Markets & Finance

S&P Picks and Pans: Activision, Amgen, Lennar, Tribune


Analysts' opinions of stocks in the news

From Standard & Poor's Equity ResearchS&P DOWNGRADES OPINION ON SHARES OF ACTIVISION (ATVI; 26.01) TO HOLD FROM BUY

ATVI signs a definitive agreement to merge with Vivendi Games, subject to customary approvals. Shares of Vivendi Games will be converted to 295.3 million new shares of ATVI stock. Additionally, Vivendi will purchase 62.9 million ATVI shares at $27.50/share, resulting in it owning a 52% stake in the combined company. ATVI expects the deal to improve operating margins by 3%-4% from higher operating leverage and $30-$50 million in cost synergy, and EPS by $0.20 in 2009. While we are positive about the deal, we believe the tender offer to acquire additional shares at $27.50 will limit near-term upside. - J.Yin

S&P REITERATES BUY OPINION ON SHARES OF AMGEN (AMGN; 54.40)

Interim Phase III Aranesp data in neoadjuvant breast cancer patients showed no survival or tumor progression effects that were statistically significant, despite numerically negative trends. Final data is expected in early 2009. Though we see the potential for refreshed safety concerns, we do not expect any resulting material sales or regulatory impact, since the trial is dosing Aranesp to maintain hemoglobin levels at 13.6 g/dL, above Aranesp's approved label, and above both FDA's target and Medicare's proposed reimbursement caps. We are keeping our 12-month target price at $64. -S.Silver

S&P REITERATES HOLD OPINION ON LENNAR (LEN; 15.84)

We are positive on today's announced formation of a joint venture between Morgan Stanley (MS) and LEN, whereby MS will pay $525 million to LEN for an 80% equity stake in acquired land with a net book value of $1.3 billion. The assets acquired consist of 11,000 homesites in 32 communities in CA, CO, FL, MD, MA, NE and NJ. We think this is a creative way for LEN to downsize its asset base during the weak housing market, and we expect LEN to get paid a fee for developing these properties in the future. With LEN trading at 0.5 times price-to-book value, slightly below peers, we would hold. - K. Leon-CPA

S&P DOWNGRADES TRIBUNE (TRB; 31.04) TO HOLD FROM BUY, ON VALUATION

FCC approved waivers allowing TRB to continue owning both newspaper and broadcasting cos in the same market, subject to possible rule changes from an ongoing FCC review of cross-ownership limits. We believe TRB and investor Sam Zell remain committed to the planned go-private transaction and we think this FCC ruling clears the way for the deal to be completed by end of 2007. In our view, the last hurdle to the deal's completion is for TRB to meet financing conditions, which we think they will. After recent share appreciation towards our $34 target price, we downgrade. - J.Peters-CFA


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