Wednesday, May 11, 2011

Analyst Actions: RIMM, JNJ, CROX, BMY, NSM

Research In Motion (NASDAQ: RIMM): Societe Generale this morning downgraded its rating on the company to Hold from Buy. The firm also lowered its price target on the stock to $50 from $70. In a research report published today, Societe Generale stated, "RIMM's sales would be up 28% YoY while EPS would be flat YoY. However, we have seen time and again in the mobile manufacturing business that a "one-off" poor quarter can lead to a whole series of others. So while we note management's full year guidance, we are very cautious about building this into our base case. We had hoped that the extremely successful international operations would give RIMM time to introduce its new models into the US market. However, these models have been delayed and will not have the new QNX operating system when they are finally launched. As such, we believe RIMM is likely to struggle for much of the remainder of the year. We have reduced our EPS forecasts by an average of 17% over the next two years and, longer term, made the assumption that RIMM's margins fall to the handset market average of 12% as its premium pricing comes under pressure. On the positive side, the company still has over $5 cash per share, although there are concerns that it intends to bid for part of Nortel's remaining patent portfolio, as reported by Bloomberg."

Johnson & Johnson (NYSE: JNJ): Goldman Sachs on Wednesday upgraded its rating on the company to Buy from Neutral. The firm raised its price target on the stock to $77 from $64.

Crocs (NASDAQ: CROX): Standpoint Research on Wednesday lowered its rating on Crocs to Hold from Buy.

Bristol-Myers Squibb (NYSE: BMY): Goldman Sachs downgraded the company to Neutral from Buy. The firm maintained its $32 price target.

National Semiconductor Corporation (NYSE: NSM): FBR Capital Markets downgraded the stock to Market Perform from Outperform. In a research note to clients, FBR Capital stated, "We are downgrading shares of NSM from Outperform to Market Perform and raising our price target from $20 to $25 following TI's recently announced intent to acquire National Semi for $25 per share, or a 78% premium to National's prior closing price. We think this deal makes sense, with TI the only likely bidder and the best strategic fit for National Semi. The $6.5B purchase price, which TI will fund with about $3B of its own cash and about $3B−$4B of new debt, represents a P/E of about 19x (2011) and 17x (2012), not inexpensive considering National's growth rate, but not ridiculously expensive either considering the manufacturing synergies and cost reductions that TI is likely to achieve in coming years. We do expect this deal to close without issue. Net, TI's acquisition of National should allow the firm to build scale, grow its product offering, improve its manufacturing efficiencies, and accelerate EPS growth, all at a fair (but not inexpensive) price. Within analog, we prefer shares of Maxim (MXIM – Outperform) over TXN given that firm is arguably faster growing and trading at the same P/E multiple (after adjusting TI's baseband contribution)." The firm also raised its price target on the stock to $25 from $20.

Full Disclosure: None.
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