Analyst Actions: Priceline.com, UBS, Ambac, American Eagle
CITIGROUP DOWNGRADES PRICELINE.COM TO HOLD FROM BUY
Citigroup analyst Mark Mahaney says Priceline.com (PCLN) shares are up 41% since the company's Nov. 8 third quarter EPS report, and trade very close to their peak 2-year forward EV/EBITDA multiple 18, vs. a 19 peak and a 14 average.
Mahaney's core thesis has not changed since a May upgrade, with key long factors including: 1) impressive European growth platform; 2) business model driven sustainable competitive advantages; 3) positive exposure to rising prices in global travel market due to a "value" oriented offering; and 4) arguably sector's best management.
He continues to view Priceline as a core Internet stock, but would prefer an entry/adding price closer to $100, which provides 20%+ upside to her $124 price target.
CIBC WORLD DOWNGRADES UBS TO UNDERPERFORM FROM SECTOR PERFORM
CIBC World analyst Meredith Whitney says she thinks UBS (UBS) shares expensive at current levels vis-a-vis unrealistic consensus earnings estimates and given she has little actual confidence in her $3.80 2008 EPS estimate, which is 19% below consensus.
Whitney notes that UBS has only a "marked-to-market/model" and has not actually sold any assets, thus it beholden to a game of "catch up" on declining underlying values of such assets. She says the company's underlying fundamentals are deteriorating; thus, she thinks until UBS actually disposes any of these assets, any true earnings base will be difficult to find.
With global banks in general trading below 9-10 times earnings, she thinks downside risk to UBS shares is in the low-to-mid $30s.
FRIEDMAN UPGRADES AMBAC FINANCIAL GROUP
Friedman analyst Steve Stelmach says he upgrades Ambac Financial (ABK) to outperform from market perform after Moody's affirmation of ABK's triple-A rating. While big risks remain, he views the shares as undervalued, absent rating agencies' requirements for sizable capital raise, which doesn't appear forthcoming, at least according to Moody's.
Stelmach says his new rating is based on losses coming within his targeted $1-$3 billion range, which is not a given, considering credit market uncertainty. He says it also assumes ABK could attract sufficient capital to fill void left by losses, which also not a certainty. But initial evidence is positive, with reports indicating MBI's recent capital raise attracted multiple bidders.
BEAR STEARNS UPGRADES AMERICAN EAGLE OUTFITTERS TO OUTPERFORM FROM PEER PERFORM
Bear Stearns analyst Randal Konik says American Eagle Outfitters' (AEO) core American Eagle brand is well positioned in relatively favorable teen sub-sector. He says mid-teens annual EPS growth is visible; margins sustainable in high teens, counter to market fears.
Konik says the company has a healthy balance sheet, tons of cash, and free cash flow generation. He sees upside near 50% and 15% downside. He says his $30 target is conservative, based on 13 times his 2009 EPS estimate of $2.45, 6 times EV/EBITDA. He notes clean inventories, cost-cutting initiatives and tons of cash provide downside support.
He says at 9.5 p-e and 4.5 times EV/EBITDA (2008), this is the cheapest stock in his group.