Analyst Picks and Pans:, Adobe, Health Insurers (AMZN)

BofA-Merrill upgrades to buy from neutral

BofA-Merrill analyst Justin Post said on Sept. 16 he believes e-commerce sales will rebound to double-digit year-over-year growth in 2010, resuming the shift to online that was interrupted by the recession. Post said that while has been weak relative to its peer group in the third quarter, the company has built sustainable competitive advantages in e-commerce, including customer loyalty, distribution infrastructure, and technology investment.

Post thinks can maintain its higher growth rate relative to the rest of the online retail group, driving upside for the shares. He sees $1.71 2009 GAAP EPS, rising to $2.29 in 2010. He raised his $95 price target to $103.

Adobe (ADBE)

Jefferies & Co. downgrades to hold from buy

After the U.S. markets closed Sept. 15, Adobe announced an agreement to buy Omniture (OMTR), a provider of online business optimization products and services, for $1.8 billion or $21.50 a share. On Sept. 16, Jefferies & Co. analyst Ross MacMillan said the Omniture acquisition, while accretive to Adobe's earnings, suggests Adobe is still seeking ways to sustain growth in its core Create Suite (CS) franchise. MacMillan said he doesn't see much synergy near term, and Omniture is not as obvious a fit as Macromedia.

The analyst noted that Adobe's third-quarter results were better than expected and the company guided fourth-quarter results roughly in-line with expectations, but said Adobe drew down about $15 million from backlog and saw only a modest sequential increase in deferred revenue.

MacMillan sees $1.52 fiscal 2009 (ending November) EPS, rsiing to $1.77 in fiscal 2010. He has a $37 price target on the shares.

Health-insurance stocks

Collins Stewart begins sector coverage with market-weight

Collins Stewart analyst Brian Wright said on Sept. 16 that health-insurer shares may rise as the health-care overhaul debate is resolved, but he thinks business conditions will get worse over the next year to 18 months.

Wright began covering the sector with a rating of market weight on Sept. 15. He said the shares will probably stage a relief rally if there is no significant overhaul, or if Congress passes a bill that does not include a public option. However he thinks rising medical costs will continue to pressure profits for the insurers.

He said any rally would be a good time for investors to take profits.

Wright assigned buy ratings to two insurers, Humana (HUM) and UnitedHealth Group (UNH). He gave hold ratings to Aetna (AET), Amerigroup (AGP), Centene (CNC), Cigna (CI), Coventry Health Care (CVH), Health Net (HNT), Molina Healthcare (MOH), and WellPoint (WLP).

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