Analysts have been sending out research reports to clients again this week. The following is a review of the most important upgrades for the week of May 7 till May 11.
Credit Suisse raised its advice for Illumina (ILMN) from neutral to outperform with a $55 price target. The company has returned to sequential growth and it can continue to penetrate the clinical market according to the Swiss-based bank. The target price is above the $6.8 billion offer of Roche (or $51 per share) which the company has now withdrawn. According to the bank there is some 28% upside for the shares which currently trade around $42 to levels around $55 a level last seen January this year after Roche announced its bid.
Morgan Stanley raised its advice for Lear (LEA) from underweight to overweight with a $55 price target. According to the bank consensus expectations have fallen to a reasonable level. Shares of the supplier of automotive seats have fallen from $47 in March to $40 at the moment after the company announced a 14% decline in first quarter profits amidst weaker European sales. According to the bank shares currently have some 37% upside.
Oppenheimer raised its advice for Newell Rubbermaid (NWL) from perform to outperform with a $23 price target. According to analysts the "pieces to the growth story are now in place" for the global marketer of consumer products. Shares have another 25% upside after a 13% return year to date. A 25% increase in the quarterly dividend, which boosted the annual dividend yield to 2.2% is a driver for the shares as well.
American International Group
Goldman Sachs raised its advice for AIG (AIG) to buy with a $40 price target as the shares have multiple catalysts. Analysts see some 35% upside for AIG given the signs of progress at Chartis, the property/casualty division of the company. Furthermore the bank is enthusiastic about the pace of divestments of non-core assets which are typically more risky and capital intensive. Proceeds of the divestment process could be used to buy back stock from the Treasury at a discount to the book value. Shares in AIG have already returned 26% this year despite renewed turmoil in financial markets.
Credit Suisse initiated Phillips 66 (PSX) with a $42 price target as the bank believes the company can deliver above average growth. The downstream activities of the former ConocoPhillips have some 35% upside according to the bank. The banks notes that the refiner is one of the most profitable ones among its peers and it can benefit from recent price declines in natural gas prices. Phillips 66 "can in more ways than the average independent energy company benefit from lower natural gas prices" according to analysts at the bank. Following the spin-off earlier this month shares have traded in a $30-$33 price range in recent weeks.
Bed Bath & Beyond
Credit Suisse raised advice for Bed Bath & Beyond (BBY) from hold to buy with a $91 price target. Shares in the retail chain which sells domestic merchandise and home furnishments have rallied already 24% year to date now trading at $72. Credit Suisse sees roughly 27% more upside as the acquisition of Cost Plus will help to boost growth. The $495 million acquisition is relatively small but promising as a specialty food department in stores of Bed Bath & Beyond could "generate store traffic and increase the edge against online retailers."
Oppenheimer initiated its advice for Landstar System (LSTR) with a $66 price target as revenue and gross profit growth should come in double digits, according to analysts at the bank. Shares in the provider of freight and supply chain solutions have returned already 14% year to date. Shares have another 22% upside as Oppenheimer praises the fact that the company is rather asset light, has a high return on its invested capital and it can continue to profit from outsourcing trends.
Nomura raised its advice for NVIDIA (NVDA) from neutral to buy with a $16 price target. Shares in the producer of graphic chips for personal and business computers have fallen from highs of $16 earlier this year to $12 at the moment after the company released a disappointing outlook for the first quarter of its fiscal 2013. Analysts point out that the company has a 20% free cash flow yield and trades at just one times revenues. Furthermore the market seems to not be putting any value on Tegra given the $5 cash position per share and the value of the regular graphics business estimated at $7-$8 per share.
Cognizant Technology Solutions
R.W. Baird raised its advice for Cognizant Technology Solutions (CTSH) from neutral to outperform with a $76 price target. Baird sees some 27% upside potential for the provider of custom information technology, consulting and outsourcing services after shares have lost some 16% during the last month. Shares lost 19% in a single day in the beginning of May after the company has cut its growth forecast as banks and pharmaceuticals keep a lid on discretionary spending for new technology projects.
Stock markets have seen a modest correction this week, closing about 1.0% lower in the case of the S&P 500. Despite the slight correction, brokers have sent out favorable research reports again to clients. Many of the recommendations were made after the release of earnings reports and often come after a large move to the upside. However on the day of the announcement, analyst recommendations can still move the stock price significantly.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.