Stock Picks: Microsoft, TiVo, J.Crew

Microsoft (MSFT)

Collins Stewart rates buy Jefferies & Co. rates buy Credit Suisse rates outperform

Analysts cautioned on Nov. 25 not to read too much into the coming departure of Microsoft Corp. finance chief Chris Liddell, which was announced the previous day.

Liddell joined Microsoft in 2005, and this year led an effort to cut $3 billion from the company's costs amid the recession. The plan included Microsoft's first mass layoffs. Liddell will step down as CFO on Dec. 1 and be replaced by Peter Klein, Microsoft said. Klein, 47, joined Microsoft in 2002 and currently is responsible for the books at the division that produces Microsoft Office and other business programs.

Collins Stewart analyst Sandeep Aggarwal in a note to investors said Liddell "has done a great job at Microsoft for the past four and half years and he now wants to take a 'CEO type' of role."

Katherine Egbert, an analyst at Jefferies & Co., also said she thinks Liddell wants to move into a CEO role. "We don't believe Mr. Liddell was forced out, nor do we think he is leaving under untoward circumstances," she wrote in a note to investors. Egbert said Klein seems a "competent replacement" for Liddell.

Credit Suisse analyst Philip Winslow said he is "encouraged by Microsoft's selection to replace Chris Liddell and believe that Peter Klein's track record suggests he will continue the focus on cost efficiency championed by Liddell."

TiVo Inc. (TIVO)

Standard & Poor's Equity Research maintains buy

S&P equity analyst Tuna Amobi said on Nov. 25 that TiVo's October-quarter operating loss per share of 6 cents, which compared with a year earlier loss of one cent, matched his estimate. He noted worse-than-projected subscriber losses, with other "lackluster" metrics, as TiVo guided expectations for January-quarter results to a $5 million-$7 million adjusted EBITDA loss and a $13 million-$15 million net loss.

Amobi sees further crucial traction on distribution and audience measurement, underscored by TiVo's latest pacts with Virgin Media (VMED) and Google Google (GOOG), among key strategic partnerships with potential long term upside.

With an imminent ruling on the company's litigation with Dish Network Corp. (DISH) viewed as pivotal to TiVo's patent momentum, the analyst keep his $14 price target. J. Crew Group Inc. (JCG)

BMO Capital Markets maintains outperform Jefferies & Co. reaffirms hold; raises price target

J. Crew Group Inc. looks to fare well during the holidays, with a favorable product assortment and third-quarter results that topped Wall Street's expectations, sending the company's stock higher in premarket trading on Nov. 25.

After the close of trading Nov. 24, the retailer of clothes, shoes and accessories reported earnings of 67 cents per share on revenue of $414.1 million. Analysts surveyed by Thomson Reuters, whose estimates generally exclude one-time items, predicted a profit of 58 cents per share on sales of $408 million.

The company has held up well during the recession, an impressive feat considering that many retailers have struggled as consumers pull back on their discretionary spending and continue to hunt for bargains.

John Morris of BMO Capital Markets said in a client note that J. Crew's quarterly performance shows that it has the ability to grab market share. He expects the retailer, based in New York, to do well during the holidays on easier comparisons, decreased inventory and products that are "ahead of the curve in terms of trend and style." Morris maintained a $50 price target.

But Randal Konik of Jefferies & Co. cautioned that J. Crew's ability to post strong quarterly results will now likely be anticipated by Wall Street. "With a first-quarter earnings beat from better sales, a second-quarter beat from better margins and now a third-quarter beat from better sales and margins, we expect Street models to recalibrate expectations substantially higher," he wrote.

Konik boosted his price target for J. Crew to $45 from $42.

Advisory Board Co. (ABCO)

First Analysis Securities upgrades to overweight from equal weight

First Analysis Securities analyst Frank Sparacino upgraded health care consulting company Advisory Board Co. on Nov. 25, citing improvements in operating budgets, pricing, admissions and profitability for hospitals despite high levels of debt. Sparacino also initiated a share price target of $30.

The financial health of hospitals has been strong since the beginning of this year and should boost Advisory Board to double-digit earnings growth by March, Sparacino said. Advisory Board, which offers subscription-based programs to health care systems, has made significant progress in automating data collection and shown "stellar execution in a difficult environment" compared to its competitors, Sparacino said.

Still, he said he expects 2010 contract renewal rates at the low end of historical ranges given a challenging first half of the fiscal year.

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