Analyst Picks and Pans

Analyst Picks and Pans: RIMM, AKAM, ALKS, KMX


Research in Motion (RIMM)

Credit Suisse upgrades to neutral from underperform

Credit suisse analyst Kulbinder Garcha upgraded the shares on Apr. 3 following RIMM'sfourth-quarter results and solid first-quarter outlook. Garcha said the company's smartphone share gains appear to be higher than he had expected. He sees a higher level of market share likely sustainable in the near term given continuing carrier promotions and the benign competitive environment ahead of launch of several high-profile products this summer. Garcha also cites resiliency in replacement rates, even in the current environment.

The analyst increased his $2.94 fiscal 2010 (ending February) earnings per share estimate to $4.07, and his $3.46 EPS forecast for fiscal 2011 to $4.69; he also increased his $37 price target to $61.

Akamai Technologies (AKAM)

Citigroup downgrades to hold from buy

Citi analyst Mark Mahaney said on Apr. 3 that Akamai shares recently traded within 2% of his $22 target, so he now sees the risk-reward as less compelling. Mahaney continues to view Akamai as a core Internet stock, but he would prefer an entry or adding price below $18, which would provide 20%+ upside to his price target. The analyst said his core thesis has not changed since his Feb. 5 upgrade; among other things, fourth-quarter gross margin stabilization factors seem sustainable, and comparisons get easier in 2009. He noted that savings from job cuts will also help.

Mahaney maintains his EPS estimates of $1.71 for 2009, $1.95 for 2010, and $2.19 for 2011.

Alkermes Inc. (ALKS)

Roth Capital downgrades to hold from buy

Roth analyst Scott Henry said on Apr. 3 he downgraded the shares after an FDA panel meeting on Liraglutide (a competitive compound from Novo Nordisk), which cast a cloud on the long-acting GLP-1 class due to concerns of thyroid C-Cell tumors. Henry said the risk impacts the royalty stream that Alkermes receives on Amylin/Lilly's type 2 diabetes drug Exenatide LAR, which includes timing and approvability of the soon-to-be-filed drug.

Henry lowered his odds of a "timely" approval to 33% from 50% for Exenatide LAR. In turn, he lowered his $14 price target on Alkermes to $13.

CarMax Inc. (KMX)

Wachovia downgrades to underperform from market perform

On Apr. 2, CarMax posted fourth-quarter EPS of 17 cents. Wachovia analyst Richard Kwas said he's surprised to hear traffic has not improved materially given recent industry data on used-car sales. He believes increased competition from franchised dealers and greater availability of CPO (certified pre-owned) vehicles marginalized CarMax's competitive edge (its market share was down this quarter). Kwas believes high new vehicle inventories are likely to continue into the summer months, which should lead to further discounting.

The analyst cut his fiscal 2010 (ending February) EPS estimate from 22 cents to 13 cents. He has a revised valuation range of $7-$8.50.


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