24/7 Wall St.

24/7 Wall St. generally reports on ten to fifteen analyst calls each morning as the top analyst calls of the day, but after we go through these at the end of the week there are always some research calls which standout above and beyond the others.  Not all calls are positive, and some are very cautious.  Some are just very wrong, and others offer more insight than you see in other calls.  This week’s top analyst calls were in shares of Alcatel-Lucent (NYSE: ALU); American Water Works Company, Inc. (NYSE: AWK); Apple Inc. (NASDAQ: AAPL); Ariba Inc. (NASDAQ: ARBA); CenturyLink Inc. (NYSE: CTL); Google Inc. (NASDAQ: GOOG); Government Properties Income Trust (NYSE: GOV); HollyFrontier Corporation (NYSE: HFC); Lam Research Corporation (NASDAQ: LRCX); and Williams-Sonoma Inc. (NYSE: WSM).

We have added in the price action and impact of calls, and also added in color on the situation and included more consensus data if relevant.

Alcatel-Lucent (NYSE: ALU) had a rough week as tech stocks in equipment got off to a rough start for this earnings season.  Deutsche Bank cut its rating to Hold from Buy, taking shares from $5.58 to $5.36 on the call, but ultimately taking shares down to a low of $5.00 during the week before it closed out the week at $5.09.  That is nearly 10% lower for the call’s impact all together, and it needs to be considered that this former dog is still up more than 50% in 2011.

American Water Works Company, Inc. (NYSE: AWK) is a company that 24/7 Wall St. has been very positive on for quite some time.  It is one of our Top Stocks To Own For The Decade.  Around $29.50, its consensus target is $31.60 and the highest official target is $38.00. We think $35 is a fair value for 2012, but one call in water came out this week that really highlighted value above and beyond what we and above and beyond what Wall Street thinks… Gabelli highlighted a recent asset swap for the operating efficiencies and rate recognition, yet it gave a private market value foe 2011 of $44 and the report actually gave a $46 private market value for 2012.  This is above and beyond our bullish stance on the greatest water utility in America.

Apple Inc. (NASDAQ: AAPL) is set to report earnings this week, but one of its larger bulls has trimmed shipment, earnings and revenue targets ahead of earnings. Gabelli maintained a “Buy” but lowered estimates under consensus.

Ariba Inc. (NASDAQ: ARBA) was given a very positive research initiation call, but one which did not get off to a good start.  Barclays initiated coverage this last Monday with a “Buy” rating and a $44 price target as the B2B platform leader is expected to gain market share.  Shares went out the prior week at $36.72 and ended up down at $34.31 on the week.  This is not a cheap stock by any real measurement.  The $44 target is now the street-high call and the consensus price target is only $36.70.

CenturyLink Inc. (NYSE: CTL) just announced the closure of its Savvis acquisition and it has already closed on its Qwest acquisition.  The company offers a high yield for investors and at $38.42 it is well under the 52-week high of $46.87.  It also trades at just under 15-times this year’s expected earnings.  Friday came word that this was downgraded to Underperform as the dubious “Bear of the Day” call at Zacks.

Google Inc. (NASDAQ: GOOG) is getting a special mention here this week on a call, but not because of the analysts catching back up to it.  This is a recognition of good research from prior weeks standing out.  When Google was in its doldrums, Canaccord Genuity reiterated its “Buy” at a time when the stock was very weak.  What stood out the most was that its price target was $800 and it did not lower its target when it reiterated that rating.  It matters because that was the highest price target out there.

Government Properties Income Trust (NYSE: GOV) is a REIT that many investors overlook.  We have even featured this as a way to “make the government pay you a 6% dividend” after it raised its dividend.  This last Monday it was downgraded to Underperform at Wells Fargo.  It seems that there is going to be rental payment risk from the federal government, probably under ‘force majeure,’ if the government defaults on its debt and cannot pay its bills. Shares were at $27.34 before the call and closed out the week at $26.40 versus a 52-week range of $24.27 to $28.53.

HollyFrontier Corporation (NYSE: HFC) is the newly combined Frontier Oil and Holly Corp. and the merger has only closed recently.  This week we saw several analyst calls on the combined company:

• Started as Outperform w/ $90 target at Oppenheimer;
• Cut to Neutral at BofA/ML;
• Started as Outperform w/ $95 target at Credit Suisse.

Lam Research Corporation (NASDAQ: LRCX) got off to a rough start for earnings season after Novellus came out on Monday with its earnings warnings after the close (as did Microchip Tech).  Unfortunately for Citigroup, the firm raised its rating to Buy on Monday morning taking the stock up from $44.17 to $44.86.  Then came Novellus’ warning and the stock closed out the week at $42.06.  Tough timing for Citi even if this trades well under 10-times forward earnings.  As noted, some research calls just don’t work out too well.  We highlighted the value stocks and value traps in chip stocks this last week after those stocks all took a hit.

Williams-Sonoma Inc. (NYSE: WSM) is not a cheap stock and it is one of the premium retail culinary equipment and gadget stores out there.  So when Goldman Sachs raised its rating to Buy from Neutral it stood out when you consider that it trades at more than 17-times forward earnings. Apparently a part of the call is a high cash to market cap ratio compared to peers, as well as West Elm, international expansion, and now more than one-third of its sales being generated online.

These are certainly not the only big impact calls of the week, but they are the ones we have highlighted as the key standout calls that matter just beyond a week or a trading day.

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JON C. OGG