates at risk. As such, they are cutting estimates on: ANF, CHS, GYMB, JCG, LTD, PLCE, and ZUMZ.

ACN Accenture assumed with an Outperform at Credit Suisse- tgt cut to $48 from $50 (40.91 )
Credit Suisse assumes coverage of ACN with an Outperform and a $48 tgt, down from $50 saying recent concerns around the cuts in worldwide I.T spending and its effects on Accenture are overblown. The firmsays the current environment will likely experience steady growth rates in I.T spending, which should benefit Accenture as clients desire more consulting and outsourcing expertise. They expect ACN to defend this position at its annual analyst day on November 14, 2007.

AMD Advanced Micro: Color on quarter (14.55 )
Nollenberger believes that AMD figuratively turned the corner in 3Q, reporting significantly better financials with upside to revenue expectations, considerably higher margins, and the impressive improvement to 2Q operating losses. They believe that AMD’s financials should further improve in 4Q due to strong PC fundamentals and a relatively benign pricing environment. In addition, higher-speed Barcelona server chips, initial shipments of Phenom, and a top to bottom 55nm graphics refresh will benefit competitive positioning and likely raise blended ASPs. While they are encouraged by the 3Q results, they believe that Asset Lite remains the key stepping stone to profitability and are patiently awaiting its details. Reits Buy… Jefferies notes that while Sept qtr results were better than expected, AMD’s goal of profitability remains uncertain. They say the upside surprise came from N.B. processors, up 43% Q/Q as well as graphics, up 29% Q/Q. However, they note that AMD was behind schedule on the launch of A.T.I. Radeon H.D. 2000 and had significant pent up demand that boosted Q/Q growth from a very low base. They would not expect Q3’s sequential growth in graphics to repeat in Q4… Wachovia says while their new estimates assume better margins than we were previously projecting, they continue to expect AMD will report losses all through 2008.

CHS Chico’s FAS: Co continues to struggle; 3Q likely below consensus - FBR (12.73 )
FBR notes that at a conf on Oct 18, mgmt gave a presentation that was very negative about current trends and was equally negative about the future outlook. As a result of mgmt’s negative outlook for Chico’s, White House/Black Market, and Soma, they are lowering their Oct comp est from -2% to -6% and their 3Q07 EPS est from $0.17 to $0.14 (consensus $0.18). They currently fear that CHS shares are still too expensive for value investors and also may lack the growth prospects to appeal to GARP/growth investors. At 0.9x EV/sales, they say CHS is still the most expensive missy name they follow, which leads them to believe that earnings may have further room to fall if margins continue to deteriorate. They believe shares may languish in the low-to mid-teen range in the near term.

USNA USANA: Minkow accuses co of illegal sales in China - NY Post (41.00 )
NY Post reports Minkow is accusing Usana of increasing its revenues by illegally selling products in China. Minkow claims to have hired three separate teams of investigators to pry into whether Usana’s Hong Kong-based employees are doing business illegally in China. Minkow claims his investigators spoke to several Hong Kong-based Usana employees who discussed how they tell Chinese citizens interested in distributing the product that the first step to getting around the rules is to obtain an account at China Merchant Bank. He says he has transcripts of phone calls between an investigator and another Hong Kong-based Usana employee, who also emphasized the importance of having an account at China Merchant Bank to set up Chinese distribution lines “[because] we will not send a check.” The same employee also allegedly said, in response to a question about whether being from China was a barrier to doing business, “No, many distributors are from China, too” and added that Usana had 30,000 distributors on the mainland.

CAT Caterpillar misses by $0.03, beats on revs; guides FY07 EPS in-line (77.66 )
Reports Q3 (Sep) earnings of $1.40 per share, $0.03 worse than the Reuters Estimates consensus of $1.43; revenues rose 8.4% year/year to $10.67 bln vs the $10.33 bln consensus. Co issues guidance for FY07, sees EPS of $5.20-5.60, compared to previous guidance of $5.30-5.80, vs. $5.45 consensus; reaffirms FY07 revs of $44 bln, may not be comparable to $41.07 bln consensus. Co sees Y08 revs up 5-10% and profit per share up 5-15% from the mid-point of the Y07 outlook range.

MMM 3M beats by $0.02, misses on revs; guides FY07 EPS in-line; raises FY07 EPS guidance (94.73 )
Reports Q3 (Sep) earnings of $1.29 per share, excluding non-recurring items, $0.02 better than the Reuters Estimates consensus of $1.27; revenues rose 5.4% year/year to $6.18 bln vs the $6.26 bln consensus. Co issues in-line guidance for FY07, sees EPS of $4.89-5.02, excluding non-recurring items, vs. $4.96 consensus, prior guidance $4.70-5.00, ex items.

AAPL Apple tgt raised to $200 from $175 at Cross Research (173.50 ) -Update-
Cross Research raises their tgt on AAPL to $200 from $175 following a series of channel checks, and given their belief that Apple’s Mac business continues to outperform, iPhone sales accelerated following the price cut (with market expansion into small business), commodity prices remain favorable and the new iPod line up is being well received.

FED FirstFed Financial downgraded to Underperform at Friedman Billings- tgt cut to $35 from $50 (44.23 )
Friedman Billings downgrades FED to Underperform from Market Perform and cuts their tgt to $35 from $50 saying they believe credit trends are eroding much faster in this weakening housing market than they previously anticipated and will put significant pressure on all mortgage lenders’ earnings.

GOOG Google: Color on qtr (639.62 )
Jefferies notes that revs (net of TAC) were up 62% YoY and 10% sequentially to $3.01 bln, exceeding their and consensus est of $2.9 bln. Considering that the “top ad promotion formula change,” one of the most important tweaks to the Google algorithm after some time only took place on August 21, they expect monetization improvements to continue into Q4. That, combined with strong Q4 seasonality, should help GOOG keep its growth momentum, says the firm… Nollenberger says paid search remains extremely healthy, with search rev on Google.com up 68% Y/Y. The only negative in their view was the unabated growth of new hires—over 2,100 engineers and salespeople were added in the qutr, up from 1,500 last qutr. Still, they say operating expense growth moderated slightly from last qtr…. BofA believes that the elimination of the European best practices funding program could add an incremental $35-$90 mln and $250-$660 mln in in incremental ‘08 and ‘09 rev, respectively… Cantor Fitzgerald says that overall, the co’s Q3 results reinforce their view that the co is taking considerable share in the rapidly expanding online ad market and solidifying its status as the linchpin to the Internet economy. They fully recognize that the party at GOOG has to end some time. Yet, they see no obvious signs that: (1 GOOG’s business has hit the proverbial wall, or (2 consumers and advertisers are shifting their behavior away from GOOG and toward its competitor.

COF Capital One downgraded to Market Perform at Friedman Billings- tgt cut to $75 (66.00 )
Friedman Billings downgrades COF to Market Perform from Outperform and cuts their tgt to $75 from $91 based on a combination of worse-than-expected credit performance in the auto platform and expectation for higher credit costs driven by increasing economic headwinds for the consumer.

Downgrades: Calyon downgrades AMR Corp (AMR 24.02) to Add from Buy and maintains their $28 tgt based on valuation, seasonality and expectations of international operations topping out, which have been the main drivers for AMR… Miscellaneous: Broadpoint Capital initiates Aventine (AVR 9.9 with an Underperform noting that net debt is expected to ramp up to around 50% in 2008 (currently 0%), due in-part to above-average capacity costs, estimated at $2.00 per gallon; Broadpoint Capital initiates BioFuel (BIOF 5.36) with a Neutral noting that the co is expected to maintain a strong balance sheet, as net debt levels are expected to reach only 42% at peak levels in 2008; Broadpoint Capital initiates Pacific Ethanol (PEIX 8.83) with a Sell noting that PEIX’s plants under construction are fully funded, but there is little room for error, leaving the co vulnerable to potential cost overruns; Broadpoint Capital initiates US BioEnergy (USBE 7.17) with a Neutral noting that USBE is expected to have the lowest debt ratios in 2008 and 2009; Broadpoint Capital initiates VeraSun (VSE 12.43) with an Underperform noting that VSE’s financial position is relatively strong, but was recently compromised by the ASAlliances acquisition, which increased net debt to over 40%, from 31% previously. This along with the downturn in margins, forced management to suspend construction of its Reynolds plant.

WB Wachovia misses by $0.14 (48.14 )
Reports Q3 (Sep) earnings of $0.90 per share, ex items, $0.14 worse than the Reuters Estimates consensus of $1.04. Co said, “While the impact of the market disruption was significant, it’s worth noting that the majority of the lower market valuations in the third quarter largely arose from a repricing of risk in the marketplace and do not reflect deterioration in the underlying credit quality of the assets in our leveraged finance and commercial real estate securitization businesses. Looking ahead, we’re taking the appropriate steps to ensure that as markets remain unsettled, we focus intently on actively managing our exposures and controlling costs. Longer term, we believe the challenges of the third quarter will be an advantage to companies like Wachovia with strong capital and liquidity positions and a clear understanding of the needs of customers and investors.”

SEMI’s tool book-to-bill falls again - EE Times
EE Times reports business is slow in semiconductor equipment. North American-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 0.81 in September, down from 0.82 in August, according to SEMI. “New equipment orders have dipped to levels last seen in late 2005 and early 2006,” said Stanley Myers, president and CEO of SEMI, in a statement. “We are seeing orders decline from the peak levels earlier this year, which were driven largely by strong investments in 300-mm memory capacity.”

WCG WellCare Group profiled in New America section of IBD (117.16 )
IBD reports the co, which handles state Medicaid programs and federal Medicare programs exclusively, has a lot riding of business riding on the govt policy decisions at the state and federal level. While drug-plan membership growth has slowed this year to the single digits, higher margins in that area should keep earnings ticking upward. “For WellCare, the bigger picture is geographic expansion next year more than, say, individual programs like SCHIP,” said Standard & Poor’s analyst Phillip Seligman. “Once you get a footprint into these states, there’s no reason why they wouldn’t expand into other counties in those states.” Still, one of the big issues that govt-related managed care cos face is how much federal support will go towards Medicare Advantage. Total membership grew more than 14% to 2.3 mln. Revenue in the quarter rose 57% from last year to $1.34 bln. Besides Medicare growth, WellCare’s launch of the Georgia Medicaid health plan in June 2006 also contributed to the uptick. While growth won’t be as high as last year, analysts polled by Thomson Financial expect this year’s earnings to rise 48% to $5.02 a share. They see 2008 profit rising another 19%.

HOG Harley-Davidson beats by $0.03, beats on revs; reaffirms FY07 & FY08 guidance (48.95 )
Reports Q3 (Sep) earnings of $1.07 per share, $0.03 better than the Reuters Estimates consensus of $1.04; revenues fell 5.8% year/year to $1.54 bln vs the $1.52 bln consensus. For the full year of 2007, the Company expects a shipment range of 328-332K Harley-Davidson motorcycles, compared to 349,196 units in 2006. The Company also expects a modest decline in revenue and lower operating margin in 2007. Reaffirms diluted earnings per share for the full year are expected to decrease 4 to 6 percent compared to 2006. Looking ahead to 2008, the Company anticipates that the U.S. retail motorcycle environment will continue to be challenging. Co reaffirms that it expects moderate revenue growth, lower operating margin and diluted earnings per share to grow between 4 and 7 percent compared to 2007.

Upgrades: RBC upgrades LaSalle Hotel (LHO 42.86) to Top Pick from Outperform. Downgrades: Baird downgrades Cabela’s (CAB 21.92) to Neutral from Outperform, following Q3 results, saying below-plan results reduce their conviction in CAB’s ability to execute on major store expansion plans while making needed progress in store-based retailing… RBC downgrades Host Hotels & Resorts (HST 22.20) to Outperform from Top Pick… UBS downgrades Southern Copper (PCU 134.15) to Neutral from Buy… UBS downgrades HSBC Holdings (HBC 96.79) to Neutral from Buy… UBS downgrades Hess Corp (HES 69.8 to Neutral from Buy… UBS downgrades AstraZeneca (AZN 52.16) to Sell from Neutral. Miscellaneous: Bernstein initiates select retailers, initiating Target (TGT 62.66) and JC Penney (JCP 56.91) with Outperforms… The firm also initiates Wal Mart (WMT 45.89), Costco (COST 66.53), Kohls (KSS 55.94), and Macy’s (M 31.3 with Market Performs… Deutsche Bank initiates Pediatrix Medical (PDX 66.01) with a Hold… Deutsche Bank initiates Radnet (RDNT 8.99) with a Buy and an $11.50 tgt saying they believe it has the best-positioned business model to thrive in the post-DRA environment as a result of its regional density and multi-modality facility base… Deutsche Bank initiates Alliance Imaging (AIQ 9.62) with a Hold… Oppenheimer initiates CytRx (CYTR 3.56) with a Buy and a $6 tgt based on an optimistic view of market potential of arimoclomol in amyotrophic lateral sclerosis, with expectations for initiation of proof-of-concept study in the next several months; and latent value of ribonucleic acid interference therapeutics, which they believe RXi Pharmaceuticals will start to realize once lead compounds are identified with subsequent advancement into the clinic.

BSX Boston Scientific beats by $0.04, reports revs in-line; guides Q4 EPS in-line, revs below consensus (13.85 )
Reports Q3 (Sep) earnings of $0.20 per share, excluding non-recurring items, $0.04 better than the Reuters Estimates consensus of $0.16; revenues rose 1.1% year/year to $2.05 bln vs the $2.06 bln consensus. Co issues mixed guidance for Q4, sees EPS of $0.14-0.19, excluding non-recurring items, vs. $0.18 consensus; sees Q4 revs of $2.050-2.150 bln vs. $2.18 bln consensus.

HON Honeywell misses by $0.01, beats on revs; raises lower end of FY07 EPS in-line, raised revs guidance above consensus (60.69 )
Reports Q3 (Sep) earnings of $0.81 per share, $0.01 worse than the Reuters Estimates consensus of $0.82; revenues rose 9.8% year/year to $8.73 bln vs the $8.58 bln consensus. Co issues raises guidance for FY07, sees EPS of $3.14-3.16 vs. $3.16 consensus, up from $3.10-3.16; sees FY07 revs of $34.20 bln vs. $33.98 bln consensus, up from $33.9 bln.

Upgrades: Bernstein upgrades Suntrust (STI 73.43) to Market Perform from Underperform… Bear Stearns upgrades Old Dominion (ODFL 22.46) to Peer Perform from Underperform… J.P Morgan upgrades Teradyne (TER 13.01) to Overweight from Neutral. Downgrades: Baird downgrades Sirona Dental Systems (SIRO 37.00) to Neutral from Outperform and cuts their tgt to $35 from $40 as recent survey work/industry checks suggest uptake of the company’s $180,000 3D/CBCT Galileos system has been slow and that competition in this category has increased dramatically… J.P Morgan downgrades UnitedHealth (UNH 48.10) to Neutral from Buy… J.P Morgan downgrades Hansen Natural (HANS 68.11) to Neutral from Overweight… Merrill downgrades JMP Group (JMP 8.04) to Neutral from Buy… Morgan Stanley downgrades MBIA (MBI 60.3 to Underweight from Equal Weight… Oppenheimer downgrades DaVita (DVA 66.53) to Neutral from Buy saying they are not discounting the likelihood that Congress passes a Medicare bill later this year that could include provisions benefiting DVA’s 2008 earnings. Rather, the firm believes shares adequately reflect potential earnings upside from favorable dialysis language in a potential year-end Medicare bill.

Upgrades: Friedman Billings upgrades IDEX Corp (IEX 35.46) to Outperform from Market Perform and raised its tgt to $41 from $40 after IEX reported Q3 results. FBR notes that fundamentals remain strong at IDEX, and they believe the prospects for 2008 and beyond look positive… CIBC upgrades J Crew (JCG 40.2 to Outperform from Sector Perform… CIBC upgrades Parker Hannifin (PH 75.76) to Sector Perform from Underperform… BofA upgrades Overseas Shipholding (OSG 72.00) to Buy from Neutral. Downgrades: Merriman downgrades Syneron Medical (ELOS 19.51) to Neutral from Buy saying that growth drivers remain four quarters away, at best. Miscellaneous: Caylon initiates Progress Energy (PGN 45.89) with an Add rating and $50 tgt… Friedman Billings raises their tgt on Danaher (DHR 82.56) to $92 from $86 noting that they believe that performance will continue to be driven by DHR’s Professional Instrumentation and Medical Technologies segments… BofA initiates Plycom (PLCM 28.80) with a Buy and a $36 tgt.

European bank stocks, HSBC drop; BP, energy shares advance - Bloomberg.com
Bloomberg.com reports European bank stocks fell after Bank of Japan Governor Toshihiko Fukui said mounting U.S. credit losses have increased “uncertainty” in financial markets… National benchmarks dropped in nine of the 17 western European markets that were open. The U.K.’s FTSE 100 slipped 0.1%. Germany’s DAX sank 0.4%. France’s CAC 40 added less than 0.1%. The Stoxx 50 retreated 0.3%, while the Euro Stoxx 50, a measure for the euro region, fell less than 0.1%.

Asian stocks decline, led by Mizuho on bank earnings, yen - Blooomberg.com
Blooomberg.com reports Asian stocks fell, completing their first weekly decline in more than a month, after Bank of America reported a profit drop from the worst U.S. housing slump since 1991, reigniting concern that lenders’ earnings will suffer… In Japan, the Nikkei 225 Stock Average dropped 1.7% to 16,814.37… The Morgan Stanley Capital International Asia-Pacific Index slipped 1.1% to 165.60 at 7.16 p.m. in Tokyo. The benchmark has lost 1.5% this week, declining for the first time since the five days ended Sept. 14.

Sensex ends down 403pts at 17,595 - The Business Standard
The Business Standard reports that follwing yesterday’s 717 points fall, the Sensex opened 34 points higher at 18,032, but soon slipped into negative zone owing to follow-up selling in the market. Aggressive selling in mid-noon trades saw the index tumble to a low of 17,226 - down 806 points from the day’s open. Selective buying at lower levels helped the index recover some lost ground and eventually end (provisional) the day at 17,595 - down 403 points.

NPD video game Sept sales review - Next-gen.biz
According to Next-Gen, the US videogame industry blew away sales from the comparable month a year ago, raking in $1.36 billion (including software, hardware and accessories) versus $778.7 million. “Halo 3 posted phenomenal results for just 12 days of sales in the month of September,” said NPD analyst Anita Frazier. “True to its name, the game rubbed off on hardware sales too - the Xbox 360 realized its best month ever in unit hardware sales outside last holiday season. If ever there was a doubt that great content drives hardware acquisition, this should put that doubt to rest.” Total home console hardware sales were up 188 percent to $418.6 million, with Xbox 360 driving that figure with 527,800 units sold. Microsoft’s console was the top seller for the month, beating out the Nintendo Wii (501,000), DS (495,800), PSP (284,500), PS2 (215,000) and Game Boy Advance (75,000). Meanwhile, next-gen competitor PS3 sold 119,400. (Stock impacted by this news: MSFT, SNE, ERTS, ATVI, TTWO, GME)

AMZN Amazon.com profiled in Inside Wall Street - BusinessWeek Online (89.85 )
BusinessWeek Online reports that Amazon.com (AMZN) is one major Internet player that has outperformed Google (GOOG). Yes, mighty Google. Amazon’s market cap of $37 bln is just 20% of Google’s $198 billion, but so far this year, Amazon’s stock has vaulted 129%, vs. Google’s 29% rise. What does that mean? To pros like Bernie Schaeffer of Schaeffer’s Investment Research, which owns shares, investors can double their money in Amazon much faster than with Google. Now at 90.55, Amazon has the vigor to blow past its former all-time high of 113, to more than 150, says Schaeffer. Its sharp rise from 36 in January has made Amazon a target of short-selling. The shorts hold 36.8 million shares, or 12% of shares in public hands. That could be good news: If the stock jumps, the shorts must scramble to buy more to cover losses, argues Schaeffer. Jeetil Patel of Deutsche Bank (DB), which owns shares, says that, in view of market volatility and a possible recession, “we continue to favor Amazon as our top pick in the Internet sector.” Consistent growth “in the 23%-30% range has persisted for four consecutive years, a trend that should buck potentially weaker consumer spending.” International sales (45% of the total) plus new initiatives like digital audio and video downloads will bolster sales, says Patel, who sees profits of $1.82 a share in 2007 and $2.21 in 2008, up from $1.09 in 2006.

C Citi’s SIVs: Staving off a fire sale - WSJ (43.83 )
Executives of Citigroup (C) say the giant bank has secured funding through year end for the $80 bln in structured investment vehicles it manages after selling $20 bln in assets since the midsummer credit crunch. The steps taken by the bank’s alternative-asset management unit, run by former Morgan Stanley stock-division chief John Havens, mean the Citigroup SIVs can avoid the kind of forced selling at distressed prices begun by some other European SIV managers, the executives said.

AAPL Two good tech stocks that aren’t frothy - Barron’s Online (173.50 )
Barron’s Online reports the party for technology stocks shows no signs of ending. Heading into a holiday season of desirable trinkets such as Apple’s iPod Touch, shares of companies with strong product cycles, including Apple, and Research in Motion (RiM), keep moving upward, and keep becoming more expensive in the process. Apple and RiM are expected to increase profit 46% and 67% this year, respectively, but the 97% and 160% rise in their shares, year-to-date, has brought valuations well above the market, trading at 40 times forward earnings. When software vendor VMware, barely two months old as a public co, has a mega-capitalization of $37 bln, it’s clear things have gotten frothy. VMware is up 241% since its August debut. As Barron’s Online pointed out two weeks ago, these brand-name stocks could continue to climb before the year is over. (See Weekday Trader, “The Party Isn’t Over for Tech Stocks,” Oct. 4, 2007.).

VLO Is Valero’s CFO Sending a Sell Signal? - Barron’s Online (71.22 )
Barron’s Online reports following disappointing Q3 earnings guidance, Valero Energy’s chief financial officer sold off nearly 20% of his stake in the oil refiner, a move that insider experts see as troubling for the stock. Last Friday, Michael Ciskowski sold 55,000 shares for $73.22 a piece, for a total of $4 mln. “The signal he sent is certainly eyebrow-raising,” says Ben Silverman, director of research at InsiderScore.com. “The timing, coming two days after the announcement, was very curious, especially because as CFO he is cognizant that analysts [were describing the slump as a] buying opportunity.” Ciskowski retains direct ownership of 219,943 shares, along with 34,367 shares in a thrift plan. He also has 100,000 shares of exercisable and unexercisable options, and 32,500 shares of unvested stock he was awarded under an incentive plan, according to InsiderScore.com. He holds less than 1% of Valero stock outstanding. The sale came two days after Valero announced that it would miss earnings estimates for the third quarter. The San Antonio, Texas-based company said it expected earnings of $1.30 to $1.40 a share, whereas analysts polled by Thomson Financial had forecast, on average, profit of $1.91 a share.

Mad Money’ Recap: Lightning Round cont. - TheStreet.com
Cramer was bearish on: Palm (PALM), Macy’s (M), IBM (IBM) and InvesTools (SWIM).

‘Mad Money’ Recap: Lightning Round - TheStreet.com
Cramer was bullish on: Research In Motion (RIMM), Wachovia (WB) and Altria (MO).

Cramer’s ‘Mad Money’ Recap - TheStreet.com
On Thursday’s edition, Jim says InterContinental Exchange (ICE) is “the single best way to play the volatility in oil.” Next he notes that if market players want to buy one beverage company, Coca-Cola (KO) is the stock to own. Cramer was also bullish on Nokia (NOK), and Transocean (RIG).