Picks of the Week: Apple, Baidu, E*Trade, Intel, RIM

Wall Street analysts give their buy, sell, or hold views on 10 stocks in the news this week

Notable Wall Street analyst opinions on stocks in the news for the week of Mar. 22-Mar. 26:

Mar. 22

Citigroup Inc.: Rochdale Securities analyst Richard Bove raised a rating on shares of Citigroup Inc. (C) to buy from neutral on Mar. 22.

In a note, Bove cited his argument that Citigroup, the recipient of the biggest U.S. bank bailout, has "turned around" -- that it has earnings power of greater that 70 cents per share and that the stock would "ultimately get back to $8.50 per share".

Bove said he had previously lowered the rating on the stock because he feared that the government's potential sale of 7.7 billion shares would cause "the issue to fall before it could rise".

He said an improving U.S. economy means an improving loan loss situation for Citigroup. "The company's balance sheet has too much liquidity and it is over-capitalized," the analys wrote. "This gives management the flexibility to off-load the problem operations and to support longer term growth".

The analyst also said that Citigroup is "the only truly international bank in the U.S. ... [t]his franchise makes it invaluable to large corporations everywhere".

Citigroup will be a "money making machine again", Bove wrote, calling the stock "long-term cheap".

Bove raised a price target on the shares to $5.00 from $3.75.

E*Trade Financial Corp.: Standard & Poor's equity analyst Matthew Albrecht kept a hold recommendation on shares of E*Trade Financial Corp. (ETFC) on Mar. 22.

On Mar. 22, E*Trade, the online brokerage that hasn't posted a quarterly profit since 2007, fell in U.S. trading amid speculation the naming of Steven Freiberg as chief executive officer signals the company isn't for sale.

In a posting on the S&P MarketScope service, Albrecht said that Freiberg "boasts executive experience across consumer facing businesses" over his tenure at Citigroup, which the analyst thinks will be a positive as the firm refocuses its efforts on its core client operations. Albrecht also noted that the company will also seek shareholder approval for a 1-for-10 reverse stock split at its May annual meeting.

"The higher resulting share price could attract new investors to the shares, and could prove a catalyst" for the stock, Albrecht wrote.

Mar. 23

Baidu Inc.: Kaufman Bros. equity analyst Aaron Kessler raised a rating on shares of Baidu Inc. (BIDU), China's largest search engine, to buy from hold on Mar. 23.

On Mar. 23, Google Inc. (GOOG), owner of the world's most popular search engine, defied China's self-censorship rules by redirecting mainland Chinese users to an unfiltered Hong Kong Web site, threatening its ability to operate in the world's largest Internet market.

Kessler said in a note that while there is still uncertainty into the final outcome of Google's ability to operate an uncensored search site in China, he believes that in the near term it is very likely the Chinese government would restrict access for Chinese users to Google's site. The analyst said Baidu would be a clear beneficiary if the Chinese government took such a step.

Kessler said he believes Baidu's pro forma earnings per share (EPS) could benefit by $4.76 in 2011, or 35%, if Google's China site were restricted. The analyst sees pro forma EPS of $9.55 in 2010 and $13.47 in 2011.

He raised a $540 price target on Baidu to $690.

Intel Corp.: Lazard Capital equity analyst Daniel Amir reiterated a buy rating on shares of Intel Corp. (INTC) on Mar. 23.

Amir said in a note that Intel's CE4100, a second generation system-on-a-chip (SoC) device aimed at the set-top box, Blue-ray and DTV market, is gaining traction at European-based Linux set-top box providers. "While the CE4100 is not enough to move the needle for Intel overall revenue, we believe the 2010 revenue opportunity could be $50 million to $100 million," Amir wrote. ""We believe that this is part of INTC's overall strategy to further penetrate the consumer market."

The analyst said his contacts with Intel's customers suggest that both first-quarter and second-quarter PC shipments are tracking higher than he previously had forecast. Amir said that management guidance of first-quarter revenue decline of 8% to the $9.7 billion figure that was the midpoint of the range provided by the company is "conservative"; he raised his estimates for the first quarter to $10 billion in revenues and 40 cents EPS (down 4.5%), and for 2010 to $42.7 billion in revenues and $1.69 EPS.

Amir has a $29 price target on the shares.

Mar. 24

Adobe Systems Inc.: Standard & Poor's equity analyst Zaineb Bokhari maintained a strong buy recommendation on shares of Adobe Systems Inc. (ADBE) on Mar. 24.

Adobe, the world's biggest maker of graphic-design programs, jumped the most in 11 months in Nasdaq trading on Mar. 24 after saying it will introduce a new version of its most profitable software on Apr. 12. Adobe said on Mar. 23 that it will host an event next month to unveil Creative Suite 5, also called CS5, comprising design products including Photoshop, Dreamweaver and Illustrator. The suite will ship late this quarter, Adobe said.

The company also forecast sales that beat analysts' estimates. Second-quarter sales will be at least $875 million, Adobe said. Analysts projected $862.2 million, the average of estimates compiled by Bloomberg. Excluding some costs, profit this quarter will be 39 cents to 44 cents a share, Adobe said. Analysts estimated 41 cents on average.

First-quarter net income fell 19 percent to $127.2 million, or 24 cents a share, from $156.4 million, or 30 cents, a year earlier, partly because of costs related to its October purchase of Omniture Inc. Excluding some costs, profit in the period ended March 5 was 40 cents, topping analysts' 37-cent average estimate. Sales rose 9.2% to $858.7 million. Analysts estimated $826.4 million.

In a posting on the S&P MarketScope service, Bokhari said she sees the release of Creative Suite 5 (CS5) driving fiscal 2010 (ending November) and fiscal 2011 sales for Adobe. She added that while the health of the economy will impact the strength of the upgrade cycle, she thinks market conditions are more favorable for CS5 than for its predecessor, CS4.

The analyst said she sees higher stock compensation and interest costs ahead for Adobe, and cut her fiscal 2010 earnings per share (EPS) estimate by 7 cents to $1.40; she kept her fiscal 2011 EPS projection at $1.79.

Bokhari lifted a target price on the shares to $44 from $43.

Walgreen Co.: Barclays Capital equity analyst Meredith Adler maintained an equal-weight rating on shares of Walgreen Co. (WAG) on Mar. 24.

Walgreen, the largest U.S. drugstore chain, said on Mar. 23 that second-quarter profit increased 4.5% as it benefitted from revamped product offerings and increased sales of 90-day prescriptions. Net income for the three months ended Feb. 28 rose to $669 million, or 68 cents a share, from $640 million, or 65 cents, a year earlier, the company said. Sales rose 3.1% to $17 billion.

Adler said in a note that Walgreen's EPS for the quarter missed her estimate by 1 cent and the consensus view of Wall Street analysts by 3 cents. She said gross margin widened by 42 bisis points, less than her estimate for a 76 basis point expansion.

The analyst raised a third-quarter EPS estimate to 61 cents from 60 cents, while maintaining EPS estimates for fiscal 2010 (ending August) at $2.22 and fiscal 2011 at $2.55. Adler said EPS estimates include dilution of 7 cents in 2010 and 3 cents in 2011 related to the company's planned acquisition of the Duane Reade pharmacy chain, which is expected to close at the end of the fiscal 2010 third quarter.

"WAG continues to make progress on key initiatives even as its core business remains depressed by the economy, limiting sales and profit growth," the analyst wrote.

Adler maintained a $36 price target on the shares.

Mar. 25

Ebay Inc.: Credit Suisse equity analyst Spencer Wang raised a recommendation on shares of eBay Inc. (EBAY) to outperform from neutral on Mar. 25.

In a note, Wang said that the rating change on shares of the most-visited U.S. e-commerce site was based on a new analysis of its PayPal electronic payments unit. "With Skype divested and the Marketplace unit fairly mature, PayPal is increasingly the growth driver for eBay and our new analysis suggests more upside than our original expectations," the analyst wrote.

Wang said his research suggests PayPal's gross transaction revenue can sustain a 14% five-year compounded annual growth rate, vs. a previous expectation of 12%, driven by expansion in international markets and growth from non-eBay sources. He raised 2010 and 2011 non-GAAP EPS estimates to $1.69 and $1.97, vs. the consensus view of Wall Street analysts of $1.67 and $1.82, respectively.

The analyst also raised a target price on eBay shares to $32 from $25.

Research In Motion Ltd.: Rodman & Renshaw initiated coverage on shares of Research In Motion Ltd. (RIMM), maker of the BlackBerry smartphone, with a market perform rating on Mar. 25.

Analyst Ashok Kumar said in a note that he estimates that unit shipments for RIM in the fiscal 2010 fourth quarter exceeded the upper end of the company's guidance range (10.6 million to 11.2 million units) by about 300,000 units. He noted that the current Wall Street consensus estimate is for about 11.1 million units.

Kumar said that aggressive pricing and promotion, and a shift in the company's sales mix toward lower-end smartphones, could have resulted in weaker pricing and margins. He noted that the company's Bold 9700 device was offered for half price at AT&T (T) throughout the quarter, though the margin impact may have been muted due to relief from royalty payments to Qualcomm in lower-end units.

Weak sell-through of RIM's Storm 2 product has created inventory overhang at Verizon Wireless (VZ), Kumar said. "At the industry level we also see supply/demand imbalance in the electronic retail channel in Europe," he wrote.

The analyst said the primary longer-term competitive threat for RIM remains Apple Inc.'s (AAPL) iPhone, "which has witnessed substantial increase in enterprise support".

The analyst has a price target of $75 on RIM shares.

Mar. 26

Apple Inc.: Credit Suisse analyst William Shope reiterated an outperform rating on shares of Apple Inc. (AAPL) on Mar. 26. He also raised a 12-month price target on the iPhone maker to $300 from $275.

In a note, Shope said that as the end of the company's fiscal second quarter approaches, "we believe it is now clear the company is running well ahead of our previous expectations" and consensus estimates of Wall Street analysts.

"[W]e believe Apple is now running well ahead of expectations in all of its key business segments during what is typically a seasonally 'sloppy' quarter," he wrote.

Shope increased his second-quarter quarter revenue and earnings per share (EPS) estimates to $12.26 billion and $2.57 from $11.45 billion and $2.27, respectively.

"[O]ur estimates would imply the March quarter of 2010 would be the second strongest quarter in company history (including seasonally strong December quarters)," the analyst said.

The addition of a profit stream from the company's new iPad, the "significant" profit and cash flow contribution from the iPhone, and an accelerating cyclical recovery in the Mac business suggest analyst consensus estimates and the stock should continue to rise, Shope said.

"Apple is our top pick," Shope said. "We continue to believe investors should be building on positions at current levels."

Oracle Corp.: Deutsche Bank analyst Tom Ernst Jr. maintained a hold rating and $24 price target on shares of Oracle Corp. (ORCL) on Mar. 26.

Oracle, the world's second-largest software maker, reported third-quarter profit that met analysts' estimates on Mar. 25 after customers bought programs they had delayed purchasing during the recession.

Profit before acquisition and some other costs was 38 cents a share in the period ended Feb. 28, the company said. That matched the average of estimates in a Bloomberg survey. Including deferred revenue from Sun Microsystems Inc., which Oracle bought in January, sales were $6.47 billion. Analysts estimated $6.32 billion.

"Oracle appears to have benefited from easier year-over-year [comparisons] and acceleration in their most macro-sensitive business," Ernst said in a note. He said that despite a 2% reduction from foreign currency translation, software license growth from existing businesses was up 10% year-over-year (13% including Sun Microsystems), ahead of the company's 9% guidance. New applications revenue showed a 15% growth rate in constant currency vs. 5% growth for its database and middleware unit.

"[T]he company's competitive rhetoric vs. SAP continued even stronger" during the quarter, the analyst said.

"We are encouraged by the company's tone on integration, reiteration of the operating synergy targets, unchanged $9.6 billion revenue outlook for Sun Microsystems and customer acceptance of the vertically-integrated hardware and software portfolio," Ernst wrote.

Before it's here, it's on the Bloomberg Terminal.