Analyst Picks & Pans November 27, 2009, 1:24PM EST

Picks of the Week: Microsoft, H-P, Goldman, TiVo

(page 2 of 2)

Story Tools

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.

Nov. 23

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.

Ebay (EBAY)

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.