Stocks in the News: Dell Needs Bigger Checkbook

Posted: Jul 04, 2013 12:01 AM
Stocks in the News: Dell Needs Bigger Checkbook

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

Stock number one today is:

Zynga Inc. (ZNGA)

And the headline says: Can Don Mattrick Turn Zynga Around? - Bloomberg

The social gaming company has staged a recent stock price rally after being hammered since March, 2012 when the stock was over $12. The stock has popped since the announcement that founder Mark Pincus has made way for former Microsoft exec Don Mattrick as CEO. Mattrick was previously honcho for Microsoft Interactive.

The company’s stock gapped up over 20 percent on Monday with the announcement and traded higher today at $3.44

The company has been plagued by slower sales and earning growth.

They have $1.27 billion of cash in the bank as of the last report with very little debt.

That said, earnings growth wouldn’t take place until next year, although the outlook brightens in the five-year period.

Investors should wait for the company to show upward momentum before participating in this risky, but perhaps attractive tech play.

Our Ransom Notes Trendline says: Stay on the Sidelines         

ZNGA Chart

ZNGA data by YCharts

Stock number two today is:

Bank of America Corporation (BAC)     

And the headline says: Big bank stress tests are back- Market Watch

“The 18 largest financial institutions got their Federal Reserve stress test results in March. And soon these mega-firms will have to tell the public what their own financial checkups reveal,” reports Market Watch

BAC took on a lot of toxic debt in wake of the 2008 financial crisis and the quality of its debt has been suspect in many investors’ minds. The stress test may provide some indication of the relative financial strength of BAC to weather another financial crisis.

Like a lot of the other financials Bank of America has been a leader since the market began to rally in July of 2012.

The bank is trading less than 1 times it’s book value, reflective of investor’s concerns about the credit quality of the portfolio.

I’ve liked the stock for a number of years, thinking that the credit quality is an overblown issue.

Our Ransom Note Trendline says: Buy Bank of America

BAC Chart

BAC data by YCharts

Stock number three today is:


And the headline says: Dell Drama Adds Another Twist- Wall Street Journal

Founder Michael Dell’s attempt to take the computer maker private in a $24 billion deal has hit a snag, or two or three.

The biggest snag is apparently Carl Ichan’s cash.

Ichan told Forbes he has the ability to write a $10 billion dollar cash check in his war with Michael Dell for control of the computer company.

That means that Dell- Michael Dell that is- will likely have to sweeten any deal that is already in place in order to buy out control of the company.

The company’s earning and revenue have struggled amidst a general downward slurge in computer manufacturing.

The company won’t return to profitability until next year and earning growth even then is expected to be sub 10 percent for the foreseeable future.

With little upside and too much drama our Ransom Note Trendline says: Stay on the sidelines

DELL Chart

DELL data by YCharts