Fix It or Sell It
AUTOBYTEL INC [ABTL], a major online automotive marketing services company, shot up 25.4% closing at $3.20 probably due to a 13D/A filing with the SEC containing a letter from Liberate Technologies (LT) (one of the largest shareholders), recommending either a restructuring and streamlining of the company, or a sale of the company, with a preference for the first option. Observing no real growth in the online reach of the autobytel.com site since the end of 2005, we see a real need for more effective demand creation. The video reviews are a step in the right direction, but being forced to watch a competitive video before the one you actually want is totally obnoxious (not to mention really stupid, since you will never be able to effectively measure ad effectiveness). The “My Autobytel” page is also a step in the right direction, but the full potential of collaboration on the consumer side fails to be communicated. We find LT’s recommendation interesting, but are not sanguine regarding the possible sale of the CRM software component given the current environment in the auto dealer world, and would like to see ABTL’s response.
COOPER TIRE & RUBBER CO [CTB] up 15.1% closing at $11.20 following the release of an 8-K filing describing a recovery plan involving cost cuttings of $70 million and inventory reductions of $100 million.
EQUIFAX INC [EFX] was up 12.1% closing at $36.34 following a press release in which it revised its guidance for calendar year 2006, from a range of $1.90 to $1.99 per share to something in excess of $2.00 per share. It also lowered its expenditure target for capital expenditures and reaffirmed its previous guidance for revenue growth of 7% to 10%.
BORDERS GROUP INC [BGP] shot up 7.2% closing at $20.60 with an upgrade by Credit Suisse from “Neutral” to “Outperform.” However, Credit Suisse also downgraded BARNES & NOBLE INC [BKS] on Friday from “Neutral” to “Underperform.” While BKS took a big hit at the open, it had almost fully recovered by the end of the day, whereas BGP’s response exhibited considerable hysteresis. The likely explanation is that the reasons given for the BGP upgrade (confidence in new CEO, conservative accounting, etc.) may have been relatively new factors, while the BKS downgrade factors (options related legal issues, competition, etc.) may have already been priced in.
QUICKSILVER INC [ZQK] slid down 10.8% closing at $12.17 after meeting earnings expectations for the third quarter which came in at $0.04 per share compared with $0.20 per share for the same period last year. However, the company revised its fourth quarter earnings guidance to $0.51 per share, including stock compensation expenses. The consensus estimate had been $0.54 per share for the quarter. WR Hambrecht initiated coverage Thursday with a “Buy” rating, but on Friday Morgan Keegan downgraded the stock from “Outperform” to “Market Perform.” Mercurial markets!
AIRTRAN HOLDINGS INC [AAI] lost altitude on Friday, slipping 11.1% to close at $9.49 following an 8-K filing in which it lowered guidance for the third quarter citing a softening in demand which became apparent by the end of August. The softening was attributed to the threat of terrorist attacks, tropical storm Ernesto and increased competition on the east coast. The company expects the trend to continue and projects third quarter revenue per available seat mile (RASM) to be “in a range of the low single digits year over year,” compared to previous guidance in the high single digits. It also had some good news indicating that non-fuel cost per available seat mile (CASM) was expected to decline 3% to 5% in the quarter and that the all-in fuel costs should be within a range of $2.28 to $2.33 per gallon (obviously on the high side given the drop in oil prices over the course of the last two days). But of course, as the market is prone to do lately, the good news apparently was filtered out and only the drop in demand was heard. The company does plan to reduce growth in the 2007 to 2008 time frame to get RASM higher, apparently anticipating continued pricing pressure from competitors. Given the relatively high P/E ratio, we do not see a significant opportunity at this time.
VOLT INFORMATION SCIENCES INC [VOL], a provider of both staffing and telecommunications and information systems, was down a shocking 15.1% closing at $34.66, after announcing financial results for the quarter ended July 30th. While the company reported earnings of $0.53 per share compared to $0.32 per share for the same period last year, the consensus estimate had been for earnings of $0.62 per share. Revenue for the quarter was $584.9 million which also fell considerably shy of the consensus estimate of $605 million.
The Daily Sector Performance Chart provides clear evidence that we generally ended the week on an upbeat except in Mining (down on average 2.5%) and Oil & Gas Production (down on average 2.3%). The decline in oil prices with crude settling at $66.25 per barrel, the lowest level in the past 5 months. The average return for all 3,588 members of the SigmaInverse Universe was 0.27% with 58.1% posting a positive return for the day.
