Stock Picks: Google, Kraft, Boston Scientific, Hasbro
Google Inc.: Standard & Poor's equity analyst Scott Kessler reiterated a buy rating on shares of Google Inc. (GOOG) on Mar. 15.
On Mar. 13, the Financial Times reported that Google, owner of the world's most popular Internet search engine, has drawn up detailed plans to shut its search engine in China and is "99.9%" certain of going ahead with the closure. The FT cited a person it didn't name. The company may make the decision very soon, while it will take time to carry out a closure to make sure staffers don't suffer reprisals from authorities, the paper said, citing the person as familiar with Google's thinking.
In a Mar. 15 posting on the S&P MarketScope service, Kessler noted that Google shares were down 3% on the FT report and additional concerns about the company's ability to provide other offerings and conduct other operations in China. "We are not surprised by these developments", Kessler said, adding that they are largely consistent with a report on Google he wrote published about two months ago.
"Despite some notable issues related to China, the Nexus One, and government actions, we see GOOG as very well positioned and attractively valued," Kessler wrote. The analyst kept his $640 12-month target price.
Kraft Foods Inc.: Morgan Stanley resumed coverage of Kraft Foods Inc. (KFT) with an overweight rating on Mar. 15.
In a note, Morgan Stanley analyst Vincent Andrews said the firm also had a $32 price target on the shares.
Andrews said Kraft has "materially underperformed" its packaged-food peers since its final offer for Cadbury in late January -- down 0.4%, vs. its peers up around 5% and the S&P 500 up 1.2% -- and now trades at the low end of the group on a price-to-earnings basis.
"We believe KFT's performance and valuation more than reflect the low ROIC [return on invested capital] on the Cadbury acquisition ... the integration risks ahead, and likely continued weak growth at heritage Kraft," the analyst wrote.
At the current Kraft share price, Andrews said he sees "limited downside, vs. a greater likelihood of a [nearly] 15% total return by year-end". The analyst said he prefers food stocks H.J. Heinz Co. (HNZ), General Mills Inc. (GIS), and Kellogg Co. (K) -- each rated overweight -- as long term investments.
Boston Scientific Corp.: J.P. Morgan analyst Michael Weinstein lowering an investment rating on shares of Boston Scientific Corp. (BSX) to neutral from overweight on Mar. 15.
Boston Scientific shares fell the most in 17 months in New York trading on Mar. 15 after the company halted sales of heart-rhythm devices because of a documentation error with its U.S. regulatory filings. Two changes in manufacturing weren't submitted for approval to the U.S. Food and Drug Administration, Boston Scientific said in a Mar. 15 statement. There's no indication that the manufacturing changes pose any rise to patient safety, the company said.
In a Mar. 15 note, Weinstein said the FDA has put all Boston Scientific implants of its ICD products on hold, pending agency approval of a design change to the Cognis and Teligen line of ICDs. He said the company notified its salesforce on Mar. 14, but provided no indication as to how long the shutdown would last.
Weinstein noted that U.S. ICDs represent 15% of the company's sales, and depending on the duration of FDA action, Boston Scientific will be vulnerable to market share loss and reputation damage amid "an already fragile environment" in its CRM business.
The analyst lowered a year-end price target on Boston Scientific to $7 from $9.50.
Weinstein added that competitors St. Jude Medical Inc. (STJ) and Medtronic Inc. (MDT) will "certainly" benefit in the short term from the Boston Scientific news, but lasting benefits will depend the on duration and the severity of the impact on Boston Scientific's business.
He reiterated overweight ratings on both St. Jude and Medtronic.
Hasbro Inc. Needham & Co. analyst Sean McGowan lowered a rating on shares of Hasbro Inc. (HAS) to buy from strong buy on Mar. 15.
In a note, McGowan said he had raised Hasbro's rating to strong buy on Jan. 12, as he believed shares of the maker of Monopoly and GI Joe offered potential appreciation of over 40% to a price target of $45; since then, the shares have risen 22%, he said.
"We continue to believe the stock will be about $45 a year from now, implying price appreciation of 18% in the next year," McGowan wrote. "We continue to like Hasbro's long-term prospects."