Companies featured in this edition of the newsletter: ACCP, CBAI, ICLK, SVUL, XCR
Markets managed to post negligible gains this week as strength in the financial sector which helped spur gains earlier in the week was met with more negative economic indicators, resulting in markets ending trading in close proximity to where they began on Monday. All told, the Dow managed to end up 0.1%, gaining 8 points on the week to close at 8277, down 5.7% on the year. The Nasdaq finished up 0.7%, closing at 1692, up 7.3% on the year, while the S&P 500 and Russell 2000 gained 0.5% and 0.4% respectively, bringing their YTD losses to 1.8% and 4.4%.
The week got off to an encouraging start on Monday, led by a 7.2% gain in financials as Bank of America (NYSE: BOA) shares rallied after being added to Goldman Sachs’ Conviction Buy List following encouraging rebounds in mortgage and capital markets during the last quarter. Better than expected results from Lowe’s helped to further fuel the rally as investors took the results as a sign that retail weakness may finally be easing, despite what the economic data may suggest.
While optimism reigned Monday, economic data later in the week tempered investors’ enthusiasm as weakness in the housing sector and labor markets highlighted the fact that although markets may be righting themselves, there is still significant room for improvement on the economic front. Both housing starts and building permits fell well below consensus estimates to new record lows, while continuing unemployment claims jumped by 75,000 to a record 6.62 million. The continued weakness in these two trouble spots for the economy led to markets selling off for the remainder of the week, but still managing to hold onto negligible gains at the close of trading on Friday.
What should investors look for this week? Earnings reports will be few and far between due to equity and bond markets being closed in observance of Memorial Day and the majority of companies having already reported, but expect results from Autozone (NYSE: AZO), Polo Ralph Lauren (NYSE: RL), and Staples (NASDAQ: SPLS) before the bell on Wednesday. Thursday morning, look for reports from wholesaler Costco (NASDAQ: COST), HJ Heinz (NYSE: HNZ) and Sears Holdings (NASDAQ: SHLD), with Dell (NASDAQ: DELL) and J. Crew (NYSE: JCG) reporting after the close.
Economic reports for the week begin with the S&P/ Case Shiller home Price Index for March at 9:00am Tuesday, followed by Consumer Confidence figures for May at 10:00am. Existing Home Sales for April are due out at 10:00am Wednesday. Thursday will see the release of Durable Goods Orders for April and weekly initial jobless claims together at 8:30am, followed by New Home Sales for April at 10:00am and weekly crude inventories at 11:00am. The week finishes up with Preliminary Q1 GDP and Q1 GDP Deflator released together at 8:30am, followed by Chicago PMI for May at 9:45am and Revised Michigan Sentiment for May at 9:55am.
Conferences for the week begin with the two day Cowen & Co. Technology, Media and Telecom Conference, being held on Tuesday in New York. Barclay’s holds their two-day Capital Wireline and Wireless Conference in New York beginning on Wednesday, as does the Exxon Mobil Annual Shareholders Meeting which is being held in Dallas. Also beginning on Wednesday is the two-day Deutsche Bank Securities Energy & Utilities Conference, being held in Miami. Sanford C. Bernstein & Co. will hold their Strategic Decisions Conference on Thursday in New York, along with Morgan Stanley, who will be hosting the Cloud Computing Symposium in New York that same day. The week rounds out with Amazon’s Annual Shareholders meeting in Seattle on Thursday.
Volume Alert: Shares of internet advertiser interCLICK (OTCBB: ICLK) jumped 15 percent on almost five times average volume last week, following the announcement of record breaking 2009 first quarter results for the period ended March 31, 2009, where the company reported record revenue, gross margin, operating income and their first quarter of operating profits under GAAP. The company posted first quarter revenue of $8.4 million; a 136% increase from pro forma 2008 first quarter revenue of $3.6 million, exceeding the company’s previously announced guidance of at least $7.0 million. Gross margin of 47.3% was the highest in the company’s history. Gross profit of $4.0 million grew 366% from pro forma 2008 first quarter gross profit of $0.9 million while expanding 24% from 2008 fourth quarter gross profit of $3.2 million. EBITDA for the period was $0.9 million, versus 2008 fourth quarter EBITDA of $0.2 million, and pro forma 2008 first quarter EBITDA loss of $1.7 million. interCLICK managed to post a net gain of $0.03 million for the period, compared to a loss of $3 million in the first quarter of ’08. The company also posted its first quarter of GAAP profitability, despite Q1 generally being a slower period for the advertising industry. The company’s strong performance is a direct result of advertisers seeking out more cost effective targeted solutions in the face of the global economic slowdown which has led to significant decreases in advertising budgets across the board, but increases for companies like interCLICK which provide substantially better return on investment to clients through more highly targeted online advertising campaigns than traditional media outlets are able to offer. ICLK expects this trend to continue, as they have forecast revenue to increase from the first quarter into the second quarter, where they anticipate revenue to exceed $9.5 million and gross margin to be at least 47%. The company also expects full-year revenue growth to exceed 60%, resulting in revenue which would exceed $36 million, making interCLICK one of the few companies able to demonstrate positive growth during these difficult economic times. Shares ended the week at $0.95, up twelve cents.
Access Pharmaceuticals, Inc. (OTCBB: ACCP), an emerging biopharmaceutical company that develops and commercializes propriety products for the treatment and supportive care of cancer patients, announced results for its first quarter ended March 31, 2009 last week. During the period, Access managed to significantly reduce their research and development expenses from $10,157,000 in the first quarter of ’08 to $687,000 in this most current period. The reduction in research and development expenses is primarily due to the acquisition of Somanta, which closed during the first quarter of ’08 and resulted in a one-time non cash in-process research and development expense of $8,879,000 for the period. The substantial reduction in R&D costs is reflected favorably in a year over year decrease in net loss of $11,317,000 from the first quarter in ’08, where net loss was $13,886,000, or $1.76 per share, compared with $2,569,000 or $0.24 per share in the first quarter of this year. The company also closed the acquisition of MacroChem Corporation during the period through the issuance of an aggregate of approximately 2.5 million shares of common stock. Access Pharmaceuticals’ ability to significantly reduce its operational expenses in the face of constricted capital markets should serve to position the company well to continue its late stage clinical programs as capital markets continue to right themselves. Shares remained unchanged on the week at $1.30.
Cord Blood America, Inc. (OTCBB: CBAI), an umbilical cord blood stem cell preservation company focused on bringing the life saving potential of stem cells to families nationwide and internationally, reported results for its first fiscal quarter ended March 31, 2009 last week. Among the highlights was a reduction in operating loss from $0.4 million in its ’08 first quarter to $0.3 million in the ’09 first quarter. In addition to the reduction in loss from operations, the company was able to increase its gross margin from 45.0% in the ’08 first quarter to 52.5% in the ’09 first quarter due to a more favorable mix of business, including a significantly higher percentage of revenue coming from the sale of umbilical cord blood stem cell preservation services. Cord Blood also managed to take steps to improve its balance sheet, including a reduction in indebtedness resulting from convertible debentures from $6.8 million one year ago to $5.6 million at the end of the ’09 first quarter, while also managing to reduce current liabilities from $13.6 million to $12.4 million. The improvements in the company’s financial condition are most readily attributable to a shift in focus aimed at capitalizing on the opportunities in the processing of umbilical cord blood, and a reduced focus on marketing efforts which can be seen directly in the year over year improvement in gross margin. Cord Blood believes that the Obama administration’s lift of the ban on stem cell research will significantly enhance the company’s position as increased funding resulting from the lifted ban should accelerate the use of stem cells in treating diabetes, heart disease, and other major diseases which it feels will aid in driving consumers to make investments in storage and collection of the potentially life-saving cells. Shares remained unchanged on the week at less than a penny.
Steel Vault (OTCBB: SVUL) an emerging provider of identity security products and services, announced last week that that its NationalCreditReport.com subsidiary, has commenced an online marketing campaign with Akamai Technologies, Inc, an online cooperative that compiles databases of shopping and purchase data from over 500 Internet sites, providing highly targeted marketing solutions. The campaign should serve to significantly enhance NationalCreditReport.com’s subscriber base, as the company has seen encouraging triple digit growth over the first few months of operations despite engaging in limited marketing campaigns. The company expects that the highly targeted marketing campaign offered by Akamai will further increase subscriber growth while maintaining a manageable cost structure which should in turn increase return on investment by decreasing customer acquisition costs associated with obtaining new subscribers for the site. Shares remained unchanged on the week at $0.36.
Medical device developer Xcorporeal (AMEX: XCR) received notice from the NYSE Amex indicating that the company is currently not in compliance with certain of the exchange’s continued listing standards. The company has until June 15, 2009 to submit a proposal addressing their plans to rectify deficiencies currently demonstrated in the company’s financial condition on or before November 16, 2009. Shares lost a penny on the week to close at $0.28.
