S&P Picks and Pans: GM, Priceline.com, Disney, Qualcomm, Ford, AIG, Genworth

Analysts' opinions on stocks in the news Friday

From Standard & Poor's Equity Research

S&P MAINTAINS SELL OPINION ON SHARES OF GENERAL MOTORS (GM; 4.20):

GM posts adjusted fourth quarter loss of $7.35, vs. EPS of $2.86, is wider than our $5.68 loss forecast as industry demand deteriorated. GM seems to be building its case for access to accelerated government aid, we believe, given its widening cash hemorrhage -- at $6.9 billion in the third quarter -- and its admission that in 2009, even with its various initiatives, without any change in trends and other factors, its liquidity will fall significantly short of the amount needed to operate its business. On what we see as a positive note, GM has put aside talks for a potentially disruptive merger with Chrysler. -E. Levy-CFA

S&P UPGRADES SHARES OF PRICELINE.COM TO BUY FROM HOLD, ON VALUATION (PCLN; 55.48):

After the impact of stock-based compensation, PCLN posts third quarter EPS of $2.18, vs. $1.45, well above our $1.74 forecast. Revenues rose 35%, despite slowing global economic growth and unfavorable forex, reflecting solid gains in gross bookings. Despite major headwinds, the notable third quarter EPS upside causes us to leave our 2008 EPS estimate at $5.15. However, we are cutting our 2009 forecast to $5.75 from $6.25. Based on what we consider much more conservative DCF-model inputs, we lower our 12-month target price to $75 from $130. However, we see notable value now at 9.6 times our 2009 EPS forecast. -S. Kessler

S&P REDUCES OPINION ON SHARES OF WALT DISNEY CO. TO HOLD FROM STRONG BUY (DIS; 21.80):

After $0.03 bad debt charge, September-quarter EPS of $0.40 on 6% less shares, vs. $0.44, misses S&P and Street estimates by $0.09. The slowdown is starting to weigh on U.S. parks, TV ads (ESPN, ABC), with tough film comps, vs. bright spots in cable (ESPN, Disney Channel), Euro Disney, licensing. In a sobering near-term outlook, DIS sees further sharp deterioration in park bookings and ABC/ESPN ads, while halting share buybacks. With likely added near-term challenges for film and North America retail stores, we cut our target price by $7 to $25, on sum-of-the-parts valuation. Dividend yields 1.6%. -T. Amobi - CPA, CFA

S&P DOWNGRADES OPINION ON QUALCOMM SHARES TO SELL FROM HOLD (QCOM; 33.05):

QCOM posts September-quarter GAAP EPS of $0.52, vs. $0.67, above our $0.49 estimate, before net $0.05 gain from unusual items. Revenues beat our forecast, but we see pressure in fiscal year 2009 (September) as customers deplete inventories amid macroeconomic ressure. QCOM appears to us poised to grow R&D, which should add to operating margin pressure. We are lowering our fiscal year 2009 EPS estimate (after stock options and investment costs) by $0.60 to $1.65. We are cutting our target price to $28 from $53, using a lower p-e multiple to reflect our view of risks. Despite QCOM's cash flow generation, we would sell. -T. Rosenbluth

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF FORD (F; 2.00):

Based on a preliminary report, Ford posts adjusted third quarter loss per share of $1.31, vs. $0.01, wider than our $0.89 loss forecast. Operating cash flow remained disappointingly negative and all regional categories and segments saw deteriorating profits. While fourth quarter industry sales should be the worst of 2008, greater Ford truck production should reduce the pace of cash outflows. In addition, Ford announced new initiatives to generate cash savings. However, despite sizable current cash resources, as we see lower 2009 industry sales, we are cautious about depressed Ford shares. -E. Levy-CFA

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF AMERICAN INTERNATIONAL GROUP (AIG; 1.87):

We expect AIG shares to open higher today amid unconfirmed reports in the Wall Street Journal that indicate the terms of AIG's $85 billion bailout loan may be restructured and other alternatives may be explored to ease AIG's ongoing financial woes. We would still not add to positions, as we believe any easing of terms may be accompanied by further dilution to equity holders. We are also wary of AIG's ability to sell enough assets to repay its loan, even under more favorable terms. Our $3.50 target price assumes the shares remain deeply discounted to historical averages. -C. Seifert

S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF GENWORTH (GNW; 3.33):

Third quarter operating EPS of $0.51, vs. $0.83, is below our $0.59 estimate. The shortfall reflects lower-than-expected results in retirement and protection products, and higher losses at U.S. mortgage insurance business. GNW suspends dividend and share buybacks. We believe limited financial flexibility and above-average investment losses are likely to limit share-price upside, even despite current depressed levels. But since GNW trades at a steep discount to peers, we keep our hold recommendation. We lower our 2008 EPS estimate to $1.95 from $2.21, and cut target price by $6 to $4. -B. Howlett