Stock Picks: Mattel, Oracle, RIM, WellCare

Wall Street analysts offer buy, sell, or hold opinions on stocks in the news on June 25

Mattel: Morgan Joseph equity analyst Jeffrey Blaeser reiterated a buy rating on shares of Mattel (MAT), the world's largest toymaker, on June 25. He has a $28 price target on the shares.

In a note, Blaeser said the box office success of Walt Disney's Toy Story 3 is likely to benefit Mattel, the master toy licensee of the animated film, in the near and long term.

"While [Toy Story] is not a new line for Mattel, feature film releases have historically produced positive returns in the toy aisle, with a good property typically generating over $100 million in annual sales. … [W]e would classify [Toy Story] as more than a good property and a likely leading toy line this year," Blaeser wrote.

He noted that Mattel has also added the World Wresting Entertainment and Thomas and Friends properties to its toy lines. "Couple the new additions with the potential of Monster High [a new toy line], relatively easy comparisons [with year-earlier sales] and the apparent stabilization of the Barbie line, [and] we believe the pieces remain in place for strong [second-quarter and fiscal year 2010 sales] gains," Blaeser said.

Oracle Corp.: Janney Montgomery Scott equity analyst Sasa Zorovic reiterated a buy rating and $30 fair value estimate on shares of Oracle (ORCL) on June 25.

Shares of Oracle, the world's second-largest software maker, advanced in late trading on June 24 after database sales and server computers from its new Sun Microsystems business fueled profit gains.

Fourth-quarter earnings excluding acquisition costs and other expenses was 60¢ a share, said Oracle, which is based in Redwood City, Calif. That topped the 54¢ average of analyst estimates compiled by Bloomberg.

Chief Executive Larry Ellison has bought 67 companies since early 2005, including this years's $7.3 billion purchase of Sun Microsystems. The acquisitions have increased the types of programs Oracle can sell and added customers who eventually buy support contracts, providing a steady stream of revenue. Oracle has called that recurring revenue stream its most profitable business.

In a note, Zorovic said Oracle "put up a very strong [fourth quarter], even by its lofty 4Q standards, with strength nearly across the board." Zorovic noted that Oracle has exited businesses at recently acquired Sun Microsystems that do not generate profits. After a further decrease in the first quarter, the analyst expects Sun's revenue to grow "solidly."

Zorovic reduced a first-quarter revenue estimate to $7.336 billion, from $7.781 billion. His earnings per share (EPS) estimate remained at 36¢. For fiscal 2011 (ending May), he lowered a revenue estimate to $33.885 billion, from $34.856 billion, and raised an EPS forecast to $1.91, from $1.87.

"The stock trades at a compelling valuation," he wrote.

Research in Motion Robert W. Baird equity analyst William Power lowered a rating on shares of Research In Motion (RIMM) to neutral from outperform on June 25. He cut a price target on the shares to $59 from $88.

On June 24, RIM, maker of the BlackBerry smartphone, reported sales that fell short of analysts' estimates, sending the stock lower as investors fretted over RIM's ability to compete with Apple's (AAPL) iPhone.

First-quarter sales rose 24 percent, to $4.24 billion, RIM said in a statement. Analysts had predicted $4.35 billion, the average of estimates compiled by Bloomberg.

In a note, Power said that RIM's first-quarter shipments missed his estimate, due in part to later-than-expected shipments of new products. He said he expects further market-share gains from Android-based devices and the iPhone. Power said the introduction of new BlackBerry devices "should help," but he increasingly fears "it may be too little, too late to turn the tide" in the U.S.

Power expects competitive concerns to continue to overhang the shares. He kept a fiscal 2011 (ending February) EPS estimate of $5.47 and cut a fiscal 2012 EPS forecast to $5.88 from $6.18.

WellCare Health Plans: Standard & Poor's equity analyst Phillip Seligman maintained a hold rating on shares of WellCare Health Plans (WCG), an insurer specializing in Medicare and Medicaid benefits, on June 25.

In a June 24 filing, WellCare said it has reached a preliminary agreement with the Civil Division of the U.S. Justice Dept., the Civil Division of the U.S. Attorney's Office for the Middle District of Florida, and the Civil Division of the U.S. Attorney's Office for Connecticut to settle their pending inquiries regarding allegations in a number of qui tam complaints filed against the company under the Federal False Claims Act. WellCare would pay a total of $137.5 million over a period of up to 36 months after the date of an executed written settlement agreement, plus interest at the prevailing Medicare Trust Fund rate.

"We believe WCG has the financial wherewithal to make the payments, and view [the] agreement as progress in dissipating clouds over the stock," Seligman wrote in a posting on the S&P MarketScope service.

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