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Stock Picks: Best Buy, eBay, Genzyme, Research In Motion

Wall Street analyst opinions on stocks making headlines in Thursday's market

Best Buy Co.: Piper Jaffray equity analyst Mitchell Kaiser reiterated an overweight rating on shares of Best Buy Co. (BBY) on Mar. 25.

Best Buy shares climbed the most in almost 10 months in New York trading on Mar. 25 after the retailer's fourth-quarter profit and full-year earnings forecast exceeded analysts' estimates. Earnings per share (EPS) rose to $1.82 in the quarter ended Feb. 27, the company said. Analysts projected $1.79, the average of estimates compiled by Bloomberg. U.S. same-store sales advanced 7.4% after Best Buy cut prices of flat-panel TVs before the Super Bowl on Feb. 7 and offered discounts during the holidays. Sales at international stores open at least 14 months increased 5.5%, topping some analysts' estimates.

The company projected profit of $3.45 to $3.60 for the current year. That compares with $3.36, the average of estimates compiled by Bloomberg.

"We remain buyers of BBY stock following a strong fourth quarter," Kaiser wrote in a note. He said he believes the company's "strong" fiscal 2011 EPS guidance of $3.45 to $3.60 and the potential for share repurchases make Best Buy the most attractive large cap stock among those he follows.

The analyst maintained a $51 price target on the shares.

Ebay Inc.: Credit Suisse equity analyst Spencer Wang raised a recommnedation on shares of eBay Inc. (EBAY) to outperform from neutral on Mar. 25.

In a note, Wang said that the rating change on shares of the most-visited U.S. e-commerce site was based on a new analysis of its PayPal electronic payments unit. "With Skype divested and the Marketplace unit fairly mature, PayPal is increasingly the growth driver for eBay and our new analysis suggests more upside than our original expectations," the analyst wrote.

Wang said his research suggests PayPal's gross transaction revenue can sustain a 14% five-year compounded annual growth rate, vs. a previous expectation of 12%, driven by expansion in international markets and growth from non-eBay sources. He raised 2010 and 2011 non-GAAP EPS estimates to $1.69 and $1.97, vs. the consensus view of Wall Street analysts of $1.67 and $1.82, respectively.

The analyst also raised a target price on eBay shares to $32 from $25.

Genzyme Corp.: J.P. Morgan equity analyst Geoffrey Meacham lowered a rating on shares of Genzyme Corp. (GENZ) to underweight from neutral on Mar. 25.

On Mar. 24, the company said U.S. regulators would re-inspect a contaminated plant and levy fines. The Food and Drug Administration will examine the Allston Landing facility where production of top-selling drugs was halted last year by a virus contamination, Genzyme said in a statement. Genzyme shut the Allston facility in June after infection with the germ Vesivirus 2117, causing shortages of Cerezyme, its best-selling drug, and Fabrazyme. An FDA inspection finished Nov. 13 detected more problems, including medicines mixed with steel fragments and non-latex rubber.

The news appeared to bolster investor support for billionaire investor Carl Icahn's bid to win four board seats at Genzyme and push for a sale of the company.

Meacham said in a note that the FDA action "is a materially negative development, and we find it highly unlikely that a company with a multi-year history of manufacturing non-compliance (that has resulted in a consent decree) can quickly resolve the issues at hand".

The fact that the Allston plant remains open and supplies of Cerezyme and Fabrazyme are not expected to be disrupted is a positive, said the analyst. "That said, supply disruption is very often associated with consent decrees, and unconditional resolution of the Allston manufacturing issues could require significant facility changes and limitations on supply," he wrote. "In addition, we think that management changes or actions by activist shareholders would be unlikely to quickly alter the course of the consent decree or add near-term value."

Meacham lowered non-GAAP EPS estimates on Genzyme for 2010 to $2.00 from $2.85, for 2011 to $3.50 from $3.95, and for 2012 to $4.15 from $4.45. He also reduced a price target on the shares to $45 from $55.

Research In Motion Ltd.: Rodman & Renshaw initiated coverage on shares of Research In Motion Ltd. (RIMM), maker of the BlackBerry smartphone, with a market perform rating on Mar. 25.

Analyst Ashok Kumar said in a note that he estimates that unit shipments for RIM in the fiscal 2010 fourth quarter exceeded the upper end of the company's guidance range (10.6 million to 11.2 million units) by about 300,000 units. He noted that the current Wall Street consensus estimate is for about 11.1 million units.

Kumar said that aggressive pricing and promotion, and a shift in the company's sales mix toward lower-end smartphones, could have resulted in weaker pricing and margins. He noted that the company's Bold 9700 device was offered for half price at AT&T (T) throughout the quarter, though the margin impact may have been muted due to relief from royalty payments to Qualcomm in lower-end units.

Weak sell-through of RIM's Storm 2 product has created inventory overhang at Verizon Wireless (VZ), Kumar said. "At the industry level we also see supply/demand imbalance in the electronic retail channel in Europe," he wrote.

The analyst said the primary longer-term competitive threat for RIM remains Apple Inc.'s (AAPL) iPhone, "which has witnessed substantial increase in enterprise support".

The analyst has a price target of $75 on RIM shares.

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