From Standard & Poor's Equity ResearchNEEDHAM UPGRADES YAHOO TO BUY FROM HOLD
Needham analyst Mark May says that actions and statements by Carl Icahn, Yahoo (YHOO), Microsoft (MSFT) and others over past few days suggest significant, positive change is more likely at Yahoo.
May believes an acquisition of Yahoo by Microsoft is the most likely outcome, with an assumed 50% probability of an acquisition, at a price of $33, $35 or $37 a share. He thinks a search outsourcing arrangement is the second most likely scenario, with an assumed probability of 40% of either a partial or total outsourcing deal with no or some cost savings. He sees 10% probability that no deal occurs.
He has a 31 price target, based on outcome probability analysis.
KEEFE BRUYETTE MAINTAINS OUTPERFORM ON SLM CORP.
Keefe Bruyette analyst Sameer Gokhale says SLM (SLM) shares are lower ahead of a decision by the Dept. of Education on the financing terms it will offer Federal Family Education Loan Program (FFELP) lenders. He says the sell-off appears to be tied to concerns that financing terms could be less favorable than investors expected.
Gokhale says in his opinion, there is a risk the DoE solution may keep FFELP loans unprofitable in the current environment. Given the urgency of the problem -- with FFELP lenders being forced to exit the market and students requiring loans for the upcoming fall semester, he expects the DoE to finalize financing terms in the near future, and perhaps in the next two weeks.
GOLDMAN ADDS AMAZON.COM TO AMERICAS CONVICTION BUY LIST
Goldman Sachs analyst James Mitchell says he is transferring coverage and adding Amazon.com (AMZN) to Americas Conviction Buy list with upside to his $98 6-month target (raised from $75). Based on measured online-offline expansion strategy; Prime, Kindle, and mobile tapping pent-up demand; and share gains in growing market, he estimates AMZN can sustain 20%-plus/year unit growth over the next 5-10 years.
Mitchell believes margins may fluctuate but structurally match or exceed offline rivals'. He says a deep recession should remove competing offline capacity; revenue growth alone can drive 20%-plus/year stock returns off flat margins and a flat FCF multiple.
He raises $1.92 2008 EPS estimate to $1.95, and $2.49 for 2009 to $2.57.