Tag - NASDAQGS:NTAP

Small-cap shares opened flat and then edged higher, underpinned by news of a big-cap energy acquisition, a firm tone in the dollar, and ideas that Wednesday’s post-FOMC minutes slide was overdone. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 2.46, or 0.34%, at 729.56.

News that NRG Energy (NYSE:NRG) tendered a bid to buy Calpine Corp. (NYSE:CPN) for a stock deal worth $11 billion injected some enthusiasm back into the M&A picture this morning, and played a supportive role in market psychology. Calpine shares were up 7.1% shortly after the opening on the news. If there are large-cap merger deals to be done, then there are certainly bargains to be had within small caps.

There are several apparel retailers coming out with earnings today, which could ripple through the markets. Children’s Place Retail Stores (Nasdaq:PLCE), which is right on the upper end of small-cap market capitalization, reported solid quarterly results this morning and the stock was up 6.2% right after the open.

Large caps in the news early today include Pfizer Inc. (NYSE:PFE), which tumbled 1% on the opening on news that its anti-smoking drug had serious side effects. Also, NetApp Inc. (Nasdaq:NTAP) tumbled 5.7% as the company’s forward projections disappointed.

Crude oil prices shot above $135 dollars a barrel overnight, and continue to be a drag on the both the consumer pocketbook and the cost structure for corporations (just ask the battered airline industry). Goldman Sachs technical analyst Kevin Edgeley said in a research report overnight that crude oil momentum and trend strength are pointing higher, and that there is a long-term channel extension target for crude at $142.90. If crude oil were to close lower today, and well off that $135 record overnight peak, it could generate a topping reversal on charts, and is worth . . .

Small caps were expected to open near steady levels this morning, with caution from another jump in crude oil offset by enthusiasm about a new large-cap acquisition. In overnight trading, the Russell 2000 (NYSE:IWM) was basically flat, while S&P 500 futures were just modestly above fair value.

The weekly unemployment claims report came in a little better than the forecast at 365,000 versus the expectation for 375,000. Equity futures were little changed immediately after the data.

Stock market activity overnight was flat to lower, with European shares hovering near steady levels, while Asia stocks were primarily lower. Hong Kong was off 1.6%, China down 1.9%, Singapore down 1.1% and Bombay lower by 1.9%.

There was news of a large-cap acquisition overnight between NRG Energy (NYSE:NRG) and Calpine Corp. (NYSE:CPN), in an $11 billion stock deal that could energize the bullish argument somewhat today.

Other big caps in the news this morning included Pfizer Inc. (NYSE:PFE), which was off about 1.5% on news that their anti-smoking drug had side effect issues. Also, NetApp Inc. (Nasdaq:NTAP) was down a whopping 14% as the firm’s projected earnings and revenues were below analyst expectations. PetSmart Inc. (Nasdaq:PETM) shares were off more than 5% overnight on lower-than-expected forward guidance.

Crude oil spiked higher yet again overnight, this time topping $135 dollars . . .

The amount of data that corporations must store, back up and protect from prying eyes these days is growing like federal deficits in the midst of a recession. Data storage needs are currently expanding by some 60% annually (although decreasing prices and increasing efficiencies mean costs rise at a fraction of that rate). That provides significant opportunity for companies such as Datalink Corp. (Nasdaq:DTLK), a tightly-run small cap that designs, installs and services customized storage systems that keep corporations running.

Datalink, based in Chanhassen, Minn., is one of the few IT companies enjoying a strong run in a weak market. It beat Wall Street estimates in the last two quarters, and guidance for the coming quarter is strong. In the first quarter this year, reported on April 16, revenue was up 17% to $47.7 million, a record increase for a first quarter, which tends to be a weak one. Net income was $769,000, compared with a $153,000 loss a year ago, and at $0.06 per share beat Street estimates by a penny. Its gross margin of 26.5% was the highest since the fourth quarter of 2004, its backlog of $30 million was only slightly off the previous quarter's record $31 million, and the company's second-quarter guidance is for EPS between $0.07 and $0.11 on revenue of $48 million to $52 million — and this is a company that tends to hit the high end of its guidance. Datalink's current growth rate is about twice that of the overall industry rate of about 6%.

But Datalink doesn't seem to be getting much love from investors. At Tuesday’s closing, the stock was at $4.85, well below its 52-week high of $7.17, reached last June as it was suffering through its second consecutive quarter of losses. The stock has barely rebounded from its 52-week low of $3.54 just before earnings were announced. Its market cap is $61 million.

In his April 17 report, analyst Clinton Morrison with Feltl & Co. wrote: "We have a hard time understanding why DTLK should be trading close to the bottom of a two-year range." Morrison rates DTLK a "strong buy" with a target price of $7, based on . . .