Analyst Picks & Pans

Stock Picks: AIG, Apple, AutoZone, Las Vegas Sands


American International Group: Standard & Poor's equity analyst Catherine Seifert maintained a hold rating and 38 price target on shares of American International Group on June 1.

On June 1, AIG said it has rejected a request from Prudential (PUK) to cut the price of its $35.5 billion offer for AIA Group, AIG's Asian life insurance unit.

New York-based AIG "will adhere to the original terms of its previously announced agreement with Prudential," it said in a statement. Prudential said it had proposed a revision to the terms of its acquisition of AIA that would have reduced the price to $30.4 billion, according to a statement e-mailed from the London-based company today.

"Unless the tone of these negotiations change[s] materially, we expect AIG will seek to sell its interest in AIA via an initial public offering, which would take longer to complete," Seifert wrote in a posting on the S&P MarketScope service. Seifert said she expects AIG shares to remain volatile, and that the 38 price target represents "a peer-average multiple to tangible book value and a discount to stated book value".

Apple: Kaufman Bros. equity analyst Shaw Wu reiterated a buy rating and 320 price target on shares of Apple (AAPL) on June 1.

On May 31, Apple said it had sold more than two million iPads

in the first 60 days of the video-playing tablet computer's availability in stores.

The iPad, which made its debut in the U.S. on April 3, became available in national markets that include Japan, France, and Canada on May 28. More countries will follow this year, Cupertino (Calif.)-based Apple said in a statement. Apple is "working hard to build enough iPads for everyone," Chief Executive Officer Steve Jobs said in the statement. Apple was forced to delay the international release of the $499 iPad after underestimating demand in the U.S.

"This milestone is well ahead of consensus expectations of approximately 1.6 million to 1.7 million units, not to mention our estimate of 2 million," Wu said in a note.

The analyst said customer adoption of the iPad continues to be better than expected and is now augmented by the device's availability in international markets.

"We had believed that the key to success for the iPad would be around the development of iPad-specific apps that would take advantage and showcase its larger screen and more powerful processor," Wu said. He noted that there are 5000 iPad-specific apps available, in addition to the 200,000 available for iPhone and iPod touch.

Wu raised iPad sales estimates for the fiscal third quarter to 2.7 million iPads (from 2 million) and for calendar 2010 to 8 million (from 6.3 million). He also raised revenue and earnings per share (EPS) estimates for the third quarter to $14.4 billion and $2.97, from $14 billion and $2.90, respectively.

"We continue to believe that AAPL is positioned to outperform in this tough macroeconomic environment with its defensible strategic and structural advantages and its vertical integration," Wu wrote.

AutoZone: Morgan Joseph equity analyst Jeffrey Blaeser reiterated a buy rating on shares of AutoZone (AZO) on June 1. He raised a price target on the shares to 215, from 186.

In a note, Blaeser said AutoZone, the biggest U.S. auto-parts retailer, reported "blowout" fiscal third quarter results on May 25. He said EPS of $4.12 were up 32 percent year-over-year and 57¢ above his expectation; revenues for the quarter rose 10 percent from the year-earlier period on a 7 percent gain in same-store sales, vs. his expectation of flat growth.

Blaeser said that AutoZone's sales appeared to benefit from market share gains, increased parts availability, an expanded average sales ticket, increasing customer accounts, and "strong" 15 percent commercial sales growth.

"AutoZone continues to spend prudently and opportunistically, in our opinion, with more investments during periods of growth with an eye toward maintaining … leverage [of selling, general, and administrative costs]," Blaeser wrote.

The analyst increased his EPS estimates for the fiscal fourth quarter to $5.34, and for fiscal 2011 (ending August) to $16.53.

Las Vegas Sands: Janney Montgomery Scott equity analyst Brian McGill raised a rating on shares of Las Vegas Sands (LVS), the casino company controlled by billionaire Sheldon Adelson, to buy, from neutral, on June 1. He raised a fair value estimate on the shares to 30, from 25.

"Given the continued strength in Macau and the possibility of further upside to our estimates in Singapore, we have upgraded [the] shares," McGill wrote in a note.

"The Macau market remains too hot to continue to ignore, in our opinion," McGill wrote. He said the Macau market will likely post higher revenues in the second quarter than the Las Vegas Strip did in all of 2009.

The company's Marina Bay Sands property in Singapore "is off to a strong start" even though it is not fully finished, the analyst said. He estimates that the property "could grow close to $1 billion in EBITDA" by 2012.

McGill said he also assumes a modest recovery by 2012 for the company's operations in Las Vegas. "If the market [were] to strengthen beyond our expectations, it could drive upside" for the shares, he said.


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