Analyst Picks and Pans: Nike, Jabil, American Superconductor
Goldman Sachs upgrades to buy from hold; raises price target
Nike posted a higher first-quarter profit on Sept. 29, driven by cost cuts. Goldman Sachs analyst Michelle Tan said on Sept. 30 that Nike's dominant marketing & R&D budget, and presence in emerging markets offer visible long-term growth. But she said the stock has underperformed (+16% year-to-date vs. the 116% advance for her group coverage and an 18% rise for the S&P 500), as the company's top line deteriorated at accelerating rate.
With first sign of sales stabilization this quarter, Tan expects investors' perspective to shift from downside risks to upside opportunities. And as sales trends improve, she sees Nike's earnings per share multiple moving to the higher end of its historical range. She raised her $4.06 fiscal 2011 (ending May) earnings estimate to $4.25 per share and her $61 price target to $75.
Jabil Circuit (JBL)
Needham maintains buy; raises price target
Jabil Circuit posted fourth-quarter earnings per share that beat Wall Street expectations on Sept. 29. Needham analyst Sean Hannan said on Sept. 30 that Jabil's fourth-quarter revenue of $2.8 billion and $0.16 non-GAAP earnings per share beat his $2.6 billion and $0.07 estimates, as well as Wall Street's $2.7 billion and $0.08 expectations. Hannan said that with stabilized business in the background, the company's recent actions to optimize operations are only just starting to take hold and show leverage power within its model. Further, he believes upcoming quarters are becoming increasingly well positioned to show healthy growth (from current revenue and earnings per share EPS levels) as the broader information technology environment recovers and new program wins materialize.
The analyst raised his $0.73 fiscal 2010 (ending August) earnings per share forecast to $1.01 and sees EPS of $1.27 in fiscal 2011. He lifted his $14 price target to $16.
American Superconductor (AMSC)
Kaufman upgrades to buy from hold
Kaufman analyst Theodore O'Neill said on Sept. 30 that AMSC announced that its largest customer, Sinovel, placed a follow-on order for $100 million in electronics for its new 3MW wind turbine. He noted that this shows the company's backlog pipeline is getting refilled. It also shows that Sinovel is not making any near-term plans to work around AMSC's designs, according to O'Neill. He noted that the order validates the company's 3MW wind turbine product which should encourage other AMSC customers. Finally, O'Neill said it shows that there is no letup in demand or financing for wind turbines in China, AMSC's core geographic segment.
The analyst sees $0.43 EPS in fiscal 2010 (ending March). He has a $36 price target.