Analyst Actions: Genzyme, China Petroleum, MicroStrategy, Nautilus
BEAR STEARNS SAYS GENZYME, AMGEN COULD BE TAKEOVER TARGETS
Shares of Genzyme (GENZ) get a lift on Oct. 15 after Bear Stearns analyst Mark Schoenebaum says he thinks that Genzyme and Amgen (AMGN) are the only major biologics companies that could realistically be bought if Biogen Idec (BIIB) disappears. He notes that Genentech (DNA) is majority owned by Roche (ROG); ImClone Systems (IMCL) has a "substantial" relationship with Bristol-Myers Squibb (BMY); and Gilead Sciences (GILD) and Celgene (CELG) are not biologics companies.
Schoenebaum thinks Amgen likely wants to remain independent until d-mab phase 3 data are released in late 2008. Thus, Genzyme seems to make the most sense as a potential target for a major pharma company looking to bulk up its biologics capabilities. He has figured 2 sum-of-the-parts valuation models for Genzyme: the base case is about $70; upside case is about $90. He rates Genzyme as outperform.
CITIGROUP UPGRADES CHINA PETROLEUM & CHEMICAL TO BUY FROM SELL
Citigroup analyst Graham Cunningham says he has replaced CNOOC (CEO) with China Petroleum & Chemical (SNP) as his preferred pick in the China oil sector due to SNP's recent underperformance. He notes, year to date, SNP has lagged CNOOC by 16.9%, as rising oil prices have led to a bleak second half of 2007 earnings outlook, and as the market has given up hope of a government move toward refining reform or even a hike to regulated product (gasoline/diesel) prices for the rest of 2007.
Cunningham says while consensus EPS estimates appear about 10% too high and EPS will most likely fall sequentially in the third and fourth quarters, these factors are already reflected in SNP's stock, in his view.
ST ROBINSON HUMPHREY UPGRADES MICROSTRATEGY TO BUY FROM NEUTRAL
Sun Trust Robinson Humphrey analyst Terry Tillman says he believes the primary catalyst for MicroStrategy's (MSTR) stock will be license revenue trends, with third quarter representing an inflection point in growth that the company could then build off of into the fourth quarter and beyond. He believes there is a strong likelihood for at least low-to-mid-single-digit license growth on a year-over-year basis in the third quarter. Given the company's high degree of profitability, low share count, thinks the leverage on the bottom line could be significant.
Tillman expects meaningful estimate revisions, especially for 2008, could play out and such revisions and financial inflection point is not fully baked into the stock. He sees $4.53 2007 GAAP EPS and $5.80 for 2008. He has a $96 price target on the stock.
RBC CAPITAL CUTS ESTIMATES, TARGET FOR NAUTILUS
RBC Capital analyst Edward Aaron says Nautilus' (NLS) job cuts are expected to provide $10 million of annualized cost savings. He views this as a first step in the process of shrinking the company down to its appropriate size. He says visibility is severely lacking with this name given very weak demand, turnover at CEO level, and recent activist shareholder involvement.
Aaron widens his $0.02 2007 loss estimate to $0.27 loss, cuts $0.35 2008 EPS estimate to $0.20 EPS. He says he significantly cuts his estimates due to lack of guidance. He believes many of the company's problems are fixable, but sees a long road recovery and remains on the sidelines until visibility improves. He cuts $11 target to $9. He has a sector perform opinion on the stock.