The Milk of Paradise
MILLS CORP [MLS] soared up 15.3% closing at $19.28 on the news that Colony Capital Acquisitions LLC would be providing additional funding for MILLS and partner Kan Am USA Management XXII Ltd. in developing the Meadowlands Xanadu mega shopping and entertainment center just outside New York City. The Xanadu Project was originally priced at $1.3 billion, but the cost has ballooned to $2 billion. Colony Capital is expected to invest $500 million and arrange for construction loan financing. In return, MILLS will issue 4.5 million shares of stock or units of The Mills Limited Partnership redeemable for MLS shares that will be allocated between Kan Am and Colony Capital.
For the original poem by Samuel Taylor Coleridge (whose last line provides our headline), click here.
And of course - the ultimate self reflection - we must provide a link to the original precursor of the amazing HTML that lies behind the entire www experience - Ted Nelson’s original hypertext vaporware project Xanadu.
WELLMAN INC [WLM] mysteriously gained 26.8% closing at $3.78 on Tuesday, with no apparent news event on volume that was about 4 times normal and confined to pretty much the first hour of trading. Looks like a major institutional buy of a relatively inexpensive stock. Given the lack of profitability (albeit the latest quarterly earnings are headed in the right direction and might even reach break-even next quarter) and huge long term debt, this is not one we would recommend.
XM SATELLITE RADIO HOLDINGS INC [XMSR] bounced up 20.3% closing at $13.52 with a two-step upgrade by Bear Stearns from “Underperform” to “Outperform.” The Bear Stearns observation that the company has solved the FM transmitter interference problem raised by the FCC is indeed positive news, and the observation that the XM fan base has remained loyal is encouraging but not surprising. However, the subscriber base forecast of 7.7 to 8.2 million for the year should definitely be achievable, since the company already had 7 million subscribers at the end of July and the new guidance appeared incredibly conservative. Our main fear is that they lower the upper end of the forecast which would still seem to be a major risk. For recent WSN posts on [XMSR], try here and here
AVI BIOPHARMA INC [AVII] up 19.6% closing at $4.28 on the news that Dutton Associates had upgraded the stock to “Strong Speculative Buy.” At the same time, it lowered its 12-month price target to $6.00 which is certainly a lot more reasonable than the consensus price target of $8.50 which appeared absurd. As we have noted before, this does not appear to be a company with any sort of plan to get to profitability in the near-term.
Alternative Energy plays MGP INGREDIENTS INC [MGPI] forged ahead 15.2% closing at $22.99 and PACIFIC ETHANOL INC [PEIX] rose 7.9% closing at $19.70 probably on a combination of oil concerns including the Iranian attack on the Roumanian oil rig, the price of light sweet crude settling above $73 per barrel for October futures, and the recognition of increasing Ethanol penetration in certain U.S. locations like Minnesota.
RAMBUS INC [RMBS] tumbled 9.7% closing at $11.21 probably due to its tardiness in submitting its 10-Q for the second quarter – now 13 days past the due date. The reason for the delay given in the NT 10-Q “Notification of Late Filing” was the need to complete the “internal investigation of past option grants and other potentially related issues.” See our previous post on Rambus as well.
CANDELA CORP [CLZR] crashed 28.7% closing at $10.33 after reporting fourth quarter results that fell well shy of expectations. While annual earnings were reported at $0.62 per diluted share, 94% more than last year’s $0.32 per diluted share, they still fell short of the consensus estimate of $0.76 per share. For the fourth quarter, the exposure was even more extreme. Fourth quarter earnings of $.10 per share fell well below the consensus estimate of $.23 per share and were actually below the earnings reported for the same period last year of $.14 per share. The obvious question is whether the fourth quarter is an exception or a signal of rough times ahead. I view the 31% increase in inventories over the past year as troubling and most likely indicative of a weakness in demand that will persist until some new product hits the market. The R&D expenditure, at 5% of sales in 2005, was probably too low, and apparently has been increased to 7.3% of sales, which hopefully will help turn the situation around. With the current P/E ratio at about 15, today’s price drop appears to be an overreaction and we would assume this is a buying opportunity. The downgrade by Cowen & Co. from “Outperform” to “Neutral” also helped to batter down the price.
The markets were marginally up today with only eleven sectors in negative territory. The big outlier was Alternative Energy with an average return of 3.8% for the day. Approximately 56.6% of the members of the SigmaInverse Universe of 3,591 stocks posted positive returns for the day.
