Archive for July, 2007
Tuesday, July 31st, 2007
Fast Money’s Guy Adami and Mad Money’s Jim Cramer has been raving about EMC’s growth prospects for the last few month pushing the stock from $12 to just about $18.60 as we speak. (I own EMC October Calls). They both claim that the valuation of VM Ware which they will hold almost 90% interest when it’s finally done is going to push their stock much higher than it is.
VM Ware’s IPO date has been set at August 18th. The initial public offering of 33 million shares in the virtualization software maker will come down Aug. 14 at a range of $23 to $25 each, according to the company but Intel and Cisco had purchases interest in VM Ware before IPO expecting greater upside. Cisco invested $150 Million for about 1.6% of VMware giving a valuation of $9.4 Billion wheras Intel which invested $218.5 million a few weeks back for a valuation of $8.8 billion. Under these circumstances we should expect VM Ware to be worth close to $10 billion.
Let’s do the numbers. They are selling 33 million shares at the top end of $25 to raise $825 million which is about 6% of all outstanding interest (100% - 90% (EMC) - 1.6% (Cisco) - 2.5% (Intel) = 6%). This comes out to be a valuation of $13.75 billion which could rise if the IPO price goes above the high end of $25 which almost every analyst on earth expects.
So if EMC as of today’s close is worth about $38 billion minus a $12.4 billion stake in VM Ware is worth $24 billion by itself minus $1 billion in cash = $23 billion. It’s expect to have $13 billion in revenue minus about up to $2 billion for VM Ware and that’s at least $11 billion in revenue with a good profit margin. So trading at only 2 times cash with a 15% growth rate would suggest that EMC is undervalued.
Cramer put his targets at $30 and up. Not only is he pitching this, he has owns it for his charitable trust as of last week! We’ll see if Cramer is right.
(more…)
Posted in Growth Story | No Comments »
Tuesday, July 31st, 2007
On his show, Jim Cramer suggested that in a worst case scenario that the builders, financials, and brokers were all to be sold if anything terrible occurs. His suggested sells in housing included DR Horton (DHI), Pulte Homes (PHM), and Toll Brothers (TOL) were all sells.
Cramer however, says all these problems can be avoid if the Federal Reverse cuts rates by one whole percent! Will that happen? How powerful is Mr. Cramer? He moves stocks but can he move the federal reserve? Of the two stocks that he owns that would benefit is Citigroup (C) and Goldman Sacks (GS).
However Cramer doesn’t believe that the doomsday scenario will ever happen and favors these sectors: oil and oil services, agriculture, machinery, aerospace, infrastructure and minerals.
Posted in Mad Money | No Comments »
Tuesday, July 31st, 2007
This is what the Fast Money Traders had to say:
Nividia (NVDA) - Guy Adami once again supported Nividia, a graphic chip company due to it’s continued strength that continued on Monday and started on the bloody days on Thursday and Friday.
Ameritrade (AMTD) - John Najarian highlights that Ameritrade’s move from $21 to $17 is due mostly to the hit from financials but trading volume is hitting highs and there is usual trading volume. Also Jeff Macke adds that there is activist support for a merger with Etrade (ET)
Sun Microsystems (SUNW) - It moves 10% aftermarket due to higher margins and lower cost. KKR, private equity fund holds a position and Jeff Macke says that we need to trade with the pros.
Republic Service Group (RSG) and Allied Waste (AW)-Garbage company that is growing through acquisitions say supported by John Najarian and Guy Adami but Eric Boiling and Jeff Macke disagrees.
Sunpower and Cypress Semi (CY) - Recommended by John Najarian as a play for earnings and growth in solar power as demand grows as shown by growth in nuclear.
Posted in Fast Money | No Comments »
