Markets & Finance

Analyst Actions: AIG, Dell, J.Crew


From Standard & Poor's Equity ResearchMORGAN STANLEY UPGRADES AIG TO OVERWEIGHT FROM NEUTRAL

Morgan Stanley analyst Nigel Dally says while it's clear American International Group (AIG) still faces several challenges, the recent severe stock price decline looks overdone. He says while AIG's reputation has been tarnished by sizable losses and the resulting capital raise, he believes the company remains a clear leader in global insurance, with strong competitive advantages that are difficult for its competitors to emulate.

Regardless of how he analyzes capital or liquidity, Dally estimates AIG has surplus capital in the range of $5-$12 billion, which includes a sizable capital buffer. In his view, the financial services crisis would need to significantly deepen before AIG would be looking to raise more capital.

He has a 48 price target on the stock.

MERRILL UPGRADES DELL TO BUY FROM NEUTRAL

Merrill Lynch nalyst Jeff Fidacaro says Dell's (DELL ) $16.1 billion revenue (up 9.2% year-over-year) is above his $15.6 billion estimate and $15.7 billion consensus; $0.38 adjusted EPS is above his $0.34. He believes Dell is beginning to see revenue growth reignite owing to its growth initiatives, expansion into retail and indirect channel, which was reflected in market share gains in the first quarter.

Fidacaro notes while cost cutting benefits (including headcount reductions) are not expected to materialize until the back half of fiscal year 2009 (January), he expects significant percentage of savings could be invested as opposed to flowing through bottom line.

He raises $1.47 calendar year 2008 EPS estimate to $1.61 and $1.75 calendar year 2009 to $1.90. He sets 27 price objective.

CITIGROUP CUTS J.CREW TO SELL FROM NEUTRAL

Citigroup analyst Kimberly Greenberger says, despite first quarter strength, J.Crew's (JCG) management lowered second quarter and fiscal year 2009 guidance as summer seasonal merchandise is underperforming and economic pressures are hurting store traffic. She notes management is cutting inventory commitments to match new expected sales growth with more opportunity to adjust fourth quarter buys than the third quarter.

Greenberger continues to believes JCG has one of best assortments in the mall, but excellent merchandise execution may not be enough to combat a heavily promotional environment, particularly in basic categories (tees).

She lowers $1.85 fiscal year 2009 (January) EPS estimate to $1.70 and $2.10 for fiscal year 2010 to $2.00. Her price target is now 34, or 17 times fiscal year 2010 EPS estimate.


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