Analyst Picks & Pans

Stock Picks: Amazon.com, Apple, Ford, Intuit


Amazon.com Inc.: Goldman Sachs added shares of Amazon.com Inc. (AMZN) to its Conviction Buy list on June 7. It raised a price target on the shares to $190 from $180.

In a note, Goldman equity analyst James Mitchell said he estimates that the online retailer's China business may add about $1 billion per year to its revenue growth starting in 2011, and that China may contribute about 10 percent of the company's global revenue by 2015.

The analyst, citing the potential for growth in book and electronics sales in China, raised his forecast for Amazon's compounded annual growth rate for revenues in 2010-2013 to 25 percent from 22 percent, above the Wall Street consensus projection of about 22 percent. He also raised his earnings-per-share (EPS) estimates for 2011 to $4.78 from $4.66, and for 2012 to $6.10 from $5.76.

Apple Inc.: Macquarie Capital USA analyst Richard Choe reiterated an outperform rating and $325 price target on shares of Apple Inc. (AAPL) on June 7.

Apple was expected to unveil a new iPhone on June 7, with analysts predicting that Chief Executive Officer Steve Jobs will deliver a refashioned chassis and added features designed to fend off a threat from Google Inc.

Jobs is set to give the keynote address at the company's Worldwide Developers Conference in San Francisco, a forum he typically uses to showcase new products. Apple has updated the iPhone each summer since the device's debut in June 2007.

In a note, Choe said he expects the focus at the conference to be the new OS 4 operating system for the iPhone, as well as the refreshed iPhone model. Choe noted that OS 4 provides "substantial software enhancements with multitasking, folders, enhanced e-mail, iBooks, iAd [mobile advertising platform], and enterprise features." He said he expects the key features to be the new A4 processor for enhanced processing speed and low power usage, a large battery for longer life, and a camera on the front of the device for video chat.

Choe said that with the company's December 2009 acquisition of music-streaming service Lala, and its "massive" data center in North Carolina, he expects Apple "to move iTunes to the cloud so users can stream and access content from anywhere."

Ford Motor Co.: Credit Suisse equity analyst Christopher Ceraso maintained an underperform rating and $10 price target on shares of Ford Motor Co. (F) on June 7.

In a note, Ceraso said he thinks the current Wall Street consensus estimate for the automaker's 2011 earnings "would require a profit margin that meets or exceeds Ford's all-time highs from the late 1990s."

"[W]e do not think Ford's current product profile or market position warrant such a lofty profit margin," Ceraso wrote.

The analyst said that in the late 1990s, as much as 90 percent of Ford's U.S. sales volume was in product segments where the company held a dominant market position of 20 percent or more. Through the mid- and late 2000s, the share of sales in dominant segments sank to the 40-to-60-percent range, he said; "unfortunately, profitability followed." Ceraso said that year-to-date in 2010, Ford's volume in dominant segments is in the 55-to-60-percent range. "We forecast it will rise to about 65 percent next year, which is a big improvement from [around] 40 percent in 2008-2009, but may not support record profitability," he said.

The analyst said that he was maintaining an underperform rating "in light of what still seems to be very bullish sentiment toward the stock that may prove to outstrip reality."

Intuit Inc.: UBS Securities initiated coverage on shares of Intuit Inc. (INTU), the world's biggest maker of tax-preparation software, with a buy rating and $43 price target on June 7.

In a note, UBS equity analyst Brent Thill said that Intuit has the dominant software franchise for small businesses and tax filers, "yet we believe low [market] penetration affords potential for double-digit [revenue] growth even from fiscal 2009's sizable $3.1 billion." Thill said that with 96 percent of the company's revenues coming from the U.S., Intuit has minimal exposure to the EMEA (Europe, Middle East, and Africa) economies.

"We are comfortable recommending this high-quality story with renewed growth, expanding profitability, and generous cash-flow generation," Thill wrote.


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