Nokia and Alcatel-Lucent
This is a two-in-one call here. Nokia Corp. (NYSE: NOK) and Alcatel-Lucent S.A. (NYSE: ALU) were raised to Overweight from Equal Weight at Barclays mid-week, due to the benefits of the merger. These are ADSs, so price targets were in European terms. What 24/7 Wall St. would remind readers is that the interest seems to be more cautious now that the terms of the deal looked like Alcatel-Lucent is selling its long-term holders down the river. Barclays seemed much more positive than the real views we have seen elsewhere.
What investors need to consider here is that mergers of this size are supposed to be transformative. The problem facing Nokia and Alcatel-Lucent is that these are two tech giants that have already endured massive change with a long-term decline. They are also trying to merge a Finnish company with a company that already had issues integrating the full French and American operations into a stable set of units.
On Wednesday, Regions Financial Corp. (NYSE: RF) was reiterated as Buy at Compass Point, with a price target of $11.50. The bank’s prior closing price was $9.73, and the stock closed at $9.58 on Friday. While this leaves an implied upside of about 20% before considering the 2% dividend yield, there was a downgrade from a much larger firm this week to make sure that investors know there is a balance here. RBC Capital Markets downgraded Regions Financial to Sector Perform from Outperform midweek, but it had an $11 price target in the call.
And the Rest
In order to keep the lesser known and micro-cap stocks separate, 24/7 Wall St. has included three more analyst calls below.
A firm called Craig Hallum started SMTP Inc. (NASDAQ: SMTP) at Buy on Wednesday, and the firm’s $11.50 price target implied more than a double from the $4.98 prior close. Even then, the shares rallied over 6% to $5.30 on Wednesday. Shares went from $5.00 to as high as $5.40 after the call, and the stock closed at $5.33 on Friday.
24/7 Wall St. cannot stress enough to readers that this micro-cap stock’s market cap of $29 million leaves even more implied risk than most other low-priced and small-cap stocks. SMTP is a business-to-business marketing and communications outfit with extremely thin trading volume, and it is hardly followed by analysts.
Bovie Medical Corp. (NYSEMKT: BVX) was started as Market Outperform with a $5 price target at JMP Securities on Tuesday. Before the call, the closing price was $2.48, but shares rose on the call and closed at $3.19 on Friday. This implied a double on the analyst call, if JMP Securities is right, but it left an implied 56% upside as of Friday’s close. Bovie has a market cap of only $74 million, and it has a 52-week range of $2.20 to $5.00.
On Friday, H.C. Wainwright started DARA BioSciences Inc. (NASDAQ: DARA) as a Buy with a $2.00 price target. This was versus a prior $0.77 closing price, and shares closed up 5% at $0.81 after the analyst call. Keep in mind that this is only a $16 million market cap, even if it does trade about 250,000 shares on average days. This positive call is after DARA acquired the exclusive North American rights to Oravig, but the company also has a $30 million shelf registration statement that was filed back on March 27.
One of the last times that 24/7 Wall St. even covered DARA was back in 2011. This was when the stock rose 24% to $2.82 on a day that the Dow was down about 500 points. The boost was on news that its investigational drug KRN5500 had been granted Fast Track designation by the FDA as a treatment of chemotherapy-induced neuropathic pain. It had a $14 million market cap at that time, and that was even after the big gain.
Again, almost all small-cap and low-priced stocks come with far larger risk than blue chip stocks. To prove a point: only five members of the S&P 500 have a share price that is less than $10, and only three of those five are under $9.00.