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Tesla Model 3 Reservations Count Ahead; Stock Hits 7-Month High

Loading the player…   Rising nearly 4% Wednesday, Tesla Motors ( TSLA ) stock has reached its highest since September, ahead of a first-week Model 3 reservations update that was expected from CEO Elon Musk later in the day, but put off till early Thursday. @FreshDialogues will have the full week's number early tomorrow morning — Elon Musk (@elonmusk) April 7, 2016 Musk said on Twitter Wednesday night “will have the full week’s number early tomorrow morning.” He’d said over the weekend that the $1,000 refundable preorder deposits for the $35,000 car reached 276,000 Saturday — far above analysts’ expectations and Tesla’s own. Will give an update tonight for the 3 day total, then last one on Wed for the full week. All efforts focused on accelerating the ramp. — Elon Musk (@elonmusk) April 2, 2016 Tesla Motors Stock Analysis Tesla stock lifted 3.9% in the stock market  Wednesday, closing at 265.42. Shares also rose more than 3% in each of the prior three trading days that followed Thursday’s unveiling of the electric Model 3, a mass-market vehicle expected to compete with gas-powered cars like BMW’s 3 Series and similarly priced ones from Volkswagen ’s ( VLKAY ) Audi, Daimler ’s ( DDAIF ) Mercedes-Benz and Toyota ’s ( TM ) Lexus, as well as electrics like General Motors ‘ ( GM ) Chevrolet Bolt. The stock is building the right side of a very long, deep base and is not in buy range.  But Tesla’s IBD Composite Rating has now risen to 72 out of a possible 99. The CR factors in its earnings and loss history, stock moves and more. Can Tesla Build Model 3 After Model X Miss? This week, Tesla missed its Q1 car unit sales expectations. So, can Tesla build all those Model 3s in light of its difficulty getting out just shy of 15,000 cars last quarter? The company said Monday that “severe Model X supplier parts shortages” of just a few parts were due partly to its own “hubris in adding far too much new technology to the Model X in version 1.” So many preorders of the $35,000 Model 3 so soon can create a big production backlog. The Model 3 is due out starting in late 2017. CEO Musk says he’s rethinking production planning. Tesla Analysts Forecast Production Pacific Crest Securities analyst Brad Erickson predicts Tesla “can deliver 370,000 vehicles” in 2020, Stifel’s James Albertine sees 200,000, and Tesla has predicted half a million. On how many Model 3 reservations will turn into sales, Erickson sees “huge optimism, but modest lack of conviction of actual purchase,” given that the deposits are fully refundable and only $1,000 each. Erickson is keeping his Tesla stock rating at sector weight. He says, “we need more comfort with the upside scenarios … before becoming more constructive on the stock.” Analysts polled by Thomson Reuters are on average only mildly positive on Tesla stock, with a lot of future expectations already built into the price. Of 21 analysts polled, nine call Tesla a buy or strong buy, five a hold, and seven an underperform. Related : Tesla Stock Shrugs Off Parts Shortage; Model 3 Reservations Pass 276,000 This Is What It’s Like To Ride In A Tesla Model 3  

Yahoo Has Been In ‘Free Fall,’ Says Report; Bid Deadline Looms?

With initial bids reportedly due Monday, Yahoo ’s ( YHOO ) revenue and earnings are expected to decline this year, according to a report by tech news site Re/code on Wednesday. Re/code said it based its report on financial information being distributed by Yahoo’s bankers to help possible buyers figure out how much they might bid. Yahoo has reportedly gotten interest from as many as 40 groups who have until Monday to submit preliminary bids for Yahoo’s core business and Asian operations. The book of disclosure documents “shows a company in what has been a serious free fall,” said Re/code, citing sources interviewed. That “has many nervous about bidding.” A Yahoo spokesperson told IBD via email that the company had no comment about the report. Re/code said that, according to the documents, Yahoo estimates that 2016 revenue “is dropping close to 15% and earnings by over 20%. Those revenues, backing out traffic acquisition costs (TAC), are expected to decline from $4.4 billion in 2014 and $4.1 billion in 2015 — already down from previous years — to $3.5 billion in 2016; meanwhile, earnings before depreciation, taxes and amortization are moving from $1.4 billion in 2014 and just below $1 billion in 2015 to $750 million in 2016.” TAC refers to payments that Yahoo makes to other websites to carry its ads. Yahoo expects to have about 9,000 employees at the end of 2016 — down from 12,500 in 2014 and 10,500 in 2015 — while stock-based compensation remains “steady,” Re/code said. That could indicate that “CEO Marissa Mayer is loading up valued employees with outsize share grants to get them to stay,” the report said.   Yahoo confirmed last week that Senior Vice President of Talent Acquisition and Development Sandy Gould will become the latest high-profile executive to leave the struggling Internet firm. Yahoo has recently implemented layoffs and begun the process of selling itself and spinning off its hefty stake in China e-commerce giant Alibaba Group ( BABA ), and is also in the midst of a proxy fight seeking to oust its entire board. Yahoo’s revenue growth has stalled for nearly a decade as ad dollars continue to slip away to rivals including Facebook ( FB ), Netflix ( NFLX ), Alphabet ( GOOGL )-subsidiary Google, and others that include high-profile startups Snapchat and Pinterest. Expressions of interest are pouring in from dozens of groups that are eyeing buying the struggling Web portal, with Verizon ( VZ ) rumored to be the most likely acquirer, said Monness Crespi Hardt analyst James Cakmak in an industry research report early last month. Yahoo stock lifted 0.7% in the stock market today , closing at 36.66. Sale or not, Yahoo is facing rough waters. In a letter charging the current board of Yahoo with failing to deliver results for its shareholders, activist investor Starboard Value announced that it wants to sweep out all of the ailing Web company’s nine directors and replace them with its own slate during Yahoo’s 2016 shareholder meeting later this year. The letter — from Starboard Value managing member Jeffrey Smith, one of Starboard’s slate of Yahoo board nominees — indicates that Starboard also doesn’t trust Yahoo’s current directors to perform in terms of either the strategic review of Yahoo’s core search and display-ad business or with the eventual fate of Yahoo’s 15% stake in Alibaba and Yahoo’s holdings in Yahoo Japan. Yahoo’s Asian assets — comprised of its Alibaba holdings and a 35.5% stake in Yahoo Japan — represent the vast majority of Yahoo’s $34.69 billion market value. Yahoo owns a 15% stake in Alibaba, or about 384 million shares. Last month, Monness Crespi estimated the value of Yahoo’s core assets at $3 billion to $4 billion. Alibaba stock closed up 1.8% Wednesday at 78.68. Verizon stock was about flat, closing at 53.52.

Allergan, Pfizer Strike Off Down Separate Paths After Merger Killed

Big pharma Pfizer ( PFE ) contemplated splitting itself, while specialty drugmaker Allergan ( AGN ) campaigned to regain investor confidence Wednesday, after the two companies announced that their planned merger was off. Pfizer early Wednesday confirmed rumors that the companies had canceled their $160 billion merger, two days after the Treasury Department released new guidelines that would have removed most of the tax benefits of the deal for New York-based Pfizer. After its stock tanked Tuesday, Allergan’s CEO went on a media blitz to promote his company’s prospects as a stand-alone. On a conference call with analysts Wednesday morning, Allergan CEO Brenton Saunders maintained that Treasury’s action against tax inversions  will have no impact on the stand-alone Allergan, which redomiciled to Ireland through an inversion deal with Warner Chilcott three years ago. The company will retain its 14% corporate tax rate, he said, and it should also be free to deploy capital however it chooses. Saunders also said Allergan’s $40 billion sale of its generic unit Actavis to Teva Pharmaceutical Industries ( TEVA ) is unaffected by the spiking of the Pfizer deal  and is on track to close in June. The timeline for that buyout was delayed from its original Q1 closing date, as Teva works its way through a multi-country regulatory clearance process, but Saunders said the two companies are determined to get it done. “Teva is doing a lot of work,” said Saunders. “They’ve restructured their company; they have named their entire leadership through a few levels that include 200 Allergan executives moving to Teva. … This is a great deal for Allergan, but also a great deal for Teva.” Allergan stock, down 15% Tuesday, rebounded 3.5% Wednesday, to 244.74. Teva stock rose 4% to 56.73. Allergan Hunts For Growth Assets The closing of the Actavis sale should give Allergan a big wad of cash, so many of the analysts’ questions on the call related to what it will do with the money. Several seemed to be rooting for share buybacks, given that Allergan stock is trading near a 52-week low in the wake of the Pfizer breakup. Saunders said all options are on the table, but he emphasized that Allergan’s “growth pharma” model means that it’s constantly on the hunt for growth assets. He said that Allergan’s business-development team has stayed active since the Pfizer deal was announced, and if the right opportunity came along “we could announce it tomorrow.” A couple of analysts raised the name of contact-lens giant Bausch & Lomb, with which Saunders has a personal history. He headed the company from 2010 until 2013, when it was sold to Valeant Pharmaceuticals International ( VRX ) for $8.7 billion. Given Valeant’s recent spectacular crackup , many on Wall Street have speculated that B&L might again go on sale, with Allergan a suitable buyer not only because of Saunders, but also because of Allergan’s large ophthalmology business. Saunders’ response to this seemed to be a swipe at Valeant’s infamously opaque financial reporting. “It sold for $8.7 billion three, four years ago, with a late-stage pipeline of 30-some programs, and a strong organic growth profile,” he said. “I can’t tell that any of those things today are still true. Based on public information, it’s impossible to tell that it’s worth more than it sold for four years ago.” Pfizer Split-Up Could Move Up Pfizer, meanwhile, rose 5% to 32.93, hitting a four-month high, as investors looked toward another possible major catalyst for its stock. Back in 2013, the company reorganized so that it would be able to split its innovative drug-development business from its established products, and perhaps divide itself into more pieces if necessary. The company had originally planned to make a decision on that this year, but when the Allergan buyout was announced, the issue was pushed into next year. In Pfizer’s press release announcing the end of the Allergan deal, however, it said the decision date is back to this year. That itself could bring some more M&A, writes Evercore ISI analyst Mark Schoenebaum. “After a recent acquisition of Hospira, Pfizer probably has critical mass to transform its Global Established Products business unit to an independent company, but Innovative Products business units might benefit from additional assets acquired from outside,” Schoenebaum wrote in an email to clients. The prospects of both companies going back on the hunt may have been what lifted drug stocks as a whole Wednesday, especially biotechs. Distressed big-cap biotech Biogen ( BIIB ), which has been subject to buyout speculation given that it’s trading 35% off its high, rose 5.3% to 279.57. Smaller Anacor Pharmaceuticals ( ANAC ) rose 16% to 73.20, likely because its late-stage eczema drug is seen as a fit for Allergan’s dermatology portfolio.