Stock Picks: Yahoo, Morgan Stanley, SanDisk

Plus Wall Street analyst opinions on Strategic Hotels & Resorts, LaSalle Hotel Properties, and FelCor Lodging Trust

Yahoo Inc. (YHOO)

Stifel Nicolaus keeps buy; raises estimates, price target

Yahoo Inc. shares rose in premarket trading Oct. 21 after the company posted strong profit margins for the third quarter after the close of trading Oct. 20. Yahoo's online advertising sales are still weak, but job cuts and a one-time boost from the sale of a noncore business helped lift earnings to $186 million from $54 million a year ago.

Stifel Nicolaus analyst George Askew said on Oct. 21 that Yahoo's third-quarter results beat his estimates, and the Wall Street consensus forecasts, on all major metrics including: revenue excluding traffic acquisition costs, adjusted EBITDA (operating cash flow), and cash earnings per share (EPS).

Askew said his thesis for Yahoo continues to be based on new leadership; EPS operating leverage as the company continues to close non-core businesses; an improving online ad market; upgrades to key businesses; latent value in Asian Internet assets; and an "underappreciated" search partnership with Microsoft (MSFT).

Askew raised his 2009 EPS (cash EPS before stock compensation expense) forecast from 57 cents to 62 cents and his 2010 EPS view from 60 cents to 72 cents. He also hiked his price target from $19 to $23.

Morgan Stanley (MS)

Standard & Poor's Equity Research maintains hold; raises estimates, price target

S&P Equity analyst Matthew Albrecht said on Oct. 21 that Morgan Stanley's third-quarter EPS of 38 cents, vs. the $1.32 EPS of the quarter ended August, 2008, missed his 41 cents estimate. Revenues were better than S&P expected, though, helped by better trading results and a full quarter of revenues from the brokerage joint venture with Citigroup (C). Compensation accruals were higher than Albrecht expected, however, and "real estate losses still weigh" on Morgan Stanley.

Albrecht noted that the firm took more risk and saw better returns in the third quarter, and should benefit from a growing share in the advice arena.

The analyst narrowed his 2009 loss per share estimate by a penny to 93 cents. He raised his 2010 estimate EPS estimate by 18 cents to $3.48 and our his price target by $2 to $36.

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