Author Archives: Scalper1

Generic Drug Stocks Crash, As Endo Warns Of Price Erosion

Drugmaker Endo International ( ENDP ) plunged 39% Friday after it delivered a hefty guidance cut driven by weakness in its generics business, dragging nearly every other generic-drug stock down with it. Endo actually beat analysts’ consensus in Q1, but it cut its full-year earnings guidance by 23% — now $4.50 to $4.80 a share — and trimmed the revenue outlook by 11% to a range of $3.87 billion to $4.03 billion. In the company’s earnings release, CEO Rajiv De Silva blamed “new competitive entrants, including for Voltaren Gel; greater-than-expected price erosion across the Generics sector; and delays on regulatory actions related to certain Endo products.” IBD’s Take: How healthy are shares of Endo and Teva and how do they stack up vs. rivals? Find out at IBD Stock Checkup It was the second factor that rattled the rest of the generics industry. Teva Pharmaceutical Industries ( TEVA ) stock fell 6.8% to 50.22, and hit a 19-month low of 50.01. Allergan ( AGN ), already staggering from the cancellation of its buyout by Pfizer ( PFE ), hit a two-year low of 195.50 and ended the day at 201.63, down 4.1%, even though it’s selling its generics business to Teva. Perrigo ( PRGO ), which cut its own guidance last month, fell 4.8%, to 92.42. Smaller drugmaker Akorn ( AKRX ), down as much as 20%, ended the day off 7.9%, at 22. Akorn, which has fallen way behind on its accounting due to internal issues, late Friday finally set dates for its Q4 and Q1 earnings releases, for May 9 and May 17, respectively. Leerink analyst Joseph Schwartz wrote in a research note that Endo’s problems read through most directly to Teva, Akorn and Perrigo, and more moderately to Allergan. Essentially, whoever’s done the most price-hiking on products representing more than 5% of generic sales lately is in the most trouble. Referring to industrywide data from IMS, Schwartz wrote: “Based on our analysis, Akorn has taken 13 price increases matching the above criteria (44% of IMS generic sales), Perrigo eight (18% of generic IMS sales) and Endo took 17 (17% of generic IMS sales).” Teva, meanwhile, is due to report its own Q1 earnings and guidance on Monday morning, and Allergan is due before the open the following day. Endo itself got at least four downgrades from Wall Street analysts Friday, mostly to neutral but one to underweight. It ended the day at 16.17, a seven-year closing low.

Cogent Stock Buybacks Loom, As Regulatory Outlook Improves

Cogent Communications Group ( CCOI ) might bring back a stock buyback program later this year, analysts say, and regulatory developments could also work in its favor. Cogent late Thursday reported Q1 earnings and revenue that modestly beat views. Cogent stock was up nearly 3% in late-afternoon trading in the stock market today , above 39. The provider of Internet communications services to small and midsize businesses has an IBD Composite Rating of 91 out of a possible 99, and it broke out of a cup-with-handle base at a 36.85 buy point on Feb. 26. Cogent stock has climbed 13% in 2016. Cogent told analysts on its earnings call after the close Thursday that it could bring back a share repurchase program if its debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio improves. “As EBITDA should trend higher in the subsequent quarters, Cogent management intimated that it will re-implement a capital return program to complement the regular dividend,” Jim Breen, an analyst at William Blair, said in a research report. At Cowen & Co., analyst Colby Synesael wrote that “we have updated our model to reflect what we think will be a stock buyback of equal size to its current recurring dividend, starting in Q3.” There might be upside for Cogent from Internet video, also called over-the-top (OTT) services, some analysts say. On the regulatory front, the  Federal Communications Commission has proposed to regulate prices in the $20 billion market for business data services , drawing criticism from  AT&T ( T ) and cable TV rivals. The proposal could help companies such as Level 3 Communications ( LVLT ) and Cogent, which sometimes lease lines from bigger telecom firms to serve their own customers. Cogent reported Q1 profit of 8 cents per share, swinging from a 4-cent per-share loss in the year-earlier period. Revenue rose 11% to $108.3  million. Analysts had modeled profit of 7 cents and revenue of $107.6 million.

Huawei P9 Imitates Apple: ‘New Dog With Old iPhone Tricks’

Chinese Huawei’s P9 is a “new dog with old iPhone tricks,” beating Apple ( AAPL ) to the smooth-backed punch, but including the usual chip suspects — Broadcom ( AVGO ), NXP Semiconductors ( NXPI ), Skyworks Solutions ( SWKS ) and Texas Instruments ( TXN ). But the iFixit teardown of the P9 smartphone did little for Broadcom stock was down a fraction in late-afternoon trading Friday, while NXP and Skyworks were both up a fraction. Texas Instruments stock, however, was up 1% on the stock market today . The Huawei P9 looks familiar , iFixit wrote, wondering, “just how far did Huawei go to imitate, and perhaps surpass, the iPhone?” IFixit notes the Huawei P9 camera is embedded within the body — as opposed to the bump in the iPhone 6S. Apple suppliers fill the inside of the Huawei P9, but their functions can vary from the iPhone 6S. Samsung supplies both — but it has a flash-memory chip inside the P9 as opposed to a RAM (random access memory) offering within the 6S, says iFixit. Huawei tapped SK Hynix for its RAM. Apple used Toshiba for its 6S flash memory. Texas Instruments supplied a fast-charging chip for the Huawei P9 vs. a power-management chip for the Apple 6S. And Huawei’s audio codec by HiSilicon is mirrored by Cirrus Logic ‘s ( CRUS ) chip inside the Apple flagship. Broadcom provides two chips for Huawei as opposed to a single chip for Apple. NXP, a single chip for the P9 and two chips for the 6S. The Huawei phone has three Skyworks chips vs. two Skyworks power amplifiers within the iPhone 6S. Huawei’s and Apple’s flagship phones both scored a 7 out of 10 on iFixit’s scale of repairability.