VFC's Stock House Stock Watch Wednesday, 9 January
Stocks in the spotlight today include: AA, BA, FCEL, D, INO, DNDN, PBTH, TEVA, MRIC
A full version of this report is available at: http://VFCsStockHouse.com
Alcoa (AA) kicked off the earnings season on a positive note on Tuesday and global stock markets rallied on Wednesday as a result. The upbeat Alcoa report helped to offset reports earlier on Tuesday that the Euro Zone (EZ) unemployment rate is still inching higher, bringing to light again previous worries that Europe is still far behind the United States along the road to recovery. That report from Europe led to a drop in oil prices, but did little to quell the overall upbeat mood in the markets. On Tuesday, before the Alcoa report was out, US markets closed down, but some of that could be attributed to continued profit taking after the post-fiscal cliff rally last week. While few expect this earnings season to provide anything more than the occasional modestly-surprising report, Wednesday could turn into a nice up day thanks to Alcoa. Overall enthusiasm may be tempered, however, especially with the debt ceiling negotiations still set to kick off over the near term while also considering the fact that one positive earnings report does not yet indicate a trend.
With that said, there's always a few stocks and stories to keep an eye on as the major news of the day dominates the headlines ... here are a few for Wednesday, 9 January, 2013...
Alcoa Kicks Off The Earnings Season On A High Note
As mentioned in the open, Alcoa on Tuesday released an encouraging earnings report that sent global markets higher and reversed what had been a couple of down days. It wasn't just the numbers from the reported quarter that set the tone, although revenue slightly beat the street and earnings were generally in-line with analyst estimates of six cents per share, rather it was the outlook for 2013 that had investors giddy. Representatives of Alcoa, which is the largest aluminum provider in the United States, predicted that demand for the metal would grow by seven percent this year - slightly above last year's rate - providing validation that the global recovery is picking up steam. One positive report will not set a trend for the season, though, so investors will likely temper expectations moving forward and take an "I'll see it when I believe it" approach towards the remainder of the quarter, but the Alcoa news certainly helped to offset reports from Europe that unemployment was still on the rise in the EZ. A nice start to the season as indications are that the global recovery will continue into 2013 and also a sign that AA could continue to benefit throughout the year.
Boeing Drops On Dreamliner Woes
Shares of The Boeing Company (BA) dropped by over two percent on Tuesday as reports of more problems with the Dreamliner became widespread news throughout the day. With Boeing having so much invested in the Dreamliner and with over 800 orders left unfilled, any bad press will make investors nervous and lead to declines such as what we saw on Tuesday. That said, a two percent drop doesn't indicate all-out fear on the part of investors and the truth is that all aircraft - not just Dreamliners - experience incidents such as these presented by the media from time to time - even new aircraft - it's just that the Dreamliner is very high-profile right now and since the media loves to play with high-profile stories, every incident is making the news. BA shares should only be modestly and temporarily effected by such reports, unless a major structural flaw is found or something else of similar scope materializes, otherwise investors may look at these dips as ample accumulation points. More relevant to investors may be the share price drops of suppliers of the defective parts that led to these incidents, such as the battery maker whose battery caused the reported fire, which in this case was Japan's GS Yuasa Corp. Yuasa dropped for a second straight day on Tuesday.
Industry, Clean Energy:
FuelCell Energy Off To A Strong Start
Shares of FuelCell Energy (FCEL) jumped by five percent on Tuesday and have risen by over fifteen percent already on the year. No significant news was released in conjunction with the five percent, high-volumed spike, although a company insider was noted to have made a modest share purchase. The quick start this year could be a precursor for what's to come as the company announced numerous solid developments last year that have it positioned for success and growth in 2013. The most significant of the most recent developments may have been the news FuelCell - in collaboration with Dominion Resources (D) - would develop the largest fuel cell power project in North America. This deal, according to Bloomberg reporting, increased the company's backlog of orders to over $125 million and provided a testament to FCEL's ability to supply power independent of the national or regional grids - a big deal in the aftermath of Hurricane Sandy. Also in 2012 FuelCell secured a deal with South Korea's POSCO Energy, a deal that brought with it $30 million of up-front financing and laid the groundwork for future - and potentially more lucrative - collaborative efforts.
With a quick start to the year underway, FCEL will be a hot story to watch moving forward. Add in a fairly significant amount of short interest and things could get exciting quick, should those shorts look to cover as developments continue to unfold on a positive note. What has held this company back thus far is the slow trek towards profitability, but as investors become convinced that profitability is on the horizon, volume may start to trickle in at a higher rate and the share price could follow. Until profitability is met, however, the threat of a stock offering does exist - one such deal was struck last year around the time of the Posco announcement - but the company has also demonstrated its ability to raise funds through partnerships and other collaborative efforts.
Healthcare, Biotech, Pharmaceutical:
Inovio To Initiate New Clinical Trial
Inovio Pharmaceuticals (INO) is another company that has gotten off to a hot start in 2013 and remains one to keep an eye on as numerous interim and actual trial catalysts could unfold this year. One such catalyst materialized during the early hours on Wednesday morning as the company announced its intention to bring to the clinical stages its hepatitis C (HCV) DNA therapeutic vaccine, which is based on the company's proprietary SynCon synthetic vaccine platform. With the SynCon technology, Inovio has produced numerous synthetic vaccines intended to treat or prevent various infectious diseases and cancer types. Three of these pipeline vaccines are moving through the Phase II stage of development and six of the company's programs are being funded by third parties. The addition of a hepatitis C vaccine to the clinical stages of development adds to the already deep potential of Inovio's pipeline to infiltrate numerous very lucrative markets with its synthetic vaccines. Volume has been relatively enormous for INO this week so far and this announcement could keep the ball rolling. Shares have jumped by roughly twenty five percent so far this year with attention being brought to the company's pipeline and technology, so the threat of a pullback exists, but there are enough developments unfolding and pending to keep attention on the company, even when focus on the sector cedes as numerous healthcare and biotech conferences wrap up later this week. Inovio may also be receiving a boost from the flu outbreak that is gripping America this winter. As mentioned earlier in the week, companies developing flu vaccines - especially the universal types - typically garner more media attention than normal and INO's universal flu vaccine technology has already demonstrated early success. Definitely one to keep an eye on these days.
Dendreon Drops Six Percent
As mentioned on Tuesday, Dendreon (DNDN) released interim fourth quarter results that indicated a reversal in the downward trend of Provenge sales. One quarter will not mark a true reversal of trend, but it starts the year on a positive note for the company and lays the foundation for the 2013 rebound predicted by numerous financial media sites. With the news on the street, DNDN shares have dropped rapidly from the six dollar mark and closed Tuesday down another six percent on volume nearly double the daily average, but within the norm for the first trading week of the new year. The current drop may provide investors looking to play DNDN as a rebound story to accumulate shares with an eye towards the mid term, especially if the drop continues as attention rolls off the sector later this month. Expanded coverage by insurance companies and cost-cutting measures implemented last year by the company should help boost the Provenge sales numbers and firm up the bottom line. Given the volatility displayed thus far in 2013, DNDN remains one to keep an eye on as both a trade and potential accumulation play.
Prolor Secures New Patent
Shares of Prolor Biotech (PBTH) initiated a Phase II pediatric trial in Europe early last year. The pediatric trial came as a huge sign of validation to the early results of the product, given that European regulators need to be essentially overwhelmed by trial data in adults before approving a trial in children. Data from these trials could start rolling in this year and given the multi-billion dollar growth hormone deficiency market, the Prolor share price could appreciate very significantly if these trials prove successful.
Although relatively quiet on the news front of late, Prolor announced earlier this week that it had received a notice of allowance from the US Patent and Trademark Office covering a patent application relating to the manufacturing methods of its CTP technology. This news may not look significant in itself to investors, but a company stands on stronger proprietary footing as its patent portfolio expands and these are developments worth monitoring. Should a company NOT receive allowance for a requested patent, then that gets interesting, being as it is a rare event.
With the market potential of hGH-CTP, Prolor is still one to keep an eye on. Should trial data start flowing in looking positive, then PBTH would be in a position to move higher fairly quickly. In the meantime, shares have remained stable in a range around the five dollar mark over the past few months, a level where those looking to play the pending trial catalysts feel comfortable adding. It's also worth noting that Teva's (TEVA) Dr. Phillip Frost is already heavily invested in PBTH and that connection is intriguing because, which is already linked to other buyout rumors, could also be considered as a potential buyer of Prolor.
MRI Interventions (MRIC) is slated to present on Wednesday at the Biotech Showcase in San Francisco. This presentation could receive its fair share of investor interest, given that 2013 is projected to become a year of significant growth after the boosting of the sales force late last year and the already-impressive gains noted over the previous quarters. MRI, which also moved into the European market last year, has developed the ClearPoint and ClearTrace MRI-enhancing systems that provide real-time imagery during complicated procedures on the brain and heart, respectively. The company not only registers sales on a sold unit, but also receives regular revenue from the "disposable items" related to individual procedures. It is revenue from those items that has fueled the recent growth. One to keep an eye on, as MRIC has also proven to return decent trades from its current trading levels.
Roundup: International markets enjoyed a nice up day on Wednesday and the stage was set for US markets to do the same. Profit taking following the early-year run looks to be complete, freeing stocks to trade in line with earnings. As mentioned, the Alcoa report has investors in an up-beat mood, but that mood could shift quickly if the expected sub-par numbers start rolling in when the season picks up full steam. There could be some distractions in store for Wednesday as well, with early headlines throwing the debt ceiling negotiations (or lack thereof) into the spotlight and others keying in on the Dreamliner fuel leaks and low-priced iPhones. Could be an interesting day.
Disclosure: Long FCEL, INO.
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