Analyst Picks & Pans

Stock Picks: Cree, Google, Microsoft, New York & Co.


Cree: Wunderlich Securities initiated coverage on shares of Cree (CREE), a maker of energy-efficient lighting products, with a buy rating and 85 target price on June 8.

"The world of lighting is finally on the verge of being completely and utterly replaced by solid-state lights and Cree is leading the industry to make this happen, " wrote Wunderlich equity analyst Theodore O'Neill in a note, citing an increased focus on energy efficiency and the dramatic reduction in demand that can be achieved with conservation alone by using solid-state, light-emitting-diode (LED)-based light.

"There are 5 billion light bulbs in the U.S. and all need to be replaced … [t]hat is a $50 billion market," O'Neill said. "There is a $500 billion-plus market to replace all the light fixtures to eliminate the light bulb socket."

Further, said O'Neill, "Cree has been on the forefront of making solid-state lighting a reality since at least 1994. " He noted that the company has $998 million in cash and no debt, and said he projects that its cash balances will rise through 2012 to $1.4 billion.

Google: Standard & Poor's equity analyst Scott Kessler reiterated a strong buy rating on shares of Google (GOOG) on June 8.

In a posting on the S&P MarketScope service, Kessler said that on June 7, Apple (AAPL) Chief Executive Officer Steve Jobs predicted that Apple would account for nearly half of the mobile advertising market in the second half of 2010, offering "an impressive list of blue-chip companies " that have already made commitments to the iPhone maker's advertising platform.

"Nonetheless, we think GOOG is poised to capture significant share and revenue in the mobile advertising market, especially following the recent purchase of AdMob, " Kessler wrote. "We think its search prowess, advertising technology and partnerships, brands, and Android are significant competitive advantages ".

Microsoft: Credit Suisse equity analyst Philip Winslow maintained an outperform rating and 40 price target on shares of Microsoft (MSFT) on June 8.

In a note, Winslow said Microsoft is scheduled to officially launch Project Natal, its new motion-detecting video gaming device, at the annual E3 conference on June 13. He said he expects the company to announce the device's official name, a launch date in October, details on pricing, and software titles that are in development for the device.

"We expect Natal's release to drive a new wave of software sales—similar to a console launch, but with a better gross margin profile from peripheral as compared to console sales—as well as a higher mix of high-margin software title revenue sold into an already established console installed base, " Winslow wrote.

"[W]e expect Project Natal's price tag to be at least $75 per unit to cover the costs of the peripheral's multiple hardware components, " the analyst said. He forecasts approximately $375 million in revenue for the company's fiscal second quarter ending December, excluding the impact of incremental gaming title sales, based on 4.4 million units of Project Natal sold at an average price of $84.99.

Winslow said recent data suggest that the average selling price of Project Natal could equal $100 to $150 per device and that at least 5 million units will be available at launch in October, with further units arriving over the course of the holiday season.

New York & Co.: Brean Murray equity analyst Eric Beder maintained a hold recommendation on shares of New York & Co. (NWY) on June 8.

Shares of the women's clothing retailer fell 30 percent to 2.28 as of 1:42 p.m. in New York on June 8. The company said on June 7 that its fiscal second-quarter loss will be wider than it forecast in May and that same-store sales are expected to be flat.

Beder said in a note that he is cutting his projections even further on the company after its updated guidance for the second quarter, as management has been forced to cut prices even more forcefully in the face of weak same-store sales and a rising inventory level. Beder said he is now assuming "no semblance of a major turn" for fiscal 2011 (ending January) or fiscal 2012. He said that until the company can begin to register some level of momentum for revenue and margins, he will "remain on the sidelines."

The analyst said incoming company Chief Executive Officer Gregory Scott "will have his work cut out for him ". Beder widened his loss per-share estimate for fiscal 2011 to 49¢, from a loss of 9¢, and cut his earnings per share (EPS) estimate for fiscal 2012 to 5¢, from 10¢.


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