>>> IBM - IBM: F4Q-14 results to be under pressure with FY-1

IBM: F4Q-14 results to be under pressure with FY-15 outlook still uncertain; target lowered to $165 from $180 at Deutsche Bank; Hold (156.94   -2.16)

Deutsche Bank lowers their IBM tgt to $165 from $180 as they expect secular challenges to persist for co, pressuring F4Q-14 results and co's FY-15 outlook. Mgmt backed off of its $20 FY-15E EPS last Q, and will likely give guidance on the call which is substantially lower given challenges. Firm expects rev to continue to be under pressure from the shift to the cloud and the negative Y/Y drag from the sale of the Series x business to Lenovo, although a new mainframe cycle slightly mitigates these declines. FX headwinds are also expected to continue and lower China demand is hurting co more than its peers.

>>> SPX - Very interesting statistic on S&P 500 and pre-election years in th

Very similar background between 1935 and 2015 and very similar price action between 2007-8 and 2014-15, take a look

 

1)   S&P 500 in 2007-2008 Vs 2014-2015

 

o   Look at the similarity between the price action in 2007-2008 Vs 2014-2015.

 

§  2007-2008 = Green

§  2014-2015 = yellow

 

o   If price was to continue and look the same one would expect to see a move lower in the S&P 500.

 

 

2)   S&P 500 In Pre-Election years – comparing 1935 to 2015 ?

 

 

-    I attached the performance of the S&P500 Index since 1931

-    Using pre-elections years in the US

 

o   Blue – Pre election

o   Yellow – pre election year and year ending in 5

o   Green – years ending in 5

 

-    One can see that the S&P performed best in pre-election years ending in 5 (1935, 1955, 1975 & 1995)

-    I also attached the chart of 1935 which is very similar to 2015 in many ways

 

o   Market crashed in 1929 and in 2009

o   In 1935 the main theme was deflation which is very similar to market talk these days  

o   1935 was pre-election year and so is 2015

o   Both years ending in 5

 

-    In 1935 the S&P rallied 41%, it first fell in the first quarter 16% (equivalent for a move to 1,758) and then rallied till the end of the year, if this was the case in 2015 expect the S&P to move lower till March (16% from the top would target 1,758) before rallying till year-end.

 

-    Judging 1935 I think the S&P can move lower towards 1,700-1,750 before resuming its uptrend

 

 

 

 

 

S&P500 1935

 

S&P500 2015 ?

 

 

 

>>> Long SAP Short Sage - have a look - look pdt attached- let me know if any Q

See Full note attached

Long SAP GY EQUITY:
Last Price Price Target Stock Rating
€55.70 €63.9 Buy
I. The stock is down 10% since July 23:
1) The Market reproved SAP's communication on its acquisitions.
2) The Market blamed SAP all its cash went on acquisitions and too little organic development.
II. Since SAP has focused its strategy on the cloud SAP became the fastest growing entreprise cloud company at scale (SAP source):
1) SAP has a stronger growth than Oracle in cloud segment. 33% organic growth in cloud subscriptions and support (40% including acquisitions (Ariba, SFSF, Hybris)), compares well with pure-play
vendors. Every cloud company acquired has performed up to expectations (SFSF growing by 30% per year, Ariba 60% and Hybris 100%).
2) In September 2014 it made a strategic move by acquiring Concur, the cloud based travel leader.
3) The cloud revenues representing € 1.2 Bn in 2013 could reach € 3.7 Bn in 2017.
4) We continue to believe in SAP’s Cloud transition and its strategy to gain market share in the long-term.
III. January 20, SAP is expected to announce its consolidated earnings for the year 2014 and to communicate on its 2017/2020 targets:
1) The headline beat at Oracle after two years of mixed results is positive for the sector, and especially for SAP. We believe the strong growth in Oracle's EMEA cloud division (80% y/y)
proves a healthy demand.
2) SAP expects cloud revenues to exceed software revenues by 2018 (SAP source).
3) SAP’s management recently said they don’t foresee acquisitions and want to focus on organic growth. The 2014's operating margins should be 34.5%, compared to 2013 (32.8%).
4) SAP trades at 15.7x its earnings in 2015, 9% under its historical average and while the software sector trades at 18.5x.
IV. 1 hour ago SAP presented its fourth quarter 2014 results:
1) The results are better than the expectations.
2) The cloud subscriptions and support sales increased 68% compared to Q4 2013. The total revenu is up 7%.
SHORT SGE LN EQUITY:
Last Price Price Target Stock Rating
Gbp 466.3 Gbp 407.4 Sell
I. The stock is up 35% since mid-october (GPB 350) with a strong increase after 2014 earnings presentation (3rd December):
1) The new CEO Stephen Kelly reiterates the 2012’s strategy wich turned on the cloud business, 2015’s goals and guidances (6% of organic growth and 28% margin for 2015).
2) The confident and pragmatic message from the new management made a positive impression.
II. We continue to believe Sage is overvalued:
1) Because of the risks surrounding the company: lack of innovation, lower margins in the software sector and the competition (low barriers and bigger companies like the well-funded companies).
2) Sage reported in-line results and the growth has been constant for 18 months, but Sage still doesn’t find its target in the cloud business. The absolute numbers remain too small at 86k paying
subscriptions.
3) In March 2015 Sage’s management supposed to confirm if the business’s transition to the cloud softwares is still ahead.
4) The stock trades at 17x its earnings in 2015, 10% above its historical average.

FT : Oil prices look due a technical correction

Oil prices look due a technical correction

Bulls have been burned by betting on rally in recent weeks
Here are some oil market technical indicators for investors to consider.
The week started with Brent hitting its lowest in nearly six years, and by mid-session on Monday taking its slide over the past six months to nearly 55 per cent.

The decline has accelerated of late — the price shedding 33 per cent over the past 30 trading days.
That took the Brent crude price’s 14-day relative strength index, a momentum gauge, to 15.7, near historic lows and deeply in supposedly “oversold” territory.
The falls are being matched in the US-traded WTI contract.
Indeed, the WTI price is now 47 per cent below its 200-day moving average, which as Strategas Research calculates is significantly more than two standard deviations. A very unusual overshoot.

As Danske Bank notes the latest futures data shows “speculators added net longs in oil for the second consecutive week, sending non-commercial positioning in the black gold to levels last seen in November”.
Still, technical analysts at Barclays believe WTI may pause for a time.
“While the absence of bottoming patterns in price makes us reluctant to call for a base, we do expect a period of consolidation. This is further backed by stretched momentum studies across all timeframes.”
Watch WTI support at $45.37 a barrel, says Barclays