MORNING COFFEE

More Serious Problems with the Facebook IPO. 

Reports say that at least two of Facebooks’ (FB) lead underwriters revised their financial forecast for the company during the IPO road-show and shared that information with select investors.  The reports say that both Morgan Stanley (MS) and Goldman Sachs (GS) revised their financial projections for Facebook soon after the company added warnings to its IPO prospectus about how its user base is increasing more rapidly than its ad numbers. Reuters reported that JPMorgan (JPM) also revised its estimates after the news was released.

Securities regulators FINRA and the SEC are looking into whether information was released to investors on a selective basis.  If select investors learned about the revisions while Facebook and its underwriters were still pitching the deal to investors, those that were aware of the information would have been able to sell their IPO shares on Friday making a nice profit while shares were on the rise and before they began their decline. 

Since setting the IPO price of $38.00 shares of Facebook have fallen steeply.  On Friday shares opened at $42.05 and rose to $45.00 before selling off immediately and finally finding support and closing at $38.23, just above the offering price.  

Since then shares have fallen each day this week, closing yesterday at $31.00.  Today on Fox News, host Eric Bolling said that sophisticated investors he has been speaking to plan on getting back in, if shares go into the low $20.00’s. Shares are now down -26.28% from Friday’s opening price. Pre-market: 31.52 +0.52 (1.68%)

Upgrades

Applied Materials (AMAT): Goldman Sachs raised their rating from Sell to Neutral and placed a target price of $11.50 on the company. Pre-market: 10.55 +0.01 (0.09%)

Aeropostale (ARO): Imperial Capital raised their rating from In-line to Outperform and raised their target price from $22.00 to $23.00.

Blackstone Group (BX): Sterne Agee raised their rating from Neutral to Buy and placed a target price of $18.00 on the company. Pre-market: 12.01 +0.02 (0.17%)

Teradyne (TER): Goldman Sachs raised their rating from Neutral to Buy and placed a target price of $18.00 on the company. Pre-market: 14.77 +0.18 (1.23%)

Downgrades

Dell (DELL): Mizuho lowered their rating from Buy to Neutral and lowered their target price from $20.00 to $15.00. Pre-market: 13.07 -2.01 (-13.33%)

Mercer International  (MERC): Canaccord lowered their rating from Buy to Hold and placed a target price of $7.50 on the company.

Coverage Initiated

Facebook (FB): Needham initiated coverage with a Buy rating and target price of $40.00. Pre-market: 31.52 +0.52 (1.68%)

Travelers Cos. (TRV): JMP Securities initiated coverage with a Market Perform rating.

Earning Reports

Analog Devices (ADI): Reported EPS of $0.53 beating estimates by +$0.02. Pre-market: 34.65 -1.15 (-3.21%)

Compuware (CPWR): Reported EPS of $0.12 in-line with estimates.

Dell (DELL): Reported EPS of $0.43 missing estimates by -$0.03. Pre-market: 13.07 -2.01 (-13.33%)

Dycom (DY): Reported EPS of $0.28 beating estimates by +$0.07.

Guess? (GES): Reported EPS of $0.30 beating estimates by +$0.03. Pre-market: 26.02 +1.58 (6.46%)

Take-Two (TTWO): Reported EPS of -$0.60 missing estimates by -$0.05. Pre-market: 12.25 +1.09 

(9.77%)

Hormel Foods (HRL): Reported EPS of $0.48 beating estimates by +$0.07. Pre-market: 30.40 +1.21 (4.15%)

Toll Brothers (TOL): Reported EPS of $0.10 beating estimates by +$0.07. Pre-market: 27.10 +0.07 (0.26%)

Markets: 
Futures at 6:49: Dow -0.71%. S&P -0.63%. Nasdaq -0.58%. Crude -0.71% to $91.20. Gold -1.0% to $1560.90. 

Europe: London -1.84%. Paris -1.98%. Frankfurt -1.59%. 

Asia: Japan -1.98%. Hong Kong -1.33%. China -0.42%. India -0.49%.