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business newsTicker Shock: Four Reasons Dell Still Looks Strong Long-Term
Tuesday's top stories and stocks with potential to move.
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Asian stocks rebounded overnight. The Hang Seng was up 3.66% and the Nikkei rose 2.34%. European stocks were in the green earlier this morning as well. And here in the US, we're currently trading lower.
Here’s what I’m focused on this morning:
Dell (DELL):
These are the first lines of a release disseminated yesterday after the bell: “Dell said today year-over-year demand for its information-technology products appears to have stabilized, and that it expects to report a slight sequential revenue increase in its fiscal second-quarter 2010, which ends July 31. The company also anticipates a modest decline in second quarter gross margins, the result of higher component costs, a competitive pricing environment, and an unfavorable mix of product and business-segment demand.”
At first blush, that doesn’t sound terrible. But I think some are going to be fretting -- particularly over that margin comment and the fact that the stock could get taken down at the open. My thoughts:
1. I wouldn’t want to fight the tape here. But from a longer-term perspective, I’m more optimistic about its prospects than I was just a few months ago. If it does sell off big in early trading, I’d see this as an opportunity.
2. Some other comments in the release deserve more attention than they're likely to get. For example, its comments regarding cost cuts and its longer-term growth target deserve more than just a passing glance.
3. I hope management is cognizant of how this release is likely to be perceived. I also hope at today’s meeting with analysts, they'll work to reassure the investment community and really drive home the opportunities that exist.
4. I’m not saying it won’t come down at all. But the estimate for this year is still a respectable $1.05. That’s not too shabby, given the company (which is certainly among the top players in the industry) closed just north of $13 last night.
Take Two (TTWO): The video-game company was out with some disappointing news. For the third quarter, it's looking to post a Non-GAAP loss of $0.65 to $0.75 and revenues of $120 to $130 million.
I don’t think investors are going to take too kindly to that, given the Street had been looking for a loss of $0.54 and revenues of a little more than $162.2 million.
In that same release it also indicated that it’s looking to post a Non-GAAP loss of $0.80 to $0.95 for this fiscal year. The estimate I’m seeing is for $0.07.
Some thoughts:
1. We aren’t talking a couple of bucks between chums at a pub here. That’s a pretty big miss, and investors won’t take kindly to it.
2. It’s almost a forgone conclusion that we're going to see estimates get ratcheted downward at this point to reflect management’s comments.
3. I was looking for something I could hang my hat on, but I found nothing that struck my fancy. As I said in a May 27 article , what's the big catalyst to get involved now?
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