CREDIT SUISSE DOWNGRADES NETFLIX
Credit Suisse analyst Heath Terry says he's downgrading Netflix (NFLX) to neutral from outperform. He says Netflix continues to benefit from a more benign competitive landscape as BBI struggles to rationalize its online operations. However, he thinks lower subscriber acquisition costs from improved competitive landscape will be offset by pressure on gross margins from the company's decision to ramp digital content and impact from higher Blu-ray DVD costs ahead of tiered pricing for subscribers.
Terry also notes that Netflix stock has risen 70% since December. He notes first quarter results were in line; for 2008, the company upped subscriber view to 9.1-9.7 million, but left net income at $75-$83 million. He maintains $1.27 2008 EPS and $1.45 2009 estimates.
MERRIMAN CURHAN DOWNGRADES TELLABS TO NEUTRAL FROM BUY
Merriman Curhan analyst Tim Savageaux says Tellabs (TLAB) reported first quarter revenue and EPS of $464.1 million and $0.08, ahead of his estimates of $455 million and $0.05, respectively. However, he downgrades as second quarter revenue guidance of $425-$455 million was well below expectations.
Savageaux says Tellabs expects revenue growth in most of its products in the second quarter with a significant decline in 5500 product, indicating to him a more customer and product specific issue vs. industry concern. He still believes Tellabs has significant strategic value but believes the company has chosen a more lengthy and uncertain turnaround path.
Thus, despite a discounted valuation and strong balance sheet, he lacks catalysts for near-to-medium term appreciation and downgrades the stock.
CREDIT SUISSE CUTS ESTIMATES, TARGET FOR NOVELLUS SYSTEMS
Credit Suisse analyst Satya Kumar says Novellus Systems' (NVLS) first quarter results are in line with lowered guidance. He notes $245-$260 million second quarter revenue and $0.01-$0.05 pro forma EPS guidance, vs. his $300 million and $0.15 estimates, with bookings and shipments guided down 10%-25% and 17%-25%, respectively.
Kumar strongly disagrees with the bull argument to "buy the bottom." He says semi-cap is now unwinding a once-a-decade DRAM capex bubble, which drove massive 200mm/300mm conversions, sparked by irrational Taiwan DRAM spenders and Microsoft's (MSFT) Vista. He says conversion is now a fading memory, Vista didn't drive price and Taiwan DRAM balance sheets are severely impaired. He sees no catalyst for irrationality to return in DRAM.
He cuts $0.75 2008 EPS estimate to $0.30, and 18 price target to 17.