Stock Market Predictions

Gap, Aeropostale shares dive after results as costs, discounts

Stock Market Predictions

Gap shares fell as much as 18 percent, while Aeropostale was down as much as 20 percent -- making them the top two losers on the New York Stock Exchange.

The S&P Retail Index .RLX was down 1.6 percent.

"Some of the companies that have pricing power have not had the same kind of results as Gap did. That, maybe, tells you something about the strength and quality of the brands," said Jay Kaplan, portfolio manager with Royce & Associates.

Kaplan does not own Gap or Aeropostale shares, but has a stake in rival American Eagle Outfitters (AEO.N) and Buckle Inc (BKE.N).

Gap, which also operates the Old Navy and Banana Republic brands, cut its full-year profit outlook and said product costs, primarily cotton, will "more than outweigh retail price increases."

"(Gap's) results underscored our view that the company can no longer offset product weakness and protect the bottom line with operational offsets," analyst Amy Noblin at Weeden & Co said in a note.

"It strikes us as if there was little foresight or plan to manage costs," analyst Noblin added.

On Thursday, teen apparel retail Aeropostale Inc (ARO.N) forecast second-quarter earnings much below analysts' estimates, saying discounts were hurting margins.

The same problems hurt Ann Taylor parent Ann Inc's (ANN.N), results on Friday, sending its shares down as much as 6 percent.

Apparel retailers have been fighting rising raw material costs, particularly cotton. This has also taken a toll on margins as retailers try to lure shoppers away from rivals by offering lower prices.

"Aeropostale materially reduced any hope of a near-term turnaround by providing second-quarter guidance below even our weak projections," said analyst Eric Beder of Brean Murray Carret & Co.

He added that the company continues to struggle with fashion misses, tough competition and bloated inventories.

Kearney, Nebraska-based Buckle Inc (BKE.N), which missed analysts' estimates, is also facing a squeeze on margins.

Aeropostale shares were down 19 percent at $17.35, while Gap shares were down 17 percent at $19.37 on the New York Stock Exchange on Friday. Buckle was down 3 percent at $39.87.

(Reporting by Nivedita Bhattacharjee and Arpita Mukherjee in Bangalore; Editing by Roshni Menon.)

Malone eyes Nook in "cheap" Barnes & Noble bid

Stock Market Predictions

Shares of Barnes & Noble jumped about 30 percent to close at $18.33 on Friday as Wall Street analysts argued the company was worth more, pointing to the growing success of the bookseller's Nook e-reader as an opportunity to be exploited by Malone's Liberty Media Corp. They said the jump also showed that investors believe other bidders are bound to come in.

Until the Liberty Media offer, the 9-month long auction process was said to be moribund. A month ago, Barnes & Noble shares had fallen as low as $8.45.

Long-time watchers of Malone said he would likely not raise his bid by much more and that the financial opportunity was probably more important than its business strategy.

"Malone will no doubt see value in the brand and the franchise and believe they can derive incremental value in the business," said Collins Stewart analyst Thomas Eagan.

Malone, 70, is known in the media business for his shrewd tax-efficient investments and owns stakes in a wide range of media and Internet assets including shopping channel QVC, satellite company DirecTV Group and Starz Entertainment. During his run as an operator in the cable TV business he was known as a ruthless operator and former U.S. Vice President Al Gore dubbed him "Darth Vader."

Apart from media, this year Malone became No. 1 private landowner in the United States with 2.1 million acres of land.

Barnes & Noble said late on Thursday that Liberty Media had offered $17 per share, or $1.02 billion, and that a special board committee would look at the bid.

Liberty Media said the offer is for about 70 percent of the bookseller, which will be attributable to its Liberty Capital tracking stock. The company said its cash contribution toward the purchase, depending on the financing it can obtain, will be around $500 million.

Liberty's offer is conditional on top shareholder and founding Chairman Leonard Riggio keeping a stake in Barnes & Noble, which he built from a local New York bookstore into a national chain, and staying involved in running the company.

Malone's Liberty Media has pursued a strategy in recent years to snap up cheap distressed media-related assets in the hope of making an outsized return on investment.

In February 2009, Malone snapped up a 40 percent stake in Sirius XM Radio by lending $530 million to the satellite radio company, which was on the verge of bankruptcy. Malone was rewarded in just a few months after Sirius turned its business around and the stake is now worth more than $3.5 billion.

STORE CLOSINGS

Barnes & Noble, which has faced years of declining print book sales, put itself up for sale in August, saying its shares were undervalued.

Janney Capital Market analyst David Strasser called the $17 offer "inadequate."

"Barnes & Noble has the potential for earnings well in excess of their previous peak earnings simply by maintaining its current 27-28 percent market share in digital books," Strasser wrote in a research note.

Barnes & Noble operates 720 superstores, but readers have been gradually switching to digital books from print versions.

One person familiar with Liberty Media's thinking said the company had been most interested in the Nook during talks, implying very little interest in keeping stores open.

If Liberty Media wanted to close Barnes & Noble stores, it would be easier than it was for bankrupt rival Borders Group.

Barnes & Noble has about 400 leases up for renewal by April 30, 2015, with over half set for 2012 and 2013. In contrast, Borders, which has closed nearly half of its superstores since filing for Chapter 11 protection, was locked into long-term leases.

In 2009, Barnes & Noble introduced the Nook to compete with Amazon.com's market-leading Kindle e-reader. Forrester Research estimates Barnes & Noble is now second only to Amazon in e-book sales.

E-books now make up about 14 percent of overall industry sales. Amazon said on Thursday that it was selling more e-books than paper books.

Credit Suisse analyst Gary Balter raised his target price for Barnes & Noble shares to $21.

A deal with Liberty would better equip the bookseller to battle with technology giants Amazon and Apple Inc, Balter wrote in a note.

"With strong backing of a media company like Liberty, we believe Barnes' digital business will be able to compete more effectively," Balter said. In turn, he added, Liberty would win Barnes & Noble's valuable e-book business.

Standard & Poor's analyst Michael Souers kept his "hold" recommendation and $19 price target. "We think there is a solid chance of an improved offer," he said.

Shares of Liberty fell 1.47 percent to end at $17.71.

(Reporting by Phil Wahba, Yinka Adegoke and Jessica Hall in Philadelphia; Editing by Lisa Von Ahn and Richard Chang)

New Mountain Finance Corp down nearly 6 percent in NYSE debut

Stock Market Predictions

Shares closed at $13, or 5.5 percent below the IPO price, on Friday on the New York Stock Exchange.

The closed-end investment company on Thursday raised about $100 million, selling 7.3 million shares for $13.75 each. It had planned to sell 8.3 million shares at $14 to $15 each, according to a regulatory filing.

New Mountain's stock had touched an intra-day low of $12.80, down 7 percent on Friday.

The business development company said its only business and sole asset will be owning common membership units of New Mountain Finance Holdings LLC, another business development company in turn managed by New Mountain Finance Advisers BDC LLC.

The company will use all of the proceeds from this offering as well as the proceeds from a concurrent private placement, to acquire common membership units from New Mountain Finance Holdings, LLC, which would then be used for new investments in portfolio companies.

As of March31, 2011, the company's portfolio had a fair value of about $460million in 45 companies, with software and healthcare services making up nearly half of the investments.

In a regulatory filing, New Mountain said it expected to primarily look at catering to U.S. middle market businesses, through both primary originations and open-market secondary purchases.

Goldman Sachs, Wells Fargo Securities and Morgan Stanley led underwriters on the IPO.

(Reporting by Alina Selyukh in New York and Brenton Cordeiro in Bangalore, editing by Gerald E. McCormick, Prem Udayabhanu)

NYSE: strongly interested in listing in Shanghai's int'l board

Stock Market Predictions

"We are strongly interested as an even stronger leading stock exchange. We feel we should be listed on the international board," he told Global Markets on the sidelines of a financial conference in Shanghai.

"It's up to the authorities to see if we are still the favorite candidate."

(Reporting by Samuel Shen and Kazunori Takada; Editing by Jacqueline Wong)

Anadarko shares climb on BP-Mitsui settlement

Stock Market Predictions

BP won a big victory in its battle to share the cost of the oil spill on Friday, when partner Mitsui & Co Ltd (8031.T) agreed to pay part of the cleanup bill and possibly billions more in fines.

Mitsui owns 10 percent of the well, while Anadarko's interest is 25 percent.

Analysts at Houston-based investment bank Simmons & Co said the Mitsui deal implies a potential $2.66 billion settlement for Anadarko, less than some investors had expected.

"Anadarko has been more vocal recently about the potential for a settlement and we believe today's BP-Mitsui news further increases the likelihood of that outcome," Simmons said in a note to clients.

Earlier this month, Jim Hackett, Anadarko's chief executive officer, said the company was prepared to settle oil spill claims.

Shares of Anadarko rose $3.22 to $74.86 in morning trading on the New York Stock Exchange.

(Reporting by Anna Driver, editing by Gerald E. McCormick)

LDK Solar postpones note sale, shares fall

Stock Market Predictions

The company's shares fell 1.3 percent after the announcement.

The company had intended to use proceeds from the sale to pay down short-term debt.

"We still expect to generate sufficient operating cash flow to support our business plan," Chief Executive Xiaofeng Peng said in a statement.

LDK shares fell to $8.10 in extended trade after closing at $8.21 on the New York Stock Exchange.

(Reporting by Nichola Groom; Editing by Gary Hill)

Malone eyes Nook in "cheap" Barnes & Noble bid

Stock Market Predictions

Shares of Barnes & Noble jumped about 30 percent to close at $18.33 on Friday as Wall Street analysts argued the company was worth more, pointing to the growing success of the bookseller's Nook e-reader as an opportunity to be exploited by Malone's Liberty Media Corp. They said the jump also showed that investors believe other bidders are bound to come in.

Until the Liberty Media offer, the 9-month long auction process was said to be moribund. A month ago, Barnes & Noble shares had fallen as low as $8.45.

Long-time watchers of Malone said he would likely not raise his bid by much more and that the financial opportunity was probably more important than its business strategy.

"Malone will no doubt see value in the brand and the franchise and believe they can derive incremental value in the business," said Collins Stewart analyst Thomas Eagan.

Malone, 70, is known in the media business for his shrewd tax-efficient investments and owns stakes in a wide range of media and Internet assets including shopping channel QVC, satellite company DirecTV Group and Starz Entertainment. During his run as an operator in the cable TV business he was known as a ruthless operator and former U.S. Vice President Al Gore dubbed him "Darth Vader."

Apart from media, this year Malone became No. 1 private landowner in the United States with 2.1 million acres of land.

Barnes & Noble said late on Thursday that Liberty Media had offered $17 per share, or $1.02 billion, and that a special board committee would look at the bid.

Liberty Media said the offer is for about 70 percent of the bookseller, which will be attributable to its Liberty Capital tracking stock. The company said its cash contribution toward the purchase, depending on the financing it can obtain, will be around $500 million.

Liberty's offer is conditional on top shareholder and founding Chairman Leonard Riggio keeping a stake in Barnes & Noble, which he built from a local New York bookstore into a national chain, and staying involved in running the company.

Malone's Liberty Media has pursued a strategy in recent years to snap up cheap distressed media-related assets in the hope of making an outsized return on investment.

In February 2009, Malone snapped up a 40 percent stake in Sirius XM Radio by lending $530 million to the satellite radio company, which was on the verge of bankruptcy. Malone was rewarded in just a few months after Sirius turned its business around and the stake is now worth more than $3.5 billion.

STORE CLOSINGS

Barnes & Noble, which has faced years of declining print book sales, put itself up for sale in August, saying its shares were undervalued.

Janney Capital Market analyst David Strasser called the $17 offer "inadequate."

"Barnes & Noble has the potential for earnings well in excess of their previous peak earnings simply by maintaining its current 27-28 percent market share in digital books," Strasser wrote in a research note.

Barnes & Noble operates 720 superstores, but readers have been gradually switching to digital books from print versions.

One person familiar with Liberty Media's thinking said the company had been most interested in the Nook during talks, implying very little interest in keeping stores open.

If Liberty Media wanted to close Barnes & Noble stores, it would be easier than it was for bankrupt rival Borders Group.

Barnes & Noble has about 400 leases up for renewal by April 30, 2015, with over half set for 2012 and 2013. In contrast, Borders, which has closed nearly half of its superstores since filing for Chapter 11 protection, was locked into long-term leases.

In 2009, Barnes & Noble introduced the Nook to compete with Amazon.com's market-leading Kindle e-reader. Forrester Research estimates Barnes & Noble is now second only to Amazon in e-book sales.

E-books now make up about 14 percent of overall industry sales. Amazon said on Thursday that it was selling more e-books than paper books.

Credit Suisse analyst Gary Balter raised his target price for Barnes & Noble shares to $21.

A deal with Liberty would better equip the bookseller to battle with technology giants Amazon and Apple Inc, Balter wrote in a note.

"With strong backing of a media company like Liberty, we believe Barnes' digital business will be able to compete more effectively," Balter said. In turn, he added, Liberty would win Barnes & Noble's valuable e-book business.

Standard & Poor's analyst Michael Souers kept his "hold" recommendation and $19 price target. "We think there is a solid chance of an improved offer," he said.

Shares of Liberty fell 1.47 percent to end at $17.71.

(Reporting by Phil Wahba, Yinka Adegoke and Jessica Hall in Philadelphia; Editing by Lisa Von Ahn and Richard Chang)

Discounts weigh on Ann Taylor parent's margins; shares fall

Stock Market Predictions

Shares of the women's clothing retailer fell 6 percent to a near two-month low of $28.47 in Friday morning trade on the New York Stock Exchange.

Chains like Ann and Chico's FAS Inc (CHS.N), which cater to women over 35, have benefited from increased traffic as they overhaul merchandise, but an extremely competitive environment has forced them to discount and keep prices low.

A rapid rise in prices of raw materials have further pressured margins, forcing many retailers to forecast weak quarters ahead.

On Wednesday, Chico's beat quarterly profit estimates, but its sales fell short of estimates.

Ann, which sells office wear through its Ann Taylor chains and more casual clothes at LOFT, saw the margins slip to 57.3 percent from 59 percent last year.

However, sales rose 10 percent to $523.6 million, beating estimates. Comparable sales increased 7.8 percent.

Ann, which dropped "Taylor" from its corporate name in March, has been investing in e-commerce and outlet stores as it grows its presence beyond traditional retail.

Ecommerce sales on a comparable basis rose 43.1 percent at Ann Taylor and 32.8 percent at LOFT. Traditional stores at Ann Taylor saw a 13.7 percent rise, while LOFT comparable sales at brick-and-mortar stores dropped 1 percent.

The growth of higher margin ecommerce businesses and stabilization of sales at Loft should drive sales and margin gains in 2011, UBS analyst Roxanne Meyer said in a note.

Sales at Loft, being called out as a brand that was beginning to fundamentally improve at the store level, could have contributed to the share movement as well, added Wall Street Strategies analyst Brian Sozzi.

The company expects second-quarter profit to be "slightly higher" than current analyst estimates, on strong sales.

For the first quarter, the company earned 51 cents a share, while analysts, on average, expected 48 cents a share, according to Thomson Global Markets I/B/E/S. [ID:nWNAB0453]

Ann shares were down 3 percent at $29.43 On the New York Stock Exchange on Friday. (Reporting by Nivedita Bhattacharjee; Editing by Maju Samuel)

Research in Motion stock: the next PALM?

Stock Market Predictions

Shares of the BlackBerry maker have lost more than 38 percent since February. Investor attempts to pick a bottom in the stock have been run over by a slide dating from June 2008, when it peaked at $148.

Some in the options market don't see the trend arresting itself, making long-term bearish bets that RIM shares will fall to the mid-$30s by January 2012.

"There is a major divergence of opinion on the stock," said Bret Jensen, chief investment strategist at Simplified Asset Management, a hedge fund based in Miami, Florida.

"While some argue that it's somewhat like Apple before the big comeback, considering the cash flow and the attractive P/E ratio, others are asking, 'Is this going to be the new Palm?'"

Palm was another high-flying maker of handheld computers whose shares dropped dramatically as the market for smartphones became competitive. It is now owned by Hewlett-Packard Co.

RIM has been disappointing investors in recent months. Sales and earnings forecasts have been cut.

Its BlackBerry smartphone lineup has steadily lost market share, especially in the hyper-competitive U.S. market, to devices such as Apple Inc's iPhone and those running Google Inc's Android software.

Since early March, RIM shares have struggled to hold above their 10-day moving average, seen as buffering against further losses. The stock fell 1.1 percent at $43.74 on Friday.

Short interest is currently at a five-month high at 6 percent of the outstanding float, according to Nasdaq.

But a Thomson Global Markets StarMine analysis puts the stock's intrinsic value at $99.44, assuming a 10-year cumulative annual growth rate of 7.3 percent, below the industry average.

The stock's trajectory since February is ugly. Since hitting a 52-week high of $70.54, the pattern has been: Drop sharply, attempt a rebound, and get whacked again.

More disturbingly, volume has ticked up of late as the share slide has picked up speed.

For the stock to turn around, it would need to rally and sustain gains at what technical strategists call a "gap" in its price -- the sharp decline that occurred in late April from the mid-$50s to the $40s.

"The bottom of that gap is at the $50 area, so the stock would need to rally sharply from current levels just to begin that process," said Bryant McCormick, an independent quantitative analyst at optionMonster.com.

THE BEARISH BUTTERFLY EFFECT

Earlier this week, RIM recalled some of its Playbook tablet computers due to an operating system flaw. The company had hoped the launch of the long-awaited tablet could revive its fortunes, but the product garnered poor reviews and complaints it had been rushed out before it was ready.

Due to the recall, RIM's Nasdaq-listed shares fell as low as $42.61, just 9 cents above an August 2010 trough.

On the same day, an options trader bought 3,500 puts at the January 2012 $40 strike for an average premium of $3.77 each, sold 7,000 puts at the January 2012 $37.5 strike at an average premium of $2.83, and picked up 3,500 puts at the January $35 strike for an average premium of $2.10 each.

The strategy, known as a bearish put butterfly spread, implies an average break-even share price of $39.79 by expiration in January.

Maximum profits will be made if RIM shares plunge nearly 15 percent from the current price to settle at $37.50 at expiration, according to Caitlin Duffy, options analyst at Interactive Brokers Group.

A butterfly put spread involves a bet shares will fall, but only to a specific level. One profits by selling puts at a strike price that is between purchases at strike prices on each side, or the "wings" of the butterfly.

"Butterfly spreads on the stock suggest some options players expect RIM's losing streak to continue into next year," she said.

(Additional reporting by Doris Frankel in Chicago; Editing by Andrew Hay and Richard Chang)

Valuation worries drive Glencore below issue price

Stock Market Predictions

The world's largest diversified commodities trader touched a low of 519 pence in unofficial grey market trade before closing at 524 pence, down 1.1 percent after more than 200 million shares changed hands, underperfoming a virtually flat FTSE index and a 0.4 percent dip in the broad mining sector.

The shares had closed on Thursday at 530 pence, exactly flat on a debut price in the middle of its indicated range, after a day of heavy volumes -- more than twice Friday's levels -- that made it one of the most traded stocks in the market.

"Basically, the valuation looks a little bit rich. They worked very hard to get a favorable price and one could argue the only reason it was up yesterday was support from the sponsoring banks," said analyst Nik Stanojevic at Brewin Dolphin.

"I think the market feels the same way. It wasn't as if they sold this thing really cheaply with the expectation it would go up 50 percent on the first day."

Unconditional trading begins on Tuesday in London, where Glencore's offer of up to $11 billion is set to be the largest listing on record, and Wednesday in Hong Kong.

Glencore, the world's largest diversified commodities trader, has said there was strong demand for its stock and it had enough buyers to cover its offering of up to $11 billion within hours of starting the sale process earlier this month.

But many investors have also expressed concern over the outlook for commodities, particularly after this month's sell-off, and fretted over the discounts that should be applied to take account of Glencore's conglomerate structure and of the fact it has operated away from the public eye for 37 years.

"Perhaps the fact that the float has, despite being over four times covered, been met with broad skepticism and sobriety is a sign of underlying health in the metals market?" analysts at Numis said in a morning note.

"The hopes for a 5-10 percent rally remain -- not exactly LinkedIn, but the first objective remains stability and garnering faith in this new currency."

Professional social networking site LinkedIn saw its shares more than double in their public trading debut on Thursday, a far cry from Glencore's more muted start.

At the offer price of 530 pence, Glencore has a market value of 36.7 billion pounds ($59.3 billion). It will be the fifth-largest mining-related company on the London exchange.

(Reporting by Clara Ferreira-Marques; Editing by Alexander Smith and Will Waterman)