Picks of the Week: Yahoo, FedEx, AOL, Citi
Wall Street analysts give their buy, sell, or hold views on various stocks in the news this week
Notable Wall Street analyst opinions on stocks in the news for the week of Dec. 7-Dec. 11:
Dec. 11
Kaufman Bros. upgrades to buy from hold; raises price target
Kaufman Bros. Aaron Kessler upgraded Yahoo on Dec. 11, saying its fundamentals are improving and its search engine is doing better than suggested by a leading research firm. Kessler wrote in a note to clients that checks with ad agencies and recent comments by Yahoo executives point to continued improvement in display ad demand and prices in the fourth quarter. He also believes Internet users are clicking more often on Yahoo search ads, counterbalancing a loss of share in the number of searches it attracts.
An expected regulatory approval in the first quarter of Microsoft Corp.'s () deal to take over Yahoo's search engine could also boost the shares by about $2 each, Kessler wrote.
Kessler raised his price target on the stock to $20 from $19. His pricing model excludes the potential effect of the Microsoft deal.
UBS maintains buy; raises price target
Disney shares should outperform those of its media peers over the next twelve months, with an estimated total return of 22% over that period, wrote UBS analyst Michael C. Morris in a Dec. 11 note. He believes investor interest in Disney will rise in the coming months "as enthusiasm for early cyclical stocks wanes and comfort with the stability of core consumer trends stabilizes".
Morris cited three factors for his 2010 view: Disney's attractive valuation, above average growth, and upward revisions to earnings forecasts. He also sees a number of factors driving results in 2011-12 above analyst consensus estimates, including a "robust" film slate featuring Pixar and Marvel films, the launch of two new Disney cruise ships that will more than double capacity, modestly improving park attendance and core advertising trends, the potential for retransmission consent at the ABC Network and stations, and a stronger consumer products pipeline.
The analyst raised his price target on Disney shares to $38 from $33.
Dec. 10
Merriman Curhan Ford initiates at sell
Broadpoint AmTech rates neutral
AOL Inc. will start trading as an independent public company Dec. 10 after nearly a decade with Time Warner Inc. (TWX) -- and some analysts are already panning the stock.
The spinoff is likely to help boost Time Warner Inc., eliminating "a continual source of investor frustration" for the New York media conglomerate, BMO Capital Markets analyst Jeffrey Logsdon said in a client note.
AOL, meanwhile, has an uphill climb. "All of the company's segments are in decline," Merriman Curhan Ford's Richard Fetyko told investors in a note. He pointed out that AOL's long-declining dial-up subscriber base is likely to drag down visits to the company's Web sites. And that means fewer ad dollars -- the revenue stream AOL is counting on for its second act.
AOL has about 5.4 million Internet subscribers, down from a peak of 26.7 million in 2002. As that base continues to erode, it is looking to improve its Web sites and wring more advertising money from them.
Benjamin Schachter, of Broadpoint AmTech, has doubts about the strategy. In a note Tuesday, he pointed to traffic declines over the past nine months at AOL's Internet properties. "If the new management team cannot fix user engagement," he said, "most of the other initiatives will not mean much."
T. Rowe Price Group Inc. (TROW)
Jefferies & Co. upgrades to buy from hold; raises price target
T. Rowe Price Group Inc. was upgraded by Jefferies & Co. analyst Daniel Fannon on Dec. 10. The analyst said the asset manager is poised to grow significantly when more investors jump back into the stock market.
Fannon also raised his price target to $60 from $54. He said in a research note that T. Rowe Price will add to its market share as more customers ratchet up their investments. As the economy recovers and customers become more comfortable with their own financial positions, it is expected they will shift money into riskier investments. That will help T. Rowe Price, Fannon said.
Even with investors remaining risk averse right now, Fannon said T. Rowe Price is still able to grow at "an above average rate" because of its fixed income investment options.
Fannon forecasts T. Rowe Price will earn 57 cents per share in the fourth quarter and $2.53 per share in 2010.
Dec. 9
UBS maintains neutral; raises price target
After the close of trading Dec. 8, FedEx announced that fiscal 2010 second-quarter earnings will come in at $1.10 per share, significantly higher than the prior guidance range of 65 cents-95 cents. UBS analyst Rick Paterson raised estimates on the package-delivery company on Dec. 9.
Paterson said in a note to clients that the upside vs. FedEx's original expectations was driven by better than expected growth in international priority and domestic ground parcel shipments, and cost cutting. He raised earnings estimates for fiscal 2010 (ending May) from $2.99 per share to $3.56 per share and for fiscal 2011 from $4.03 per share to $4.50 per share.
"Our customer surveys show no indications of an inventory restocking on a broad scale, yet," wrote the analyst.
Paterson raised his one-year price target on the shares from $91 to $99.
Deutsche Bank upgrades to buy from hold; raises price target
Deutsche Bank analyst Todd Raker upgraded CA Inc. on Dec. 9, saying the business software company is poised to benefit from opportunities in the new technologies of virtualization and cloud computing. Raker also increased his target price on the company's shares to $28 from $22.
Virtualization helps companies save money on power and equipment by enabling a single computer to function like multiple machines. Cloud computing is centered on the idea of running software from remotely hosted computers rather than on the user's own machine.
Raker said that as cloud computing starts to see "significant adoption" by businesses, managing how it is used will become increasingly important. Cloud computing leads to increased service and elevated security requirements for the companies that use them, and CA's "product portfolio is well positioned to benefit," the analyst said.
"We think the Street does not fully appreciate the virtualization/cloud computing management opportunity," Raker added.
Business Exchange
Track and share business topics across the Web.
Most Popular Stories
- Three Types of People to Fire Immediately
- Lego Is for Girls
- Google's Spreading Tentacles of Influence
- Gatorade Goes Back to the Lab
- Impress Potential Investors in 12 Steps
- Three Types of People to Fire Immediately
- Which Is America's Best City?
- Lego Is for Girls
- Top B-School Stories of 2011
- Professional Women and a Secure Retirement
