American Express (AXP): Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Frank Braden
We believe the recent decline in share price reflects investors' concern about the health of consumer credit. But we think AmEx's cardmembers typically enjoy a better credit profile than those of its competitors. Additionally, we see AmEx's rewards programs providing added incentive for consumers to pay off their balance ahead of competing cards. We also expect a solid employment environment and resilient consumer spending to help support transaction volume. We are maintaining our 12-month target price of $65, 19 times our 2007 EPS estimate of $3.43, a premium to peers.
Chattem (CHTT): Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Loran Braverman, CFA
Updated from earlier report
Following Chattem's 's November-quarter conference call and our earlier downgrade of its shares to hold from buy on Feb. 12, the stock has sold off sharply. With 15% upside now to our 12-month p-e-based target price of $61, we find the shares attractive. We think Chattem should be able to report growth in fiscal 2007 (November) meaningfully above trend, following the January acquisition of five brands, three of which are number one in their categories. We estimate the sales contribution of the five will bring Chattem's sales growth to 39% and should help support EPS of $2.73, up 45%.
Nasdaq Stock Market (NDAQ): Maintains 3 STARS (hold)
Analyst: Jason Willey
Nasdaq failed to receive the 50% shareholder acceptance it needed to take control of the London Stock Exchange. We view this news as a setback, as Nasdaq has devoted significant time and balance sheet capacity to acquiring the London Stock Exchange. The company must now decide what to do with its 29% stake in the LSE, and reassess its overseas expansion strategy. While we expect some weakness today, we believe a failed bid was already largely priced into Nasdaq's shares. We are leaving our 12-month target price at $42, but believe the unsuccessful bid removes a key potential catalyst for Nasdaq.
Applied Biosystems (ABI): Upgrades to 4 STARS (buy) from 3 STARS (hold)
Analyst: Jeffrey Loo, CFA
The upgrade is based on valuation. The shares are down 10% since the start of 2007, now trading at 21 times our fiscal 2008 (ending June) EPS estimate, slightly below peers. Applied Biosystems reported solid December-quarter results and we see continued solid growth over the next several quarters. We believe the company is well positioned to benefit from its years-long restructuring and product portfolio rebalancing. But we expect fast-growing units producing systems for real-time polymerase chain reaction and mass spectrometry will be partly offset by flat or declining sales in core DNA and other product lines. We are maintaining our target price of $40.
Allianz (AZ): Reiterates 4 STARS (buy)
Analyst: Derek Chambers
We expect 2006 results February 22. We see good operating performances for both the property-casualty and banking segments, reflecting continued low catastrophe losses and solid trading conditions. We see the planned merger with French subsidiary AGF allowing Allianz to integrate its businesses more efficiently and supporting productivity growth. We are raising our 2006 earnings per ADS estimate to $2.03 from $1.93, 2007's to $2.00 from $1.89, and are boosting our 12-month target price $1 to $23, based on our DCF model using 10% cost of equity and medium-term return on equity of 12.5%.
Alltel (AT): Cuts to 2 STARS (sell) from 3 STARS (hold)
Analyst: Kenneth Leon, CPA
We believe Alltel would be more appropriately priced at $56, our 12-month target price, which assumes an enterprise value 6 times our 2007 EBITDA estimate, near wireless peers. In our opinion, Alltel faces increased pricing pressure from its larger wireless peers, which are gaining market share from smaller and regional wireless carriers. We believe our 2007 EBITDA estimate would narrow if Alltel proceeds with a more aggressive marketing campaign to retain or grow its customer base. With shares priced above our view of fair valuation, we would sell.