Upgrades and Downgrades for Wednesday May 25

by: Richard Saintvilus

Updated 25-May-11




Brokerage Firm

Ratings Change

Price Target

Avago Tech


Kaufman Bros

Hold» Buy

$34 > $40

Fuel Systems


Northland Securities

Market Perform » Outperform


Analog chipmaker Avago Technologies Ltd. said Tuesday that its fiscal second-quarter net income rose by 50 percent as revenue grew and costs were kept in check. Net income in the three months to May 1 grew to $135 million, or 54 cents per share, from $90 million, or 37 cents per share, a year earlier. Excluding items such as amortization of intangible assets and stock-based compensation expenses, adjusted earnings came to 64 cents per share, above the 62 cents per share expected by analysts polled by FactSet.

Fuel Systems Solutions and Alternative Fuel Systems, or AFS, last week announced that AFS Acquisition Co. Inc., a wholly-owned indirect subsidiary of Fuel Systems, took up and accepted for payment 15,704,867 common shares of AFS, presenting approximately 83.3% of the outstanding AFS Shares on a fully-diluted basis, pursuant to its previously announced offer to acquire all of the outstanding AFS Shares, including all AFS Shares that may be issued on the exercise of options granted under AFS's stock option plan, at a price of Cdn.$0.50 in cash per AFS Share by way of a formal take-over bid.




Brokerage Firm

Ratings Change

Price Target




Buy» Hold

$49 > $36

Juniper Networks



Buy» Hold

$50 > $40

NetLogic Microsystems, Inc., a worldwide leader in high-performance intelligent semiconductor solutions for next-generation Internet networks, on Monday announced volume production for its NL11k family of IPv6 knowledge-based processors for delivery to customers ' next generation of IPv6 switches and routers. The first of over two dozen IPv6 systems from leading original equipment manufacturers (OEMs) that are using the NL11k knowledge-based processors will begin shipping in production in the third quarter of 2011, with the remaining customer systems expected to commence shipping over the following twelve months.

Juniper's router revenues grew by about 25% in Q1 2011 compared to Q1 2010. [1] The growth is being led by Juniper's MX series of routers, similar to what we have seen over the past few quarters. In addition to this, Juniper saw some good design wins with T1600 core routers and mentioned that customer interest in its T4000 series of routers remains high. The T4000 will ship later this year.

Analysts expect Juniper to gain share at a faster pace. Revenues from network switches grew by 37% in Q1 2011 compared to Q1 2010. The growth comes with the success of the EX series of switches. Switching remains a big expansion opportunity for Juniper since the company has very low share in this market. Although the market is currently dominated by Cisco, competitors like Juniper and HP are putting up a fight.

Coverage Reiterated /Price Target Changed



Brokerage Firm

Ratings Change

Price Target


Applied Materials



Piper Jaffray

Stifel Nicolaus



$445 » $554

$18 » $19





$22 » $24

GT Solar


Brean Murray


$15 » $18

Chatham Lodging


FBR Capital


$23 » $21

Perfect World


HSBC Securities


$25 » $27

Piper Jaffray affirmed its positive view on the shares of Apple, saying now is a good time to own them. Piper has a $554 price target. offering his examination of why the shares have "lagged," as he puts it.

The top reason is that investors are worried Apple's "monster growth rates" will slow in coming years. Investors are expecting 15% to 20% growth annually, but Munster points out the company achieved an 83% revenue increase in the March quarter, year over year, after increasing revenue 49% in the year-earlier quarter.

Munster sees room for expansion across the product line, with 30% increases in iPhone sales, 40% increases for the iPad, 15% increases in the Mac and iPod lines, and 20% growth for all other businesses — "cloud" services, etc. — over the next four years. He cautions his estimates are "conservative." Things such as an Apple television set in the next two to four years could add new business.

Applied Materials Inc. stock was down about 2 percent in pre-opening bell trading Wednesday after the company posted a weaker-then-expected earnings outlook. The Santa Clara-based chipmaking equipment company said Tuesday afternoon that it expects sales in the current quarter to drop by between 3 percent and 10 percent from the $2.86 billion it reported in the second quarter on Tuesday. Analysts expected $2.83 billion in third quarter revenue.

Inphi Corporation, a leading provider of high-speed analog semiconductor solutions for the communications and computing markets, Tuesday announced that its Isolation Memory Buffer (iMB™) 02-GS02A has completed a significant milestone for the component validation phase with Intel. Memory vendors will now be able to use Inphi's iMB components to build memory modules for DIMM level qualification.

GT Solar International Inc. a maker of solar manufacturing equipment, may be an acquisition target after it increased its forecasts for margins and revenue and said it would expand into new business lines. The company is "the most profitable public equipment company," making it "a great acquisition target," Theodore O'Neill, an analyst at Wunderlich Securities Inc., said today in a research note. O'Neill reiterated his "buy" recommendation, which dates to April 2010, and did not name any potential buyers.

The U.S. Trustee's office has taken issue with plans by bankrupt hotel manager Innkeepers USA Trust to sell five of its properties to a subsidiary of Chatham Lodging Trust for $195 million. In court papers filed Monday evening, the office of U.S. Trustee Tracy Hope Davis said the plan would wrongly release Apollo Investment Corp from claims against it from Innkeepers' creditors and equity holders. Innkeepers has given no reason for release of the claims, which in any case would not impact overall recovery for creditors, the trustee said. For those reasons, the court cannot confirm the plan, according to the filing. The company's plan outline "is completely void of any discussion regarding why Apollo should receive a release," the trustee said.

Earlier this week, Perfect World released its first quarter 2011 earnings report. At an initial glance, PWRD topped Wall Street estimates by a wide margin. Earnings per share (EPS) were .76 in Q1 which beat analysts ' consensus of .55. Behind the large positive headline earnings surprise however, there are reasons to be both optimistic, yet cautious on the company's growth prospects for the remainder of this year.

Disclosure: I am long AAPL.