Today’s Market

I’m officially declaring that today never happened. Frontier Airlines (FRNT) plunged 28.6% on the news that Southwest Airlines (LUV) is moving into Frontier’s Denver hub. Merrill Lynch quickly downgraded the stock. That’s an awful downgrade. Did it never occur to the analyst that Southwest would or could do this? Obviously, I think today’s sell-off is waaayy overdone. The fact is Frontier has been competing against Southwest for along time. Southwest will probably get two gates at Denver’s airport, and they’re going to have about 40 employees there. That’s hardly worth chopping 28.6% off the stock.
We’ll know all the details later, but we’re probably looking at maybe a dozen or so daily flights. I think this will hurt Frontier’s flights to Vegas and L.A., but it won’t harm their lucrative Mexico business. Frontier is a healthy company with a growing business. Earlier, Southwest moved into to Philadelphia and clobbered everyone. Frontier will not be such a pushover. I’m still holing on to my Frontier stock.
eBay (EBAY) fell after its earnings yesterday. The online auctioneer earned 20 cents a share, which was inline with expectations. But due to the Skype merger, the company expects 20 cents a share for this quarter, which was one penny below expectations. Sales grew by 37%. The company forecast earnings for next year of 81 to 86 cents a share.
Our Buy List dropped -2.85% today while the S&P 500 lost -1.50%. Ironically, the S&P 500 was up 1.50% yesterday. This was just an ugly day, although we’re still ahead of the market for the month. The good news is that oil prices continued to fall. Oil is now down to $61 a barrel. That should help Frontier tomorrow.
Google (GOOG) just reported earnings of $1.51 a share which was far ahead of Wall Street’s estimates of $1.36. That topped that highest estimate on Wall Street of $1.46 a share. The stock is soaring in the after-hours market. Google’s bottom line increased from $52 million last year, to over $380 million this year. The company is now up to nearly 5,000 employees and has a market cap of roughly $90 billion. That’s $18 million per each employee. General Motors (GM), by contrast, is worth about $50,000 per each worker.
Lastly, here’s a chart of how the energy sector has been doing over the past month. It’s not looking good, and I don’t think it will get better.

Posted by Eddy Elfenbein on October 20th, 2005 at 5:54 pm

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