Stock Picks: AIG, Palm, Wynn Resorts, Fluor

Wall Street analyst opinions on stocks making headlines in Friday's market

American International Group Inc.: Standard & Poor's equity analyst Catherine Seifert maintained a hold recommendation on shares of American International Group Inc. (AIG) on Feb. 26.

AIG, the insurer rescued by the U.S., posted a fourth-quarter loss on Feb. 26 on charges tied to paying down its bailout debt and boosting commercial insurance reserves. The net loss of $8.87 billion, or $65.51 a share, narrowed from $61.7 billion, or a reverse-split adjusted $458.99, a year earlier when AIG posted the biggest loss in U.S. corporate history. The operating loss, which excludes some investment results, was $53.23 a share, missing the $3.94 average loss estimate of three analysts surveyed by Bloomberg.

Seifert said in a posting on the S&P MarketScope service that AIG's fourth quarter operating loss per share of $52.53, vs. a $287.69 loss one year earlier, and full-year $46.40 loss, vs. a $395.28 loss, reflected numerous unusual items excluded from her operating EPS estimates of $2.00 for the fourth quarter and $3.51 for all of 2009.

"Our takeaway from these results is that AIG's core insurance units remain weak, and that a high degree of execution risk remains in AIG's turnaround strategy, the analyst wrote.

Seifert cut her price target on the shares by $2 to $30, under the assumption that AIG trades at a discount to its stated book value. Seifert said she believes AIG's tangible common equity, which was a deficit of $162.06 per share at Sept. 30, is still negative.

Palm Inc.: BMO Capital Markets analyst Tim Long maintained an underperform rating on shares of Palm Inc. (PALM) on Feb. 26.

Palm, the maker of the Pre phone, said after the close of trading Feb. 25 that sales this year will be "well below" its forecast because customers aren't buying devices as quickly as expected. The company had initially projected sales of at least $1.6 billion for the year ending in May. Revenue in the fiscal third quarter will be $310 million at most, Palm said. Analysts projected $409.3 million, according to the average estimate in a Bloomberg survey.

In a Feb. 26 note, Long said that Palm's update third-quarter revenue guidance was well below his estimate of $379 million and even further below the Wall Street consensus view of $425 million. Long also noted that Palm indicated that fiscal 2010 revenues would fall below its previously forecasted range of $1.6 billion to $1.8 billion.

Long said he believes the company expected Verizon Wireless to drive increased revenue in the second half of fiscal 2010. "[w]e believe sell-through has lagged because carrier promotion was limited, and Palm is shipping what is essentially a six-month old device [the Pre] with limited differentiation," the analyst said. Long added that he thinks Palm now has "sizeable" channel inventory issues at Sprint and Verizon, "which will make for an even tougher fourth-quarter as their lineup ages".

The analyst lowered his pro forma estimates for fiscal 2010 to a loss of $1.36 per share from a loss of $1.04; and for fiscal 2011 to a loss of $1.11 per share from a loss of 87 cents. He also lowered his price target on the shares to $5 from $9.

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