Analyst Actions: Intel, Amazon.com, Yahoo, Unitedhealth
BANC OF AMERICA DOWNGRADES INTEL TO NEUTRAL FROM BUY
Bank of America analyst Sumit Dhanda says his bullish thesis for Intel (INTC) for 2007 was predicated on upside to estimates driven by sales growth, gross margin expansion beyond consensus, operating margin expansion, and attractive valuation. However, his analysis suggests near-term upside from aforementioned drivers are limited.
While Intel's competitive positioning has never looked better, Dhanda says it is unlikely to serve as a sufficient offset to weak seasonality in the first half of 2008.
Bottom line, he says the stock moves on expectations for gross margin and EPS upside. Barring a scenario which results in upside in PC demand, he thinks the fourth quarter will mark the last quarter of meaningful upward revisions suggesting limited upside to stock.
He cuts his price target to $26.
CITIGROUP UPGRADES AMAZON.COM TO BUY FROM HOLD
Citigroup analyst Mark Mahaney says he views the general consolidation in Amazon.com's (AMZN) share price since late July as creating an entry opportunity for what he has viewed as a "core" Internet holding. He also says the market's long-term operating margin expectations for Amazon have become more muted and realistic in the wake of fourth quarter guidance.
Mahaney believes margin expansion could by itself drive double-digit EPS growth in 2008. He thinks Amazon can continue to gain eRetail share. He says Amazon's digital media offerings appear to be gaining material traction. He adds that international exposure supports top-line growth and hedges against U.S. consumer weakness.
He sees EPS of $1.15 for 2007 and $1.79 for 2008. He has a $119 target price for the stock.
THINKEQUITY UPGRADES YAHOO TO BUY FROM ACCUMULATE
ThinkEquity analyst William Morrison says with Yahoo (YHOO) shares are down 22% since he initiated coverage on Oct. 22, he believes the current price ($23.26) offers an attractive entry point.
While Morrison remains concerned about slowing user growth, display monetization challenges, and restructuring of Yahoo's relationship with AT&T (T), his research suggests near-term fundamentals have improved, and he believes Yahoo is more likely than not to report better-than-expected results for the fourth quarter. On the latter point, he believes most Street estimates overstate Yahoo's exposure to AT&T; potential losses from restructured or discontinued partnership now are largely discounted in stock.
He sees EPS of $0.45 for 2007 and $0.50 for 2008. He has a $32 target price.
CIBC WORLD DOWNGRADES UNITEDHEALTH TO SECTOR PERFORM FROM SECTOR OUTPERFROM
CIBC World analyst James Naklicki says Unitedhealth Group (UNH) shares had a great run into yearend 2007, rising almost 20% in the past 2 months, driven by a rotation into names with less economic sensitivity. He says UNH now trades at a 10% premium to peers. However, he thinks the company will have trouble outperforming peers in 2008, as Sierra already included in guidance.
Naklicki also believes UNH's earnings are not as diversified as they once were. He notes the company has acknowledged service issue, but he says evidence of change is not likely to be apparent until the 2009 selling season gets under way.
He still sees EPS of $3.51 for 2007 and $4.00 for 2008. He keeps $60 price target on the stock.