Analyst Picks & Pans

Stock Picks: Apple, eBay, U.S. Bancorp


Apple Inc. (AAPL)

Kaufman Bros. rates buy

Apple Inc. appears to have done well over the Thanksgiving weekend even without steep discounting and despite the release of Windows 7 -- a testament to the resilience of its products, Kaufman Bros. analyst Shaw Wu said on Nov. 30 .

Wu said in-the-field checks revealed strong foot traffic at Apple stores even if Black Friday discounts were a "modest" 4% to 10% on a limited set of products. The blockbuster iPhone was not on sale.

Third-party retailers that sell Apple products were more promotional. Discounts at retailers including Best Buy (BBY), Amazon.com (AMZN), Wal-Mart (WMT), and Target (TGT) were as much as 20% compared to 11% to 13% in prior years. Some included gift cards of $50 to $150.

Apple's popularity also is remarkable given that its Mac computers sell at two to three times the price of PCs, he said. Apple has done well given competitive pressure from Windows users who are upgrading to Windows 7.

Wu said it looks like new iMacs and MacBooks are out of stock at certain retailers or in limited supply -- a good sign going into the holiday season. As such, Wu said his sales forecast of 2.9 million Macs in the quarter -- already higher than what other Apple analysts are expecting on average -- is "likely conservative."

He said the release of the Snow Leopard operating system, new iPods and desktop Macs and a potential new product is expected boost sales in coming quarters.

Ebay Inc. (EBAY)

Standard & Poor's Equity Research reiterates buy

"Cyber Monday" marks the unofficial beginning of the online holiday shopping season on Nov. 30. S&P equity analyst Scott Kessler said in a Nov. 30 note that Shop.org indicates some 97 million Americans plan to shop via the Internet on Nov. 30, up from 85 million last year.

Kessler said he expects eBay's eBay.com and PayPal units to fare well in the online shopping season, as "they will benefit this holiday season from the continuing migration of shoppers and buying to digital platforms, more creative and effective marketing and promotional activity, a better focus on consumers and users, and strengthened relationships with merchants".

The analyst kept his 12-month price target of $26.

U.S. Bancorp (USB)

RW Baird upgrades to outperform from neutral; raises price target

U.S. Bancorp's stock price makes it an attractive buy for investors, RW Baird analyst David George said on Nov. 30 as he upgraded the shares to the firm's highest investment rating. George also boosted his stock price target by $4 to $29.

U.S. Bancorp shares have slipped 10% since mid-October.

"USB shares trade at what we view as a deserved premium to other banks on our estimates of normalized earnings," George wrote in a note to investors. "Despite this premium, the stock trades at a discount to peers on consensus 2011 EPS estimates, likely due to our view that USB will achieve normalized EPS faster than peers given the companys lower-risk loan book and high pre-provision returns on capital."

The Minneapolis bank is buying small banks, adding to its earnings potential, George said, and increasing its market share through the downturn. He also expects it to be among the first of the big regional banks to raise its dividend. American Eagle Outfitters Inc. (AEO)

Lazard Capital Markets upgrades to buy from hold Stronger sales at American Eagle Outfitters Inc. over the past several weeks led Lazard Capital Markets analyst Todd Slater to upgrade the teen apparel retailer on Nov. 30.

Slater noted the retailer's sales have risen during the first three weeks of November. American Eagle gained market share during the recession as consumers stayed away from higher-priced teen apparel stores like Abercrombie & Fitch Co., he said. Slater called American Eagle "one of the clear winners" over the Black Friday weekend.

"American Eagle Outfitters appeared to benefit from stronger traffic-driving promotions," Slater wrote in a client note.

Slater said there's a chance the company will post better-than-expected fourth-quarter results, based on a successful Black Friday and November sales.

Sonic Corp. (SONC)

Wedbush Morgan upgrades to neutral from underperform

Wedbush Morgan's Rachael Rothman upgraded Sonic Corp. on Nov. 30, calling the restaurant operator's stock price appealing.

Rothman in a report to clients noted that the fast food chain operator's stock price has fallen about 20% in the past two months. He maintained his $10 share price target.

Sonic, like many restaurant operators, has struggled as consumers eat at home more often to save money during the recession. But Rothman said Sonic, based in Oklahoma City, is likely to benefit from its focus on boosting average checks with more combo meal offerings and promoting its core menu items. The company also faces easier comparisons in its fiscal second quarter ending in February, and should gain from a franchisee incentive program to open new restaurants in underserved markets, the analyst added.

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