Each morning we cover the upgrades, downgrades, and initiations we see in Wall Street research calls from the analysts. Many calls offer great insight not found elsewhere, while some calls turn out to just be dead wrong and the become the dubious calls of the week. There were several very dubious calls this last week which analysts wish they could go back and take the opposite stance. We also saw some very insightful calls.
This last week’s top research calls seen were in shares of the following: Alcatel-Lucent (NYSE: ALU); Cisco Systems, Inc. (NASDAQ: CSCO); Emdeon Inc. (NYSE: EM); Gap Inc. (NYSE: GPS); HCA Inc. (NYSE: HCA); Juniper Networks, Inc. (NYSE: JNPR); Melco Crown Entertainment Ltd. (NASDAQ: MPEL); Netflix Inc. (NASDAQ: NFLX); Pandora Media, Inc. (NYSE: P); Sprint Nextel Corporation (NYSE: S); The Wendy’s Company (NYSE: WEN).
We have given a summary of each call in this week’s summary. We also included the price action and added in other color on the news if applicable.
Alcatel-Lucent (NYSE: ALU) had nothing short of a horrible week as the market hit the stock on peer weakness and then as its earnings was not up to snuff. On Friday came a big downgrade. We reported that it was cut to Sell at S&P Equity Research but it was actually cut to Strong Sell. Alcatel-Lucent remains one of the better networking and comm-equipment shares in 2011, but the week closed out at $4.05 versus $51.9 the Friday before.
Cisco Systems, Inc. (NASDAQ: CSCO) needs all the help it can get, and a bear turned into a bull. Goldman Sachs was negative for quite some time on Cisco and was right on the way down. On Thursday the firm raised its rating to Buy with a $21 price target. Unfortunately this was bad week for networking and comm-equipment stocks, but maybe the firm is trying to just hit somewhere close to the bottom rather than predict the absolute bottom as shares were $16.46 the Friday before and closed the week out at $15.97. The Thursday gain did go from $15.69 to $16.01 on the day of the upgrade.
Emdeon Inc. (NYSE: EM) had a strange week. Reports were out that Blackstone may be in talks to buy the company for $3 billion in enterprise value, including its more than $1 billion in debt. Shares of the provider of revenue and payment cycle management solutions effectively went from $13 to over $16 on the reported buyout talks, but William Blair stepped in on Thursday and cut the rating to Market Perform. That doesn’t sound as promising as speculative investors might have hoped.
Gap Inc. (NYSE: GPS) has been battered and bruised after its dismal warning killed the stock in recent weeks. But what has happened is that the cost of cotton has come crashing down and this all bodes well for Gap’s input costs and ultimately its margins. Jefferies raised the rating to Buy from Hold, but more importantly it took the price target to $25 from $16 in the call. Maybe the Gap isn’t all “cr@#” after all.
HCA Inc. (NYSE: HCA) had an awful week after its earnings showed a trend that people are having fewer expensive and elective surgeries due to harder times. This is a recent IPO and when you have a wave of huge underwriters and a huge company that suddenly goes into the confession booth on Wall Street you have to wonder who knew what and when. Certainly this hasn’t just come up as a surprise overnight. Goldman Sachs was in the underwriting group and it downgraded shares to Neutral from Buy after the earnings. Another dubious call, although the firm was far from being alone in its research. Shares closed on the lows of the week at $26.68 versus a close of $34.61 the prior Friday before. Don’t just single Goldman Sachs out alone though, Jefferies raised HCA to “Buy” the week before and many of the underwriting firms had positive ratings. Now it is a busted IPO, so maybe investors should let the rest of the analysts downgrade it and let the dust settle and then consider nibbling for a longer-term position now that the bargain bin has been found.