Stock Picks: Netflix, Boeing

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Broadpoint also raised its price target to $76 a share based on a p-e multiple of 18 times estimated 2011 earnings and a multiple of 13 times estimated free cash flow. The stock currently trades at only 11 times estimated free cash flow. The Air Force refueling tanker program isn't factored into Broadpoint's model. If Boeing wins the contract, the tanker could generate $25 billion to $30 billion in sales (of 179 tankers) over the next decade.

Qualcomm (QCOM)

Morgan Keegan downgrades to market perform

ThinkEquity downgrades to hold from buy, target price of $42

Qualcomm surprised investors on Jan. 27 with a reduced forecast for 2010 and profit guidance for the second quarter that was below analyst projections. The San Diego company said it was seeing lower selling prices for its mobile phone chips from developed regions of the world.

Morgan Keegan analyst Tavis McCourt said in a client note that Qualcomm is likely suffering the effects of Samsung and LG, its largest customers, fighting to maintain market share against such rivals as Nokia (NOK), Research in Motion (RIMM) and Apple (AAPL), which have strong products in the high-end portion of the market.

"After years of taking share with relatively little (price) erosion due to substantial success selling touch screen handsets in Europe and the U.S. with little competition, we believe LG and Samsung are starting to feel the pressure of Nokia being a better competitor on the high end, Apple and RIM reaching a size where they are making a bigger difference every quarter, and Android handsets taking share in the important U.S. market," McCourt wrote. "We believe this has forced LG and Samsung to be more price competitive in nearly every geography in order to maintain share, which then has a domino effect across the industry."

In a Jan. 28 note, ThinkEquity analyst Vijay Rakesh diagnosed the same problem besetting Qualcomm's sales. "We believe if current competitive trends and mix effects continue as in the last three quarters, it could mute EPS upside," Rakesh wrote. Beyond that, however, "we believe the longer-term story for QCOM is still intact."

Morgan Keegan now expects Qualcomm to post full-year revenue of $10.6 billion, down from $11.3 billion and per-share income of $2.14, down from $2.26. ThinkEquity projects sales this fiscal year of $10.46 billion, down from $11.2 billion. Earnings per share for 2010 are pegged by Rakesh at $2.18, down from $2.25. He has a target price of $42 for Qualcomm. The stock dropped nearly 15%—the most in 16 months—to $40.35 in afternoon trading.

Gentex (GNTX)

Robert W. Baird upgrades to outperform from neutral

Before the market opening on Jan. 28, Gentex reported earnings of $30 million, or 22¢ a share in the fourth quarter, vs. a loss of $10.4 million, or 8¢ a share, a year earlier on a 45% gain in net sales. The maker of automatic-dimming rearview mirrors and commercial fire protection products beat the average analyst profit forecast by 4¢ per share and the consensus revenue estimate by $13.6 million.

Based on CSM Worldwide's light vehicle production outlook for the first quarter, Gentex said it now expects net sales to jump 80% to 90% year-over-year in the first three months of 2010, compared with the consensus view of a 69.6% rise in sales. The company noted that the global auto market still looks somewhat unstable.

David Leiker at Robert W. Baird raised his rating on the stock to outperform from neutral and cited stronger new business growth, which is closer to 15% to 20% than the 10%-12% range in the past, and a historically high incremental contribution margin.

"The company has the potential for double-digit revenue growth over the longer term from growing [market] penetration, which is currently in the low 20% range, and improving mix from better feature adoption," Leiker said in his note. Gentex's market penetration is improving based on the company's move toward lower-priced vehicles and increasing adoption of auto-dimming exterior mirrors by several OEMs, such as Ford (F), Volkswagen, and Honda Motor (HMC), the note said.

Baird also predicts Gentex's margins will begin to recover over the next few years as the company is able to spread its fixed overhead costs over a bigger revenue base once double-digit revenue growth resumes.

UAL Corp. (UAUA)

Stifel Nicolaus reiterates buy

Next Generation Equity Research reiterates buy, raises target price

The parent of United Airlines turned in a better-than-expected financial performance in the last quarter of 2009 and said business-travel demand appeared to be rebounding smartly this winter. Much of the good news concerned sales that were higher than most analysts expected: $4.19 billion compared with the forecast of $4.09 billion, according to Bloomberg.

Stifel Nicolaus analyst Hunter Keay boosted his estimate of revenue per available seat mile (PRASM), an industry measurement of seat profitability, to 9% from 7.2% due to strong pricing airlines expect this year. "System load factors appear to be close to reaching peak levels implying an imminent industry-wide effort to pursue yield growth," Keay wrote.

In a Jan. 28 note to clients, Next Generation analyst Dan McKenzie raised his target price on UAL shares from $19 to $20. Keay established a $17 target on the stock, which traded at $12.39 on Thursday. "A better earnings outlook drives better valuation," McKenzie wrote.

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