Highlights from Wall Street analyst research on selected stocks Friday
From Standard & Poor's Equity Research
Sandler O'Neil cuts to hold from buy
Analyst Jeff Harte says Citi (C) will consolidate 7 Structured Investment Vehicles (SIVs) with net assets of $49 billion. While this is "not end of the world", the situation has the potential to get worse. Harte says that due to high current credit ratings of SIV collateral he expects move to reduce Citi's Tier 1 ratio by only 17 basis points. However, risk of rating agency downgrades/or further valuation deterioration exists, and could place further pressure on Citi's capital ratios. While Harte expects the company will eventually get its capital and balance sheet issues behind it, and he continues to like its long-term business prospects, he says that currently there's too much uncertainty surrounding Citi's financial outlook. he cut his price target to $34.
Bear Stearns upgrades to peer perform from underperform
On Dec. 13, JetBlue (JBLU) announced Lufthansa agreed to buy about $300 million in JetBlue stock. Analyst Frank Boroch says the liquidity injection by Lufthansa buys JetBlue time to execute its turnaround. Boroch says that although fundamental challenges are still unresolved, he believes JetBlue has a superb brand. He notes the company said it would be open to consider deeper ties with Lufthansa and other airlines. Boroch thinks expectation of additional equity investments in the company, as well as short-covering, could support the shares. He sees minimal dilution from the Lufthansa investment, and maintains his fourth-quarter EPS projection of roughly 2 cents.
Take-Two Interactive Software
Cowen reiterates outperform
Analyst Doug Creutz says Take-Two (TTWO) remains his best idea ahead of its fourth-quarter earnings release. When Take-Two reports results on Tuesday, he expects revenue of $309.7 million, vs. the company's guidance of $275-$300 million, and a loss (including option expense) of 7 cents, vs. guidance for a loss of 13 to 18 cents. Creutz looks for management to give a progress report on Grand Theft Auto IV, though he doesn't necessarily expect an announcement of an actual launch date. The analyst says investors should also get more clarity on the company's balance sheet situation; he believes concerns about a potential liquidity crunch are unwarranted. Creutz expects Take-Two to ship six titles during fiscal 2008 (Oct.) that will exceed 1 million in lifetime U.S. unit sales; he expects revenue growth of 40% in fiscal 208.
Citigroup keeps hold
Analyst John Reilly Walsh says Novell's (NOVL) fourth-quarter results were mostly in line with his estimates. However, he notes Novell stock fell about 8% in post-market trading on Thursday, likely due to disappointing fiscal 2008 (Oct.) guidance. Walsh says fiscal 2007 was a year of transformation for Novell, and the company is making progress. However, with Novell's expectations of flattish fiscal 2008 revenue and 8% operating margins, he sees little in the near term for investors to get excited about. The analyst maintains his hold rating and $7.50 target price. As for EPS estimates, Walsh increased his 17 cents fiscal 2008 figure to 22 cents and his fiscal 2009 forecast to 25 cents from 20 cents. He notes the company is shedding some non-performing businesses and reducing its services revenue exposure.