Markets & Finance

Analyst Picks and Pans: APOL, CELG, ONNN, ZZZ


What Wall Street analysts are saying about selected stocks in the news Wednesday

Apollo Group (APOL)

R.W. Baird downgrades to neutral from outperform

Baird analyst Amy Junker said on Apr. 1 that Apollo's second-quarter results beat her estimates, but management noted increased investments in the second half which will result in more modest margin expansion than in the first half. Junker added that management warned bad debt could continue to increase as collections remain difficult amid the weak economy.

The analyst increased her fiscal 2009 (ending August) earnings per share view to $3.91 from $3.86, but cut her fiscal 2010 forecast to $4.70 from $4.79 on increased investments and higher bad debt assumptions.

Celgene Corp. (CELG)

Oppenheimer cuts estimates, price target

Celgene offered a disappointing outlook, highlighted by weak sales of its multiple myeloma drug Thalomid. Celgene said it expects to reach the low end of its annual profit and revenue targets, and forecast first-quarter results below Wall Street estimates.

Oppenheimer analyst Brian Abrahams said on Apr. 1 that although he awaits further clarity, it appears inventory drawdowns and increased patient payment assistance will lead to flat-to-down quarter-over-quarter Revlimid sales. He cut his $2.17 2009 earnings per share estimate to $2.08, and his $2.80 forecast for 2010 to $2.69. He also cut his $73 price target to $67, reflecting expectations for more measured Revlimid growth.

Despite the second-quarter misstep, Abrahams believes Revlimid's growth outlook remains strong. He thinks Celgene is still undervalued vs. its large cap peers. He kept his outperform rating on the shares.

ON Semiconductor (ONNN)

UBS upgrades to buy from neutral, raises price target

UBS analyst Parag Agarwal said on Apr. 1 that his checks in Asia indicate an improving demand outlook, especially from China. Agarwal said he hasn't seen any material deterioration in pricing, and in cases where he has seen pockets of weakness, it's been used to clear excess inventory. Given the improving order rate, he expects pricing to stay generally stable, and to see increased utilization. Longer term, he's more confident about the company's ability to generate synergies from its acquisitions.

The analyst lifted his $0.07 2009 earnings per share view to $0.12, and his $0.24 2010 forecast to $0.31. He raised his $3.60 price target to $5.

Sealy Corp. (ZZZ)

Stifel Nicolaus maintains hold

On Mar. 31, Sealy said profit slumped 71 percent, as fewer consumers lined up to buy mattresses because of a tough economy. Revenue fell 21% to $310 million from $391.9 million a year earlier. Stifel Nicolaus & Co. analyst John Baugh, who rates the stock hold, said on Apr. 1 that sales declined in the U.S. and abroad. Baugh said Sealy has suffered in the past year from poorly received Stearns and Foster mattress products and overall weakness in premium mattress sales.

Looking ahead, Baugh expects revenue to remain relatively weak in the second quarter. "Sealy is not out of the woods by any stretch," he wrote in a client note.

Baugh expects margins to improve in the third quarter from a new Stearns and Foster product line. "Sealy has received firm commitment orders from several large retailers and looks to be picking up some distribution it had previously lost," he said.


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