Analyst Picks and Pans: McDonald's, Palm, Capital One

McDonald's (MCD) Barclays keeps overweight

McDonald's posted a 2.2% rise in August global sales and 1.7% rise in U.S. sales. Barclays analyst Jeffrey Bernstein said the fast food chain's August U.S. sales disappointed Wall Street, with pressure on formerly more resilient dayparts, while Europe sales remain strong.

Bernstein says escalation of discounting in quick service restaurants (QSR) remains a concern, though less than the "burger wars" of a decade ago. While McDonald's EPS growth is tempered by the broader macro environment, fundamentals are stronger in QSR. He says while world-wide volatility remains, McDonald's continues to outperform QSR.

He kept an overweight opinion, and has a $68 price target on the stock.

Palm (PALM) Credit Suisse downgrades to neutral from outperform

Credit Suisse analyst Deepak Sitaraman lowered his rating on Sunnyvale, Calif.-based Palm to neutral from outperform, saying the company's choice of Sprint Nextel (S) as the exclusive carrier for its new Palm Pixi smart phone may hinder sales of the device.

Palm announced Wednesday that a new phone called the Palm Pixi will be available in time for the holidays, although it did not say how much the new phone will cost.

Sitaraman called Palm a "credible competitor" in the emerging smart phone market, but said near-term sales are likely to disappoint without AT&T Inc. (T) or Verizon Wireless (VZ) offering service for the phone. Sitaraman cut his target price on the stock to $12 from $18.

He now expects Palm to sell 6 million smart phones next year, down from a previous estimate of 8.1 million. That estimate also includes sales of the Palm Pre, the phone Palm launched earlier this year as part of an effort to regain its footing in the competition with Apple's (AAPL) iPhone and the BlackBerry from Research in Motion (RIM). The Pre is also carried exclusively by Sprint.

Capital One Financial (COF) Citi Investment Research upgrades to buy from hold

Citing an expected improvement in credit losses, Citi Investment Research analyst Donald Fandetti raised his rating on Capital One Financial to buy from hold and his share price target to $44 from $28.

"Though management has been cautious about the credit outlook, we believe the worst is behind the company in terms of credit card charge-offs, which should lead to lower loan-loss provisions and potentially a less bearish tone from management near-term," Fandetti wrote in a research note Wednesday.

Charge-offs are loans that are written off as not being repaid. Credit card charge-offs often mirror unemployment, which has risen steadily throughout the recession. Last week, the Labor Dept. said the nation's unemployment rate hit 9.7% in August, a 26-year high.

Because of its increasing banking operations, Fandetti said Capital One's strong capital base should allow it to handle future losses and still maintain adequate reserves to help diversify its portfolio and eventually grow its loan base. He left his 2009 and 2010 forecasts for Capital One unchanged.

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