Stock Picks: Apple, 3M, Viacom, AMR

Apple Inc: Needham & Co. analyst Charlie Wolf maintained a buy rating on shares of Apple Inc. (AAPL) on Feb. 12 and increased his price target on the iPhone maker.

Wolf said in a note to clients that he was raising his price target on Apple from $235 to $280 because "the trajectory of Mac and iPhone sales were materially higher in the company's last two quarters than we forecast" in a September report. Wolf said the recently introduced iPad should make a material contribution to Apple's valuation.

Reflecting the growing sales of iPhone applications, iTunes revenues were also higher than his previous forecast, said Wolf. He also noted that Apple "continued to build its cache of excess cash".

The analyst maintained his earnings per share (EPS) estimates of $12.85 for fiscal 2010 and $15.25 for fiscal 2011.

3M Corp.: BofA Merrill Lynch analyst John Inch lowered his rating on shares of 3M Corp. (MMM) We to underperform from neutral on Feb. 12.

In a note to clients, Inch said that while shares of the maker of Post-It notes have rebounded along with other diversified industrial stocks, "we think there is less relative MMM upside potential from here due to slower expected growth over the coming cycle, elevated margins that appear to have less runway, and MMM's defensive trading history and underperformance last expansion cycle."

Inch said that while 3M's first quarter results should significantly exceed Wall Street expectations, "growth is expected to decelerate in the second half" of 2010, in contrast to other industrial stocks. Currency exchange rates, pricing, more difficult comparisons, and 3M's exposure to the European economy could all negatively pressure second half performance, he added.

"Beyond 2010, we think 3M should still underperform given the company's history of slower growth and lower relative operating leverage," the analyst said.

Inch maintained a price target of $90 on the shares.

Viacom Inc.: Thomas Weisel Partners analyst Benjamin Mogil upgraded his rating on shares of Viacom Inc. (VIAB) to overweight from market weight on Feb. 12, and raised his price target on the shares to $35 from $32.

In a note to clients, Mogil said his rating and price target increase on the owner of the Paramount film studio was based on his view that the company's core media (excluding the Rock Band video game franchise) and film segments are entering 2010 with "stronger fundamentals than has been the case for a number of years".

Mogil noted that Viacom posted quarterly results on Feb. 11 that were ahead of his expectations and the Wall Street consensus forecast. Citing "structural improvements" at Paramount, he said the studio is no longer "the drag it had once been on Viacom's overall results and valuation". Mogil added that management's comments on the media segment were "encouraging", particularly regarding affiliate revenue growth as "telco carriers are adding some of Viacom's more niche channels".

AMR Corp.: Stifel Nicolaus analyst Hunter Keay upgraded his rating on shares of AMR Corp. (AMR) to buy from hold on Feb. 12 based on higher estimates of passenger revenue per available seat mile, or PRASM, for the company's American Airlines unit, and reduced risk following Japan Air Lines' decision to remain in the Oneworld ticketing alliance.

Keay said that rival UAL Corp. (UAUA), owner of United Air Lines, indicated its January 2010 PRASM increased 9.5%-11.5% from a year earlier, well above his estimate of of a 5%-6% rise. He said that while it is unlikely that AMR's PRASM exceeded this level, the company has "consistently outperformed its peers on PRASM in recent quarters due to more mature destinations and effective yield management.

Keay estimated that AMR's January 2010 PRASM increased around 5%.He increased his 2010 consolidated PRASM estimate from 9.0% to 10.7%.

The analyst called JAL's decision to remain with Oneworld "significant" as he believes a JAL defection to the rival SkyTeam network would have had a significantly negative impact on AMR's share price.

Keay said AMR shares are "inexpensive" even after their recent run-up, citing an implied price target of $13.

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