Stock Picks: Novellus Systems, Sirius XM, Take-Two Interactive

Novellus Systems Inc.: Standard & Poor's equity analyst Angelo Zino reiterated a hold rating and $29 price target on shares of Novellus Systems Inc. (NVLS) on Sept. 3.

In a posting on the S&P MarketScope service, Zino said the maker of semiconductor equipment provided a mid-third-quarter update and said it still sees bookings flat to up 10 percent from the second quarter, with sales of $345 million to $365 million vs. a prior forecast of $335 million to $365 million, and operating earnings per share (EPS) of 80 cents to 90 cents, vs. prior guidance of 72 cents to 90 cents.

"Although we see softening PC sales, we expect revenues to be supported by healthy demand for mobile devices and enterprise spending," Zino said. The analyst said he is "wary" of falling memory prices, but sees the company's customers remaining profitable into 2011.

Zino maintained operating EPS estimates at $2.75 for 2010 and $3.45 for 2011.

Sirius XM Radio Inc.: Miller Tabak equity analyst David Joyce reiterated a buy rating on shares of Sirius XM Radio Inc. (SIRI) on Sept. 3, with a short-term price target of $1.25 and a long-term target of $1.45.

In a note, Joyce said he was lowering estimates on Sirius, the only U.S. satellite radio broadcaster, to reflect higher estimates for customer turnover, or churn, in the second half of 2010 after a spike in net subscribers added in the second quarter.

Joyce lowered his estimates for free cash flow for the third quarter to $41 million from $56 million, and for 2010 to $143 million from $192 million.

Take-Two Interactive Software Inc.: Kaufman Bros. equity analyst Todd Mitchell maintained a hold rating and $12 price target on shares of Take-Two Interactive Software Inc. (TTWO) on Sept. 3.

On Sept. 2, Take-Two, publisher of the Grand Theft Auto video games, reported an unexpected third-quarter profit and boosted its earnings outlook on sales of its new release Red Dead Redemption. The shares rose as much as 21 percent.

Profit excluding some costs was 28 cents a share, the company said in a statement. That compares with the average 8-cent loss estimated by 13 analysts in a Bloomberg survey. Take-Two forecast a 2011 profit of 60 cents to 70 cents, its first in a year when it didn't deliver a new Grand Theft Auto game. Analysts had estimated a full-year loss of 20 cents.

Red Dead Redemption, more than four years in development, was created by Take-Two's Rockstar Games studio, which also makes Grand Theft Auto. The game, with an average score of 95 out of 100 in reviews compiled by, is set in the U.S. Wild West during the early 20th century and lets players travel in a cowboy-movie landscape and hunt outlaws.

The company said third-quarter net income was $5.92 million, or 7 cents a share, compared with a loss of $56.5 million, or 73 cents a share, a year earlier. Revenue more than tripled to $354.1 million from $94.9 million.

Chairman Strauss Zelnick, who took control of the New York-based company in 2007, has focused on reducing the number of titles produced and increasing their quality. After delays in development, Take-Two released Mafia II on Aug. 24 to strong initial sales, according to product-tracking firms in the U.S. and U.K. Other new titles scheduled for release this year include NBA 2K11 and the latest iteration of the popular Civilization PC game.

Mitchell said in a note that Take-Two's third-quarter results "exceeded all expectations," driven by Red Dead Redemption, which sold 6.9 million units during the quarter.

The analyst said that for the fourth quarter, he expects revenue of $320 million and EPS of 32 cents, and for fiscal 2010 revenue of $1.1 billion and EPS of 70 cents. "We look for results to be driven by further demand for Red Dead, in particular an expected strong release into Japan in October," he said.

Mitchell said he believes that Mafia II "is also selling well."

"Moreover, NBA 2K will have Michael Jordan on the cover and in the game," he added.

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