Analyst Picks & Pans

Stock Picks: Oracle, Priceline.com


Oracle (ORCL)

Standard & Poor's Equity Research Services maintains hold

S&P equity analyst Zaineb Bokhari said in a Nov. 10 note that as expected, European regulators issued an objection to Oracle's proposed acquisition of Sun Microsystems (JAVA), citing the potential for reduced competition in the database market if Oracle gains open source database provider MySQL (owned by Sun). Bokhari noted that the U.S. Department of Justice reiterated its clearance of the deal. The analyst thinks Oracle and MySQL compete at different ends of the database market and is not convinced that Oracle's ownership will limit competition.

Bokhari also thinks MySQL will expand Oracle's market reach, but "judging by current sales, not by much initially."

Priceline.com (PCLN)

RBC Capital rates outperform; raises estimates, price target

RBC Capital analyst Ross Sandler said on Nov. 10 that Priceline reported significant upside to his third-quarter estimates. He said the outperformance was broad-based, with hotel room nights accelerating to a year-over-year increase of 56%, while air tickets were up 31%. Sandler noted that there are few Internet companies in his coverage universe as large as Priceline experiencing this kind of volume acceleration at these growth rates.

The analyst also said his thesis for Priceline is based on industry-high exposure to the higher-margin hotel segment and faster growth in international regions continuing to drive above-average growth. He rised his $7.53 2009 pro forma EPS estimate to $8.21, his $9.21 forecast for 2010 to $10.04, and his $235 price target to $260. Electronic Arts (ERTS)

Kaufman Bros. maintains buy; cuts estimates

Electronic Arts reported modestly better-than-expected fiscal second-quarter results after the close of trading Nov. 9. Kaufman Bros. analyst Todd Mitchell said in a Nov. 10 note to clients that the company's non-GAAP revenue of $1.15 billion was up 2% and ahead of his forecast of $1.07 billion.

Mitchell said EA continues to be challenged by the weak retail environment, noting that company management was "chagrined", asserting software sales are down 12%-13% year-to-date and forecasting another negative comparison in October, for a drop in overall software sales in the mid- to high-single digits this year.

The analyst now looks for fiscal 2010 revenues of $4.24 billion and non-GAAP earnings per share (EPS) of 75 cents (from his prior estimates of $4.16 billion and 80 cents). For the third quarter, he sees revenue of $1.59 billion and non-GAAP EPS of 64 cents, and he looks for fiscal fourth quarter revenue of $690 million and non-GAAP EPS of 6 cents. Mitchell maintained his fiscal 2011 non-GAAP EPS outlook at $4.42 billion in revenue and non-GAAP EPS of $1.25. He also maintained his $23 price target.

GT Solar International (SOLR)

Piper Jaffray downgrades to underweight from neutral; cuts estimates, price target

After GT Solar posted lower second-quarter results, Piper Jaffray analyst Jesse Pichel downgraded the shares on Nov. 10. Pichel noted that the company's EPS of 6 cents matched his estimate. Pichel said the company's DSS furnace business is well positioned for the coming expansion cycle, and possibly a replacement cycle as the company launches its 600KG furnace next year. However, he thinks GT Solar's backlog for polysilicon reactor equipment (75% of its backlog) is at risk due to rapidly deteriorating financial conditions at its polysilicon equipment customers in China.

On anticipated lower revenues, the analyst cut his fiscal 2010 (ending March) EPS estimate from 49 cents to 40 cents, his fiscal 2011 estimate from 56 cents to 26 cents, and his $7 price target to $3.

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