Markets & Finance

Stock Picks: Citigroup, Take-Two, Taubman


Wall Street analyst opinions on selected stocks in the news Friday

Citigroup Inc. (C)

Standard & Poor's Equity Research maintains hold

S&P equity analyst Stuart Plesser said in a Dec. 4 note that in the aftermath of Bank of America's (BAC) plan to repay $45 billion in TARP capital received from the U.S. government, there is now additional pressure on Citigroup to follow suit. The biggest incentive, Plesser believes, for Citigroup to repay TARP is to remove compensation constraints that are in place for TARP participants. Plesser said Citigroup may face employee departures after bonuses are paid for 2009.

"Still, we think the government will be loathe to allow Citigroup to repay TARP until the government sells its ownership stake in Citigroup, and the company further demonstrates that chargeoffs have stabilized," the analyst wrote.

Take-Two Interactive (TTWO)

Kaufman Bros. downgrades to sell from buy; lowers price target

Brean Murray downgrades to hold from buy

Shares of Take-Two Interactive Software Inc. plunged ahead of the regular session Dec. 4 after the video game maker lowered its financial outlook again and said it probably won't meet its profitability goals for next year. The news, coming after the close of trading Dec. 3, rattled analysts and investors, who sent Take-Two shares down $3.09, or 28 percent, to $7.83 in premarket trading.

In a note, Todd Mitchell, an analyst with Kaufman Bros., said the outlook is "indicative of broader problems at the company with regards to accountability which we though had gone away." He lowered his price target to $7 from $14.

Take-Two blamed the weak forecast on disappointing sales of its "Major League Baseball" titles. The overall video game industry has weathered a tough year, with consumers cutting back on discretionary purchases. The company's chairman, Strauss Zelnick, said Take-Two won't meet its goal next year of turning an operating profit on an adjusted basis.

For the quarter that ended in October, the company expects to report earnings of 5 cents to 10 cents per share. Its forecast in September called for 30 cents to 35 cents and analysts had been expecting 33 cents. Take-Two is also expecting bigger losses for the full year and the first quarter of fiscal 2010 than Wall Street anticipated. It projects an adjusted loss of $1.10 to $1.15 per share for fiscal 2009, while analysts expected a loss of 84 cents per share. In the fiscal first quarter, it expects to lose 40 cents to 50 cents, compared with the average forecast of a loss of 26 cents.

Brean Murray analyst Andrey Glukhov said the company's "soft" 2010 outlook "is fairly frustrating".

Taubman Centers (TCO)

Oppenheimer downgrades to underperform from perform

Shares of mall operator Taubman Centers Inc. have risen too far ahead of what could be a disappointing retail season, Oppenheimer analyst Samit Parikh said on Dec. 4 as he downgraded the Bloomfield Hills, Mich., company.

Shares have risen 18 percent since early November, compared with an 8 percent increase in the RMZ, a real estate investment trust index, he said. As a result, the company's stock appears to be "too richly valued." Parikh said investors should pare their exposure to Taubman ahead of "potentially disappointing holiday sales numbers."

Taubman's "top-quality portfolio and strong balance sheet with manageable near-term debt maturities deserve a premium valuation," Parikh said. But its shares are the most expensive in the mall sector, he said.

Concerns about sales by mall tenants could undercut the value of Taubman shares, Parikh said. "While the company has noted improving trends during the fourth quarter, the holiday sales season is still in its early stages and we're not convinced that sales will be robust enough to meet investor expectations," he said.

A better-than-expected sales season is reflected in the stock's current price, he said.


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