Each morning we give a quick hit to the top Wall Street analyst upgrades and downgrades that we see. As you might expect, some calls are much better, are much more aggressive, or have much deeper insight than others. On Saturday we prefer to give you the biggest standout calls from the week. The top analyst research calls in the last week by our take covered shares of Chimera Investment Corporation (NYSE: CIM), Dendreon Corporation (NASDAQ: DNDN), Krispy Kreme Doughnuts, Inc. (NYSE: KKD), Lululemon Athletica Inc. (NASDAQ: LULU), Mosaic Co. (NYSE: MOS), NASDAQ OMX Group Inc. (NASDAQ: NDAQ) and VirnetX Holding Corp. (AMEX: VHC).
We have given color on each stock and the research call itself. Some of this week’s calls were bullish and some were not bullish at all. Much depends upon the market bias and this was also a week where research calls tended to become less aggressive in general as the three-day weekend neared. That makes the “top analyst calls” stand out from the pack even more.
Chimera Investment Corporation (NYSE: CIM) absorbed a downgrade from Jefferies early this last week as Jefferies cut its rating to HOLD on the high-dividend mortgage REIT with a $3.80 price target. Chimera is sort of like former-parent Annaly Capital Management, Inc. (NYSE: NLY) except that it was set up to buy more distressed mortgage loans when it first started out. The downgrade did not have much impact, maybe 2%, but why this matters so much is that Chimera is one of these mortgage REITS that yields well above 10%.
The belief of Jefferies is that defaults and lower returns from mortgages will cut its income versus expectations. Shares closed at $3.90 on Friday, its 52-week range is $3.51 to $4.36, and the Thomson Reuters consensus target is only at $4.22. As this company is forced to pay out 90% of its income as dividends, this call is one which may matter and it could impact many mortgage REITs.
Dendreon Corporation (NASDAQ: DNDN) was again given some of the most cautious coverage yet from Credit Suisse covered in more detail at BioHealthInvestor.com. Dendreon shares were reiterated as Underperform with a stinky $29.00 pricing target by Credit Suisse. The call here is more than controversial as it is based on competitive threats being underestimated and does not consider much about the competing candidate’s side-effects.
Krispy Kreme Doughnuts, Inc. (NYSE: KKD) was a reiterated call but one we felt was very aggressive considering its history and considering its gains. This one hit a new 52-week high of $8.99 on Friday and that was after a huge gain to $8.05 after earnings on Monday. Shares were at $8.80 late on Friday. What was an impressive call was not just that Zacks kept its #1 (Strong Buy) rating… It was that it still calls it a value stock. If you know the history of Krispy Kreme, this could be considered a very controversial call.
Lululemon Athletica Inc. (NASDAQ: LULU) has been one incredible performer. This week it was given the downward-dog position. FBR Capital Markets said enough is enough and the firm downgraded the stock to Underperform from Market Perform in a valuation call. Its price target is $80.00.
The reason we are attracted to this call is not just that Lulu has been a great performer and not just because it is an expensive stock by most metrics. Its chart has started to fade after a monumental move to the upside. Please take a look at the chart (see below) from Stockcharts.com because this shows that our first key moving average violation has taken place. If we could do a tag-along call, ours would be called “The Broken Chart of the Week.”
Mosaic Co. (NYSE: MOS) is a multi-call ‘pick of the week’ rather than just one call. Its stock has recovered from its secondary offering, in part due to analyst upgrades in support of the stock. Over the last week alone we have seen upgrades from Susquehanna, Stifel Nicolaus, and J.P. Morgan. Our own take is that Mosaic can rise through about $72 next week before it starts to stall near-term. As of right at the close on Friday, Mosaic’s stock was up five straight days as the analysts helped an oversold situation here.
NASDAQ OMX Group Inc. (NASDAQ: NDAQ) is a very interesting call if you consider that the merger exchanges are happening and that the exchange had to back off the NYSE Euronext (NYSE: NYX) buyout. Of all the exchanges, Goldman Sachs raised NASDAQ OMX to “BUY” as it said the exchange is less reliant upon transaction fees than all major peers. Goldman Sachs is also more optimistic for NASDAQ earnings power over the next two years or more than the rest of Wall Street. Shares were up over 4% at $25.38 late on Friday versus a 52-week range of $17.18 to $29.71.
VirnetX Holding Corp. (AMEX: VHC) is controversial enough of a stock on its own and it fits right into the controversial world of intellectual property companies rather than being an operating company that makes products and sells them. The company is a patent royalty company that pursues patent cases in internet security software and technology with almost 50 patents. It has gone after Microsoft, Apple, and many others, and it has either won case rulings or gotten settlements from companies. This week came an upgrade to Outperform by Cowen & Co. with the note that this could be worth 40% more. This call is gutsy, but controversial, and it had shares up over 5% at $24.34 right before the close on Friday against a 52-week range of $5.07 to $28.89.
You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.
JON C. OGG