MORGAN KEEGAN DOWNGRADES RESEARCH IN MOTION TO MARET PERFORM FROM MARKET OUTPERFORM
Morgan Keegan Analyst Tavis McCourt says Research In Motion (RIMM) shares have appreciated approximately 70% since late June, and as of Friday were at a p-e of 38 times his $2.98 calendar year 2008 EPS estimate. While he expects growth trends to stay strong and thinks his most recent estimates are a bit conservative, he believes substantial upside is necessary to drive further appreciation.
McCourt notes RIMM has said it's seeing the effects of weakness in the financial services vertical, which while not material now, could have an impact on subscriber growth. He sees the shares being hindered near term by, among other things, expectations of a slowing economy. He maintains $2.15 fiscal year 2008 (February) EPS.
WACHOVIA UPS DISCOVERY HOLDING TO OUTPERFORM FROM MARKET PERFORM
Wachovia analyst John Janedis says he upgrades Discovery Holding (DISCA) following recent weakness in DISCA shares, solid uptick in ratings, and strong scatter market. He says industry contacts continue to suggest fourth quarter scatter market remains strong, up 15%-20% over the upfront. He believes cable networks will be near-to-intermediate term beneficiaries as a result of the lack of available inventory at the broadcast networks.
Looking ahead to the first quarter of 2008, from a revenue perspective, Janedis thinks DISCA's cable nets are poised to benefit from a protracted writer's strike and have sold inventory at higher CPM's (cost per mil's) than originally anticipated.
He raises $0.48 2008 EPS estimate to $0.50; $39 valuation range to $41.
LEHMAN DOWNGRADES AUTO SUPPLIERS
Lehman Brothers downgraded shares of American Axle & Manufacturing (AXL), Johnson Controls (JCI) and Tenneco (TEN) to equal weight from overweight. Analyst Brian Johnson says while industry sales of light vehicles managed to maintain themselves around 16 million unit range, the consumer is weakening and he's been observing deterioration in auto ABS credit conditions, which makes him worried about impending tightening in credit standards for car buyers.
He cuts his 2008 sales outlook to 15.5 million light vehicle seasonally-adjusted annual rate, down from 16.2 million units, a marked deterioration from 16.1 million he sees in 2007. He says large production cuts he's modeling across the board for 2008 should have material negative impact on General Motors (GM) and Ford (F), as well as on EPS of North American suppliers.
Johnson cuts AXL target to $24, TEN to $26, and JCI to $41.