Analyst Actions: Cadence, Focus Media, CardioNet
CADENCE DESIGN SYSTEMS, INC. (CDNS)
Citigroup upgrades to buy from hold, adds to top picks
Analyst Terence Whelan says he reversed his cautious view on Cadence and now sees it as a strong candidate to generate 50% one-year and 100% two-yr returns. He advises buying now before expense cutting and model change benefits become visible to the Street over the next two to four quarters. Whelan says future catalysts include: 1) new CFO Kevin Palatnik is the first step in helping repair management credibility; 2) cost restructuring likely announced in the next few quarterss; 3) the Citi Tech Conference on Sept. 3, Cadence's Live Analyst Day on Sewpt. 9, and a Nasdaq conference on Dec. 3. Also, Whelan says Cadence's $912 million buyback authorization (upped from $500 million on Aug. 15) limits downside to $7, in his view. He raised his $9 price target to $11.50.
FOCUS MEDIA HOLDING LTD. (FMCN)
Piper Jaffray ups target, keeps buy
Analyst Gene Munster says Focus Media's second-quarter results beat estimates and are a step in regaining Street credibility. He notes investors' concern is centered on the risk Focus Media's business will be negatively impacted in the fourth quarter by a post-Olympics slowdown, along with a greater slowdown in the overall Chinese economy. But he expects investors will gain confidence in the fourth quarter as it becomes clear that non-Olympic advertising spending will lead spending in Dec. Munster notes margins improved in three of the company's five segments in the second quarter, reversing recent negative trends. He sees margins improving in the third and fourth quarters in the tow segments that saw a quarter-over-quarter margin drop in the second quarter. The analyst increased his $63 price target to $65. He sees $1.88 2008 non-GAAP earnings per ADS, rising to $2.59 in 2009.
CARDIONET, INC. (BEAT)
Citigroup downgrades to hold from buy
Analyst Amit Bhalla says the downgrade is based on: 1) valuation--as of Friday's close, CardioNet represented a neutral stock risk/reward tradeoff (year-to-date it was up 87%); and 2) uncertainty on the dollar amount the Centers for Medicare and Medicaid Services will reimburse the CardioNet system “technical fee" come the Nov. 1 national coverage decision. Bhalla says his question is not “whether" a code will be issued, but the dollar amount. Long term, he still believes CardioNet will penetrate the outpatient arrhythmia monitoring market from its current 6% market share. The analyst maintains his 43 cents 2008 EPS estimate, and increased his 2009 forecast from 98 cents to $1.00. He raised his $26 price target to $35.
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