MORGAN STANLEY DOWNGRADES IMCLONE SYSTEMS TO UNDERWEIGHT FROM EQUAL-WEIGHT
Morgan Stanley analyst Steven Harr says he's setting a 38 price target for ImClone Systems (IMCL) as he believes data at ASCO in early June for Erbitux in both lung and colorectal cancers will not meet expectations. He believes this will lead to: 1) greater risk to Erbitux estimates in lung cancer; 2) potential re-emergence of Amgen's (AMGN) Vectibix as a competitive threat.
Harr cuts his Erbitux sales estimates in lung cancer, his 2009 EPS estimates are now 20% and more below Street. He says his diligence suggests issues may emerge from FLEX data, including: 1) a modest survival benefit; 2) lack of progression free survival benefit; 3) lack of response rate improvement.
He trims $1.25 2008 EPS estimate to $1.23, and raises $0.96 for 2009 to $1.00.
CITIGROUP BELIEVES PROPOSED CIRCUIT CITY DEAL FITS WITH BLOCKBUSTER
Citigroup analyst Tony Wible says the proposed Circuit City (CC) deal fits with Blockbuster's (BBI) current strategy and sees compelling reasons for a merger (although there are risks). He believes it is key to realize that a BBI-owned CC will look very different than today, as BBI integrates CC stores into its restructuring plans.
Wible thinks successful integration of CC would likely drive revenue and cost synergies. He says, applying his pro forma estimates to a 4-times 2010 EV/EBITDA target multiple suggests BBI could be worth over $8 a share.
However, a successful execution of deal would likely drive investors to assign a valuation to BBI that is more in line with other retailers, pointing to almost $11 a share. He maintains a buy opinion on BBI shares.
CREDIT SUISSE DOWNGRADES BUILD-A-BEAR WORKSHOP TO NEUTRAL FROM OUTPERFORM
Credit Suisse analyst Paul Lejuez says Build-A-Bear Workshop's (BBW) model has relatively attractive free cash flow characteristics, but he is concerned that macroeconomic weakness will continue to pressure comparable (comps) store sales and margins in the foreseeable future. He says recent results were hurt by very challenging mall-traffic trends and higher fuel costs.
Lejuez expects an especially difficult second quarter, since Easter shifted into the first quarter; he now sees second quarter loss per share of $0.16, driven by 17%-19% comp decline.
He says the company is very dependent on mall traffic and, barring a second half economic recovery, he does not expect significant improvement in comps this year. He still sees mid-single digit comp decline in 2009. He cuts $0.85 2008 EPS estimate to $0.76. And he lowered his price target to 11.