Ciena Corp. (NASDAQ: CIEN) is trading higher today, a day after it’s weakness on the announced buyout of the Nortel assets.  Continuing to pick on it about the risks, the leverage, and the potential inversion of the balance sheet can’t be said anymore than what was written yesterday at Investorplace.com.  It is possible that the bulk of the punishment is behind the company on the announcement of the news, and now it is up to the company and the economy how this integration treats the stock price.  But what is interesting is how many others have keyed in about, including Ciena’s CEO and then analysts.  And today we have S&P panning it.

Standard & Poor’s just downgraded Ciena today.  The corporate credit rating cut was to “B” from “B+,” which is still deeper into junk territory.  S&P noted that the final $769 million acquisition price is sharply higher than its earlier bid.  Also noted was that the higher cash and debt-financed price will further deplete Ciena’s liquidity, and will increase its net debt.  On top of the downgrade, S&P said it is leaving Ciena’s rating on CreditWatch with negative implications.

Jefferies cut the rating to an underperform rating.  It commented about severe integration risks specifically for Ciena if it won the offer.  We cannot share that concern more, particularly since the deal won’t be accretive until 2011 per the CEO.

Morgan Keegan downgraded Ciena yesterday to Market Perform from Outperform.  It called it an “at all costs approach.”

CEO Gary Smith gave a CNBC interview yesterday talking about a transformational deal.  Frankly, it was a very unimpressive comment.

It was just in late-October that Citigroup issued a Buy rating, but that was based upon a lower perceived buyout price than the final tally of $769 million.

It is easy to Monday-morning quarterback a merger.  It is also easy to pan a company for taking a risk or paying what seems to be too much.  It may be the case that Ciena needed to acquire this for future relevance.  Still, it is hard to not consider that if the assets were so great then why couldn’t it have saved Nortel from the bankruptcy executioner.

Ciena shares are up almost 4% at $12.46 mid-afternoon.  Assuming this holds, it will break a 3-day losing streak.  But it is also under the $14.02 close from last Friday when the bidding delay was viewed as a positive for Ciena.

JON C. OGG
NOVEMBER 24, 2009

General Electric Co. (NYSE: GE) has seen at least some decent trading action today, despite the softness in the market.  The stock was reaffirmed as “Overweight” at JPMorgan, but the research call sounded much more positive than the same $17.00 price target.  The firm believes hot spots in the financial sector of its operations have been reduced mostly down to commercial real estate now.  The firm now sees this being a tailwind for earnings ahead.  According to OptionsHawk.com, there has been some substantial options trading activity around this as well.

Joe Kunkle of OptionsHawk noted , “Just saw a buyer of 131,500 January 2011 $22.50 calls for the 76 cent offer.  On the day 210,000 calls have traded, 1.5X average already, and just 22,000 puts, 0.25X average, showing the shift to bullish sentiment.  Other large purchases have been in January 2010 $17.50 and $21 calls.  Shares of GE are hitting highs on the day and near a bit of a breakout from recent resistance at $16.25, potentially looking to fill an October gap to $16.60.  This trade is looking for a whole lot more, though, possibly an inverse head and shoulders breakout at $17.50 that would imply a move to $28 by 2011.  The conglomerate may looks to sell parts to focus on it’s core business and trades 2.78X cash value, just 13X free cash flow.  The GE capital Portfolio is also seeing significant improvements and may be a big addition to it’s bottom line.  Implied volatility remains unchanged at 31%, near 52 week lows.”

Shares are up 1% at $16.18 today, and this would mark the highest close since the end of October as long as it closes above $16.09.  The 2009 to 2010 transition for GE and its revenues and earnings is also going to be a wild card.  Thomson Reuters is calling for $0.99 EPS in 20098 and $0.92 EPS in 2010, but on revenues of $154.99 billion in 2009 and $151.36 billion in 2010.

Taking that into consideration and considering that the NBC Universal deal is in the air and considering that GE was trying to unload its appliances unit a year and a half ago, all those estimates and the financial condition could be vastly different if the capital markets and if deal making continues to improve.

Jon C. Ogg
November 24, 2009

These are this Tuesday morning’s top 10 analyst upgrades, downgrades, and initiations we have seen early this morning in Wall Street research calls:

Activision Blizzard (NASDAQ: ATVI) Started as Outperform at Wells Fargo.
Amylin Pharmaceuticals (NASDAQ: AMLN) Raised to Overweight at Barclays.
Cephalon (NASDAQ: CEPH) Raised to Buy at Jefferies.
CNOOC (NYSE: CEO) Started as Sell at RBS.
Electronic Arts (NASDAQ: ERTS) Started as Market Perform at Wells Fargo.
Expedia (NASDAQ: EXPE) Started as Buy at Collins Stewart.
Priceline.com (NASDAQ: PCLN) Started as Hold at Collins Stewart.
Prudential Financial (NYSE: PRU) Raised to Outperform at Wells Fargo.
Tiffany & Co. (NYSE: TIF) Started as Buy KeyBanc.
Union Pacific (NYSE: UNP) Cut to Neutral at UBS.

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JON C. OGG
NOVEMBER 24, 2009

Many, or most, major banks do not have enough capital to comfortably maintain their current ratings.  Standard & Poor’s has a report out saying that the banks are underfunded despite capital raised and despite the recovery we have seen.  Standard & Poor’s introduced a new tracking for capital adequacy and even questions how useful standard market and regulatory measures are.  Citigroup Inc. (NYSE: C) and UBS AG (NYSE: UBS) are two of the trouble spots outlined herein.

In the larger international banks, S&P noted that the average risk-adjusted capital ratios in those banks it reviews was 6.7%.  That is over 3% under average tier one ratios.  S&P believes that the current capital “remains a neutral to negative rating factor for the majority of banks” it covers. S&P now believes that banks need to have a risk-adjusted capital ratio of at least 8%.  S&P has issues over tier one and leverage ratios, because they do not adjust for risks and are not consistent.

Mizuho Financial Group Inc. (NYSE: MFG) was listed as the most vulnerable at an approximate 2% ratio; and UBS AG (NYSE: UBS) and Citigroup Inc. (NYSE: C) remained among the weaker banks.

HSBC Holdings PLC (NYSE: HBC) was the strongest with a 9.2% ratio; and ING Bank NV (NYSE: ING) and Goldman Sachs Group Inc. (NYSE: GS) were also listed in the stronger bank category.  24/7 Watt St. still argues that Goldman Sachs is a bank that is truly no bank.

When you see reports like this it is not always a signal of an imminent downgrade.  But the tone sure sounds more like downgrades are coming if more capital is not raised or if things do not just start to improve on their own.

JON C. OGG

These are this Monday’s top analyst upgrades, downgrades, and initiations seen from Wall Street research calls:

American Express (NYSE: AXP) Started as Overweight at Morgan Stanley.
Capital One (NYSE: COF) Started as Equal Weight at Morgan Stanley.
Deere (NYSE: DE) Raised to Overweight at Morgan Stanley.
D.R. Horton (NYSE: DHI) Raised to Hold at Citigroup.
Jefferies (NYSE: JEF) Cut to Sell at Goldman Sachs.
Knight Capital (NASDAQ: NITE) Cut to Neutral at Goldman Sachs.
NASDAQ OMX (NASDAQ: NDAQ) Raised to Buy at Goldman Sachs.
Schlumberger (NYSE: SLB) Raised to Outperform at Credit Suisse.
Starbucks (NASDAQ: SBUX) Raised to Buy at Jefferies.
Wellpoint (NYSE: WLP) Raised to Overweight at JPMorgan.

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JON C. OGG

These are Friday morning’s top 10 analyst upgrades, downgrades, and initiations we have seen early this morning in Wall Street research calls:

AFLAC (NYSE: AFL) Raised to Overweight at Morgan Stanley.
Broadcom Corp. (NASDAQ: BRCM) Started as Outperform at BMO Capital Markets.
Dillard’s (NYSE: DDS) Raised to Buy at Deutsche Bank.
Dominion (NYSE: D) Cut to Sell at Citigroup.
Intel Corp. (NASDAQ: INTC) Started as Outperform at BMO Capital Markets.
Marvell Technology (NASDAQ: MRVL) Started as Outperform at BMO Capital Markets.
Peabody Energy (NYSE: BTU) Removed from Conviction Buy List (still Buy rated) at Goldman Sachs.
RioTinto (NYSE: RTP) Cut to Underperform at Credit Suisse.
Suntech Power (NYSE: STP) Raised to Hold at Soleil.
Texas Instruments (NYSE: TXN) Started as Outperform at BMO Capital Markets.

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JON C. OGG
NOVEMBER 20, 2009

These are this Thursday’s top ten analyst upgrades, downgrades, and initiations seen in Wall Street research calls:

AmerisourceBergen (NYSE: ABC) Started as Buy at UBS.
ASML (NASDAQ: ASML) Cut to Neutral at B of A Merrill Lynch.
Cardinal Health (NYSE: CAH) Started as Buy at UBS.
CVS Caremark (NYSE: CVS) Started as Buy at UBS.
Express Scripts (NASDAQ: ESRX) Started as Buy at UBS.
Intel Corp. (NASDAQ: INTC) Cut to Neutral at B of A Merrill Lynch.
Marvell Technology Group (NASDAQ: MRVL) Cut to Neutral at B of A Merrill Lynch.
MedcoHealth Solutions Inc. (NYSE: MHS) Started as Buy at UBS.
Solarfun (NASDAQ: SOLF) Raised to Outperform at Oppenheimer.
Texas Instruments Inc. (NYSE: TXN) Cut to Neutral at B of A Merrill Lynch.

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JON C. OGG

These are this Wednesday’s top ten analyst upgrades, downgrades, and initiations seen in Wall Street research calls:

Analog Devices (NYSE: ADI) Raised to Conviction Buy List at Goldman Sachs.
Arch Coal (NYSE: ACI) Started as Overweight at HSBC.
Intuitive Surgical (NASDAQ: ISRG) Started as Market Perform at Morgan Keegan.
Peabody Energy (NYSE: BTU) Started as Overweight at HSBC.
Pulte Homes (NYSE: PHM) Raised to Buy at Citigroup.
Research-in-Motion (NASDAQ: RIMM) Cut to Market Perform at BMO.
Seagate Technology (NASDAQ: STX) Cut to Underperform at BofA Merrill Lynch.
Sunpower Corporation (NASDAQ: SPWRA) Cut to Neutral at Janney Montgomery Scott.
Target Corp. (NYSE: TGT) Cut to Neutral at Goldman Sachs.
Western Digital Corp. (NYSE: WDC) Cut to Underperform at BofA Merrill Lynch.

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JON C. OGG

Verisk Analytics, Inc. (NASDAQ: VRSK) is seeing some very cautious or at least unexciting analyst initiations now that its quiet period has ended.  This post-IPO has at least held its value, which is more than many other post-IPOs can claim.  The risk management suite of actuarial data came public in early-October in a $1.9 billion IPO after it sold 85.25 million shares at $22.00 per share.

It turns out that many felt it was a fully priced deal.  Yet the stock popped above the pricing and has never gone back close to it.  Since the deal opened, it has traded in a trading range of $26.10 to $30.00.  The problem is that today’s slate of analyst initiations has failed to give investors any solid endorsement nor any solid hope of a real growth of shares.

BofA Merrill Lynch and Morgan Stanley were the lead underwriters.  J.P. Morgan and Wells Fargo Securities were senior co-managers, and William Blair, Fox-Pitt Kelton, and Keefe, Bruyette & Woods were all acting co-managers.

Bank of America Merrill Lynch started it as “Neutral”
Wells Fargo started coverage as “Market Perform”
KBW has started the rating as Market Perform
Fox-Pitt Kelton started the rating as “In-Line”

The good news is that today’s share price is only down 0.4% at $28.77.  But that is also on a day where the broad market is up about 1.5% and when most shares are higher.

JON C. OGG

These are the top ten analyst upgrades, downgrades, and initiations we have seen from Wall Street research calls early this Monday:

Cadence Pharmaceuticals (NASDAQ: CADX) Cut to Perform at Oppenheimer.
Coach Inc. (NYSE: COH) Raised to Buy at Goldman Sachs.
Dell Inc. (NASDAQ: DELL) Started as Buy with $19 target at Goldman Sachs.
Harvest Energy (NYSE: HTE) Cut to Neutral at UBS.
Nordstrom (NYSE: JWN) Raised to Buy at Goldman Sachs.
Research In Motion (NASDAQ: RIMM) Started as Hold, $66 target, at Auriga.
Sprint Nextel (NYSE: S) Raised to Outperform at Credit Suisse.
Suntech Power Holdings Co. Ltd. (NYSE: STP) Raised to Neutral (from Underweight) at HSBC.
United Rentals (NYSE: URI) Raised to Outperform at Oppenheimer.
Verisk Analytics (NASDAQ: VRSK) Started as In-Line at Fox-Pitt; Started as Market Perform at KBW.

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JON C. OGG