24/7 Wall St. Top Analyst Calls of the Week (AVP, BBBY, FSLR, KND, NFLX, POT, RSH, RGLD, SIRI, S, TLAB, WFM, CSCO, BIDU)October 29, 2011 by Jon C. Ogg
Each morning 24/7 Wall St. issues its list of some of the key analyst upgrades, downgrades, and initiations seen from Wall Street research firms. We review these calls and other calls made throughout the week to see which stand out the most. Some are great calls that were greatly insightful. Other calls may be relevant well into the future, and some calls turn out to be total duds that were very painful for the analysts who made them (and the traders that listened). After reviewing and filtering all of these research reports, we end up with the top analyst calls of the week.
This weeks top analyst calls were in the following stocks: Avon Products Inc. (NYSE: AVP); Bed Bath & Beyond Inc. (NASDAQ: BBBY); First Solar Inc. (NASDAQ: FSLR); Kindred Healthcare, Inc. (NYSE: KND); Netflix, Inc. (NASDAQ: NFLX); Potash Corp. of Saskatchewan (NYSE: POT); RadioShack Corp. (NYSE: RSH); Royal Gold, Inc. (NASDAQ: RGLD); Sirius XM Radio Inc. (NASDAQ: SIRI); Sprint Nextel Corporation (NYSE: S); Tellabs Inc. (NASDAQ: TLAB); and Whole Foods Market, Inc. (NASDAQ: WFM).
We have a runner up call in Cisco Systems, Inc. (NASDAQ: CSCO) and we also have a highlight on Baidu, Inc. (NASDAQ: BIDU) despite some valuation concerns.
We have compiled the ratings news and relevant data around the reaction to each or around the implications on each. Color has also been provided if relevant on the name.
Avon Products Inc. (NYSE: AVP) had an awful post-earnings week due to a drop and due to an SEC investigation. On Friday came news that Citigroup was reiterating a “Buy” rating as the worst is likely price in. The problem is that Citi highlighted more negative than positive and it cut the target to $22 from $29 in the call. Around $19.00, that is not really enough upside even if the stock is now getting “cheap.” Avon was cut to “Neutral” by UBS on Friday.
Bed Bath & Beyond Inc. (NASDAQ: BBBY) rarely pulls back very much, Shares were down over 3% on Friday because Morgan Stanley initiated coverage with a quite boring “Underweight” rating. Interesting considering that its client base never spends like there is a recession. On Wednesday Bed Bath & Beyond was reiterated at “Buy” and the target was raised to $70 at Argus.
First Solar Inc. (NASDAQ: FSLR) may have taken more downgrades after its CEO firing/resignation SNAFU, but at least one analyst is defending the position. Argus came out and lowered the price target to $90.00 but the firm is maintaining its “BUy” rating. This one has gotten so ugly that perhaps there is some value. We just hate trying to think about former high-flying stocks as “value” because it means things went really bad. Interestingly enough, shares bounced more than 20% from the lows of the week.
Kindred Healthcare, Inc. (NYSE: KND) may have been beaten up too much during the malaise around healthcare reimbursement rates. We would caution that earnings are due this coming Thursday (NOV 3). In July this was above $20.00 then the reimbursement rate woes came on at the time as a bad sell-off. Zacks has finally said enough is enough and named it the Value Stock of the Day this last Thursday as the research shop sees this trading well under ten-times next year’s earnings estimates.
Netflix, Inc. (NASDAQ: NFLX) is a stock where the analysts got this one very wrong. It seems that what Reed Hastings “should do” is the opposite of what he really does. Here is how many downgrades came after the fact this week: Citigroup, JPMorgan, Goldman Sachs, and Janney. Too bad the whole analyst crowd was looking at the chart upside down. Keep in mind that shares rose close to $10.00 from the lows of the week.
Potash Corp. of Saskatchewan (NYSE: POT) was downgraded to a “Sector Perform” rating from a prior “Outperform” rating late on Thursday by Scotia Capital. The firm believes the post-earnings rise is going to face headwinds ahead due to difficulty in passing on price hikes in Asia and South America. Scotia also believes higher competition is heading its way in the years ahead. Shares were still up and around $51.00 compares to a consensus price target of $66.00.
RadioShack Corp. (NYSE: RSH) saw a post-earnings belly flop. The news is not good and if you have been to a Radio Shack lately you may know why: the stores are just dead quiet from what we see compared to elsewhere. Goldman Sachs once tried to get real gutsy here by adding it to the Conviction Buy List, but it downgraded the rating to Neutral after the earnings report. That is an analyst saying like the kids… “I want my momma, I want my momma. I wanna Do-Over game here!” Not very impressive at all. To make matters more interesting, Morgan Stanley came out with a much more value oriented Overweight rating on the stock.
Royal Gold, Inc. (NASDAQ: RGLD) had a solid week as shares were at $63.92 the prior Friday and shares were challenging the $73-handle this last Friday. We saw two analyst upgrades earlier in this last week: Raised to Overweight at HSBC; Raised to Outperform at National Bank. Not bad, not bad at all.
Sirius XM Radio Inc. (NASDAQ: SIRI) keeps getting credit ratings upgrades. This last week brought a credit rating from Standard & Poor’s. Oddly enough, it is getting closer and closer to investment grade and there is no real S&P fear of competition from Pandora Media, Inc. (NYSE: P). Sirius shares were up only marginally this last week.
Sprint Nextel Corporation (NYSE: S) is usually bashed by analysts. We have seen waves of downgrades. That was not the case on Friday. Macquarie went out on a limb and raised its rating to “Outperform” as news was out that a Clearwire agreement and as news of debt financing are circulating after it beat earnings with a narrower loss than expected.
Tellabs Inc. (NASDAQ: TLAB) had a sad week and it may be about to be even more sad despite its cheap “value stock” status. We saw 3 analyst downgrades this last week, but more important was that it was on three days in a row. More pain, or the final capitulation? Wall street sees more pain after losing 10% from its pre-earnings price.
Whole Foods Market, Inc. (NASDAQ: WFM) is the “Boy I sure got that one wrong” call. Credit Suisse raised the rating from Underperform to Neutral after being wrong for so long. This happened as shares are within spitting distance of a 52-week high. They had this one wrong all the way up, and frankly the new rating doesn’t offer any guidance.
Cisco Systems Inc. (NASDAQ: CSCO) is probably a runner-up more than anything, but there is yet one more change of heart with another analyst upgrade for a stock that became grossly too oversold during the malaise. UBS raised the rating to “Buy” and it caused a large run on the day of the upgrade.
Baidu, Inc. (NASDAQ: BIDU) is one we have featured as still having more upside than other technology darlings, even if we have some valuation concerns. This remains the case after its solid earnings and revenue growth.
Also see the following research targets:
- Mall department store stocks with the most upside
- Transport and shipping stocks with the most upside
- Semiconductor stocks with the most upside
- Solar stock “value” is more like a “value trap”
JON C. OGG