Analyst Picks and Pans: Citigroup, Amgen, Blockbuster

What Wall Street analysts are saying about selected stocks in the news Friday

Citigroup (C)

Bank Of America/Merrill upgrades to buy from underperform

Bank Of America/Merrill analyst Guy Moszkowski said on Aug. 14 he was upgrading Citi because, in his view, credit quality is stabilizing; the technical overhang of its new share issuance is past; and given the company's new disclosure of core Citicorp vs. non-core CitiHoldings, he sees limited book-value downside potential.

Moszkowski said Citi's return on equity (ROE) in 2011, as earnings begin to normalize, is forecast at 10%-11%, so he expects Citi will, in the next 12 months trade at around book value; thus, his price target for the stock moved from $2.50 to $5.75.

Amgen (AMGN)

Citigroup downgrades to hold from buy

Citigroup analyst Yaron Werber said on Aug. 14 that an FDA panel was surprisingly cautious on Amgen's Prolia (denosumab, or dmab) which he believes will likely lead to more modest adoption than expected in a postmenopausal setting. He sees increased risk for broad-based approval in prevention of skeletal related events in an oncology setting since the FDA is "totally obsessed" with any signs of safety imbalance given dmab theoretically can lead to cancer based on its mechanism of action.

Werber believes Wall Street's dmab sales estimates will have to be cut. He lowered his $5.22 2010 EPS estimate to $5.20, and his $71 price target to $68.

Blockbuster (BBI)

Wedbush downgrades to neutral from outperform

After Blockbuster posted a second-quarter loss, Wedbush analyst Michael Pachter downgraded the shares. Pachter said on Aug. 14 that the company's second-quarter results missed expectations, and that BlockbusterI cut its 2009 guidance. Pachter believes upside potential for Blockbuster is limited until the company can restructure its heavy debt burden. He noted that the company is facing slowing customer traffic, increasing competition, and costlier debt. He said that as pressure from Coinstar's Redbox DVD rental kiosks intensifies, Blockbuster's profitability is eroding precisely when it needs to generate sufficient free cash flow to retire a large amount of debt in 12-16 months.

The analyst cut his $0.28 2009 EPS estimate to $0.01, and his $2 price target on the stock to $1.50.

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