Stock Market Predictions

Groupon short position almost 3 million shares: Nasdaq

Stock Market Predictions

Nasdaq said the number of Groupon shares held short as of November 15, or short interest, was 2.92 million. That is 8.3 percent of the shares available to trade, or the float, according to Thomson Global Markets data.

Nasdaq releases short interest data on a week lag, so the Groupon numbers do not include negative bets or hedges from this week.

Groupon shares plunged below the company's $20 IPO price on Wednesday. The stock slipped 1.2 percent to close at $16.75 on Friday.

(Reporting by Alistair Barr, editing by Gerald E. McCormick)

HTC tumbles again; growth potential in doubt

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The popularity of Apple iPhones and Samsung Electronics' Galaxy line-up, coupled with recession-weary shoppers and long-running lawsuits, have taken the gloss off what was one of the industry's biggest success stories.

With Nokia's fall from market dominance still fresh in the memory, and BlackBerry maker Research in Motion losing ground, HTC needs to recapture its innovative drive to make sure it maintains its position.

"It won't be easy for HTC to get out of the mess it's in right now," said Simon Liu, deputy investment officer at Polaris Group's fund unit.

"Still, it's not the end of HTC. It's certainly not another Nokia. Nokia missed out on the smartphone market from the very beginning, and didn't develop applications as well as Apple."

A SMARTPHONE NAMED DESIRE

For a decade, Taiwan's HTC quietly made phones for others to sell, but then decided to push its own brand in late 2006. In the year to April, its shares more than tripled after its innovative designs played well with shoppers.

Sales at HTC -- whose models include Desire, Sensation, Wildfire, Rhyme and ChaCha -- grew four-fold in a year and a half, and in the third quarter of this year it sold more smartphones in the United States than any of its rivals.

But its cracking performance is sputtering as it fails to bring out new products to rival the iPhone and Galaxy in the high-end smartphone market.

And, closer to home, China's ZTE Corp and Huawei Technologies Co Ltd are turning out smartphones that sell for as little as $100 in a fast-growth, low-cost market that HTC so far has largely avoided.

"It lacks a star smartphone," said CK Lu, an analyst with research firm Gartner in Taipei. "If you put HTC phones all in a line, you won't be able to differentiate the products too clearly, unlike Samsung's Galaxy 2 or the iPhone."

"In China, for example, consumers won't be able to differentiate HTC phones from a slew of others, such as the China-made ones, and that's where HTC is facing some problems."

REVENUE SLIDING

HTC, valued at around $14 billion, saw a bigger build-up of unsold inventory than rivals in the third quarter, a portent of weak sales in the crucial year-end holiday season.

Late last month, the company warned that revenue would fall by up to 8 percent in October-December from the third quarter, and on Thursday it flagged a much bigger drop, citing tougher competition and the global downturn.

"Aside from rising competition from Apple and Samsung in the high-end market, aggressive price competition from Huawei and ZTE at the lower-end could put further pressure on HTC's margin," said Laura Chen, analyst at BNP Paribas.

"We believe HTC is reviewing its product roadmap to regain market share in 2012. However ... most of its new products are to be launched only late in the first quarter."

HTC is also re-evaluating its $300 million acquisition of S3 Graphics after the graphics technology firm lost a U.S. legal battle against Apple, raising the specter that HTC products could be banned from the United States -- where it earns half its revenue. HTC had planned to buy S3 to beef up its defenses in its own separate lawsuit battle with Apple.

"Winning the lawsuit has made it possible for Apple to squeeze HTC by the neck in future," said Liu at Polaris.

HEADWINDS

These headwinds have pushed HTC shares down more than 60 percent in six months, making it the worst performer among major handset firms, along with RIM. Shares in LG Electronics Inc are down 36 percent and Nokia 29 percent. Samsung and Apple both rose around 9 percent in that period.

Five analysts now have 'sell' ratings on HTC, up from two just a month ago. The number of 'buy' recommendations has dropped to nine from 13, Thomson Global Markets StarMine data showed.

HTC shares fell by the most allowed in one day on Friday, dropping nearly 7 percent for a second consecutive session. The stock has fallen 30 percent in 8 straight trading days.

The company, which had 10.8 percent global market share in the third quarter, sold only 1 million more phones than RIM, and its market share gap with bigger rivals is set to widen as Nokia fights back with its first Windows-based models. [ID:nL5E7MG45M]

"HTC hasn't offered enough new models, and hasn't been aggressive in its pricing strategy," Barclays analyst Dale Gai wrote in a client note. "We believe Samsung leads HTC in most high-end models, including LTE phones, where HTC has failed to compete on form factor."

Gartner's Lu, however, sees little risk of HTC going the way of Nokia.

"Basically, HTC is on the right track, but it will take time for its brand- and retail-building. It's in way better shape than LG, RIM and Motorola. But it's true it's not as competitive as Apple or Samsung."

Annie Lu, a spokeswoman for HTC, said the company remained confident about driving new technologies. "HTC has a strong and complete portfolio in both high-end/premium and mass market high quality products," she told Global Markets.

"With our U.S. operator partners, we have launched premium products such as HTC Rezound (with Verizon Wireless) and HTC Vivid (with AT&T), with high customer satisfaction ratings.

"In the mass market sector, HTC Wildfire has been a big hit this year, and we expect strong sales with the HTC Explorer launch," she added.

(Additional reporting by Lee Chyen Yee in Hong Kong; Writing by Miyoung Kim and Jonathan Standing; Editing by Ian Geoghegan)

U.S. bank shares fall on Europe, stress test concerns

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Bank of America Corp (BAC.N) shares fell 4.3 percent to $5.14, near a 52-week low of $5.13 touched in early October. It was the lowest closing price for the bank since March 2009.

Other banks whose shares declined were Citigroup (C.N), down 3.8 percent, and Morgan Stanley (MS.N), down 3.6 percent.

Among regional banks, Regions Financial Corp (RF.N) shares slumped more than 5 percent. The KBW Bank Index .BKX closed down 3.4 percent, a steeper decline than the broader market.

The stress tests announced by the Fed are more rigorous than those a year ago, said Jefferson Harralson, an analyst with Keefe, Bruyette & Woods Inc.

"Investors are worried that we won't see a normal resumption of dividends and share buybacks at healthier banks, and for more stressed banks, this could force them to raise capital," Harralson said.

Despite some signs of improvement in the economy and in the health of banks, investors remain worried about factors outside the United States such as the European debt crisis, said Frank Barkocy, director of research at Mendon Capital Advisors.

"There are signs that fundamentals look better, but we have to get these external clouds of concern to dissipate," Barkocy said. "That may take some time."

The cost to insure U.S. bank debt with credit default swaps jumped on Wednesday after a weak German bond sale added to fears that contagion from Europe's debt crisis could spread globally.

Bank of America's CDS costs rose the most, jumping 34 basis points to 471 basis points, or $471,000 per year to insure $10 million in debt, according to data by Markit.

In the stress tests, Bank of America and five other large banks will be measured for their ability to withstand further deterioration in the European debt crisis.

Banks will also be examined for their exposure to investor requests to buy back soured mortgage loans, Harralson noted.

"Obviously, Bank of America is the bank that stands out there," he said.

Bank of America Chief Executive Brian Moynihan has taken steps in recent months to settle claims related to mortgage-backed securities, although his most significant initiative, an $8.5 billion agreement with major institutional investors, still needs court approval.

In nearly two years as CEO, Moynihan has worked to shed assets, streamline operations and build capital to cover mortgage losses and meet new international standards. He has also suffered a number of setbacks, including the Fed's rejection of a dividend increase in March and a backlash this fall over a now-canceled debit card fee.

"I think Brian's trying to get things done and is making good progress," Barkocy said. "Sometimes he says things when he's not on firm ground, and it comes back to bite him in the behind, so to speak."

Mike Mayo, an analyst with CLSA, said the bank's management needs to improve confidence in the company after past miscues. The bank should consider shedding more assets to make it easier to manage, he said, without offering any specific examples.

"There should be no sacred cows in the analysis," Mayo said.

(Reporting by Rick Rothacker and Joe Rauch in Charlotte, N.C.; Additional reporting by Karen Brettell in New York; Editing by Maureen Bavdek, Steve Orlofsky, Gary Hill)

Pandora shares fall on fears of competition, outlook

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The company posted higher-than-expected third-quarter earnings and revenue after the market closed on Tuesday.

Investors shrugged off that news and focused on broader concerns about the company's growth potential, given a flock of competitors as well as executives' remarks about fourth-quarter revenue.

"We are not comfortable adding to shares at current levels due to valuation and the increased competitive threat from other social music platforms, despite differences in the business models compared to Pandora's Internet radio platform," Stifel Nicolaus analyst Jordan Rohan wrote in a note to investors on Wednesday.

Stifel Nicolaus has a "hold" rating on Pandora stock.

Pandora, which has been around for a decade, runs a mostly free service that recommends different songs based on listener's playlists. Almost 90 percent of its revenue comes from advertising.

The company faces competition on all flanks, from traditional radio companies such as Clear Channel, which has started its own customized online streaming service; satellite radio providers such as Sirius XM Radio Inc; and Spotify, which allows users to integrate its streaming music through Facebook.

Investors had been eagerly awaiting Pandora's initial public offering in June, but the stock price has sunk about 32 percent since then. The company's market capitalization is roughly $2 billion.

Pandora said it expected fourth-quarter revenue of $80 million to $84 million. Rohan wrote that was "below previously implied guidance of $83 million at the mid-point."

During a conference call with analysts on Tuesday, Pandora said it was taking a responsible approach to its forecast, keeping a watchful eye on advertisers who might cut back on fears of a wider economic downturn.

"There's no impact at the moment, but we are paying close attention to what's going on in the marketplace," Pandora Chief Financial Officer Steve Cakebread said during the call.

Shares of the company were down 10.5 percent at $10.60 in morning trading.

Groupon shares sink below $20 IPO price

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Groupon's shares fell 14.2 percent to $17.22 on Nasdaq, bringing its decline over the last three days to about 34 percent.

Groupon raised more than $700 million in an IPO in early November, making it the biggest IPO by a U.S. Internet company since Google Inc raised $1.7 billion in 2004.

Analysts have cited concerns about increased competition, a greater availability of the company's stock for short-selling, and a sharp reversal of market sentiment that is taking down more speculative companies.

"The momentum is negative now and it is likely to continue negative until they have something positive about the company," said Edward Woo, a Groupon analyst at Wedbush Morgan.

"There was a lot of negative sentiment heading into the IPO, the IPO surprised a lot of people, it was much stronger than expected," he said.

One reason for that strength was the fact that Groupon sold only about 6 percent of itself in the IPO, creating a scramble for the stock. It was one of the lowest floats of the past decade.

LivingSocial, Groupon's closest rival, which is part owned by Amazon.com Inc, announced plans on Monday to offer more than 20 deals with national merchants over the crucial Black Friday shopping period.

Daily deal companies often subsidize national deals, making them less profitable than offers run with local merchants. The national deals usually bring in lots of new customers, but put pressure on profit margins.

Analyst say Groupon shares were also lower because it became easier this week to short, or bet against, the company.

In the first week after the IPO, there was little stock available for short sellers, who have to borrow shares before they can sell them. If the stock drops, they can buy it back at a lower price, return the shares to the lender and pocket the difference as profit.

Woo has a price target of $22 and a "neutral" rating on Groupon's stock. He says that may come down if the stock is not able to bounce back soon.

"It is a little surprising at how quickly it's happening," said Woo. "But on the other hand the valuation was very high to begin with."

(Reporting by Edward Krudy; Editing by Chizu Nomiyama)

Olympus surges more than 25 percent in heavy trade

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Michael Woodford, still an Olympus director despite being fired as CEO, is attending the firm's scheduled board meeting on Friday in Tokyo, his first return to the boardroom since it unanimously dumped him on October 14.

Olympus was up 18.3 percent at 1,205 yen, after earlier rising as high as 1,276 yen. The shares have pared losses but are still down more than 50 percent from the day the scandal broke.

Big stockholders, a major governance advocacy group and Woodford have all called for the Olympus not to be delisted. Olympus has also said it will meet a December 14 deadline for filing its financial statements for the six-months to September.

(Reporting by Lisa Twaronite; Editing by Joseph Radford)

Yingli Green posts loss, cuts shipment view

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Like other solar makers, Yingli has been hit hard this year as a glut of panels has knocked prices lower, squeezing profit margins and pushing its shares down 64 percent so far since 2010.

On Tuesday, Suntech Power Holdings, JA Solar and other Chinese companies reported disappointing earnings and said the market would remain weak into the first half of 2012.

At the request of some U.S. solar companies, the Obama Administration is investigating whether Chinese manufacturers, including Yingli, have engaged in "dumping" their solar panels at below-market prices.

Yingli has strongly denied the dumping charge, and China's industry fired back this week, saying it might seek an investigation into possible dumping of polysilicon by U.S. companies.

Yingli Green's net loss for the third quarter was $28.3 million, or 18 cents per American Depositary Share ADS, compared with a year-earlier profit of $68.2 million, or 44 cents per ADS.

Revenues rose 36 percent to about $667.7 million.

Yingli's gross margin shrank to 10.8 percent from 22.1 percent in the second quarter and 33.3 percent a year earlier.

For 2011, Yingli cut its module shipment forecast to a range of 1,580 to 1,630 megawatts from its previous estimate of 1,700 to 1,750 MW. The revised figure represents growth of about 50 percent from 2010 shipment levels.

Shares of Yingli Green rose 1 cent to $3.55 in premarket trading on Wednesday.

(Reporting by Arup Roychoudhury in Bangalore and Matt Daily in New York; Editing by Supriya Kurane and Lisa Von Ahn)

FDA okays Boston Scientific stent despite concerns

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The agency approved the Promus Element Plus drug-eluting heart stent late on Tuesday, seven months sooner than expected. Boston Scientific shares rose as much as 5.3 percent on Wednesday.

The decision followed a disclosure by the agency on Friday that it was investigating instances in which the stents - tiny tubular devices made of wire mesh - were found to shrink or lengthen after implantation.

The Promus Element is designed to be thinner and more flexible to make its delivery to the artery easier. Complaint reports about the device show it can become deformed in cases where there is calcification of the artery, a twisted blood vessel or faulty placement by the surgeon.

"While additional data collection is ongoing and will continue into the postmarket, the totality of the information available and considering the addition of appropriate information in the labeling led to the conclusion that the Promus Element provides a reasonable assurance of safety and effectiveness," an FDA spokeswoman said in an email response to Global Markets on Wednesday.

The FDA said the problem, known as longitudinal deformation, has occurred most frequently with Boston Scientific's Ion stent, approved in the United States earlier this year, and the Promus Element, which had been available outside the United States.

The FDA said it viewed both devices as safe when used for authorized indications, but added it was working with the manufacturers to understand the problem.

The approval for the Promus Element Plus stent is an important step that will allow Boston Scientific to replace the Promus stent it co-markets with Abbott Laboratories.

Boston Scientific plans to market the U.S. stent immediately and awaits approval in Japan by mid-2012. It expects the combined launches will add $200 million to its gross margin after 2012.

In response to a Global Markets query, Boston Scientific said an evaluation of worldwide complaints concerning the Promus Element, as of October 31, showed 136 longitudinal stent deformation events per 829,372 units sold.

Of a total of 133 patients in whom longitudinal stent deformation was reported, new stents were implanted in 76 patients and 4 patients underwent surgery.

The FDA action quelled concerns on Wall Street that regulatory approval of the Promus Element would be delayed due to concerns about the deformation cases.

Michael Matson, an analyst with Mizuho Securities, said the approval is key to the company's margin expansion efforts.

"While we continue to watch this issue closely, we think that the Promus Element approval may indicate that FDA is not overly concerned about longitudinal compression," Matson wrote in a research note. "We continue to believe that Boston Scientific is in the early stages of a turnaround in terms of both revenue growth and margins. The Promus Element approval should help on both fronts."

Boston Scientific shares were up 4 cents to $5.35 on the New York Stock Exchange after trading as high as $5.59 earlier in the session.

(Reporting by Debra Sherman; editing by Michele Gershberg, Dave Zimmerman and Andre Grenon)

Agricultural demand fuels Deere results, outlook

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The world's largest farm machinery maker said hefty incomes of the world's farmers -- driving record 2011 results -- are expected to be stable in 2012. Demand for agricultural commodities, such as grain, will remain high.

The company solidly outpaced analyst expectations in the fourth quarter as agricultural and turf equipment sales were stronger than expected. Those results offset a slightly disappointing result on construction and forestry margins.

Deere's projection of 2012 net income of about $3.2 billion, compared with $2.8 billion in 2011, was also higher than Wall Street's expectations.

During a conference call, the company said it plans to more tightly manage inventory of combines, which is a closely watched indicator of company health.

Moline, Illinois-based Deere's strong earnings and positive outlook come during particularly good times for U.S. farmers. Farmland prices in the United States surged to the highest level in three decades in the July-to-September period, even as major crop prices have fallen from peaks earlier this year.

Deere said it has continued investing in its product line to meet demands from farmers.

"Our success reflects a continued pattern of strong customer response to our innovative lines of equipment," Chief Executive Samuel Allen said, adding that Deere remains well positioned to carry out its extensive growth plans and capitalize on positive long-term economic trends.

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For a graphic on Deere earnings results: link.reuters.com/qax25s

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RECORD 2011

Deere posted net income of $669 million, or $1.62 per share, for the fiscal fourth quarter that ended October 31, compared with $457 million, or $1.07 per share, a year earlier. Revenue rose 20 percent to $8.61 billion.

Wall Street expectations called for Deere to earn $1.43 a share, according to Thomson Global Markets I/B/E/S.

For full-year 2011, Deere's net income reached a record $2.8 billion, and the company generated $3.6 billion in cashflow from operations.

Sales, positively affected by currency translation and price increases, topped $32 billion in 2011, helping the company offset a $665 million increase in raw material costs, which are expected to rise another $500 million in 2012.

During the fourth quarter, Deere continued its pace of double-digit growth in both established and emerging markets. In the United States and Canada, equipment sales rose 14 percent, while sales outside that region grew at more than twice that pace -- posting a 31 percent equipment sales rise.

Last month, Deere rival Agco Corp (AGCO.N) posted stronger-than-expected third-quarter results and raised its full-year outlook for the fourth time. CNH Global (CNH.N), which also outpaced analysts' forecasts, said full-year revenue growth would be at the upper end of its prior forecast of 15 percent to 20 percent.

Deere's shares rose about 3.3 percent to $75.28 in morning New York Stock Exchange trading. The wider market slumped on concerns over unemployment, consumer spending and the economy in Europe.

"SUBSTANTIAL GROWTH"

Deere executives remain bullish on its ability to thrive.

"In spite of an unsettled global economy, demand for John Deere products is expected to experience substantial growth in fiscal year 2012," Deere said in a press release.

The company said momentum is expected to be strong in the current November-to-January period, with sales seen rising as much as 16 percent to 18 percent compared with the same period a year ago. Full-year equipment sales growth will moderate in coming quarters, settling in at 15 percent for all of 2012.

In Europe, sales are expected to be flat next year "as a result of general economic concerns" there. South America industry sales, which were strong in 2011, are expected to be flat as well.

Increased availability of financing and higher crop production in China and high agricultural commodity prices in India are expected to be key factors fueling Deere's momentum in Asia.

(Reporting by John D. Stoll in Detroit, editing by John Wallace and Maureen Bavdek)

Alibaba.com posts slowest quarterly growth in almost 2 years

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The third-quarter results missed analyst forecasts and were attributed to a weak macroeconomic climate that led to a slower pace of customer additions.

"They are focusing on the quality of suppliers and also improving the overall quality of products that they are offering, such as some of the newer services to help buyers to check the quality of products before they are shipped," said Dick Wei, an analyst with JPMorgan.

"If you look at customer growth, there are no new initiatives and growth is not that top priority at this point," Wei said. "Revenue will pick up again later in 2012 or 2013."

Alibaba Group, parent of Alibaba.com, has seen a series of protests and dissatisfaction from its clients and suppliers.

Earlier this year, a significant increase in fraudulent transactions had caused a management reshuffle in Alibaba.com and prompted the e-commerce firm, one of the best known Chinese internet names, to step up supervision of suppliers.

This week, hundreds of sellers from Taobao -- which focuses mainly on consumer-to-consumer transactions -- protested outside the firm's Hangzhou offices, calling for the abolition of the website's feedback system, local media said.

Alibaba.com operates an e-commerce website that links Chinese businesses looking to sell their goods to overseas buyers. Alibaba Group, founded by billionaire Jack Ma, is 40 percent owned by Yahoo Inc.

Alibaba.com's exposure to international markets makes its turnover sensitive to the performance of the world's major economies such as the United States and Europe.

"The third quarter of 2011 presented a picture filled with challenges arising from the weaknesses in the U.S. economy and the debt troubles in the euro zone, which have threatened to spin out of control," Alibaba.com said in a statement.

"We are more cautious about the global economic outlook and believe that it may have a prolonged impact on China's export sector," the group said.

Growth in China's factory output is likely to fall slightly to between 12 and 13 percent in 2012 due to weakening global demand, the industry ministry said on Thursday, but that level probably still implies a comfortable GDP growth rate of 8 to 9 percent next year.

Fears that China may be set for a sharp slowdown flared again on Wednesday after HSBC's flash PMI survey showed the factory sector shrank the most in 32 months in November on signs of domestic economic weakness.

"Despite the stress posed by the external environment, we will stay focused on upgrading our business model and building quality, trustworthy e-commerce platforms," Alibaba.com Chief Executive Jonathan Lu said in a statement.

SLOWING PACE

Net profit for July-September rose to 409.7 million yuan ($63 million) from 366.1 million a year earlier, below an average forecast of 432.23 million from three analysts polled by Thomson Global Markets I/B/E/S.

Revenue grew 10.6 percent to 1.6 billion yuan and revenue from its international marketplace rose 11.8 percent to 947.5 million.

Revenue from its China Gold Supplier membership package was up 11.5 percent at 918.6 million yuan, contributing 57.3 percent to total revenue. Value-added services formed 30 percent of China Gold Supplier revenue in the quarter.

The number of paying members rose 4.9 percent to 787,653 compared with the same period last year. Subscribers for its China Gold Supplier and Global Gold Supplier packages fell 1.3 percent and 24.8 percent, respectively.

The firm said the slowing pace of customer additions and renewals was expected because of Alibaba.com's recent initiatives to beef up the quality of its membership base and a price hike in the beginning of the year.

Alibaba.com said pressure on membership renewal may continue in the fourth quarter as a special one-time offer granted to existing members to renew at an old lower price expires.

Alibaba.com, which competes with Global Sources Ltd, said in September it may spin off and publicly list its internet application services provider HiChina.

Alibaba.com shares were up 2 percent before the results. They have lost about 36 percent this year, compared with a 22 percent fall in the broader Hang Seng Index.

($1 = 6.3590 Chinese yuan)

(Additional reporting by Twinnie Siu and Lee Chyen Yee in Hong Kong; Editing by Vinu Pilakkott and David Holmes)