SBS Broadcasting Reports on 7/28

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SBS Broadcasting (SBTV) reports after the close tomorrow followed by a Friday morning conference call. I remain long SBTV and expect another strong earnings report. The shares look very attractive and are my #1 pick in media at the moment.
SBTV’s 1Q05 earnings report was very strong. However, despite repeated leading questions from analysts the company refused to raise its full year guidance. I except the 2Q05 results to firmly indicate guidance is too low. Whether management continues to play it conservative is impossible to know. Current guidance calls for 138 million euro in EBITDA while my spreadsheet and 1Q05 results indicate mid-140s is more likely….

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Taking Partial Profits in Motorola

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With Motorola shares breaking through $20 based on a favorable cover story in this weekend’s Barron’s and in anticipation of the company’s analyst meeting which starts this evening, I reduced holdings for most clients this morning. Similar to the partial sale made in Sears Holding a few weeks ago, this sale is all about maintaining discipline. I have had a long-time target of “low $20s” on MOT. When a stock reaches an initial target it makes sense to take a little off the table. This is especially true when the market has had a big rally as this one has so far in July. Current MOT positions are considered normal size at around 2.5% of most client portfolios, so the bullish comments I posted on MOT last week are still valid. I expect the shares to go higher over the balance of this year.

Another Strong Quarter For Motorola

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As you know, I am a daily contributor to StreetInsight.com, one of the sites operated by the Street.com. Among other things I do for them, I provide live commentary on conference calls. In the extended comments section available to subscribers is my commentary on MOT’s latest quarter including pre call thoughts and the live comments I posted. Overall, it was a good quarter for MOT and supports a continued bullish view of the shares.

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Motorola Reports Tonight

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Motorola (MOT) reports tonight after the close. Wall Street Insight estimates have been rising steadily throughout the quarter and are well ahead of the guidance provided by management on the 1Q05 earnings call. Earnings are projected at 25 cents on revenues of $8.55 billion. The estimate is up from 22 cents three months ago. Other key metrics to look at tonight include handset shipments, ASPs, handset margins, and infrastructure sales…

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Positive Comments on DVDs from Fox is Good News for Lions Gate

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Lions Gate Entertainment (LGF) rebounded nicely on Friday, up almost 5%, and gained further on Tuesday. Since June 30, the shares have suffered a one-two punch from weaker-than-expected EBITDA guidance for 2H05 and issues in the DVD market raised by shortfalls at Pixar (PIXR) and DreamWorks Animation (DWA).
The rebound that began Friday may be due to some commentary from UBS analyst Aryeh Bourkoff on recent meetings he held with senior operating management of News Corporation (NWS). Among the meetings was a session with Tom Rothman, co-chairman of Fox Filmed Entertainment. As noted by Aryeh, Rothman believes that the DVD shortfalls at Pixar and Dreamworks are “isolated incidents, not indicative of secular trends.” Rothman acknowledged slowing growth given the greatly enlarged base of home video business but according to Aryeh, Rothman drew a distinction between “slowing growth and slow growth.” Rothman also noted that for Fox Filmed Entertainment, home video growth is “thriving” and remains very strong….

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Apple Shines

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Apple (AAPL) shares were trading up sharply during its conference call last night and look even higher in pre-open trading today. The gains are well deserved as the earnings report and the tone of the call were both excellent. iPod shipments easily exceeded expectations and computer shipments were at the high end of expectations. Gross margins were better than expected due to strength in software sales, declining commodity costs for storage, and maybe even average selling price declines that weren’t quite as bad as feared….

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Previewing Apple’s Earnings

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Apple Computer (AAPL) reports after the close tonight. Consensus expectations call for revenues of $3.34 billion and EPS of 31 cents. Consensus is above management guidance of $3.25 billion and 28 cents. Full year 2005 EPS estimates are $1.33 with 2006 at $1.54, or 16% growth. Current 3Q consensus estimates for revenues and EPS are $3.6 billion and 33 cents, respectively.
Other key metrics to watch include iPod shipments, computer shipments, inventories and receivables. iPod shipments are forecast in the 5.2 to 5.5 million range, flat with last quarter’s 5.3 million. Computer shipments are forecast at 1.1 million also flat with last quarter. It is worth noting that AAPL reports shipments into the distribution channels not final sales for these measures.
AAPL shares could be volatile in either direction depending on the details in the quarterly report and the guidance and commentary about current and future trends. Northlake is long AAPL and thus optimistic but cautious optimism is a fairer characterization regarding Wall Street’s short-term reaction….

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Sold Half of Sears Holdings

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Just a brief note to let everyone know that I sold half of client and personal holdings in Sears Holdings as the stock crossed $160 on Tuesday afternoon. I still think this momentum stock can go nicely higher as traders react to news flow including asset sales, better same store sales against easy comps and margin expansion due to better-than-expected cost savings. However, since I had an initial target of $160, I want to show discpline and ring the register given the huge gains in the shares since they were purchased. The stock is still held by all clients including in my own accounts (just like everything clients’ own) so we still want it to go higher. If the shares were to pullback sharply, buying back the positions sold will be considered. The new lower commission structure at Schwab makes these sort of trades easier.

July Model Signals

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Fresh signals for July for the Market Capitalization and Style models led to some trades in clients accounts on July 1st. The Market Cap model shifted from a weak large cap signal to a solid mid cap signal for July while the Style model moved firmly into growth territory for the first time since the fall of 2003. As a result of the new signals, positions in the S&P 500 were replaced by the S&P 400 Mid Cap Index. Additionally, half of the holdings in the Russell 1000 Growth Index were swapped into the Russell 2000 Growth Index. This trade gives portfolios exposure to smaller companies to take advantage of the new Mid Cap signal….

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Will Slowing Growth in DVD Sales Hurt Disney and Lions Gate?

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Below expectation sales of DVDs of The Incredibles coming on the heels of a much larger shortfall for Shrek 2 have accelerated already brewing concerns about DVDs as a growth engine for movie studios. This has ramifications for Disney (DIS) and Lions Gate Entertainment, (LGF). Disney (DIS) has benefited greatly from sales of DVDs from its library of animated hits and my investment thesis on LGF rests largely on margin expansion related to DVD sales from the string of recent box office success the company has enjoyed….

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