24/7 Wall St. Top 10 Analyst Calls of the Week (AIG, COG, CPST, CBOE, CTXS, JDSU, MMYT, RSH, S, WYNN)June 11, 2011 by Jon C. Ogg
Each morning we cover about 15 to 20 analyst upgrades and downgrades which we think will have an impact on the underlying stocks. After each week we review those research calls and other research calls to see which ones really stood out or which ones had the most impact on each issue. Suddenly, we end up with the top analyst calls of the week.
This week there were far more and we actually have ten top analyst calls of the week because the calls were so varied. The Top Ten Analyst Calls of the Week were in shares of American International Group, Inc. (NYSE: AIG), Cabot Oil & Gas (NYSE: COG), Capstone Turbine Corporation (NASDAQ: CPST), CBOE Holdings, Inc. (NASDAQ: CBOE), Citrix Systems, Inc. (NASDAQ: CTXS), JDS Uniphase Corporation (NASDAQ: JDSU), MakeMyTrip Limited (NASDAQ: MMYT), RadioShack Corp. (NYSE: RSH), Sprint Nextel Corp. (NYSE: S), and in Wynn Resorts Ltd. (NASDAQ: WYNN).
On each call we have given the basics, but we have also added in some detail and then added color if applicable. This week also has a real mix between the equivalent of “Buy” or “Sell” when it comes to a bias. It was amazing how many important research calls came out this week considering that there were hardly any earnings reports that would send analysts into a frenzy.
American International Group, Inc. (NYSE: AIG) was very important this week. Now that the secondary offering has been completed, many analysts in that huge underwriting group have initiated coverage. If you just look at the share price performance, AIG is now higher than the day it closed on its secondary offering went out. That was $28.28 on the close that day and shares are at $28.96 now at a time that the broad DJIA market and financials were lower. The summary ratings seen this week were as follows:
- Bank of America Merrill Lynch started it with Buy rating;
- Barclays started it with a Equal-Weight rating and a $31 target;
- Deutsche Bank started it with a Buy rating and $34 target;
- Goldman Sachs started it as Neutral with a $31 target;
- UBS maintained Neutral, lowered target to $30.
Cabot Oil & Gas (NYSE: COG) saw a huge pop when its shares were raised to Raised to Buy from Hold at Canaccord Genuity this week. Analyst John Gerdes raised his target price from $58 to $85, or 47%, and noted that it clarified the coming Marcellus infrastructure buildout and believes Cabot should add another 200 million cubic feet per day of take away capacity by late this year with a another 450 million cubic feet per day by late next year. Shares went from $55.91 to a high of $60.64 that day and a close of $58.31 on that call. The gain at one point had shares up almost 8.5% and generated a close of up 4.3% on this. That is a very large move for an established energy company worth about $6 billion in market cap.
Capstone Turbine Corporation (NASDAQ: CPST) is coming up with earnings this week and it makes turbine generator sets for use in stationary distributed power generation systems. It is one cult stock that we used to call “less dirty” energy in the green energy boom and it does have a cult following. What we could not get over was how FBR Capital Markets initiated a rating of “Outperform” and gave a $2.75 price target objective this last week. This company loses money and can be volatile after earnings. We wonder if the team at FBR stumbled upon something other than the Russian order that was announced. Their target price is $2.75 and shares rose more than 2% to $1.65 on the call (closed there Friday too). What FBR is saying is that it sees some 66% of upside remaining in the stock and that is assuming the event risk of the earnings.
CBOE Holdings, Inc. (NASDAQ: CBOE) was an interesting call from Goldman Sachs this last week. Exchanges are supposed to be consolidating and this one leads its field by far. So why did the team at Goldman Sachs cut the rating from an already-cautious “Neutral” down to “SELL” this week? Maybe it was the lock-up period expiration. Shares lost more than 2% on the call but quickly recovered to end the week at $24.26 versus a post-IPO range of $19.60 to $34.18.
Citrix Systems, Inc. (NASDAQ: CTXS) has had a good year and at $80.01 it has a market cap of about $15 billion and a 52-week range of $41.62 to $88.49. This week we saw an analyst duel occur. The stock was downgraded to “Underweight” at JPMorgan, but the target price was raised to $65 from $53 in the call. It was also raised to Outperform as Bull of the Day on Monday by Zacks based upon more excitement around virtualization, cloud, and unified communications.
JDS Uniphase Corporation (NASDAQ: JDSU) had a rough week after CIENA Corporation (NASDAQ: CIEN) had an earnings disappointment. As telecoms and major communication providers continue to consolidate, it creates an environment for what would be called “Good Hits & Bad Misses” when it comes to earnings. On Friday came a downgrade to Underperform from Zacks based upon a building inventory glut. Shares closed down almost 3% on Friday at $16.86 and its 52-week range is now $9.05 to $29.12.
MakeMyTrip Limited (NASDAQ: MMYT) is the former high-flying IPO out of India based around online travel services. Shares are trading at $22.14, down almost half from its 2010 peak of $42.88 and only a few percentage points above the post-IPO low of $20.75. We saw two calls this week that may make this one attractive. Deutsche Bank started coverage with a “Buy” rating and a $28 price target. Oppenheimer was even more bullish after raising it to “Outperform” with a price target objective of $32.00. The market was weak enough that this had little impact on the price but it leaves much upside.
RadioShack Corp. (NYSE: RSH) hit yet a new 52-week low on Friday of $12.51 and closed at $12.66. Its shares are now down almost half from the 52-week high of $23.38. THE SHACK was started in coverage at Barclays with an “Underweight” rating in what was a neutral retail segment broader call. This company just cannot win for losing.
Sprint Nextel Corp. (NYSE: S) is another stock that just cannot get any real traction. This last Tuesday came a downgrade by Stifel Nicolaus to “Sell” from an already-cautious “Hold” rating and the firm assigned a price target of $4.50 on the beaten stock. Shares only fell about 2% on the downgrade to $5.49 on Tuesday, but the stock slid the rest of the week and closed down at $5.22 versus a 52-week range of $3.70 to $6.45. Boy, isn’t that inspiring?
Wynn Resorts Ltd. (NASDAQ: WYNN) is a very unusual call for us to cover but this call stood out massively. Late Friday afternoon, when very few investors are in during summer, came word that Standard & Poor’s raised its corporate credit rating to “BB+” from “BB.” It also said it still has a “Positive” rating outlook which implies that another credit rating upgrade could come in the coming months. It is often that credit ratings matter less, but Wynn is now just one-notch shy of being considered “Investment Grade” for its bond and corporate credit ratings. The basis is the strength of cash flow in Las Vegas and around its timeline, budget, and funding plan for its planned Cotai, Macau resort. Casinos rely heavily on borrowings and Wynn has been trying to gradually pay down its debt. This will only make its borrowing costs lower and give Wynn cheaper access to capital for refinances ahead. At $131.99, its 52-week range is $73.12 to $151.73. That is very impressive if it can get rid of its “junk bond” ratings status even if it does trade at about 28-times a blended 2011-2012 earnings projection.
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JON C. OGG