3 Stocks I Saw on TV
Microsoft ( MSFT) plunged in after-hours trading Thursday, casting a shadow on a day that saw the Dow Jones Industrial Average move pass 9,000 and the Nasdaq extending its winning streak extend to 12 days. For the day, the Dow rocketed 188.03, or 2.12%, to 9069.29, while the S&P 500 rose 22.22, or 2.33%, to 976.29. The Nasdaq jumped 47.22, or 2.45%, to 1973.60. But the euphoria was gone in after-hours trading with the slide in the shares of Microsoft ( MSFT), Amazon.com ( AMZN) and American Express ( AXP). For a break-out of stocks that were recently mentioned in the "Fast Money" show, check out Dan Fitzpatrick's "3 Stocks I Saw on TV."
The three stocks drew the attention of the trading panel of CNBC's "Fast Money" TV show. Melissa Lee, the moderator of the show, asked the panelists and experts whether the poor showing of these stocks could lead to a sell-off on Friday. Jim Goldman, a CNBC reporter, said Microsoft's report was "ugly" from top to bottom. The software giant's revenues fell to $13.1 billion for the quarter, 17% below analysts' estimates while net income was $3.05 billion compared to $4.3 billion a year ago. CFO Christopher Liddell said the company expects tough economic times for the rest of 2009 while expressing some optimism for 2010, Goldman said. Goldman said Microsoft still has some ammunition down the road, with the launch of Windows 7, a new Office Suite and new server software. Still, Karen Finerman was flabbergasted by the revenue miss, saying a miss of that magnitude is hard to make up with cost-cutting.
Peter Miseck, a global tech strategist with Canaccord Adams, said what surprised him about Microsoft's earnings was "how much money they lost from online services." He said the company is facing pricing pressures on its operating system and a slowdown in software sales. Miseck downplayed the significance of Microsoft's effort to land a search deal with Yahoo!. He said Microsoft has to think "out of the box" and "make an end run" to come up with an answer. Jon Najarian was sitting in on the conference call of Amazon whose shares were slumping in after-hours after it posted revenues that were slightly below analysts' estimates. Najarian said the conference call was very conservative. He said the numbers actually look pretty good, with Amazon.com forecasting $4.75 billion to $5.25 billion for the current quarter. He also said the company is forecasting a 30% growth for third parties that do business with Amazon. Lee asked the panel what impact Microsoft and Amazon will have on the Nasdaq tomorrow. Terranova said he was paring his tech positions tomorrow, while Pete Najarian was amazed by the size of Microsoft's revenue miss. "You have to think it's going to drag the Nasdaq down tomorrow." Steve Grasso, though, viewed any selloff as just a correction after a substantial rally in the markets. Carter Worth, chief technical analyst for Oppenheimer, also tried to put things in perspective, saying the drop in the shares in Microsoft and Amazon brings them back to levels they were on Monday.
Over the long haul, he sees the Nasdaq heading to 2100 while not seeing a lot of upside in either the Dow on S&P going forward. Goldman broke in a report from the Wall Street Journal that Yahoo!'s board was going to meet later today with Microsoft to discuss a search deal. He said it's unclear whether Yahoo!'s board wants a deal. The third big stock to fall in after-hours was American Express, which suffered a dramatic drop in net income in the past quarter. Finerman said American Express had a tough task because it faced strong expectations from the big runup to its earnings report. "The bar was higher," she said. Lee brought in Marshall Larsen, CEO of Goodrich ( GR), whose stock fell 7% after reporting a 5% drop in profits. Larsen said the company is still well positioned in the parts of defense budget that continue to grow such as the intelligence surveillance and helicopter markets and the F-34 Lightning Fighter. Ebay ( EBAY) CEO John Donahoe appeared on the show. The company's stock rose 10% today, after blowing away estmates and raising guidance for the third quarter. Donahoe said eBay is sticking with its business plan and executing across all lines of its business. He said everything grew in the past quarter except for the auction business. He said the company is seeing stabilization in the ecommerce business but doesn't know what the second half will bring. Finerman said both Amazon and eBay put up good numbers. She said eBay shares are up because it trades at 13 times earnings while Amazon trades at 41 times. She said that's too huge a disparity for Amazon to overcome.
In the final trades, Terranova was long Abbott Labs ( ABT) while Grasso was long Anadarko ( APC). Finerman advised getting puts on Whole Foods ( WFMI). Pete Najarian was long Bucyrus ( BUCY). "Check out "'Fast Money' Portfolios of the Week" on Stockpickr every Thursday.