Analyst Picks and Pans: Cognizant, Talbots, Atmel

Cognizant Technology Solutions (CTSH) S&P Equity Research downgrades to buy from strong buy on valuation

S&P Equity Research analyst Dylan Cathers said in a note Tuesday that the shares are up over 8% today, and his downgrade is based on valuation, as the shares approach his target price. Cognizant reported second quarter EPS of $0.47, vs. $0.35 a year ago, $0.08 above S&P's estimate.

Cathers said he expects revenue growth of over 12% in 2009, as the company is now seeing some growth in the banking and transaction processing areas, and the healthcare vertical remains strong. He expects operating margins will improve this year, and he raisid his 2009 EPS estimate by $0.12 to $1.72, and 2010's by $0.18 to $1.85.

The analyst lifted his 12-month target price by $3 to $39.

Talbots (TLB) FBR Capital upgrades to outperform

FBR Capital Markets analyst Adrienne Tennant upgraded women's retailer Talbots to outperform from market perform on Tuesday, citing good control of costs that bode well for longer-term returns.

"Mallwide traffic remains sluggish; we fully expect ongoing negative comps," Tennant said in a note. "However, we believe loss expectations for the remainder of the year could be sufficiently low." Comps, or comparable sales, refer to sales in stores open at least a year, a key metric for retailers.

Tennant said the company has more tightly controlled its inventory by using promotions and markdowns to make sales. The analyst believes the shares have "dramatically underperformed" its competitors over the past month.

Tennant narrowed her second-quarter loss expectation to 50 cents per share from 53 cents and raised her price target to $7 from $5. Analysts surveyed by Thomson Reuters forecast a second-quarter loss of 53 cents per share, on average.

Atmel (ATML) Goldman Sachs downgrades to neutral from buy

Goldman Sachs analyst James Schneider said Atmel's $285 million second quarter sales were ahead of his and the Street's $280 million estimate, and $0.04 operating loss (excluding one-time tax benefit) was ahead of his and the Street's $0.05 loss estimate.

Schneider believes the market is now more appropriately valuing Atmel's strong microcontroller franchise and the restructuring catalyst for the disposal of its ASIC business has now passed.

While he believes estimates for Atmel will continue to move higher in coming quarters, he thinks that the significant valuation disconnect for the stock has largely been resolved.

He maintained a $0.10 2009 loss estimate and $0.10 2010 EPS estimate. He also kept a $4.50 six-month price target for the stock.

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