Stock Market Predictions

Western Digital could regain market share

Stock Market Predictions

Western Digital on Friday said it partly resumed production ahead of schedule and raised its outlook for the December quarter, prompting at least three brokerages to raise their price targets on the stock.

Seagate was the least hit among hard disk drive makers and its factories were running at full capacity after the floods.

Western Digital shares, which have gained more than a quarter since hitting a year low in October, were trading up 11 percent at $32.37 on the New York Stock Exchange on Friday. They rose as much as 14 percent earlier in the session.

Brokerage ThinkEquity said Western Digital could gain additional capacity and earnings power in the June quarter as the company expects to close its acquisition of Hitachi Ltd's (6501.T) hard disk drive business by March.

ThinkEquity analysts raised their rating on the company to "buy" from "hold."

Barclays Capital expects "Western Digital will be able to recover lost share from Seagate much faster than expected," and raised its price target on the stock to $40 from $35.

(Reporting by Rachana Khanzode in Bangalore; Editing by Sriraj Kalluvila)

Zumiez shares jump on Q3 results, strong November sales

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"Zumiez's merchandise strategy of offering a broad assortment of unique merchandise has resulted in increased conversion and traffic in a promotional environment," Needham analyst Christine Chen said in a note to clients.

Chen also said Zumiez, which has now beaten estimates for at least the past eight quarters, will continue to enjoy pricing power given the uniqueness of its products.

Zumiez sells clothing and equipment for skating, snowboarding and other action sports.

Shares of the Everett, Washington-based company were up 17 percent at $27.43 on Friday morning on Nasdaq. They touched a high of $28 earlier in the session.

(Reporting by Abhishek Takle in Bangalore; Editing by Sriraj Kalluvila)

Lululemon sales come up short, shares tumble

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It is the second quarter in a row that the chain has shown signs of faltering. Catching a wave of popularity for yoga among young professional women, its premium exercise pants and other apparel have gained an enthusiastic following. Lately any signal that its growth might slow has spooked investors.

The Vancouver-based company said on Thursday revenue rose 31 percent to $230.2 million in its third quarter ended October 30. Analysts on average had forecast $235.7 million, according to Thomson Global Markets I/B/E/S.

Sales at established stores rose 16 percent, compared with its own forecast of the low to mid-teens in percentage terms. That was lower that same-store sales growth of 20 percent in the previous quarter.

Looking ahead, the company made a low to mid-teens forecast for the current quarter.

"Lulu remains an attractive growth story, in our view; however, today's numbers likely won't be enough to keep the stock going at its current multiple," Nomura analyst Paul Lejuez wrote in a research note.

Chief Executive Christine Day said the company had not been able to meet sales demand in the quarter. Lululemon has struggled to catch up on inventory since the end of 2010, when it posted particularly strong sales. Day said the situation has improved in the current quarter.

"Our goal for Q4 was to break the inventory cycle we were in all year, and we have achieved it," she said. "We have the right mix of styles and color, and a healthy and clean inventory."

Lululemon has expanded rapidly in Canada, the United States and Australia. The company opened or acquired 18 stores in the quarter, bringing its total to 165.

Profit rose to $38.8 million, or 27 cents a share, from $25.7 million, or 18 cents, a year earlier. Analysts were expecting earnings of 25 cents.

The company forecast earnings between 40 and 42 cents in the fourth quarter, and revenue between $327 million and $332 million.

The stock was down 16 percent at C$42.63 in early trading on Thursday on the Toronto Stock Exchange.

(Reporting by Allison Martell in Toronto and Aftab Ahmed in Bangalore; Editing by Frank McGurty)

Sprint offers Clearwire $1.6 billion "lifeline"

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Shares in Clearwire, which investors had seen as a bankruptcy risk, rose 14 percent after the news. The deal includes a potential equity infusion and extends Sprint's use of Clearwire's network.

Clearwire also said it was able to pay $237 million debt interest due December 1.

Clearwire, which is majority owned by Sprint, had been seeking almost $1 billion in financing to keep operating and to fund an important network upgrade. Its stock rose 13 percent on Wednesday after a Global Markets report that Clearwire was expected to reach a funding deal with Sprint.

While the deal with Sprint, Clearwire's biggest shareholder and customer, was applauded by investors, some analysts still questioned the long-term future of the partnership as Sprint and Clearwire have a tempestuous past and Sprint is also planning on upgrading its own network.

Sprint is attempting to throw a "lifeline" to Clearwire, according to Nomura analyst Michael McCormack but, he said, it "merely prolongs the current debate regarding Clearwire's strategic importance to Sprint."

Standard & Poor's rating agency described the deal as "potentially positive" but it did not change its ratings of Clearwire, which still implies a default risk. It is waiting for the timing of the funding "in light of Clearwire's current substantial cash flow deficits." before any changes, S&P said.

However, Moody's rating agency changed its rating outlook on Clearwire to "stable" from "negative" after the news.

LONG-TERM QUESTIONS REMAIN

Sprint, which is seeking up to $3 billion additional funding itself, committed to a Clearwire equity offering of up to $347 million and said it would pay Clearwire about $1.28 billion for using its wireless network.

Clearwire made a concession to Sprint by adjusting their existing agreement to allow unlimited data use. But Mizuho's Michael Nelson said that was "a small price to pay."

In particular, he said Sprint's equity investment commitment gives other prospective investors more confidence.

"We believe the deal with Sprint increases the probability that Clearwire will secure additional funding," said Nelson.

Clearwire's Chief Executive Erik Prusch said the deal "cements" the relationship with Sprint.

"We think this is a very important piece to the whole mix of funding for this company, having our leading shareholder step up in this way," he said.

He declined, however, to comment on Clearwire's other efforts to raise more money in an equity offer or vendor financing.

The deal also helped answer questions for Sprint investors on Sprint's spectrum requirements for its high-speed wireless service plans, Wells Fargo analyst Jennifer Fritzsche said.

"It removes a significant overhang for the shares," Fritzsche said in a research note, adding that Sprint now has "an enviable spectrum position."

But others were more cautious about Sprint's long-term intentions for Clearwire. Sprint is building its own national high-speed service but has said it will need to piggy-back on Clearwire's service in high-demand markets.

"Sprint gives them the breathing room they need to continue to survive, for now," said independent analyst Jeff Kagan. "The next big question is, what is next?"

DIFFICULT RELATIONSHIP

Clearwire had said last month that it was considering skipping the Dec 1 interest payment, a comment analysts saw as a negotiating tactic aimed at forcing Sprint's hand.

Many investors fled Clearwire on October 7 when Sprint's comments at an analysts meeting led to fears that it was considering abandoning Clearwire.

Under the new agreement, Sprint will pay $926 million for unlimited use of Clearwire's WiMax wireless network in 2012 and in 2013, after which payments will depend on data usage.

It will also pay Clearwire up to $350 million over two years for capacity on a high-speed service Clearwire wants to build using a faster technology known as Long Term Evolution, if Clearwire achieves certain network targets by June 2013.

Sprint also committed to providing equity funding of up to $347 million if Clearwire makes an equity offering between $400 million and $700 million to keep Sprint's current voting interest at the same level.

Clearwire shares closed up 25 cents at $2.03 on Nasdaq after the news, still two pennies below their close before the October 7 event. Sprint shares closed at $2.70 on the New York Stock Exchange, unchanged from Wednesday.

Fixed income investors also reacted positively to the news, sending Clearwire's typically illiquid debt instruments up and pushing down the price of Sprint's credit default swaps, or the cost of insuring Sprint's debt.

(Reporting by Sinead Carew, Nicola Leske and Melissa Mott; editing by Derek Caney, Gerald E. McCormick and Andre Grenon)

Kroger profit beats estimates, lifts 2011 forecast

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The company now expects earnings for the year of $1.95 to $2.00 a share, up from its previous forecast of $1.85 to $1.95. Analysts on average had forecast $1.96, according to Thomson Global Markets I/B/E/S.

Shares of the company, which owns chains that include Ralphs and Food 4 Less, rose 1.1 percent in early trading on Thursday.

Kroger also narrowed its forecast for identical-supermarket sales growth, excluding fuel, to 4.5 to 5 percent for 2011. Its prior call for a rise of 4 percent to 5 percent. Identical-supermarket sales are a closely watched measure of sales at stores open without expansion or relocation for five full quarters.

Kroger's fiscal third-quarter net income was $195.9 million, or 33 cents per share, compared with $202.2 million, or 32 cents per share, in the year-earlier quarter.

Analysts, on average, were looking for 32 cents a share, according to Thomson Global Markets I/B/E/S.

The company booked an inventory-related charge of $61.6 million in the latest quarter, versus $11.5 million in the year-earlier period.

Sales, including fuel, rose 10.3 percent to $20.6 billion. Identical-supermarket sales rose 5 percent, excluding fuel.

The company, which is known for its ability to hold down food prices, also said it expects 2012 earnings-per-share growth of 8 percent to 10 percent.

Kroger's shares were up 25 cents at $23.43 on the New York Stock Exchange in early trading.

(Reporting by Lisa Baertlein in Los Angeles and Brad Dorfman in Chicago; editing by John Wallace and Maureen Bavdek)

Disney CEO Iger buys $1 million worth of Apple stock

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Iger, who was appointed to Apple's board on November 15, bought 2,670 Apple shares on the open market on Tuesday at an average price of $375 each, according to a U.S. Securities and Exchange Commission filing.

Iger's wife also owns 75 Apple shares, the filing said.

As part of being a director of Apple, the long-time Disney executive also is entitled to the standard $50,000 annual retainer and received an initial grant of 142 restricted Apple stock units that will vest in February.

(Reporting by Poornima Gupta; Editing by Lisa Von Ahn)

BofA CEO faces investors, shares plumb lows

Stock Market Predictions

Shares of the second largest U.S. bank have bounced around a 52-week low and threatened to fall below $5 earlier this week, before central banks pumped more liquidity into the financial system and bank stocks surged.

Moynihan has been shedding assets to build capital and working to cut expenses to improve profits. But investors remain worried about the bank's mortgage liabilities and the strength of its balance sheet.

About the time Moynihan speaks on Tuesday, the bank will also make two top executives available for private meetings with investors.

The bank has notified hundreds of institutional investors about the meetings but only a few are expected to attend, a person familiar with the matter said. It often holds such meetings around investor conferences, the person added.

At least two of the investors invited to the private meetings with co-Chief Operating Officer Tom Montag and Chief Financial Officer Bruce Thompson have been selling Bank of America shares short, a trade that profits if the bank's shares drop. The bank may be trying to charm skeptics, one of the investors said.

Any communication with investors is a positive, said Jon Finger, a Houston-based Bank of America investor, who has been a vocal critic of the bank's recent acquisitions.

"There's a lot of fear and concern about the stock," said Finger, who was not invited to the meetings. "To the extent, the bank communicates with investors and reduces fear, the stock could perform better."

In one email obtained by Global Markets, the bank said it had room for eight to 10 investors to attend a one-hour meeting with Montag at the bank's New York headquarters. The former Merrill Lynch and Goldman Sachs executive runs the bank's global banking and markets unit and added the title of co-chief operating officer after a management shake-up in September.

Executives cannot give investors material nonpublic information, but they can reiterate comments that the bank has already said.

Bank stocks in general have been buffeted by concerns about the European debt crisis and the economy, but Bank of America's shares have been particularly susceptible to wild swings amid concerns about its capital levels.

Bank of America's shares closed at $5.08 on Tuesday, their lowest point since March 2009, but were at $5.63 in late afternoon trade on Friday. As of Thursday, the shares were down 58 percent this year, compared to 27 percent decline in the KBW Bank Index.

This year, Moynihan has made a number of efforts to lay out his strategy for investors but hasn't been able to assuage their concerns about the bank's mortgage liabilities and its ability to meet new capital standards.

The bank held its first investor day in four years in March, but Moynihan's comments about a possible increase in the

bank's dividend came back to haunt him when the Fed denied the request. In August, Moynihan participated in an unusual public conference call with fund manager Bruce Berkowitz but the bank's shares have continued to slide.

Next week, he will be one of a number of bank CEOs to give presentations at the annual Goldman Sachs Financial Services Conference. It will be Moynihan's first conference since his bank's board held a strategy retreat last month.

(Reporting by Rick Rothacker in Charlotte, North Carolina, and Lauren Tara LaCapra in New York, Editing by Dan Wilchins)

H&R Block shares fall on wider Q2 loss

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The shares, which touched a low of $14.45, were trading down 9 percent at $14.66 in early trade on the New York Stock Exchange on Friday.

The company, on Thursday, posted a loss of 38 cents a share from continuing operations, excluding items, compared with the consensus estimate of 34 cents.

H&R Block has been shedding its non-core assets such as its consulting unit in order to focus on its tax preparation business in the light of increasing competition, especially from digital software products like Intuit's (INTU.O) TurboTax.

Sand Canyon Corporation, the company's now-closed subprime mortgage unit, saw an increase in mortgage putback claims in the quarter and took new claims of around $483 million, prompting a $20 million increase in Sand Canyon's loan-loss reserves.

The company is expected to disclose new capital deployment and tax services strategy leading up to the tax filing season at its investor day next Thursday.

(Reporting by Aman Shah in Bangalore; Editing by Sreejiraj Eluvangal)

Groupon shares climb above $20 IPO price

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Groupon stock slumped below $20 last month on concern about competition from rival LivingSocial and how the European debt crisis might affect overseas growth.

However, Groupon released strong early holiday sales numbers this week and executives said international growth remains strong.

Groupon shares rose more than 7 percent to an intraday high of $20.82 on Friday. The stock was up 5.5 percent to $20 in late-morning trading.

(Reporting by Alistair Barr. Editing by Robert MacMillan)

RIM caps dismal year with another profit warning

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Waterloo, Ontario-based RIM, the company whose now ubiquitous BlackBerry created the concept of on-the-go email, said it no longer expects to meet its full-year earnings forecast due to weak sales, the PlayBook writedown and a charge related to a damaging service outage in October.

"This is a classic falling knife stock," said Eric Jackson of Ironfire Capital, who has previously bet on RIM's share price dropping but does not currently have a position in the stock.

"Although people keep wanting to buy into the belief that RIM has found a bottom, I see at least six more months of pain as they keep transitioning their business."

RIM, which Canada's industry minister on Friday described as a "Canadian jewel," has fallen out of favor with investors as it struggled to keep pace in a fast-changing smartphone market. In recent years, Apple's iPhone and Google Android devices have gobbled up RIM's once mighty market share.

RIM badly needs the PlayBook, launched to scathing reviews in April, to be a success as it plans next year to launch new smartphones based on the same QNX-based operating system used in the tablet.

PlayBook is a half-baked latecomer to a market segment where Apple's iPad has established an overwhelming dominance. Yet the poor reception it has received is just one of a string of problems facing the one-time technology darling.

The company has infuriated investors with several product missteps and profit warnings and RIM faced an embarrassing global outage in October, when customers were left without email and the popular BlackBerry messaging service for several days.

And if RIM cannot convince developers to build apps for the languishing PlayBook, its new smartphones will struggle to gain traction against the iPhone and Android devices that already boast huge libraries of applications.

Bernstein Research analyst Pierre Ferragu said RIM's latest warning was not a surprise itself. But he was alarmed that management apparently fails to see the writing on the wall for its products and for its corporate structure.

"What is more worrying, of course, is the profound denial the tone of the release reflects. Although it appears obvious to us that RIM's current strategy is bound to fail rapidly, the company continues to support it vehemently," he said.

"We can only hope that this increasing dissonance will accelerate necessary changes at the top of the company."

An activist shareholder said in October that some 8 percent of RIM investors back his call for RIM's board to replace its co-chief executives and consider a break-up or sale.

PLAYBOOK PRICE CUTS

Seeking to boost anemic PlayBook sales, RIM recently slashed prices on the device and plans to expand the promotion. It sold only about 150,000 tablets in the quarter to November 26, down from 200,000 in the previous quarter - a tiny fraction of the 11 million iPads that Apple sold in its latest quarter.

"RIM is continuing to suffer from its Playbook endeavors," said CCS Insight analyst Geoff Blaber. "It hurt RIM initially by diverting focus, but muted demand is now becoming clearly visible in the financials."

RIM's Nasdaq-listed shares fell 9.7 percent to $16.77 by the close. In Canada the shares fell 9.2 percent to C$17.08.

The shares have shed some three-quarters of their value since a February peak, a meltdown that has actually prompted some analysts to raise their ratings on RIM. Goldman Sachs said last month that the current valuation already fairly captures the fundamental concerns.

Speculation has also been rife that RIM could be the target of a strategic buyout.

Canada's Industry Minister Christian Paradis declined to comment on that speculation in an interview with Global Markets in New York, but he said Canada had to support RIM. Any takeover of a Canadian company of RIM's size can be blocked by the government if it decides the deal would not bring a "net benefit" to the country.

"RIM is a Canadian jewel," Paradis said in the interview, which was conducted in his native French. "First of all what I hope for is that RIM be able to be on a path of prosperity. As for speculation (about a takeover), we'd have to see what happened and consider if the law would apply."

FULL YEAR EARNINGS

In its warning, RIM said it no longer expects to meet its full-year earnings forecast of $5.25 to $6 per share because of weaker than expected smartphone shipments, a $360 million after-tax writedown on PlayBook inventories and a $50 million charge related to the October outage.

Excluding the two charges, RIM now expects adjusted earnings in the third-quarter to be at the low to mid-point of its previously forecast $1.20 to $1.40 per share range.

Revenue, excluding the outage charge, is expected to be slightly below the previously forecast range of $5.3 billion to $5.6 billion, in part because of the PlayBook discounting.

RIM, which reports third quarter results on December 15, said it shipped about 14.1 million BlackBerry phones in the quarter, in line with its earlier forecast of between 13.5 and 14.5 million.

It said it was confident the PlayBook promotion will help boost sales and reduce its inventories.

"Early results from recent PlayBook promotions indicate a significant increase in demand across most channels," Co-Chief Executive Mike Lazaridis said in a statement.

But RIM also said it expects to ship fewer smartphones in the current quarter than in the recently-ended third quarter, despite having a lineup of updated devices on offer in the traditionally busy Christmas period.

"We do not see any sign that RIM's downward spiral is about to bottom out," Nomura analyst Stuart Jeffrey said in a note for clients. "The company has a number of new phones on the market, yet guidance for Q4 suggests that their momentum is already starting to stall."

(Additional reporting by Phil Wahba in New York and Tarmo Virki in Helsinki; Editing by Janet Guttsman and Frank McGurty)