A roundup of Thursday's Wall Street research on selected stocks
From Standard & Poor's Equity Research
JP Morgan cut its third-quarter revenue estimate on Baidu.com (BIDU) on Oct. 11.
Analyst Dick Wei tells salesforce he's cutting Baidu's third-quarter revenue estimate to about $65.7 million from $67.9 million, as his latest checks suggest an in-line quarter. Wei believes the recent shutdown of some smaller websites in China and the Shenzhen distribution transition (to direct sales) will lead to slower growth in the second half of 2007, but will be positive in the long term. He notes, as of the Oct. 10 close, Baidu's share price had risen about 20% since Oct. 1. Believes any share price pull-backs on the back of these short-term issues offer an excellent buying opportunity for the leading Chinese search engine.
The analyst maintains his overweight rating, $400 target price, and third quarter GAAP EPS estimate of 62 cents.
Ruby Tuesday, Inc. (RT) posted a drop in first-quarter earnings per share. ST Robinson Humphrey cut its fiscal 2008 earnings estimate on Oct. 11.
Analyst Christopher O'Cull says he believes a lack of advertising for three weeks during the period is the primary reason for the poor results. He says same-restaurant sales began showing a sharp decline (on a two-year cumulative basis) in May as competitors (e.g., Applebee's (APPB)) began offering lower-priced promotional items designed to drive guest counts in a difficult consumer spending environment. Unfortunately, with mid-July menu changes, O'Cull believes the company needs to invest heavily in advertising to inform guests that it offers competitively priced choices to users that are more price-point sensitive.
The analyst cut his $1.50 fiscal 2008 (May) EPS estimate to $1.10, and rates the shares neutral.
Bear Stearns initiated coverage of Gigamedia Ltd. (GIGM), with outperform on Oct. 11.
Analyst James Rhee says that Gigamedia, once a struggling Taiwanese broadband provider, has transformed itself into a purveyor of online entertainment with reach across Europe and Asia. He likes Gigamedia for its solid presence in two growing and lucrative industries -- real-money gaming software and online games. He sees revenue rising at a healthy clip, registering three-year compound annual growth rates of 26% and 83% for the two segments, respectively, over 2007-10.
Rhee believes management has prudently employed cash from the disposal of less attractive assets and operations to create shareholder value. He has a $27 yearend 2008 price target.