Google Nears July Lows, High Beta Stock Selling Overdone

Much has been made about investors being much more risk-averse in these turbulent, volatile markets and sending down high-beta stocks like Google Inc. (GOOG). In fact, the search behemoth has been creeping lower, falling as much to surprisingly close in on its July lows (while at the same time the major market indices have come off their lows), and is currently extending its losses, down in lunch hour trading close to double digits to $465 on mediocre volume of 1.6 million shares. But the selling seems overdone. Google is priced at a teenager-like PE on a forward earnings basis when it is expected to grow revenue by 26% and earnings by 23%. And its strong search position remains unchallenged, with Google accounting for 61.9% of July searches, up .4% from June according to comScore. There are only so few times when Google’s shares are at such a compelling valuation, and this is one of those times.

Las Vegas Sands: Putting Faith in Sheldon Adelson

"Put simply, Las Vegas Sands' U.S. liquidity appears tighter than we initially thought and published following earnings," Banc of America’s Shaun Kelley said in his Friday downgrade of Las Vegas Sands Corp. (LVS). But put simply, the market has already largely discounted a lot of those fears in the share price and the downgrade seems ill-timed. In the five trading sessions prior to the analyst downgrade, the stock was off by 38.6% while in the two days after the bearish comments, the casino stock actually moved higher by 1.2% to $41.89. And CEO Sheldon Adelson (the world’s twelfth richest person at $26 billion) emphatically assured during the second quarter conference call that although there were funding needs, there would not be any liquidity problems. This exchange during the call, courtesy of SeekingAlpha, says it all; “A friend of mine says that... I don't equal the height of Yao Ming or LeBron James or any of the basketball players. Ming isn't here, but LeBron James and Kobe Bryant and other top players are here in Macau. However, one of my closest friends says, Sheldon, don't worry about your height. You're the tallest person I know when you stand on your wallet. And I'm saying right now the company will not have liquidity problems.” The dialogue implies that in a worst case scenario, Adelson would back the company with his own money. Thus, you can put your faith in Adelson and bet that Las Vegas Sands is a pretty good bounce candidate at this level.

Amazon’s Reaction to Citi’s Kindle Note: Irrational Exuberance

Citigroup's Mark Mahaney is out with a note this morning regarding Amazon Inc.’s (AMZN) Kindle, saying the sleek and trendy electronic reader is the “iPod of the book world” and could be one of the top gifts this holiday season. The analyst has doubled his 2008 unit sales estimate of Kindle from 190,000 to 380,000. Revenue from Kindle is expected to be $1 billion, up from a previous estimate of $400 to $750 million. The news may be good, but the quick and early 9% move in the stock speaks of irrational exuberance.

MedcoHealth a Case of an Inefficient Market

MedcoHealth Solutions Inc. (MHS), a pharmacy benefits manager, recently raised full-year diluted guidance, excluding items, to a range of $2.30 to $2.33 – growth upwards of 28% compared to the last fiscal year, up from previous guidance of $2.27 to $2.31 per share. Looking a bit forward, the consensus analyst estimate for full year 2009 has been moved up to $2.74, implying somewhat lower growth at 19% (but still good), and for all that, the stock trades at a teenager-like PE. After touching a post-earnings high of $50.16 on Jul. 25, shares have languished, continually hovering just above its 50-day and 200-day moving average support at $47.42 and $47.89 respectively. Even with today’s 3% move that coincides with a major market rally, the stock still appears to be inexpensively priced. This could be a case of an inefficient market having its way with Medco.

eResearch Reassuring Conference Call Sparks Recovery

In the aftermath of a Leerink Swann mid-July downgrade that wiped out about 25% of EResearch Technology Inc. (ERES) market cap, the stock is trying to recover. In what could be called a reassuring conference call on Monday, management announced positive guidance – reiterating full year 2008 revenue of between $133 million to $140 million, said new bookings came in at $49.0 million for the quarter, an increase of 42.0% from the 34.5 million in the same period last year and most importantly, refuted the argument of competition to its cardiac safety services from automated methods, the main thesis for that analyst rating change to “underperform.” That is probably as good a reason as any for yesterday’s curiously delayed 9.1% post-earnings move up on heavy volume of 1.2 million shares. The gain puts eResearch shares back on track.