Stocks in the News: Ebay, Morgan Stanley, Pepsi

Posted: Apr 19, 2013 12:01 AM

Welcome to John Ransom's Stocks In The News, where the headline meets the trendline.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.            

Stock number one is:

eBay Inc., (SYMBOL: EBAY) and the headline says:

EBAY Slips: First Quarter Revenue Misses, Second Quarter View Light  (Barron's Blog)  

eBay Inc. shares are down today because overly-bullish analysts have been reined in on eBay’s second quarter forecast.  First quarter numbers came in nicely, new accounts grew by 2.8 million, the Marketplaces division is doing better than expected, and the company’s full-year projections remain about the same.  Citi Research says, “This is the first time that the company did not exceed the high end of its revenue guide after 8 straight quarters of doing so.”         

Earnings per share are expected to grow 16-18% per year for each of the next three years.  The PE is 19.3, in a five-year range of 5-27.  Morgan Stanley Research has a $62 price target on the stock.  Citi Research adds, “We’d be buyers of EBAY on a material dip from current levels.”         

EBAY shares have been trading between $50 and $58 for five months.  There’s price support at $53.50.  Shareholders should hold their positions, and for new investors …..       

Our Ransom Note trendline says: BUY EBAY BELOW $54.        

EBAY Chart

EBAY data by YCharts

Stock number two is:            

Morgan Stanley, (SYMBOL: MS) and the headline says:          

Morgan Stanley Shares Fall as Trading Revenue Declines  (Bloomberg)   

Morgan Stanley beat Wall Street’s revenue and earnings estimates for the first quarter.  As with other large banks reporting this week, Morgan Stanley reported weak fixed income revenue and strong equity revenue.  Difficulties are industry-wide, including low interest rates, a tough regulatory environment, and a poor economy forcing cost-cutting efforts to meet earnings goals.    

Institutional securities business revenue was up 30% from a year ago.  Wealth management revenues and margins were solid.  The company is aggressively reducing risky assets in its bond trading unit.    

Earnings per share are expected to be solid this year, after a 2012 loss, and then grow another 22% and 16% in the next two years.  The PE is 9.9.  The stock is still falling from a recent high of $24.50, and has not yet established support.  While fundamentals appear attractive, we would wait for an improving chart pattern before jumping in.   

Our Ransom Note trendline says:  STAY ON THE SIDELINES.    

MS Chart

MS data by YCharts

Stock number three is:          

PepsiCo, (SYMBOL: PEP) and the headline says:

PepsiCo first-quarter profit beats; stands by 2013 outlook  (Reuters)       

Global food & beverage leader PepsiCo beat Wall Street’s estimates on revenue and earnings for the first quarter, helped by easing commodity prices and international growth; but hurt by falling North American revenues.  Standard & Poor’s Research called North American beverage results, “disappointing”, and management stated, “the cola category continues to be a challenge.”

Earnings per share are projected to grow 7-9% per year for each of the next three years.  The PE is 18.9.  The dividend yield is 2.59%.   

The stock has been trading in the upper $70’s, and broke past long-term resistance at $80 today.  While the chart is bullish, earnings growth is moderate, and cola beverage revenue is a major concern.          

Our Ransom Note trendline says: HOLD PEPSI SHARES.           

PEP Chart

PEP data by YCharts

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