From Standard & Poor's Equity ResearchCITIGROUP MAINTAINS BUY ON INTEL
On Mar. 4, Intel (INTC) cut its first quarter gross margin guidance. Citgroup analyst Glen Yeung says that, while negative effect of NAND will impair margins throughout 2008, the effect will wane as the year progresses. He estimates 35%-40% of gross margin impact is related to an inventory write-down that will not recur in the second quarter or beyond.
Yeung cuts $1.40 2008 EPS estimate to $1.32, $1.66 for 2009 to $1.59, and 27 target price to 26. But he says the company's core PC remains surprisingly solid.
He says he expected to see pullback in Intel and the group in general in the March timeframe, albeit not driven by NAND. He says, despite the surprising nature of the shortfall, he would use March weakness as buying opportunity. He notes his trough valuation for Intel shares remains 17.50.
JP MORGAN DOWNGRADES BARNES & NOBLE TO UNDERWEIGHT
JP Morgan analyst Charles Grom says he downgraded Barnes & Noble (BKS) to neutral from overweight on Feb. 5 primarily on concerns its fiscal year 2009 (January) outlook would need to come down materially due mostly to slowing sales and secular margin pressure.
He says, while the stock has compressed, BKS's initial fiscal year 2009 outlook looks too optimistic (largely in expectations for positive same-store sales), and in order to stay ahead of the curve, he's downgrading BKS again to underweight.
Grom cuts his $1.95 fiscal year 2009 EPS estimate to $1.67 (including buybacks), which compares with BKS's revised view of $1.70-1.90 (or about $1.77-1.97, including buybacks).
RBC CAPITAL DOWNGRADES THORNBURG MORTGAGE
RBC Capital analyst Jason Arnold says in light of recent margin calls and concerns for liquidity, he downgrades shares of Thornburg Mortgage (TMA) to underperform from sector perform. He says he now expects a loss of $3.19 in the first quarter (vs. prior EPS estimate of $1.64), as the most likely outcome is a fire sale of remaining MBS (mortgage backed securities) at a material discount, leading to material GAAP loss and book value impairment.
Arnold thinks TMA is at risk of failure if lenders choose to pull lines and seize collateral backing the company's investments - collateral at risk could extend beyond MBS, which could have more dire implications for TMA's future.
He thinks the shares should trade down to $2 per share (0.25 times book) in light of present risk.