S&P: Hold Google, Buy Time Warner

Plus: Analyst comments on McDonald's impressive sales growth, and other companies

Google (GOOG ) : Reiterates 3 STARS (hold)

Analyst: Scott Kessler

An unconfirmed report in today's Wall Street Journal says Google and Comcast (CMCSA ) are in talks with Time Warner (TWX ) to buy a minority stake in AOL for up to $5 billion. Google and Comcast are purportedly interested in AOL's websites and Instant Messenger. We think Google's interest makes sense. AOL generates expansive traffic, has a substantial number of registered users, and can offer access to considerable services and content. In our view, building on Google and AOL's successful search relationship would contribute to better ease-of-use and more revenue for AOL.

Time Warner (TWX ) : Reiterates 4 STARS (buy)

Analyst: Tuna Amobi, CPA and CFA

An unconfirmed Wall Street Journal report says Comcast (CMCSA ) and Google (GOOG ) are in talks to buy up to 50% of AOL's content business for $5 billion. This follows unconfirmed reports of Time Warner talks with the MSN search unit of Microsoft (MSFT ). While Google and AOL have a profitable paid search alliance, closer alignment with Internet and cable giants seems consistent with the strategy to unlock AOL value with its 100 million-plus monthly visitors. But aside from AOL valuation concerns, the move could defeat Time Warner's stated goal to protect core narrowband profit amid subscriber erosion.

McDonald's (MCD ) : Reiterates 4 STARS (buy)

Analyst: Dennis Milton

September same-store sales grew 2.7% in the U.S. and 3.9% globally, above our estimates of 1.5% and 2.9%. We are impressed by the U.S. sales growth, given the difficult comparison after the year-ago rise of 10.6%, as well as the negative impact of hurricanes. McDonald's projects third quarter earnings per share of 58 cents vs. 61 cents, in line with our estimate. We are maintaining our 2005 earnings per share estimate of $1.96, and 2006's at $2.09, and our 12-month target price remains $38. At 16 times our 2005 earnings per share estimate, McDonald's shares are at a slight discount to peers, despite the company's product development capabilities that we view as superior.

SVB Financial (SIVBE ) : Cuts to 1 STAR (strong sell) from 2 STARS (sell)

Analyst: Mark Basham

We think risks on the company's shares have increased amid a more hawkish recent tone of Federal Reserve speakers. We expect that continuing rising interest rates will lift the cost of gathering the deposits that SVB then lends or invests. Also, business prospects within the tech sector, which comprise most of SVB's investment banking clients, have in our view turned mixed, which we think will affect early-stage companies more than established technology firms. Our 12-month target price, based on a mix of discounted cash flow model and peer comparison valuations, is unchanged at $30.

Boston Private Financial (BPFH ) : Ups to 3 STARS (hold) from 2 STARS (sell)

Analyst: Christopher Muir

Our upgrade is based on valuation, as the shares have recently declined and now trade below our target price. It is our view that Boston Private Financial has a healthy banking business and its investment management units offer diverse equity and fixed income products. We believe the shares should trade at a premium of about 15% to small-cap regional banking peers, or 16.6 times our 2006 earnings per share estimate of $1.68, or $28. Our dividend discount model indicates a value of $25.50; our target price, which remains $27, is based on a blend of these valuations.

Fidelity National Financial (FNF ) : Reiterates 3 STARS (hold)

Analyst: Jason Seo, CFA

Fidelity National Financial announced that its wholly owned subsidiary Chicago Title Land Trust Co. has acquired the land trust assets of LaSalle Bank, including 34,000 existing land trusts, creating the largest provider of land trustee services in the eastern U.S. Terms were not disclosed. We see the transaction as strengthening Fidelity National Financial's already dominant market share of the title insurance industry in preparation for the planned spin-off of its title insurance unit as a separate publicly traded entity, which is scheduled to be completed Oct. 17. Our 12-month target price remains $48.

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