>>> Oclaro: Color on Quarter --> OCLR +3% premarket.

Oclaro: Color on Quarter
  • B. Riley FBR, Inc. raises their OCLR tgt to $8.50 from $8.25. OCLR's F2Q sales declined 10% Q/Q and are expected to decline another 10% Q/Q in F3Q. Management expects F3Q to be the bottom, as headwinds should be mostly behind the company after F3Q; F4Q sales are expected to increase 5% Q/Q. Since OCLR has decided to stay away from low-margin business in favor of high-margin products such as laser chips and 400G, they expect improving sales and the ramp of new products to drive GM expansion to the high 30s in C2H18. They are reducing FY18/FY19 EPS estimates from $0.53/$0.60 to $0.50/$0.51. Valuation is compelling, as the stock is trading at cash-adjusted 8.5x their FY19 EPS estimate.
  • DA Davidson notes Oclaro is one of the leading providers of optical components to the cloud and service provider networking markets. Over the last several quarters the company has faced dual head-winds: a weakening market in China as well as a transition within the cloud market from CFP transceivers to QSFP28 transceivers. The company weathered those headwinds to deliver 2Q results in-line with previous guidance. The China/Datacenter weakness is projected by management to continue into the March quarter, with strong CFP-ACO transceiver demand expected to drive sequential growth in the June quarter. They believe the CFP transition has almost run its course, and that OCLR is well positioned for renewed growth; $9 tgt.
  • Needham: To some extent, Oclaro sounded a little more confident even as they remained guarded about the outlook broadly. They are one quarter closer to recovery and they are sustaining their margin structure and generating solid free cash flow. On China, they sounded about the same. Oclaro saw a pick-up in the December quarter with overall China Revs up 20% Q-Q, but they stood firm that this was temporary and expect a reversion to prior demand conditions in CY1Q and still do not see a recovery in China till CY2H18. The March guide was close to their low on the Street and well below the average. They offered soft Q-Q growth guidance for the June quarter, below consensus and their low-on-the-Street estimate. They are cutting our revenue and EPS estimates and staying at our Hold rating.
  • OCLR +3% premarket.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:
  • CRUS -14.3%, EMKR -12.7%, AMSC -11.4%, BDX -6.1%, CFX -5.7%, VSH -5.5%, MAC-4.6%, HESM -3.6%, GWPH -3.3%, JBSS -2.7%, DNKN -1.4%, LEG -1%, BGCP -1%, (BGC Partners and Newmark (NMRK) to coordinate timing of financial results - both will be releases Feb 9 before 8 am ET; BGCP Q4 revenues will be above high-end of the range of previous guidance), NOV -1%
M&A news:
  • CAFD -6.5% (8point3 Energy Partners to be acquired by Capital Dynamics)
Other news:
  • XIV -84.4% (VelocityShares Daily Inverse VIX continues to decline)
  • SVXY -79.3% (ProShares Short VIX Short-Term ETF extending lower)
  • BIOA -49.3% (public offering of $10 mln for 40 million units)
  • SQ -3.3% (continued weakness)
  • LULU -2.5% (lululemon athletica CEO Laurent Potdevin has resigned effective immediately; co also reaffirmed its updated guidance provided on January 8, 2018)
  • M -1.9% (modestly lower following block trade)
  • JE -1.3% (Just Energy to acquire privately held energy monitoring and management company EdgePower)
  • HOG -1.2% (increases quarterly dividend to $0.37/share from $0.365/share and authorizes the repurchase of additional 15 mln shares )
  • CTXS -1.1% (Citrix Systems appoints Fortinent (FTNT) CFO Andrew Del Matto as CFO effective February 19, 2018 )
  • NXPI -0.8% (following CRUS results)
Analyst comments:
  • XOM -1.2% (downgraded to Underweight from Equal Weight at Barclays)
  • CLGX -1.9% (downgraded to Sell from Neutral at Compass Point)

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:
  • FN +11.9%, CPST +7.1%, LITE +5.6%, SWKS +3%, (also announces $1 billion stock repurchase program), LII +2.8%, MU +2.5%, (raises Q2 guidance and announces Chief Financial Officer transition), OCLR +2.1%, PINC +2%, TM +1.3%, GM +1.2%, RE +1.1%,TDG +1.1%, SPGI +1%, VSM +0.8%, EMR +0.8%, AGN +0.8%, RBC +0.7%, ITUB +0.6%,APTI +0.5%
Other news:
  • UVXY +50.9% (ProShares Ultra VIX Short-Term move higher continues in after hours)
  • ASFI +39.9% (declares special cash dividend of $5.30 per common share)
  • ARGS +14.7% (obtains option to license PD1 checkpoint inhibitors; to host call on tomorrow Feb 6 at 8:30am ET)
  • AKTX +11% (announces additional data for its Phase II COBALT clinical trial and provides an update on other clinical trials with Coversin)
  • BDSI +4.4% (announces BELBUCA patent litigation settlement agreement with Teva)
  • NAK +1.9% (announces that the US Army Corps of Engineers selected the third-party contractor that will support them in completing an Environmental Impact Statement for the Pebble Project)
Analyst comments:
  • MU +2.5% (upgraded to Overweight from Sector Weight at KeyBanc Capital Mkts)

>>> Micron upgraded to Strong Buy at Needham

Micron upgrade details -- to Strong Buy at Needham; tgt $76 (39.40)
Needham upgrades MU to Strong Buy from Buy and sets target price at $76. Last night, Micron released new, increased guidance for F2Q18 by 4% or $270MM. The company also announced that David Zinsner would succeed Ernie Maddock, who is retiring, as CFO. Given this positive pre-announcement, firm remains favorable on the memory cycle and believe Micron has room to expand NAND gross margins despite a declining pricing envm't. Furthermore, they believe whatever excess NAND supply in the market will be absorbed by demand for client and data center SSDs. Now that they have seen evidence of two consecutive quarters indicating $10+ annualized earnings, firm is upgrading. They believe the market is incorrectly applying a trough multiple on peak earnings. Over time, in firm's view, this disconnect will close and we should see a re-rating in the multiple.

>>> Early premarket gappers

Early premarket gappers
Gapping up:
  • UVXY +53%, ASFI +39.9%, ARGS +18.2%, QTNT +13.7%, FN +11.9%, CPST +7.1%, OCLR+3.5%, PINC +2%, SWKS +1.4%, AGN +1.2%, TDG +1.1%, RBC +0.7%, MU +0.6%, ALLT+0.6%, APTI +0.5%
Gapping down:
  • XIV -84.4%, SVXY -79.3%, BIOA -47.4%, CRUS -12.3%, AMSC -11.4%, EMKR -7.1%, CAFD-6.4%, CFX -5.7%, SQ -5.4%, CNC -4.3%, ADM -3.9%, HESM -3.6%, BDX -3.3%, LULU-3.1%, JBSS -2.7%, NOV -2.5%, GWPH -1.9%, HOG -1.8%, DNKN -1.4%, JE -1.3%, M-1.2%, CTXS -1.1%, LEG -1%, BGCP -1%, MTGE -0.6%, RE -0.6%, FTNT -0.6%, NTR -0.6%

>>> General Motors beats by $0.22, reports revs in-line; reaffir

General Motors beats by $0.22, reports revs in-line; reaffirms FY18 in-line with 2017; new pickups expected to accelerate earnings in 2019 (39.54)
  • Reports Q4 (Dec) earnings of $1.65 per share, excluding non-recurring items, $0.22 better than the Capital IQ Consensus of $1.43; revenues fell 7.7% year/year to $34.48 bln vs the $34.28 bln Capital IQ Consensus. EBIT-adjusted of $3.1 bln was a record for a fourth quarter. This result was driven by sales of GM's latest crossovers, along with strong pricing and cost control — which more than offset a wholesale volume decline during the quarter. NA EBIT $2.9 bln from $2.7 bln.
    • 2017 sales: Through December 31, 2017, GM sold 8.9 million vehicles globally, an increase of 0.8 percent from 2016, and grew market share in each of its three key markets. In the United States, GM sold 3 million vehicles, including record sales of crossovers and pickup trucks, helping the company earn record average transaction prices, according to J.D. Power PIN estimates. GM and its joint ventures sold 4 million vehicles in China for the first time. The record sales were anchored by Baojun and Buick, along with Cadillac, which posted a sales increase of 51 percent. In South America, Chevy posted a 13.8-percent sales increase. Global deliveries of electric vehicles were a record 69,500, led by record deliveries of Chevrolet Bolt EV (26,000) and Baojun E100 (11,500).
  • To advance its vision of a zero emissions world, GM laid out plans to introduce at least 20 new all-electric vehicles that will launch by 2023.
  • The company also recently filed a Safety Petition asking the U.S. Department of Transportation to allow GM to safely deploy its fourth-gen self-driving Cruise AV on public roads. This vehicle eliminates the steering wheel, pedals and other unnecessary manual controls. GM expects to deploy self driving vehicles in a ride sharing environment in 2019.
  • In January, GM forecasted its full-year 2018 to be largely in line with 2017's record performance, building on previous records in 2016 and 2015.
  • The introduction of its all-new full-size pickups later this year is expected to help accelerate earnings in 2019.