Analyst Picks & Pans

Stock Picks: Apple, China Telecom, Prudential Financial, Thor Industries


Apple: Kaufman Bros. equity analyst Shaw Wu reiterated a buy rating on shares of Apple (AAPL) on July 6. He raised a price target on the shares to 349, from 342.

In a note, Wu said that based on his analysis of supply chain data, there was a "high likelihood that an inventory drawdown and screen supply constraints could impact near-term shipments" of the company's iPhone over the next two quarters. He lowered estimates for iPhone shipments for the fiscal 2010 (ending September) third quarter to 7.5 million, from 9 million. For the fourth quarter, Wu raised a forecast to 10.5 million units, from 10.4 million. He kept his calendar 2010 forecast at 40 million.

The analyst raised forecasts for iPad shipments to 3.5 million, from 3.3 million, for the third quarter and to 10 million, from 9.7 million, for calendar 2010. Wu maintained calendar 2010 shipment forecasts for the company's iPod device at 9.8 million and for its Mac computers at 3.2 million.

China Telecom: Standard & Poor's Equity analyst Robert Lin maintained a hold opinion and 50 price target on shares of China Telecom (CHA) on July 6.

In a posting on the S&P MarketScope service, Lin said that the company, China's biggest fixed-line carrier, added 3.02 million net wireless subscribers in May and said that year-to-date, the company has added more wireless subscribers than he expected. "While still a small carrier in the [Chinese wireless] market, we believe the company's market share climbed to 9.2 percent, from 5.6 percent a year earlier," Lin wrote.

Lin said the company's larger wireline voice segment continued to lose customers. "{W]e forecast revenue pressure in this segment in '10 and '11, partially offsetting wireless and broadband gains," he wrote.

Prudential Financial: Janney Montgomery Scott equity analyst Larry Greenberg raised a rating on shares of Prudential Financial (PRU) to buy, from neutral, on July 6.

In a note, Greenberg said he believes an approximately 20 percent correction in shares of the second-biggest U.S. life insurer places the stock price slightly below the company's book value per share, providing "an attractive entry point" for investors.

"In our view, Prudential is a winner in the annuity space, possesses a diversified product and geographic profile, and is well capitalized," the analyst wrote.

Greenberg said his economic assumption is for "a muddle-through economy where we have modest growth and avoid a double-dip [recession]". He said that if economic conditions worsen, "our upgrade will likely prove to be untimely, but the probability will increase that PRU will use its excess capital to take advantage of market dislocations [via merger-and-acquisition deals] and create long-term value for shareholders".

Thor Industries: Soleil Securities raised a rating on shares of Thor Industries (THO) to buy, from hold, on July 6. A price target on the shares was raised to 45, from 28.

On July 2, shares of the recreational vehicle maker, whose brands include Airstream and Four Winds, said an evaluation of its accounting didn't result in any changes to previously reported financial results.

Equity analyst Elliott Schlang said in a brief note that Thor shares trade "for only 11.4 times" a 12-month forward earnings per share (EPS) estimate of $2.24. At the new price target of 45, the shares would be selling at 20 times forward EPS, he said. "Even with resolution of the review, the shares are still off about 9 percent since 3Q10 (April) results and the accounting review were reported on June 10," he noted, vs. a decline of 6 percent for the Standard & Poor's 500-stock index.

Schlang maintained EPS estimates at $1.87 for fiscal 2010 (ending July), and $2.41 for fiscal 2011.


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