BetterTrades
(Best) TIVO, ITMN, RCNI (Worst) MDVN, ARD, MEI from Better Trades
March 8, 2010
Aside from one down day during the middle of last week, the major indices posted gains throughout the week. This was due in large part to optimism from investors following upbeat economic data, including the job markets, productivity and factory orders.
The DOW closed the week higher, climbing 240.94 points, or 2.3%, to close at 10,566.20. The S&P also finished the week in the green, rising 34.20 points, or 3.1%, ending at 1,138.69. The NASDAQ concluded the week up, gaining 88.09 points, or 3.9%, to close at 2,326.35.
Top 3 Stocks
TIVO – TiVo Inc. ($9.48 to $17.50) +84.6%
One of the highest percentage gainers for the week ending March 5 was TiVo Inc. (TIVO), which saw its stock price soar nearly 85% last week. The recent surge in stock price was a direct result of the company’s victory in a long-running dispute with Dish Network Corp. (DISH) over patents on digital video recorders. The company has also been embattled with EchoStar, which has allegedly been infringing on TiVo’s copyrights as well.
TiVo, which has pioneered a brand new category of products with the development of the first commercially available digital video recorder, developed its brand to solely resonate with its customers while providing a superior television experience. If the decision from the Federal Court of Appeals stands, TiVo is in-line to receive a minimum of $300M from Dish on top of the $100M already received from prior litigations.
Dating back to 1999, TiVo became synonymous with digital recording. With that, the company was thrust into the spotlight and faced intense competition from generic DVRs provided by Dish Network and other subscription television providers. Dish is not the only competitor that TiVo has had to stand against.
Last August, TiVo sued both AT&T (T) and Verizon (VZ) over similar patent infringements, including multi-room viewing capability and correct overshooting when viewers fast-forward the watched programs.
The company commented on the news and was satisfied by the courts decision, "In which it rejected EchoStar's attempted workaround claim regarding the TiVo patent, found EchoStar to be in contempt of court and ordered the permanent injunction fully enforced."
TiVo representatives later added, "In addition, the Court's award of an additional $103 million plus interest through April 2008 makes this victory all the more important. EchoStar may attempt to further delay this case but we are very pleased the Court has made it clear that there are major ramifications for continued infringement."
Following the news on March 3, shares of TIVO soared nearly 62% during the next day’s trading session. By the close of the week, the stock had managed to add more than $8 per share.
With a new trading week beginning, TiVo stock had reversed its upward swing, and traded in the red by the sound of the closing bell. The stock lost $0.18, or 1%, to end the day at $17.38 per share. Throughout the past year, shares of TIVO have traded as low as $6.06 per share, while topping out at $17.98, which was achieved during the March 5 session.
ITMN – InterMune Pharmaceuticals Inc. ($13.74 to $23.28) +69.4%
Also posting massive percentage gains throughout last week’s trading was InterMune Pharmaceuticals Inc. (ITMN), which managed to post a gain of nearly 70%. InterMune is best known for developing and commercializing innovative products for the treatment of serious pulmonary and infectious diseases and congenital disorders.
The latest increase in market share was a direct result of news from the Food and Drug Administration (FDA), in which the federal health officials revealed their reviews of the experimental drug Pirfenidone, a drug designed to treat idiopathic pulmonary fibrosis, a rare lung disease.
Although the FDA had already reviewed documents pertaining to the approval of Pirfenidone, the government agency announced that they would ask its panel of pulmonary experts to vote on the drug’s effectiveness and safety benefits to those that would be taking the drug.
A spokesman from InterMune commented on the recent development, "While reversal of the disease may not be feasible ... the slowing of progression in loss of lung volume constitutes a clear benefit to patients. Side effects were readily monitored, are typically reversible, and nonlethal."
Without treatment, pulmonary fibrosis can make it hard to breathe and causes coughing, and it gets progressively worse over time. Patients diagnosed with IPF are usually between the ages of 40 and 70, with a median age of 63 years. The disease tends to affect more men than women and the median survival time for the disease from time of diagnosis is two to five years, with a five-year survival rate of around 20%.
Currently more than 200,000 people throughout the U.S. and Europe are affected by IPF.
After the release of the FDA’s findings, shares of ITMN soared nearly 80% before paring its gains. By the end of the week, the stock has tallied an overall market gain of 69.4%, adding more than $9.50 per share.
As the March 8 trading session concludes, the stock finished the day in the green, adding $0.02, or 0.1%, to close at $23.30 per share. During the past year, the stock has traded as low as $10.48 per share, while reaching an annual high of $25.37 per share, which was established intraday on March 5.
RCNI – RCN Corp. ($10.98 to $15.15) +38.0%
Rounding out the top three percentage gains was RCN Corp. (RCNI), the nation's first and largest facilities-based competitive provider of bundled phone, cable and high-speed Internet services delivered over its own fiber-optic local network to consumers in the most densely populated markets in the U.S. The latest surge in stock price was attributed to news that the company was being acquired by a private equity firm for a reported $570M.
The private firm, Abry Partners LLC, has agreed to purchase RCN Corp. for nearly $1.2B, including all outstanding debt. Abry will acquire the company for a reported $15 in cash per RCNI share, which equates to a 22% premium over RCN’s closing price of $12.26 on March 4. The offer also represents a 43% premium over RCN’s average closing price over the past 30 days.
The deal is expected to be completed sometime during the second half of 2010.
RCN, which has posted 14 consecutive quarterly losses, is set to announce its most recent earnings report on March 9. Analysts believe that the broadband and cable television services provider will post a loss of $0.18 per share on $191.85M in overall revenues.
In the company’s latest earnings report, back in November, RCN posted a net loss of $5.7M in the 3Q, albeit much better than the $14.7M loss in the same period from a year ago. The company did manage to post a year-over-year gain in revenues, as overall sales increased from $187M to $192M, a 3% gain.
Throughout the past year, the stock has traded within a relatively broad range, with a yearly low of $3.41 per share and an annual high of $15.22 per share, which was established during intraday trading on March 5.
With Monday’s trading complete, shares of RCNI were lower on the day, falling $0.02, or 0.1%, to end the session at $15.13 per share.
Worst 3 Stocks
MDVN – Medivation Inc. ($36.01 to $12.13) -66.3%
Despite the major indices climbing more than 2% each during last week’s trading sessions, there were many companies that did not fare as well as those mentioned previously. One such company, Medivation Inc. (MDVN) saw its stock plummet more than 66% last week, on devastating news that the company’s drug Dimebon failed its trial run.
Medivation, which is a biopharmaceutical company that acquires promising technologies in the late preclinical development phase, develops them quickly, and cost-effectively, was involved with drug-giant Pfizer Inc. (PFE) in the development of the Alzheimer’s drug. On March 3, the two companies revealed that data from its late-stage trial of Dimebon had no greater effect on its patients than did the placebo at improving symptoms of Alzheimer’s.
The news was quite disturbing to Medivation, which had seen earlier results from the test study that suggested promising results as a treatment for the debilitating neurodegenerative disease. In a smaller trial version of Dimebon, which was called Latrepirdine, revealed that the medicine had the potential to improve memory functions among patients suffering from Alzheimer’s on a mild to moderate basis.
Medivation CEO, David Hung, remarked on the recent development, "The results were unexpected and we are disappointed, especially for all these patients with Alzheimer's and their caregivers."
Nevertheless, the drug has drawn some concerns from analysts in that the drug had only been tested in Russia. Industry experts first predicted the drug to reach a total of $600M in overall sales by 2014.
With the news of the failed trial, shares of Medivation plunged more than $27 per share, losing nearly two-thirds of its market value. By the end of the week, the stock lost a total of more than $24 per share.
Heading into the start of a new trading week, shares of MDVN were trading in positive ground, adding $0.15, or 1.2%, to conclude the March 8 session at $12.28 per share. During the course of a year, the stock has traded as high as $40.49 per share, and as low as $11.83 per share, which was established during Monday’s trading.
ARD – Arena Resources Inc. ($41.43 to $33.60) -18.9%
Included in the list of top percentage losers for the past week was Arena Resources Inc. (ARD). Arena saw its stock price plunge nearly 19% due in large part to a dismal 4Q earnings report. Arena, which is engaged in oil and natural gas acquisition, exploration, development and production, with activities in Oklahoma, Texas, New Mexico and Kansas, was hurt primarily by lower income that was exacerbated by hefty increases in costs and operating expenses.
For the recent quarter, Arena Resources posted a net profit of $9.3M, or $0.24 per share, compared to the previous year’s net earnings of $13.6M, or $0.35 per share, a decrease in profits of more than 31%. Revenues, meanwhile, increased on a year-over-year basis, climbing from $33M a year ago to $42.4M, an increase of more than 28%.
On average, analysts within the industry were looking for the oil and natural gas company to post a quarterly profit of $0.35 per share based on $41M in total revenues.
Quarterly results were greatly affected by an increase in operating costs that amounted to $27.7M, 133% higher than the $11.9M in costs from the same period a year ago.
On a yearly basis, the company managed to post a profit of $42.3M, or $1.09 per share in 2009, compared to a net profit of $83.6M, or $2.20 per share in 2008, a decrease in earnings year-over-year of more than 49%. Overall sales throughout the year tallied $126.6M, down nearly 40% from 2008’s overall sales totals of $208.9M.
Following the company’s earnings announcement on March 2, shares of ARD slipped nearly $5 per share, losing almost 12% of its market share. With the March 8 trading session concluded, shares of Arena Resources were down 1.7%, giving up $0.57 to end the day at $33.03 per share.
During the past 52 weeks, the stock has managed to trade as high as $45.72 per share, while dipping to an annual low of $21.16 per share.
MEI – Methode Electronics Inc. ($12.44 to $10.85) -12.8%
Finally, another company that saw its stock move substantially following an earnings announcement was Methode Electronics Inc. (MEI). Although the company managed to post better results year-over-year, its stock still slipped nearly 13% following the news.
Methode Electronics conducts its business by manufacturing component devices world-wide for Original Equipment Manufacturers (OEM) of information processing and networking equipment, voice and data communications systems, consumer electronics, automobiles, aerospace vehicles and industrial equipment.
Reporting for the 3Q, Methode posted a net loss of $4.5M, or $0.12 per share, versus a net loss of $27M, or $0.74 per share, a decrease in net loss year-over-year of 83%. The company did manage to increase its revenue stream, as overall sales climbed from $80.8M to $89.1M, an increase of more than 10%.
The company benefited greatly from a reduction in operating and overall expenses. During the quarter, Methode posted a restructuring charge of $0.6M, compared to expenses incurred in last year’s 3Q of $3.8M.
Commenting on the company’s recent performance was Donald W. Duda, President and CEO of Methode, "Although the general economic climate continues to be extremely challenging, we executed relatively well in the third quarter in what are still difficult end markets. Year over year, third-quarter Fiscal 2010 consolidated sales increased just over 10 percent, with improvement in each of our segments. More importantly, third-quarter gross margins also improved in each of our segments year over year due primarily to the impact of the significant restructuring activities we undertook.”
As the markets paused from its impressive upswing last week, the major indices traded mixed by the close, as did shares of Methode Electronics. At the sound of the closing bell, shares of MEI resumed its downward trend, trading down by more than 7%, or $0.82, to end the day at $10.03 per share.
Throughout the course of a year, the stock has managed to trade within a relatively narrow range, reaching an annual low of $2.59 per share in March of ’09, while topping out at $14.32 per share, which was established during the third week in February.
2010 Better Trades Article
brought to you by
BRIAN MULLIN
