Analyst Actions: Google, Caterpillar, Infospace
GOLDMAN RAISES ESTIMATES, TARGET FOR GOOGLE
Goldman Sachs analyst Anthony Noto says Google's (GOOG) third quarter revenue and operating income outperformed by 2.5%, 3.4%, respectively. He sees a positive catalyst for shares that should drive estimates meaningfully higher and increase investor confidence in its long-term growth rate of around 20%.
Noto advises investors to buy Google with 25% upside to his new yearend 2008 target of $800, vs. his old $620 yearend 2007 target.
He raises $15.79 2007 EPS estimate to $16.05, $20.73 for 2008 to $22.20, $25.54 for 2009 to $28.00. He believes continued revenue, profit outperformance will drive Street estimates and valuations higher. He rates the stock as buy.
WACHOVIA KEEPS OUTPERFORM ON CATERPILLAR
Caterpillar's (CAT) third-quarter EPS misses analysts' estimate, and the company trims 2007 view. Wachovia analyst Andrew Casey says the company's $1.40 third quarter EPS missed his and consensus estimates by $0.01 and $0.03. And Caterpillar cut the midpoint of its 2007 guidance range to $5.40, which is consistent with his estimate but slightly beneath consensus' $5.44.
Casey believes most of the negative guidance was expected, but the stock reaction could be negative. He says, given that Caterpillar has reiterated its 2010 goals, implying $8-$10 in EPS, this could be an attractive buying opportunity for long-term investors. He notes that Caterpillar expects the rest of the world to remain strong and offset ongoing weakness in North America.
He recommends buying on any weakness. He maintains $5.40 2007 EPS and $6.50 2008 estimates. He has a $93-$96 12-18 month valuation range for the stock.
NEEDHAM UPGRADES INFOSPACE TO BUY FROM HOLD
Analyst Mark May says he expects the sale of Infospace's (INSP) Directory unit for $225 million and its Mobile unit for $135 million to close by yearend. After that, he expects Infospace to pay out a special dividend of about $400 million in the first quarter of 2008, leaving it with $175-$200 million in cash and $28 million in calendar 2008 EBITDA from its Online Search business. He is applying a reasonable 6X EV/EBITDA multiple and taking into consideration post-deals cash, derives a current fair value of $22 and a yearend target price of $23.
While May sees challenges to growth in the Online Search business, he does view it as a cash cow business and views the current valuation as compelling.