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 14 till May 18.
Chesapeake Midstream Partners LP
Deutsche Bank raised its advise for Chesapeake Midstream Partners (CHKM) from hold to buy with a $30 price target. According to the German based bank there is some 20% upside for the shares of the partnership which operates and develops natural gas assets. Shares are down 13% on the year amidst a decline in natural gas prices and problems at Chesapeake Energy (CHK) but the partnership maintains that the problems of its parent are isolated. Furthermore the bank likes the greater visibility of the business' cash flow.
R.W. Baird raised its advice for Xcel Energy (XEL) from neutral to outperform with a $31 price target. There is some 10% more upside for the utility holding business according to the broker. Shares in Xcel trade flat for the year after a relatively strong performance in recent weeks. Recently the company reaffirmed its full year 2012 earnings guidance of $1.75-$1.85 vs. $1.77 expected by analysts.
Barclays Capital raised its advice for Teradata (TDC) from equal weight to overweight with a $85 price target. The UK based bank sees some 20% upside potential for the analytics data solutions firm. Teradata's strong exposure to the "big data theme" and healthy revenue trends in recent quarters leave more room to the upside according to analysts. Shares in the firm have already returned 45% this year amidst a continued boom in technology and data information stocks in particular.
UBS raised its advice for Arch Coal (ACI) from neutral to buy with a $11 price target. Analysts see some 50% upside for the coal producer as negative catalysts, including the debt overhang, are well known to the market. Risks like the weak thermal conditions and potential for fuel switching have already played out, leaving Arch Coal ultimately levered to natural gas prices. Shares in the coal producer have already halved in 2012 after dropping significantly in 2011 as well.
JP Morgan raised its advice for Hologic (HOLX) from neutral to overweight with a $22 price target. Analysts see a healthy 30% upside for the manufacturer of diagnostics, medical imagining and surgical systems as the risk/reward is "too compelling to ignore". Shares have fallen significantly from levels of $21 in April to $17 at the moment after the firm acquired Gen-Probe (GPRO) for $3.7 billion. While analysts question the ultimate returns of the acquisition, potential for returns are too compelling given the estimated cost synergies of $75 million and the low probability of further deals in the near term.
Credit Suisse raised its advice for Amazon.com (AMZN) from neutral to outperform with a $270 price target. The Suisse based bank sees some 25% upside for the internet retailer whose shares have already returned 23% year to date. Analysts expect higher margins on a changing product mix. Divisions like 3P (the marketplace) and the cloud computing platform are growing a above average rates. Amazon's "thin margins could result in a outsized impact on valuation from a moderate estimate change".
Both Sterne Agee and Citigroup raised their advice for Groupon (GRPN) with a price target in the low twenties. Shares of the coupon company have fallen over 40% year to date but analysts see green lights on the horizon. The strong first quarter earnings report alleviated some concerns about the ability of the firm to generate "meaningful operational leverage". Strong sequential growth in the US hints towards market share gains which outweigh the concerns about an expiring lock-up date.
Bank of America/Merrill Lynch raised their advice for Juniper Networks (JNPR) from neutral to buy with a $25 price target. Weak carrier spending and bad timing of product launches has put pressure on earnings per share, and resulted in a loss of market share. Shares of the producer of network infrastructure equipment have lost 16% year to date as the market grew worried about these trends. Analysts see some 50% upside potential for the shares.
Citigroup raised its advice for Legg Mason (LM) from neutral to buy with a $32.5 price target. Analysts see some 30% upside potential for the investment management service provider. Deleveraging strategies and share buybacks increase returns to shareholders. Investors have been applauding the recent moves, sending shares 6% higher year to date.
Stock markets have seen a strong correction this week, closing about 4.0% 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.