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Blue Nile (NILE)

Deutsche Bank upgrades to hold from sell

Shares of online jewelry retailer Blue Nile rose in premarket trading Nov. 6, after third-quarter profit rose 10% and a Deutsche Bank analyst upgraded the stock, seeing bright prospects for market share and its international business. Still, the analyst raised his price target on the shares to a level below Thursday's closing price because he thinks the stock is too expensive.

After the close of trading Nov. 5, Blue Nile said profit rose to 17 cents per share, up from 15 cents in the year-ago quarter. International sales growth was strong, and the company gained market share, Blue Nile said.

Deutsche Bank analyst Herman Leung said Blue Nile is making strides in gaining market share, given that many jewelers have gone bankrupt during the recession. Specifically, Leung said the number of jewelry businesses that have gone out of business in 2009 so far this year has risen 60% from a year ago.

Leung also said that international results are improving, which could be a bright long-term growth opportunity. An additional benefit to international business is the declining dollar. "Diamonds are transacted in U.S. dollars, and with the dollar getting weaker, we believe there is a benefit for Blue Nile in the near-term," Leung wrote in a client note.

Leung hiked his price target by $20 to $50. That means he thinks shares have room to decline about 15% from the Nov. 5 close of $58.72. "We think a discount to its historical average is warranted as the business growth (about 20 percent) is slower than its historical average," he wrote.

W&T Offshore (WTI)

Vanguard Natural Resources (VNR)

Continental Resources (CLR)

Jefferies & Co. downgrades each to hold from buy

Oil and gas exploration and production companies face pressure as near-term catalysts are limited, natural gas prices are likely to remain relatively low and stock values remain high, Jefferies & Co. analyst Subash Chandra said Nov. 6 as he downgraded stocks of W&T Offshore, Vanguard Natural Resources, and Continental Resources.

Chandra said Houston-based W&T Offshore's opportunity to increase its production and reserves at current commodity prices and services costs appears light, and assigned a $12 price target. Excluding acquisitions, he expects a double digit decline in production and reserves in 2010, despite resuming a modest drilling program in 2010.

Given expectations that natural gas prices will remain under stress for some time, Chandra expects shares of Vanguard Natural Resources to face pressure. Chandra's price target for Vanguard fell to $18 from $18.50. Shares fell 3.2% to $17.52 in premarket trading Nov. 6.

Shares of Continental Resources are trading at a substantial premium, Chandra said as he downgraded the stock. "Growth rates will have to accelerate to justify the premium," Chandra said. Still, he raised his price target for the company to $44 from $43. Shares of Continental closed at $39.23 on Nov. 5.

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