S&P Stock Picks and Pans

S&P Downgrades Research In Motion to Hold

Plus: Analysts comment on Oracle, upgrade Applied Micro Circuits, and more

STORY TOOLS

S&P Stock Picks and Pans Archive

PEOPLE SEARCH

Search for business contacts:

PREMIUM SEARCH
Search by job title, geography and build a list of executive contacts

From Standard & Poor's Equity Research
Research In Motion (RIMM) : Cuts to 3 STARS (hold) from 5 STARS (strong buy)
Analyst: Kenneth Leon, CPA

Our downgrade follows a 40% rise in the stock price since late July, compared with a 6% increase for the S&P 500. Following an estimated sales rise of 30% in fiscal 2007 (February), we see 20% growth in fiscal 2008. Despite Research In Motion's success with expanded shipments overseas and the rollout of new BlackBerry models, we believe Research In Motion will experience tougher competition ahead from Motorola (MOT) and Nokia (NOK) along with Palm (PALM). Based on 30.6X our fiscal 2007 EPS estimate, a premium to peers but on faster growth, we are lowering our 12-month target price by $5 to $95.

Oracle (ORCL) : Maintains 4 STARS (buy)
Analyst: Zaineb Bokhari

Ahead of August-quarter results expected Sept. 19, we continue to forecast non-GAAP EPS of 16 cents, vs. 14 cents. We expect revenues to rise 20% to $3.49 billion, with solid growth for both software and services. We expect Oracle to target cost synergies while it integrates recent acquistions, and we look for operating margins to widen from a year ago. Despite recent appreciation, we consider Oracle shares to be attractively valued, trading at notable discounts to peer P/E and P/E-to-growth multiples. Our 12-month target rises $2 to $19, a 1.6X PEG, using our 90 cents fiscal 2007 (May) EPS estimate, below peers.

Applied Micro Circuits (AMCC) : Ups to 3 STARS (hold) from 2 STARS (sell)
Analyst: Zaineb Bokhari

Applied Micro Circuits announces that its review of past stock option grants is largely complete. While restated financials have yet to be finalized, the company expects to recognize up to $200M in stock-based compensation expense, starting in fiscal 1998 (March). We believe Applied Micro Circuits's underlying operations are stabilizing, and we are encouraged by the impending resolution of this issue. Our EPS estimates (after options) stay at 7 cents for fiscal 2007 and 9 cents for fiscal 2008. But our 12-month target price rises $1 to $3.50, which at 3.3X our calendar '07 sales per share estimate of $1.08, is within historical averages.

Media General (MEG) : Cuts to 3 STARS (hold) from 4 STARS (buy)
Analyst: J.Peters-CFA

Excluding recent acquisitions and planned divestitures, Media General reports August revenues up 2.3%. Broadcast revenues increased 7.0%, buoyed by strong political ad revenues. Publishing revenues dropped 0.9% despite a 3.3% gain in retail advertising, hurt by weakness in classified ads and circulation revenues. We are disappointed by quarter-to-date revenue results, and are concerned that weakness in publishing revenues may persist without a corresponding drop in expenses. We are lowering our '06 EPS estimate $0.08 to $3.02, and our 12-month target price $2 to 43.

Sony ADRS (SNE) : Cuts to 2 STARS (sell) from 3 STARS (hold)
Analyst: T.Amobi-CPA,CFA

We expect FY 07 (Mar.) operating losses of games division to widen by $85M-$170M, approaching $1B. We believe the delay in the PS3 launch will force Sony to carry PS3-related inventory longer than expected and lead to more inventory write-downs. We are reducing our FY 07 and FY 08 EPS estimates to $0.67 and $0.64, from $0.78 and $0.76 and our 12-month target price by $7 to $38, on blended historical price/book and P/E ratios at 1.7x and 44x, respectively. With potential games unit downside, we view the current P/E of 65X as pricey vs. TOPIX Electric Appliance sector average 40X.

DaimlerChrysler (DCX) : Reiterates 1 STAR (strong sell)
Analyst: M.Cohen

Despite today's profit warning that contemplated a possible Q4 profit for DaimlerChrysler's Chrysler group, we think the unit will be challenged to reach a Q4 operating profit. Prospects for '07 also seem to us weak, given our expectation of no volume growth in the broader market and our ongoing concerns about Chrysler's new models on pricing, product and market mix. Competitor launches in key segments should increase pressure. On the cost side, UAW concessions seem to us ever more unlikely. With Ford and GM restructuring, we question ongoing structural profitability of the Chrysler Group.

All of the views expressed in this research report accurately reflect the research analyst's personal views regarding any and all of the subject securities or issuers. No part of analyst compensation was, is or will be, directly or indirectly related to the specific recommendations or views expressed in this research report.
Standard & Poor's Regulatory Disclosure

Any advice, analysis, or recommendations contained in articles labeled "Insight from Standard & Poor's" reflect the views of Standard & Poor's, which operates separately from and independently of BusinessWeek Online. It is possible that BWOL may from time to time publish information that is not consistent with advice, analysis, or recommendations that are published by Standard & Poor's. Standard & Poor's and BusinessWeek Online are each units of The McGraw-Hill Companies, Inc.

READER COMMENTS

BW MALL SPONSORED LINKS

Free Online Practice Account Practice Forex Trading in a Live Trading Environment. Risk-Free!
Get up to $500k HSBC Term Life Ins. at HSBCusa.com Apply online today. No medical exam. No agent visit. Get instant coverage if you qualify.
48HourPrint.com You'll order from us again and again. Great service, fast delivery.
Richardson's Online Sales & Service Training Fast. Easy. Effective. Improve the selling skills of your team with Richardson’s on-demand eLearning
Practice Forex Trading Start Trading With A Free $50,000 FXCM Demo Account - Play Before Pay!

Buy a link now!

Get BusinessWeek directly on your desktop with our RSS feeds. XML

Add BusinessWeek news to your Web site with our headline feed.

Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video.

To subscribe online to BusinessWeek magazine, please click here.

Learn more, go to the BusinessWeekOnline home page