This week's stockpick is up.....
- Thread starter Equity Trader
- Start date
ET take a look at Xcel Energy. Sitting at about 7 bucks. Like many was up in the high 20's. Has strong history of 5% to 6% divins. This should not be this low. Large mid west power company.
Appreciate any thouhgts.
Appreciate any thouhgts.
ET, this company scares me a bit. Looking at their full asset sheet, their burn rate is a bit high for my tastes on their short term investments. Looks like they are selling off to keep their moderate cash standing. STI roughly half what they were 9 months ago. Net tangible assets off 30%+ past 9mo. If their losses continue as projected, wouldnt that necessitate dipping more into their cash reserves?
Good writeup though, lots to think about here.
Good writeup though, lots to think about here.
acehistr8
acehistr8
The company's present burnrate is approximately around 7m a quarter and their revenue is somewhere around 9-10m a quarter.Their losses being almost double of rev is not unusual for a company in a emerging technology (speech) of which the full extent of the applications still has not been fully realize...
The company has announced a 17% cut in workforce probably in marketing and sales and engineering. The top management team is still intact.... This restructure happen the beginning of July...
The positive is that Speechworks is gaining market share and receives government contracts....Their rate of announcing new contracts through PRs is quite frequent....
Nuance and SSFT is their somewhat direct competitor and presently the breakdown in license Rev is as follows.
License Revenue for the 3/02 & 6/02 qtr:
Nuan 5.9M 7.6M (+29%)
Ssft 7.4 13.2M (+78%) (speech rev only)
Spwx 4.6M 5M (+9%)
If you look at the present share price and their O/S,SPWX has certainly the potential to increase shareholders equity considering their close as of Friday 2.59,almost inline with their bookvalue..Their is plenty of room for increase in market share and in time,I believe the current share price is a nice entry level for futher gains
Thank you for your reply.
Have a good day.
ET
p.s.
djv, I will post on your request on Xcel energy company tomorrow.
acehistr8
The company's present burnrate is approximately around 7m a quarter and their revenue is somewhere around 9-10m a quarter.Their losses being almost double of rev is not unusual for a company in a emerging technology (speech) of which the full extent of the applications still has not been fully realize...
The company has announced a 17% cut in workforce probably in marketing and sales and engineering. The top management team is still intact.... This restructure happen the beginning of July...
The positive is that Speechworks is gaining market share and receives government contracts....Their rate of announcing new contracts through PRs is quite frequent....
Nuance and SSFT is their somewhat direct competitor and presently the breakdown in license Rev is as follows.
License Revenue for the 3/02 & 6/02 qtr:
Nuan 5.9M 7.6M (+29%)
Ssft 7.4 13.2M (+78%) (speech rev only)
Spwx 4.6M 5M (+9%)
If you look at the present share price and their O/S,SPWX has certainly the potential to increase shareholders equity considering their close as of Friday 2.59,almost inline with their bookvalue..Their is plenty of room for increase in market share and in time,I believe the current share price is a nice entry level for futher gains
Thank you for your reply.
Have a good day.
ET
p.s.
djv, I will post on your request on Xcel energy company tomorrow.
djv
djv
Xcel Energy...
I like their markets,but the recent acquisition of NRG seems to be a financial strain....NRG just announced that they may not be able to make next payment for an energy project Shaw is working on due to liquidity issues.
As a result, Shaw and NRG have reached an agreement under
which Shaw will acquire the assets of the project -- the
LSP-Pike Energy LLC project -- and will forgive NRG its debt.
Shaw will also pay NRG $43 million. I suppose this will work out in the end...NRG is also looking to unload their Asian units and that should streamline their operations.
The risk profile of NRG, like other power generators and energy traders/marketers, remains high for several reasons. The market continues to have concerns after Enron including liquidity issues, credit quality concerns, questionable growth, increasing regulatory pressures, questionable and complex accounting rules, concerns over off balance sheet obligations and uncertainty over energy prices due to the economy and mild weather. NRG also owns power plants in California and could eventually be forced to give refunds, although we do not expect their obligation, if there is any, to be material. Xcel is not a major trader as it primarily sells its own power. It has previously acknowledged that it had been a counterparty to two "wash" trades back in 1999 and 2000 at the request of Reliant Energy (NYSE - REI) for which it received a small profit. Xcel could be subpoenaed for information on these transactions as others have been. No such trades have occurred since then.
This will present a real problem when states they serve think there may be similar problems like with Enron and will go after damages.
Its current problems revolve around the debt the company took on in recent years to acquire assets. Pre-Enron, such debt levels were common and not such an issue. NRG's credit quality could be lowered to noninvestment grade by Moody's (but not by S&P which has reaffirmed it at 'BBB-') which could cause some liquidity issues that would likely be addressed by some combination of equity or convertible security issuances by Xcel, cash from asset sales and debt issuances at NRG. Xcel's credit quality remains investment grade with all three rating agencies.
All this from NRG aquisition could evently put a damper on Xcel,but for now it appears they can adjust,but the unloading of operations from NRG is key and their (NRG) problems has to be satisfied by liquidation of NRG assets and can/must not roll into XCEL,this is very critical..
Analysis, are lowering their 2002 and 2003 EPS estimates to $1.85 and $2.20 from $2.00 and $2.50, respectively...
The lower estimate reflects a recent regulatory decision in Connecticut that denied a request by NRG and its customer, Connecticut Light and Power (subsidiary of Northeast Utilities (NU - NYSE)), from increasing rates by one cent per kilowatt hour. NRG operates plants which it had purchased from the utility. It then sells the power back to CLP under contract. The increase had been requested back in December, 2001 to recover higher environmental compliance and transmission costs. The increase would have positively impacted net income by $5 million per month. The ten cent decrease in our estimate reflects the impact for the balance of the year.
Last but not least is a class action law suit...
Law Offices Of Charles J. Piven, P.A. today announced that a securities class action has been commenced on behalf of shareholders who acquired Xcel Energy, Inc. (NYSE: XEL) securities between January 31, 2001 and July 26, 2002, inclusive (the "Class Period").
The case is pending in the United States District Court for the District of Minnesota, against defendants Xcel Energy, James J. Howard, Wayne H. Brunetti and Edward J. McIntyre.
The action charges that defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period which statements had the effect of artificially inflating the market price of the Company's securities.
The above suit is always problematic for any company since fines and punitive damages can result insignificantly in monies owed.Also the length of these suits is a hindurance and effects present trading swings and until this is resolved,don't expect much in the way of pps improvements.
Their dividend appears to be their only real asset at this time...The company did announce that current dividend rate will stay, but pressure to cut the dividend could resurface next quarter should the company's ongoing asset sale strategy not come to full fruition or earnings appear to be coming in less than expected. At the current yeild on an annual basis the dividend rate is extremely attractive...Their current dividend rate is 1.50 yearly and today's share price makes that a nice 20% return,not bad at all.
Have a good day....
ET
djv
Xcel Energy...
I like their markets,but the recent acquisition of NRG seems to be a financial strain....NRG just announced that they may not be able to make next payment for an energy project Shaw is working on due to liquidity issues.
As a result, Shaw and NRG have reached an agreement under
which Shaw will acquire the assets of the project -- the
LSP-Pike Energy LLC project -- and will forgive NRG its debt.
Shaw will also pay NRG $43 million. I suppose this will work out in the end...NRG is also looking to unload their Asian units and that should streamline their operations.
The risk profile of NRG, like other power generators and energy traders/marketers, remains high for several reasons. The market continues to have concerns after Enron including liquidity issues, credit quality concerns, questionable growth, increasing regulatory pressures, questionable and complex accounting rules, concerns over off balance sheet obligations and uncertainty over energy prices due to the economy and mild weather. NRG also owns power plants in California and could eventually be forced to give refunds, although we do not expect their obligation, if there is any, to be material. Xcel is not a major trader as it primarily sells its own power. It has previously acknowledged that it had been a counterparty to two "wash" trades back in 1999 and 2000 at the request of Reliant Energy (NYSE - REI) for which it received a small profit. Xcel could be subpoenaed for information on these transactions as others have been. No such trades have occurred since then.
This will present a real problem when states they serve think there may be similar problems like with Enron and will go after damages.
Its current problems revolve around the debt the company took on in recent years to acquire assets. Pre-Enron, such debt levels were common and not such an issue. NRG's credit quality could be lowered to noninvestment grade by Moody's (but not by S&P which has reaffirmed it at 'BBB-') which could cause some liquidity issues that would likely be addressed by some combination of equity or convertible security issuances by Xcel, cash from asset sales and debt issuances at NRG. Xcel's credit quality remains investment grade with all three rating agencies.
All this from NRG aquisition could evently put a damper on Xcel,but for now it appears they can adjust,but the unloading of operations from NRG is key and their (NRG) problems has to be satisfied by liquidation of NRG assets and can/must not roll into XCEL,this is very critical..
Analysis, are lowering their 2002 and 2003 EPS estimates to $1.85 and $2.20 from $2.00 and $2.50, respectively...
The lower estimate reflects a recent regulatory decision in Connecticut that denied a request by NRG and its customer, Connecticut Light and Power (subsidiary of Northeast Utilities (NU - NYSE)), from increasing rates by one cent per kilowatt hour. NRG operates plants which it had purchased from the utility. It then sells the power back to CLP under contract. The increase had been requested back in December, 2001 to recover higher environmental compliance and transmission costs. The increase would have positively impacted net income by $5 million per month. The ten cent decrease in our estimate reflects the impact for the balance of the year.
Last but not least is a class action law suit...
Law Offices Of Charles J. Piven, P.A. today announced that a securities class action has been commenced on behalf of shareholders who acquired Xcel Energy, Inc. (NYSE: XEL) securities between January 31, 2001 and July 26, 2002, inclusive (the "Class Period").
The case is pending in the United States District Court for the District of Minnesota, against defendants Xcel Energy, James J. Howard, Wayne H. Brunetti and Edward J. McIntyre.
The action charges that defendants violated federal securities laws by issuing a series of materially false and misleading statements to the market throughout the Class Period which statements had the effect of artificially inflating the market price of the Company's securities.
The above suit is always problematic for any company since fines and punitive damages can result insignificantly in monies owed.Also the length of these suits is a hindurance and effects present trading swings and until this is resolved,don't expect much in the way of pps improvements.
Their dividend appears to be their only real asset at this time...The company did announce that current dividend rate will stay, but pressure to cut the dividend could resurface next quarter should the company's ongoing asset sale strategy not come to full fruition or earnings appear to be coming in less than expected. At the current yeild on an annual basis the dividend rate is extremely attractive...Their current dividend rate is 1.50 yearly and today's share price makes that a nice 20% return,not bad at all.
Have a good day....
ET
ET,
I worry though about the selloff of STI. Companies such as this *may* tend to sell of investments to cover costs first before using cash. Would have to see some more data to confirm this. Also their EBITDA has been falling every quarter, and forward projections indicate a loss of around 85cents/share this year.
Couple additional notes. Industry target on SPWX is around $4/shr. Reason cited being that this type of technology is strongly tied to the willingness of a company to invest big dollars in IT upgrades. Hopefully that is something we will see in the next couple of quarters. Companies have been witholding billions in investment capital as the market has tanked, conventional wisdom says eventually this money will get invested somewhere, and IT is usually the first to get funded.
Cant argue that it is a good entry price here, definitely a good long term hold, especially if the IT market really sees a bounce towards the end of this year.
I worry though about the selloff of STI. Companies such as this *may* tend to sell of investments to cover costs first before using cash. Would have to see some more data to confirm this. Also their EBITDA has been falling every quarter, and forward projections indicate a loss of around 85cents/share this year.
Couple additional notes. Industry target on SPWX is around $4/shr. Reason cited being that this type of technology is strongly tied to the willingness of a company to invest big dollars in IT upgrades. Hopefully that is something we will see in the next couple of quarters. Companies have been witholding billions in investment capital as the market has tanked, conventional wisdom says eventually this money will get invested somewhere, and IT is usually the first to get funded.
Cant argue that it is a good entry price here, definitely a good long term hold, especially if the IT market really sees a bounce towards the end of this year.
ET, I sit right in the middle of Xcel's market. Have not seen or read much about most info you have here. I can see now part of there price drop. That was super info you gave us. And Thank You very much. Will follow and not make any moves at this time. 
