Picks of the Week: Amazon.com, Yahoo, Apple, Morgan Stanley

Wall Street analysts give their buy, sell, or hold views on 10 stocks in the news this week

Highlights of analyst stock opinions issued the week of Oct. 19-23:

Oct. 23

Amazon.com (AMZN)

Janney Montgomery Scott upgrades to buy from hold; raises estimates, target price

Janney analyst Shawn Milne upgraded Amazon on Oct. 23. He sees Amazon continuing to gain market share despite tough competition from online sites such as eBay Inc. (EBAY). He said the company has a good handle on costs, which will drive up earnings. Milne expects Amazon to post annual earnings growth of 25% over the next two to three years. The analyst raised his price target for Amazon shares to $135 from $82.

Milne also raised his fiscal 2009 sales and earnings estimates to $23.8 billion and $2.57 per share, respectively, from $22.6 billion and $2.38. For fiscal 2010, he raised his sales forecast to $28.6 billion from $26.5 billion and earnings of $3.10 from $2.75. The analyst's new estimates exceeded Wall Street's consensus forecasts.

Capital One Financial (COF)

Standard & Poor's Equity Research maintains buy; raises price target

S&P equity analyst Stuart Plesser said on Oct. 23 that Capital One posted third-quarter operating earnings per share (EPS) of $1.03, in line with last year's figure, and $1.11 above his estimate. Plesser said results benefited from an increase in net interest income reflecting a low interest rate environment, and higher non-interest income. Although chargeoffs increased in the third quarter, the rate of increase has decelerated and Plesser thinks they are manageable, particularly in light of Capital One's "solid" capital levels.

Plesser reduced his loan-loss provision estimates and now looks for 2009 EPS of 80 cents, vs. a previous loss of $1.19. He raised his price target by $6 to $48.

Oct. 22

EBay (EBAY)

Deutsche Bank maintains sell; raises estimate, price target

Deutsche Bank analyst Jeetil Patel said on Oct. 22 that eBay's third quarter earnings per share (EPS) of 38 cents (as adjusted), released after the close of trading Oct. 21, beat Wall Street expectations for EPS of 37 cents, aided by a weaker U.S. dollar and contributions from its Gmarket business. And yet, noted Patel, the company's core EPS looked in line or below forecasts.

The analyst said that while ad rates have been low year-to-date, ad pricing is rising while e-commerce spending hasn't picked up much. Patel said both of these industry dynamics incrementally may pressure growth and margins at eBay. Patel raised a $1.50 2009 pro forma EPS estimate on eBay to $1.53, and a $15 price target to $16.

Amgen (AMGN)

Citigroup maintains hold; cuts estimate, price target

Citigroup analyst Yaron Werber said on Oct. 22 that Amgen's third-quarter results showed strong expense cuts and growing EPS. But he noted that further Aranesp safety issues in pre-dialysis and the FDA's request for new data on Prolia's safety in cancer raise new concerns.

Werber said the FDA rejection of Prolia in treatment of bone loss in prostate cancer despite a panel recommendation raises concerns the agency is taking a tough stance on the drug's theoretical potential to cause tumor growth; this, plus an upcoming CMS panel on Aranesp reimbursement will keep the stock under pressure. Werber cut a $5.24 2010 EPS estimate to $5.10, and a $68 price target to $64.

Oct. 21

Yahoo Inc. (YHOO)

Stifel Nicolaus keeps buy; raises estimates, price target

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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