Analyst Actions: JPMorgan, NetApp, Brookfield Properties, Stamps.com
SANDLER O'NEILL DOWNGRADES JPMORGAN CHASE TO HOLD FROM BUY
Sandler O'Neill analyst Jeff Harte says while recent regulatory actions (e.g., bans on short sales of financial stocks), the prospect for additional measures (e.g., possible creation of a government entity to purchase problem assets from financial cos) are near-term positives, significant fundamental headwinds persist. Specifically, he says U.S. housing prices continue to decline, and credit deterioration appears to be spreading to commercial lending products as well.
Harte thinks JPMorgan Chase (JPM), as one of the largest consumer and commercial lenders in the country, is likely to struggle with a difficult operating environment well into 2009. He cuts $0.50 third quarter EPS estimate to $0.13, $2.43 for 2008 to $2.01 and $3.50 for 2009 to $3.34.
WACHOVIA DOWNGRADES NETAPP TO MARKET PERFORM FROM OUTPERFORM
Wachovia analyst Aaron Raker says that while he agrees with argument that underlying growth drivers for the enterprise storage market will remain robust over the long term, it reminds us that the industry can see periods of excess capacity/underutilization.
Raker notes talks still suggest most enterprise environments run their networked storage environments at 30%-50% utilization rates, which he thinks could be more heavily scrutinized and drive down spending over the next three to six quarters.
Between 2000-2002, he estimates that overall enterprise storage industry revenue contracted by about 35%. During this time, industry capacity (terabytes) shipment growth slowed to low/mid-30% y/y range.
He cuts estimates on EMC (EMC), NetApp (NTAP), Emulex (ELX), and QLogic (QLGC).
STIFEL NICOLAUS DOWNGRADES BROOKFIELD PROPERTIES TO HOLD FROM BUY
Stifel Nicolaus analyst John Guinee says he downgrades Brookfield Properties (BPO) on valuation, with total return of 16.8% year-to-date, vs. Morgan Stanley U.S. REIT index at 8.5%. He says with 5.5% implied NOI cap rate, BPO is fully priced on real estate metrics.
Guinee thinks Manhattan vacancy rate will exceed 10% by early 2009 and will quickly transition from a landlord to tenant market. He believes the result of massive government intervention is delevering of financial institutions which has to result in more job losses. He also says declining oil prices will likely slow rent growth in Houston (8% of office NOI), Calgary (6%), and Alberta (with virtually all residential development profits) markets.
He cuts $1.57 2008 FFO estimate to $1.44 and $1.69 for 2009 to $1.56.
NEEDHAM DOWNGRADES STAMPS.COM TO UNDERPERFORM FROM HOLD
Needham analyst Mark May says Stamps.com (STMP) holds significant levels of cash on its balance sheet ($4.64/share), which generates interest income that accounts for about 50% of pre-tax income.
Given the recent flight to quality and decline in bond yields, he's adjusting estimates as STMP EPS will be directly impacted. He says new EPS estimates also reflect expected slower PC Postage subscriber adds given macroeconomic environment. He cuts $0.63 2008 EPS estimate to $0.57 and $0.81 for 2009 to $0.72.
May thinks risks to EPS posed by declining bond yields, slowing economy, in addition to a valuation of 17 times 2009 EPS, make him believe that the stock could come under pressure. He figures the potential downside is to $11-$12.
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