Analyst Picks and Pans
Stock Picks: Google, AT&T, NetApp, Avon, Tupperware
Credit Suisse keeps outperform; raises price target
Credit Suisse analyst Spencer Wang sharply raised his share price target on Google on Oct. 9, just two days after the online search leader's CEO Eric Schmidt said an economic recovery is under way in the U.S. and Europe.
Wang boosted his price target to $600 from $475. The new target implies the stock has room to rise 17% over the next year. Google's shares last crossed $600 in May 2008.
Wang said he expects Google's advertising revenue will benefit from improved consumer spending and higher ad spending.
On Oct. 7, Schmidt said Europe's economic improvement appears to be keeping pace with the U.S. He said advertising is traditionally a lagging indicator of how the economy is faring because businesses buy more ads when they have already noticed an improvement.
Wang said online search will be "one of the first advertising mediums to benefit from an advertising recovery."
S&P Equity Research reiterates strong buy; lowers estimates
S&P equity analyst Todd Rosenbluth said on Oct. 9 that ahead of the expected release of AT&T's third-quarter results on Oct. 22, he was modestly lowering his 2009 and 2010 earnings per share (EPS) estimates. Rosenbluth believes AT&T's wireless segment will remain a driver of its results, but also believes increased marketing and handset costs will help limit the company's operating margin. the analyst also expects the company's enterprise segment to remain sluggish.
Rosenbluth cut his 2009 EPS forecast by 6 cents to $2.12 and his 2010 estimate by 7 cents to $2.28. However, he still see AT&T's earnings prospects and balance sheet as relatively strong and views its dividend, yielding an above-average 6%, as stable. He maintained his 12-month price target of $31.
Jefferies & Co. keeps hold; raises price target
NetApp Inc.'s decision to resume giving guidance won praise from analysts Friday, with one saying it's a good start for the data storage company's new CEO.
"(The) economy seems to have stabilized and NetApp is benefiting from improving demand trends in storage," wrote Jefferies & Co. analyst William Choi in a note to investors. "The new CEO has a focused strategy to run NetApp as an independent best-of-breed company."
NetApp named Tom Georgens as CEO in August, replacing Dan Warmenhoven as part of what it said was a management succession process.
The Sunnyvale, Calif., company forecast fiscal second-quarter adjusted earnings between 29 cents and 30 cents per share on sales of $870 million to $885 million. Analysts polled by Thomson Reuters expect, on average, a profit of 29 cents per share on sales of $862.1 million for the quarter, which ends this month.
NetApp expects third-quarter earnings of 35 cents to 36 cents per share, excluding items, on sales of $910 million to $930 million. Analysts predict earnings of 33 cents per share on sales of $894 million.
Choi raised his price target to $30 from $22. Nu Skin Enterprises (NUS) Health Sciences (HESG)
Jefferies & Co. upgrades to buy from hold
Tupperware Brands (TUPP) Avon Products (AVP) Herbalife (HLF)
Jefferies & Co. rates buy
Rising unemployment and access to consumers in growing overseas markets are benefiting direct sellers of products including personal care items, nutritional supplements and housewares, Jefferies analyst Douglas Lane said on Oct. 9.
Higher joblessness means more salesperson candidates for direct sellers, as direct sales jobs frequently attract the unemployed or people searching for a part-time second job, Lane wrote in a note to clients.
He upgraded Nu Skin Enterprises and Health Sciences in a note to investors Oct. 9. He also raised price targets and estimates for the two companies, as well as Tupperware Brands Corp., Herbalife Ltd. and Avon Products Inc.
In the second quarter, the companies beat earnings-per-share estimates by 21.5%, on average, Lane said. He expects the five companies to beat current Wall Street estimates for 2009, especially as they benefit from favorable foreign exchange rates.
Ultra Clean Holdings (UCTT)
Needham & Co. reiterates buy
Needham analyst Y. Edwin Mok said on Oct. 9 that Ultra Clean raised its third-quarter revenue and earnings per share guidance on improvement in semiconudctor equipment demand. He believes customers have returned to ordering sub-systems and gas panels from the company, after working down finished tool inventories. Mok said that as customers' inventory days continue to improve over next few quarters, he expects Ultra Clean to outperform the semiconductor equipment industry.
Long-term, Mok believes increased outsourcing by semiconductor equipment OEMs and an expanded non-semiconductor business will enable the company to achieve earnings power that will drive the share price higher. He has an $8 price target.