Archive for April 10th, 2008
Posted by: in Latest News
Filed under: Deals, Good news, Options, Technical Analysis
 Cephalon Inc. (NASDAQ: CEPH) shares are trading higher today on news that Takeda Pharmaceutical, a Japanese firm, has agreed to buy Cephalon competitor Millennium Pharmaceuticals (NASDAQ: MLNM) for $25 a share. MLNM is trading up almost 50% to $24.45 currently, indicating that investors think this deal will most likely happen. If you think that the stock won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CEPH.
After hitting a one-year high of $84.83 in June, the stock hit a one-year low of $56.20 in February. CEPH opened this morning at $64.94. So far this day the stock has hit a low of $64.45 and a high of $66.18. As of 12:45, CEPH is trading at $65.27, up 1.05 (1.6%). The chart for CEPH is neutral and improving, while S&P gives the stock a bullish 4 Stars (out of 5) purchase rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $55 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we’ll make a 7.5% return in just five weeks as long as CEPH is above $55 at May expiration. Cephalon would have to fall by more than 15% before we would begin to lose money. Learn more about this type of trade here.
CEPH hasn’t been below $56 at all in the past year and has shown support around $59 recently. This trade could be risky if the company’s earnings (due out on 5/1) disappoint, but even if that happens, that position could be protected by support the stock might find between $55 and $60, where it bottomed out in the past two months.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that might include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CEPH or MLNM.
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Posted by: in Latest News
Filed under: Deals, Johnson and Johnson (JNJ)
 Yesterday, I met up with a health care venture capitalist. He mentioned that M&A is apt to be a huge factor over the next few years. After all, major pharma companies will have a variety of their blockbuster drugs go off-patent.
Well, interestingly enough, we got a mega-deal today; that’s, Takeda Pharmaceuticals (the top drug company in Japan) has concurred to pay $8.8 billion for Millennium Pharmaceuticals (NASDAQ: MLNM), which develops biopharmaceuticals for such things as cancer and inflammatory diseases (its top drug is Velcade). There’s also a key strategic relationship with Johnson & Johnson (NYSE: JNJ).
No doubt, the Millennium deal is fairly rich - with a valuation at 17 times revenues. Then again, Millennium is growing quickly and has a promising stable of drugs. And as for Takeda, it has two major drugs — Prevacid and Actos - that’ll come off-patent in 2009 and 2011. In other words, the company has really no other option but to pay up on deals.
In today’s trading, Millennium’s stock price is up 49.72% to $24.48.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements . He also operates MergerBook.com.
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Posted by: in Latest News
Filed under: Deals, Bad news, Industry, Law, Boeing Co (BA)
 The Boeing (NYSE: BA) 787 Dreamliner has been delayed for a third time and deliveries to airlines may not start in earnest for a year. The news is bad for Boeing, but it is worse for some of the airline partners who were counting on a fixed schedules for getting the new plane into service. The Dreamliner flies farther, saves more fuel, and carries more passengers than many aircraft in service now.
Several airlines, including Qantas, New Zealand Air, Air India, and All Nippon will all ask for money because of the delays. According to Reuters, “More than 50 airlines are waiting for 892 Boeing 787s, worth a combined $145 billion at list prices.”
The news is very tricky for Boeing investors to assess. There is an excellent case that some of the airlines which expected the 787 this year and next have legitimate claims. Some might even argue that they have the ability to cancel their orders and buy a competing product from Airbus. The costs to Boeing could stretch into the tens of billions of dollars. But none of the airlines has made public the value of its damage request. Boeing also might elect to counter these claims, perhaps in court. Of course, being involved in a lawsuit with your largest customers is rarely a good idea.
One thing Boeing’s shareholders can be sure of is that the mess is going to cost some money, and that usually moves a company’s share price down.
Douglas A. McIntyre is an editor at 247wallst.com.
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Posted by: in Latest News
Filed under: Before the bell, Earnings reports, Deals, Microsoft (MSFT), Yahoo! (YHOO), Time Warner (TWX), Wal-Mart (WMT), Costco Wholesale (COST), duPont(E.I.)deNemours (DD), News Corp’B’ (NWS), Genentech Inc (DNA), AMR Corp (AMR), Economic data, Rite Aid Corp (RAD)
 Stock futures were lower this morning amid fears of weak earnings reports and jitters about oil prices, which continue to rise today.
Stocks fell Wednesday after a lowered outlook from UPS, seen as an economic bellwether, and oil briefly topping $112 a barrel, bringing the Dow industrials down 49 points or 0.4%, the Nasdaq Composite down 26 points or 1.1%; and the S&P 11 points or 0.8% lower.
On the economic calendar today, the weekly jobless claims data for the week ending April 5 is due out this morning at 8:30 a.m. EDT. According to Bloomberg, claims are expected to be around 386,000, and anything above 400,000 will fuel concerns about the weakening of the job market. Investors will also be watching March chain store sales reports. The day began with an upbeat report from Costco (NASDAQ: COST), whose sales rose 7%. Wal-Mart (NYSE: WMT) then reported its same-store sales rose 0.7%, which was below analysts’ estimates of 1%, but said it expects better April figures. The company stated its inventory in US stores is well managed.
Dupont (NYSE: DD) said in a statement this day that its first quarter earnings topped forecasts.
In the news, the New York Times reports News Corp. (NYSE: NWS) might be joining forces with Microsoft (NASDAQ: MSFT) in its bid for Yahoo! (NASDAQ: YHOO). The two companies are stated to be in speaks to combine News Corp.’s MySpace, Microsoft’s MSN and Yahoo! to create an world wide web giant. Meanwhile the Wall Street Journal reports Yahoo! is in speaks with Time Warner (NYSE: TWX) to combine with AOL in order to foil Microsoft’s bid. Separately, Yahoo confirmed it would test Google’s AdSense search service.
In other deal news, Japan’s Takeda Pharmaceuticals said it would buy Massachusetts-based Millennium Pharmaceuticals (NASDAQ: MLNM) for $8.8 billion. Takeda’s $25-a-share offer represents a 53% premium to Millennium’s closing price Wednesday.
American Airlines plans to cancel 900 more flights today, following over 1,000 yesterday. AMR Corporation (NYSE: AMR), parent company of American, shut down over 11% yesterday.
European stocks continued to decline for a third day in a row and, as expected, the Bank of England cut interest rates by 25 basis points to 5% this morning.
Earnings are expected today from Genentech Inc. (DNA) and Rite Aid Corp. (RAD).
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Posted by: in Latest News
Filed under: Deals, Bad news, Industry, Law, Boeing Co (BA)
The Boeing (NYSE: BA) 787 Dreamliner has been delayed for a third time and deliveries to airlines may not start in earnest for a year. The news is bad for Boeing, but it is worse for some of the airline partners who were counting on a fixed schedules for getting the new plane into service. The Dreamliner flies farther, saves more fuel, and carries more passengers than many aircraft in service now.
Several airlines, including Qantas, New Zealand Air, Air India, and All Nippon will all ask for money because of the delays. According to Reuters, “More than 50 airlines are waiting for 892 Boeing 787s, worth a combined $145 billion at list prices.”
The news is very tricky for Boeing investors to assess. There is an excellent case that some of the airlines which expected the 787 this year and next have legitimate claims. Some might even argue that they can cancel their orders and buy a competing product from Airbus. The costs to Boeing could stretch into the tens of billions of dollars. But none of the airlines has made public the value of its damage request. Boeing also might elect to counter these claims, perhaps in court. Of course, being involved in a lawsuit with your largest customers is rarely a good idea.
One thing Boeing’s shareholders can be sure of is that the mess is going to cost some money, and that usually moves a company’s share price down.
Douglas A. McIntyre is an editor at 247wallst.com.
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Posted by: in Latest News
Filed under: Before the bell, Earnings reports, Deals, Microsoft (MSFT), Yahoo! (YHOO), Time Warner (TWX), Wal-Mart (WMT), Costco Wholesale (COST), duPont(E.I.)deNemours (DD), News Corp’B’ (NWS), Genentech Inc (DNA), AMR Corp (AMR), Economic data, Rite Aid Corp (RAD)
Stock futures were lower this morning amid fears of weak earnings reports and jitters about oil prices, which continue to rise this day.
Stocks fell Wednesday after a lowered outlook from UPS, seen as an economic bellwether, and oil briefly topping $112 a barrel, bringing the Dow industrials down 49 points or 0.4%, the Nasdaq Composite down 26 points or 1.1%; and the S&P 11 points or 0.8% lower.
On the economic calendar this day, the weekly jobless claims data for the week ending April 5 is due out this morning at 8:30 a.m. EDT. According to Bloomberg, claims are expected to be around 386,000, and anything above 400,000 will fuel concerns about the weakening of the job market. Investors will also be watching March chain store sales reports. The day began with an upbeat report from Costco (NASDAQ: COST), whose sales rose 7%. Wal-Mart (NYSE: WMT) then reported its same-store sales rose 0.7%, which was below analysts’ estimates of 1%, but said it anticipates superior April figures. The company stated its inventory in US stores is well managed.
Dupont (NYSE: DD) said in a statement this day that its first quarter earnings topped forecasts.
In the news, the New York Times reports News Corp. (NYSE: NWS) may be joining forces with Microsoft (NASDAQ: MSFT) in its bid for Yahoo! (NASDAQ: YHOO). The two companies are stated to be in speaks to combine News Corp.’s MySpace, Microsoft’s MSN and Yahoo! to create an world wide web giant. Meanwhile the Wall Street Journal reports Yahoo! is in speaks with Time Warner (NYSE: TWX) to combine with AOL in order to foil Microsoft’s bid. Separately, Yahoo confirmed it would test Google’s AdSense search service.
In other deal news, Japan’s Takeda Pharmaceuticals said it would purchase Massachusetts-based Millennium Pharmaceuticals (NASDAQ: MLNM) for $8.8 billion. Takeda’s $25-a-share offer represents a 53% premium to Millennium’s closing price Wednesday.
American Airlines plans to cancel 900 more flights today, following over 1,000 yesterday. AMR Corporation (NYSE: AMR), parent company of American, closed down over 11% yesterday.
European stocks continued to decline for a third day in a row and, as expected, the Bank of England cut interest rates by 25 basis points to 5% this morning.
Earnings are expected this day from Genentech Inc. (DNA) and Rite Aid Corp. (RAD).
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Posted by: in Latest News
Filed under: Deals, Competitive strategy, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Time Warner (TWX), News Corp’B’ (NWS)
 Due to the attempts to purchase or build a partnership with Yahoo! (NASDAQ:YHOO) investors can no longer keep track of the players without a score card. Overnight, word get out that Time Warner (NYSE:TWX) was speaking to Yahoo! about putting AOL into a new, combined company. Then The New York Times reported that News Corp (NYSE:NWS) is in speaks with Microsoft (NYSE:MSFT) about putting MySpace, MSN, and Yahoo! together.
The News Corp deal is by far the more complex. It puts together a social network, the MSN web portal, and Yahoo!, the No.2 search company. Managing such a far-flung collection of businesses would represent a significant logistical and marketing problem. However, it could drive a higher price for Yahoo!. Microsoft would gain control of the largest display advertising network in the world, would have the largest number of one-of-a-kind visitors controlled by any company, and rank closer to Google (NASDAQ:GOOG) in search. Having the MySpace social network might actually cause a set of troubles because operators of these businesses are finding it hard to discover ways to get huge advertisers to use them. As collections of people who can’t be broken into simple categories they’ve been vexing to marketers.
It is very difficult to determine how any of these new marriages creates more value that the $31 that Microsoft has offered for Yahoo!. At this point, at least, the value of another combination is ephemeral. The potential benefits are in the future and, therefore, are difficult to judge.
Shareholders of Yahoo! might have to decide if they want to elect for a bright dream of the future or cash on the table.
Douglas A. McIntyre is an editor at 247wallst.com.
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