Stock Picks: Starbucks, Fannie Mae, Nvidia

Plus Wall Street analyst opinions on Blue Nile, W&T Offshore, Vanguard Natural Resources, and Continental Resources

Starbucks (SBUX)

Jefferies & Co. reaffirms hold; raises price target

Shares of Starbucks Corp. perked up in premarket trading Nov. 5 after the chain said its fourth-quarter profit climbed and it lifted its fiscal 2010 adjusted earnings guidance due to improving traffic in its stores. After the close of trading Nov. 5, the company said customers increased their spending and more people visited its coffee shops in the fourth quarter, although there were fewer locations to frequent. The chain's cost-cutting measures were credited with giving its earnings a boost, as the company spent the year slashing expenses, laying off workers and reinventing the food it sells.

Starbucks adjusted profit of 24 cents per share beat the 21-cents-per share estimate of analysts polled by Thomson Reuters. Analysts' estimates typically exclude one-time items. Starbucks also raised its adjusted profit outlook for next year. It now expects earnings per share excluding one-time items to climb between 15 percent and 20 percent. The company previously expected earnings per share to grow 13 percent to 18 percent.

Jefferies & Co.'s Jeff Farmer said in a Nov. 6 client note that the quarterly results also topped his earnings forecast of 22 cents per share. The analyst said Starbucks' cost-cutting efforts have been better than expected, as it finished 2009 with $580 million in cost savings compared with a prior forecast for savings of $400 million. Farmer increased his price target on the shares to $22 from $21.

Fannie Mae (FNM)

Standard & Poor's Equity Research maintains hold; widens loss forecast

S&P equity analyst Rafay Khalid said on Nov. 6 that the mortgage giant's third-quarter loss per share of $3.47, vs. a $12.97 loss per share one year earlier, was wider than his $3.24 loss estimate, reflecting higher-than-expected loss provisions. Khalid expects Fannie to continue to suffer losses through 2010, necessitating further investments by the U.S. Treasury. He sees Fannie "facing uncertainties regarding its role in the housing market."

Khalid widened his 2009 loss per share forecast by 76 cents to a $14.05 loss and his 2010 loss forecast by $5.44 to a $14.93 loss. However, he kept his 12-month target price of $1.50.

Nvidia (NVDA)

Canaccord Adams reiterates buy

Driven by strength across all its businesses, Nvidia Corp. posted better-than-expected results for its third quarter, sending shares higher in premarket trading Nov. 6. The graphics chip maker posted earnings and revenue above Wall Street's expectations after the close of trading Nov. 5, and forecast revenue above estimates for the current quarter as well.

Bobby Burleson, an analyst with Canaccord Adams, said while all of Nvidia's businesses were strong, its GPU business performed the best, with sales up 25% quarter-over-quarter to $464.5 million. The company's total sales were $903 million. A GPU is a graphics processing unit, used mainly to process 3-D graphics.

Burleson said Nvidia experienced some supply constraints during the quarter, as its customers saw stronger than anticipated demand for their products.

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