Tuesday Losers: Taseko Mines, Ctrip.com and Monsanto

David Sterman's picture

Tuesday, July 6, 2010 - 12:38pm

by David Sterman

Among the biggest losers in Tuesday's early trading are Taseko Mines (AMEX: TGB), Ctrip.com (Nasdaq: CTRP) and Monsanto (NYSE: MON).

Top Percentage Losers --Tuesday, July 6, 2010
Company Name (Ticker) Intra-Day Price Intra-Day
% Loss
52-Week High 52-Week Low
CTrip.com (Nasdaq: CTRP) $32.05 -15.8% $72.66 $19.45
Taseko Mines (AMEX: TGB) $3.62 -7.7% $6.21 $1.40
Monsanto (NYSE: MON) $45.40 -2.5% $87.28 $45.25

*Table includes companies with minimum market capitalizations of $200 million and three month trading volumes of at least 100,000 shares. All percentage returns are listed as of 12:30AM Eastern Standard Time. Click on ticker symbols for up-to-the-minute price quotes and percentage gain data.

A Call Option on Taseko's Second Mine

Shares of Canada's Taseko Mines (AMEX: TGB) are falling -8%, continuing a slump that began in mid-April that has now taken shares down roughly -40%. At its peak, shares looked somewhat undervalued based on the company's existing Gibraltar mine (located in British Columbia -- despite the name) and a soon-to-be-approved new massive copper and lead mine roughly 100 miles away. Shares have been falling as the latter mine, known as Prosperity, has hit some regulatory roadblocks.

The Prosperity mine, which is to be leased from public lands, would provide clear economic benefits to the region, generating nearly C$400 million in annual tax receipts. But a just-released provincial assessment of the mine implies that fisheries and lakes in the area would be damaged. The federal government in Ottawa will weigh that finding when it makes a final determination. A final decision is expected to weigh the economic benefits and the environmental costs, whereas the provincial assessment panel was told to ignore the potential financial benefits.

Action to Take --> At this point, shares have fallen so far that they appear attractive simply based on the existing Gibraltar mine, with +10% to +20% upside. The Prosperity mine still has a 50/50 chance of final approval and represents a call option on the stock, should the mine be approved.

------------------------------------

Ctrip.com Facing a Double Blow

In recent weeks, concerns have built that Chinese economic activity is set to sharply cool. This could cause domestic travel to slump and would be a clear negative for Ctrip.com (Nasdaq: CTRP), which acts as an online travel agent for foreign and domestic tourists. In addition a range of foreign air carriers have announced plans during the past two weeks to sharply curtail or even eliminate any commissions paid to firms like Ctrip.com, which would pressure revenue growth rates.

Shares of Ctrip.com predictably slumped on those concerns and fell another -16% Tuesday morning. Only recently, investors saw Ctrip as the best way to play the fast-rising China tourism sector, pushing shares up more than +300% in the past two years.

Action to Take --> Even with the pullback, shares trade for roughly 30 times projected 2011 profits. During the long-term, Ctrip has a chance to become a large and dominant player in one of the world's largest tourism sectors, but near-term headwinds could keep shares under pressure for a while. Better to monitor this name rather than bottom-fish.

------------------------------------

Monsanto Slips Further

Shares of Monsanto (NYSE: MON) are off another -2% on Tuesday, right near a three-year low, even as the broader market posts a solid rally. A European Union court has ruled that farmers cannot be prevented from buying processed soymeal, even if the soybeans originally came from Monsanto's patent-protected seeds. Monsanto had already seen the ruling coming and reached an out-of-court settlement last week.

Last week, Monsanto reported fiscal third quarter results that were roughly in-line with recently lowered forecasts. Monsanto has seen a never-ending stream of bad news, as this week's court ruling typifies, but a clear case can be made for a rebound in profits and share price, as we opined recently.

Action to Take --> A combination of tremendous intellectual property, a still-robust global agricultural picture and a more farmer-friendly attitude should push this company back on the growth path. The cycle of downward earnings revisions appears to be at an end. Shares trade for about 15 times next year's EPS forecast, well below the 30 or 40 forward multiple these shares use to garner.

Shares traded at more than 40 times projected profits a few years ago, but now trade for about 16 times projected fiscal 2011 profits. This stock will never again garner such a rich multiple, but there's no reason it can't support a P/E ratio in the low to mid 20s. That would translate into about +50% upside back to around $75 a share. That's a far cry from the $150 levels seen back in 2008, but new investors won't complain about such a gain.

David Sterman does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.