Analyst Picks & Pans
Picks of the Week: Microsoft, H-P, Goldman, TiVo
QLT Inc. (QLTI)
RBC Capital upgrades to outperform from sector perform; raises price target
RBC Capital analyst Douglas Miehm said on Nov. 27 that QLT reached a settlement with Massachusetts General Hospital (MGH) in its litigation over royalties for its Visudyne treatment for wet age related macular degeneration;; the company will pay MGH $20 million for full payment of all past and future royalty obligations. Miehm said the settlement was much better than he expected.
To account for the better-than-expected settlement, Miehm narrowed his 26 cents 2011 loss per share estimate to a 24 cents loss. He upgraded the shares as he believes they are being undervalued by the market. He raised his price target to $6.00 from $4.50.
Theravance Inc. (THRX)
Cowen & Co. maintains neutral
Cowen analyst Ian Sanderson said on Nov. 27 that the FDA review deadline for the company's Vibativ compound for treatment of nosocomial pneumonia (NP) was Nov. 26; he and other Wall Street analysts see an approval delay -- likely in form of a complete-response letter. Sanderson said the key regulatory hurdle may be numerically higher mortality rates for Vibativ vs. vancomycin in Phase III trials. He sees approval for Viative for treatment of NP in the second half of 2010.
The analyst noted that with slow rollout in complicated skin and skin structure infections indication projected for Vibativ, low visibility in terms of timing, and the outcome of the anti-infective advisory committee review of the NP indication, he keeps his neutral rating on the shares.
Collins Stewart rates buy Jefferies & Co. rates buy Credit Suisse rates outperform
Analysts cautioned on Nov. 25 not to read too much into the coming departure of Microsoft Corp. finance chief Chris Liddell, which was announced the previous day.
Liddell joined Microsoft in 2005, and this year led an effort to cut $3 billion from the company's costs amid the recession. The plan included Microsoft's first mass layoffs. Liddell will step down as CFO on Dec. 1 and be replaced by Peter Klein, Microsoft said. Klein, 47, joined Microsoft in 2002 and currently is responsible for the books at the division that produces Microsoft Office and other business programs.
Collins Stewart analyst Sandeep Aggarwal in a note to investors said Liddell "has done a great job at Microsoft for the past four and half years and he now wants to take a 'CEO type' of role."
Katherine Egbert, an analyst at Jefferies & Co., also said she thinks Liddell wants to move into a CEO role. "We don't believe Mr. Liddell was forced out, nor do we think he is leaving under untoward circumstances," she wrote in a note to investors. Egbert said Klein seems a "competent replacement" for Liddell.
Credit Suisse analyst Philip Winslow said he is "encouraged by Microsoft's selection to replace Chris Liddell and believe that Peter Klein's track record suggests he will continue the focus on cost efficiency championed by Liddell."
TiVo Inc. (TIVO)
Standard & Poor's Equity Research maintains buy
S&P equity analyst Tuna Amobi said on Nov. 25 that TiVo's October-quarter operating loss per share of 6 cents, which compared with a year earlier loss of one cent, matched his estimate. He noted worse-than-projected subscriber losses, with other "lackluster" metrics, as TiVo guided expectations for January-quarter results to a $5 million-$7 million adjusted EBITDA loss and a $13 million-$15 million net loss.
Amobi sees further crucial traction on distribution and audience measurement, underscored by TiVo's latest pacts with Virgin Media (VMED) and Google Google (GOOG), among key strategic partnerships with potential long term upside.
With an imminent ruling on the company's litigation with Dish Network Corp. (DISH) viewed as pivotal to TiVo's patent momentum, the analyst keep his $14 price target. Nov. 24
Deutsche Bank keeps hold; raises estimates, price target
Hewlett-Packard Co. shares slipped Nov. 24 after the computer and printer company's fourth-quarter results showed weakness in its core businesses and that growth in PC shipments were accomplished at lower prices. Deutsche Bank analyst Chris Whitmore said without the boost from technology services, revenue would have fallen by 13% from a year ago, excluding the effects of foreign currency fluctuations.
While he raised his revenue and earnings estimates for HP, as well as his price target, Whitmore kept his hold rating because of downward pressure in HP's printing business. He said printer revenue in the quarter came in softer than expected and that he sees HP stepping up efforts to regain market share. Such actions usually include larger discounts.
Sales in China were a bright spot in the quarter, up 20 percent year-over-year, but Whitmore said margins were down indicating that HP sold more PCs but of the cheaper variety. Windows 7 did provide a boost to sales, however, the analyst said in a research note.
Whitmore raised his fiscal 2010 revenue forecast to $119.4 billion from $116.7 billion, and earnings to $4.35 per share from $4.20. He also increased his price target to $52 from $44.
Goldman Sachs Group (GS)
Bernstein lifts estimates
Despite a likely end-of-year slowdown in fixed-income trading, Goldman Sachs will top Wall Street expectations by cutting the percentage of sales it sets aside as compensation, Bernstein analyst Brad Hintz said on Nov. 23. Hintz also added that the seasonal slowdown doesn't signal that the bank's ability to profit from a recovery in credit markets has ended.
In a Nov. 23 note to investors, Hintz boosted his earnings estimates for 2009, even though sales from trading of fixed income products -- corporate and government bonds, currencies and commodities -- historically have slowed at the end of the year as traders cut risk and banks typically reduce lending.
Fixed-income sales and trading has helped buoy Goldman's results for two straight quarters.
Hintz said that Goldman will likely compensate for the seasonal slowdown by cutting the percentage of sales it sets aside to compensate employees. Over the past year, Goldman has accrued $16.7 billion for employee compensation -- that's 58 percent of pre-tax profit, he said, above 2006 and 2007 levels of 53 percent. He expects that ratio to be 36 percent in the fourth quarter. "This, of course, will substantially enhance bottom-line performance," he said.
Hintz expects Goldman to earn $19.67 per share for the year, up from a prior estimate of $18.88. Goldman is expected to post fourth-quarter results in mid-January.
Standard & Poor's Equity Research upgrades to buy from hold
S&P equity analyst Scott Kessler said on Nov. 23 that eBay recently completed the sale of some 70% of Skype for $1.9 billion in cash and a $125 million note. Kessler sees this as good news for eBay, as it can better focus on core operations, redeploy the proceeds to pursue international growth opportunities via organic investment and/or mergers and acquisitions, and move past uncertainties related to now-resolved Skype-related legal matters.
Notwithstanding some recent search challenges on eBay.com that have been fully addressed, Kessler thinks eBay will perform well this holiday shopping season, and sees the stock as attractively valued. His 12-month price target remains $26.