Analyst Picks & Pans

Stock Picks: Bristol-Myers Squibb, Peet's Coffee, Sirius XM


Bristol-Myers Squibb: Soleil Securities maintained a hold rating and $28 price target on shares of Bristol-Myers Squibb (BMY) on Nov. 3.

On Nov. 2, Bristol-Myers Squibb said its melanoma drug ipilimumab will need three additional months of review by the U.S. Food and Drug Administration. The agency pushed back the date when it will rule on the company's bid for approval of the biotechnology drug to March 26, 2011, from Dec. 25, 2010, the company said. The company has applied to sell the drug for application in patients with pretreated advanced melanoma.

Bristol-Myers Squibb, based in New York, "continues to be very encouraged by its interaction with FDA" and is confident about ipilimumab's development, the company said in a statement. The company has provided further data to the FDA as part of the review.

In a note, equity analyst Manoj Garg said he had expected only a "modest" revenue contribution of $50 million from ipilimumab in 2011. "[W]e are not changing our projections at this time, and will continue to monitor the situation," he said.

Garg said the stocks's "significant" premium valuation—33 percent higher than its industry peers—"sufficiently captures BMY's forward prospects … we will wait for a more attractive entry point to become engaged in the shares."

Peet's Coffee & Tea: Janney Montgomery Scott equity analyst Mitchell Pinheiro maintained a neutral rating on shares of Peet's Coffee & Tea (PEET) on Nov. 3. He raised a fair value estimate on the shares to $42, from $40.

On Nov. 2, the Emeryville (Calif.)-based company posted third-quarter earnings per share (EPS) of 28¢, topping the average estimate of 24¢ of analysts surveyed by Bloomberg. Revenue was $80.2 million, vs. the average estimate of $79.9 million.

Peet's raised its 2010 adjusted EPS outlook to a range of $1.30 to $1.33 from its prior guidance of $1.27 to $1.30. It said it sees 2011 adjusted EPS in a range of $1.53 to $1.60 on revenue growth of 8 percent to 10 percent.

In a note, Pinheiro said Peet's better-than-expected third-quarter EPS "was driven by the continued leverage in operating expenses," due to a rising percentage of the company's revenues from its higher-margin specialty business—grocery, food service, and home delivery—which now accounts for 38 percent of net sales, versus 32 percent in the third quarter of 2007.

"[T]he company has leveraged the Peet's brand and the growing preference for higher-quality coffee while being more thoughtful in its retail approach (scaling back new store openings)," the analyst wrote.

"Despite the attractive EPS growth rate" in 2010 and 2011, Pinheiro said he believes that the stock's current valuation "leaves little upside."

Sirius XM Radio: Wunderlich Securities equity analyst Matthew Harrigan maintained a buy rating on shares of Sirius XM Radio (SIRI), the only U.S. satellite radio broadcaster, on Nov. 3. He raised a price target on the shares to $1.75, from $1.50.

In a note, Harrigan said the price target increase came ahead of the company's announcement of third-quarter results on Nov. 4, largely on the assumption of an increase in U.S. vehicle sales to a 12.0 million seasonally adjusted annual rate in 2011.

Harrigan said a recent increase in the share price is likely due to both an improving U.S. economy and the company's Oct. 13 announcement that it added 334,727 net subscribers in the third quarter, compared to a net subscriber gain of 102,295 in the third quarter of 2009.


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