Analyst Picks and Pans: GS, COST, HD, LOW, TGT, CBS

Goldman Sachs (GS)

KBW cuts to market perform from outperform

Goldman Sachs Group Inc. shares are likely to give back some of their recent price gains, Keefe, Bruyette & Woods analyst Lauren Smith said Tuesday as she cut her rating on investment firm to market perform from outperform.

Smith noted that the stock rose more than 30% last week, benefiting from a massive, broad market rally. However, it's likely that the shares will retract from current levels along with the market, she said.

"We believe that both Goldman Sachs and Morgan Stanley

(MS) will remain volatile and will continue to provide a lot of trading opportunities but we think they are more likely to give back some of these recent gains along with the market," Smith wrote in a note to clients.

Smith also trimmed her price target on the Goldman shares by $7 to $101. Her 2009 profit estimate went from $8.95 per share to $6.60 per share. However, Smith raised her target price on Morgan Stanley by $4 to $28, and increased her full-year profit estimate to $2.25 per share from $2.10 per share.

Costco Wholesale Corp. (COST)

Home Depot (HD)

Lowe's Cos. (LOW)

Kohl's Corp. (KSS)

Target Corp. (TGT)

Best Buy Co. (BBY)

United Stationers (USTR)

Jefferies & Co. raises rating on each

A Jefferies & Co. analyst raised his rating on Costco Wholesale to buy on Tuesday, citing above-average renewal rates in club membership and improving traffic trends.

Analyst Daniel Binder raised the company's rating from hold and boosted his price target to $49 from a previous range of $37 to $40.

Costco's margins suffered during the fiscal quarter that ended Feb. 15 due to deep price cuts that were intended to draw cash-strapped customers.

Binder said that membership renewal rates have jumped as a result. In the November through January period, Costco member renewals increased 15% compared with the rest of the year. Binder expects the increase to boost membership fee growth over the next 12 months.

Traffic trends are also improving, he said, citing its 5% growth in February.

"Costco is still taking share and with expectations reset and some of the larger price cuts behind us, we are optimistic that margin erosion will be less significant going forward," Binder said. "In a difficult environment, Costco has a low cost structure, which allows it to sell goods cheaper than anyone else."

Binder also upgraded his ratings on Home Depot Inc., Lowe's Cos., Kohl's Corp., Target Corp., Best Buy Co. and United Stationers Inc.

CBS Corp. (CBS)

Caris raises to above average from average

Analyst David Miller says that at the shares' current level, he believes deep-value investors have the opportunity to pick up a liquid media name with an equity value reflecting only the Showtime asset, which continues to grow. Miller thinks the market is valuing all other CBS assets effectively at zero - syndication, interactive, and Outdoor businesses, plus old media assets like spot TV and Radio - and adds that investors now have the chance to own them for free.

Because macro conditions remain tough, Miller cut his $1.00 2009 EPS view to $0.90. He has a $5 price target on the shares.

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