S&P Picks and Pans: Google, Bear, Oracle, RIMM, FedEx
S&P REITERATES HOLD OPINION ON SHARES OF
Google announces that the FTC has cleared its proposed acquisition of DoubleClick. The deal has already received approval from Australian and Brazilian authorities, and can be completed if the European Commission signs off on it. We think the FTC's decision makes completion of the transaction more likely. However, we are not sure what the EC will do, and believe its standards for review/approval are perhaps more strict than the FTC's. We think that deal consummation would be a material positive for Google, especially as it pursues display advertising opportunities. /S. Kessler
S&P KEEPS HOLD OPINION ON SHARES OF BEAR STEARNS
Bear posts a November-quarter loss per share of $6.91 vs. year-ago $4.00 EPS, wider than our estimate of a loss of 91 cents. Write-downs of mortgage-related assets totaled $1.9 billion, higher than we expected, and costs rose rapidly, particularly severance and legal expenses. The firm's fixed-income exposure extends into investment banking, where revenues were hurt by reduced underwriting activity. Asset management posted a strong quarter. We will update following management's conference call, which we expect to include an update on remaining mortgage exposure and a fiscal 2008 (Nov.) outlook. /M.Albrecht
S&P MAINTAINS STRONG BUY RECOMMENDATION ON SHARES OF ORACLE CORP.
November-quarter non-GAAP EPS of 30 cents vs. 21 cents (after options) is 4 cents above our estimate. Revenues rose 27% to $5.36 billion, $360 million above our view, helped by Hyperion acquisition and forex. License revenues grew 38%; before Hyperion, licenses rose a solid 32%. We think Oracle's broad product set, diverse customer base and large geographic footprint will enable it to grow solidly and weather economic uncertainty. We raise our fiscal 2008 (May) EPS estimate 4 cents to $1.25 and fiscal 2009's 2 cents to $1.45. We raise our discounted cash-flow (DCF)-based target price $1 to $27, assuming 10.7% cost of capital and 4% terminal growth. /Z. Bokhari
S&P MAINTAINS HOLD OPINION ON RESEARCH IN MOTION SHARES
Ahead of RIM's November-quarter results, due after the close, we forecast $1.65 billion in revenues and 62 cents in EPS. We project smartphone sales will double from a year earlier on new products and global expansion. We believe attention will also be on RIM's February-quarter guidance, given its exposure to U.S. consumer spending and financial services firm's telecom equipment spending, both of which could be restricted in early 2008. We see February-quarter revenues of $1.84 billion and EPS of 67 cents. Despite a high P/E multiple versus peers, we would hold RIM shares given our forecast for above average 25% EPS growth. /T.Rosenbluth
S&P MAINTAINS HOLD OPINION ON QUALCOMM SHARES
Qualcomm revises its December-quarter revenue and EPS guidance upward, we believe a reflection of stronger demand than expected for chips supporting CDMA wireless handsets. We note that royalty payments may prove lighter than expected. But we believe demand will remain strong throughout fiscal 2008 (Sep.), and we increase our EPS forecast by 5 cents to $1.75, after 36 cents per share for stock option costs and strategic investments. We are raising our 12-month target price by $1 to $41 in order to reflect a premium-to-peers P/E multiple warranted by a higher operating margin. /T.Rosenbluth
S&P REITERATES STRONG BUY OPINION ON SHARES OF FEDEX CORP.
November-quarter EPS of $1.54 vs. $1.64 is a penny off our estimate. Margins were hurt by fuel and a weak U.S. economy; international remained strong. FedEx sees fiscal 2008 (May.) EPS of $6.40-$6.70. We are lowering our fiscal 2008 estimate to $6.65 from $6.75, and fiscal 2009's to $7.45 from $7.65. The shares are trading at 12.7X our fiscal 2009 estimate, below the low end of FedEx's historical P/E range and below the S&P 500. We think any strengthening of the U.S. economy in calendar 2008 would push the shares higher. We keep our 12-month target price at $140, 18.8X our fiscal 2009 estimate, slightly above the S&P 500. /J.Corridore
S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF ACTIVISION
Activision raises December-quarter guidance for the second time in a month and now expects revenue of $1.375 billion and EPS of 76 cents, compared to prior guidance of $1.225 billion and 66 cents. The company cites better-than-expected worldwide demand, driven by strong sales of Guitar Hero III and Call of Duty 4. We are raising our fiscal 2008 (Mar.) EPS estimate by 10 cents, to 97 cents, and our 12-month target price by $3, to $33, on our higher earnings outlook. However, we believe near term upside will be constrained by the pending merger with Vivendi, subject to approvals, which will acquire a majority stake at $27.50. /J.Yin