MOST NOTEWORTHY: Ascent Solar, Xcorporeal and Chipotle Mexican Grill were today's noteworthy initiations.
Cowen said Ascent Solar Technologies Inc.'s (NASDAQ: ASTI) unique thin-film solar technology is well suited for integrated applications. Shares were started with an Outperform rating.
Roth Capital believes Xcorporeal Inc (AMEX: XCR) is targeting a large, unmet market, as the firm notes that 500K patients are expected to receive kidney therapy over the next few years. Roth, which initiated shares without a rating, anticipates that the company will obtain regulatory approval for the home therapy and critical care markets during the next few quarters, possibly creating a catalyst for the stock to appreciate.
JP Morgan initiated the Class B shares of Chipotle Mexican Grill Inc (NYSE: CMG.B) with an Overweight rating as they believe the recent pullback provides a compelling entry point.
OTHER INITIATIONS:
Lehman initiated NCR Corporation (NYSE: NCR) with an Overweight rating and $30 target.
Chipotle (NYSE:CMG) is recently up $1.90 to $116.90. CMG is scheduled to report Q1 EPS on April 23. Morgan Joseph says "Q108 should mark the first quarter of growth deceleration for CMG. While we believe CMG remains one of the best operators in the industry, we also believe that like its comps, it will eventually fall victim to the recessionary consumer environment." CMG May call option implied volatility is at 55, puts are at 65; above its 26-week average of 48, according to Track Data, suggesting larger price risk. CMG puts are priced higher than calls because CMG is difficult to borrow.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
MOST NOTEWORTHY: Chipotle Mexican Grill, Micrus Endovascular and Acorda Therapeutics were today's noteworthy initiations:
Jefferies expects the quality gap between Chipotle Mexican Grill (NYSE: CMG) and its peers will become more apparent in a weakening consumer environment. The firm started shares with a Buy rating and $110 target.
Micrus Endovascular (NASDAQ: MEND) was initiated with an Outperform rating and $20 target at Barrington, citing the company's strong product line, improving salesforce, leading market share position and their expectation for continued strong transition from clipping to coiling.
Acorda Therapeutics (NASDAQ: ACOR) was assumed with an Overweight rating at JP Morgan, as they believe the company's Fampridine-SR for multiple sclerosis is a $500M + opportunity
OTHER INITIATIONS:
Stanford initiated Mariner Energy (NYSE: ME) with a Buy rating and $35 target.
For those who are new to BloggingStocks, I wrote a series back in May-June of 2007 highlighting what I thought could be the top 25 stocks for the NEXT 25 years. The series was written and researched as an answer to a USA Today article that highlighted the best 25 stocks of the past 25 years.
I wrote about Chipotle Mexican Grill (NYSE: CMG) back on May 21. The stock was trading at $82 per share, although I had been recommending it in my advisory service back when the shares were trading at $40. I thought, and still do, that Chipotle has a chance to be the next major American fast food restaurant chain. In September 2007, the shares hit $114-115, and frankly, I thought the stock was ahead of itself and needed to take a breather. I wrote an update piece explaining that although I still believed Chipotle will be a major player for the NEXT 25 years, it seemed prudent to take the opportunity for short term profits. Commodity costs were rising and the chain was not about to raise its menu prices to offset.
The shares proceeded to go as high as $155 and I thought that maybe I misread this one. The numbers were strong and I thought the momentum in the name might actually keep it afloat. Phew, finally, this one has come back to earth. Chipolte has fessed up that higher commodity costs and a slower spending consumer have taken their toll. The shares are back down to $105, representing a 30 P/E multiple on 2009 earnings per share expectations of $3.40. Still expensive, but this is a very high growth rate company.
I would wait for the shares to trade back below $90 before putting a toe in the water. The concept is viable and very popular. The chain has room to quadruple its store base in the United States and will emerge as the best new concept in this decade and the next. I'd keep an eye on the share value and start accumulating on major dips.
Georges Yared write about great growth stocks today in Game On Investing
MOST NOTEWORTHY: BioScrip, Chipotle Mexican Grill and CoStar Group were today's noteworthy upgrades:
BioScrip (NASDAQ: BIOS) was raised to Buy from Neutral at Broadpoint, as they believe the company's specialty business is worth more than the current price implies.
Baird upgraded Chipotle Mexican Grill (NYSE: CMG) to Outperform from Neutral following Q4 results, citing valuation and a positive view on fundamentals.
CoStar Group (NASDAQ: CSGP) was upgraded to Outperform from Market Perform at JMP Securities, as they expect the company to report a solid quarter next Thursday.
Chipotle Mexican Grill (NYSE: CMG) experienced some delicious growth over its fourth quarter and full-year reporting period. As the press release issued on Valentine's Day after the market closed indicated, Q4 revenues spiced up almost 32% to $288.9 million, and diluted earnings soared 61% to $0.53 per stub. For the full year, revenues jumped 32% to $1.1 billion, and diluted earnings rocketed 66% to $2.13 per share.
But was this enough to satisfy the after-hours market? Nope -- at the time of this writing, the after-hours quote on Chipotle's stock was down almost 13%. I'll give you a second or two to guess why. Got it yet? Sure you do -- even if you hadn't already read the headlines, you must have intuited that Chipotle didn't meet analyst expectations. The sacrosanct Wall Street crowd wanted a couple pennies more for the quarter.
Well, I say the Chipotle story looks pretty good from where I'm sitting. Restaurant operating margins are up, comps are up over 10% for the quarter and the year, and new stores will continue to be rolled out. Plus, operational cash flow increased 42%. Chipotle, which used to be a part of McDonald's (NYSE: MCD), is becoming a major brand in the restaurant sector, and is a strong competitor against related companies such as Burger King (NYSE: BKC), Wendy's (NYSE: WEN), and Yum! Brands (NYSE: YUM).
Yes, economic times will be difficult going forward, as Ben Bernanke has warned, but I've got a sneaking suspicion Chipotle Mexican Grill's stock will recover from the recent pullback from its 52-week high of better than $155.
MOST NOTEWORTHY: BigBand Networks, Chipotle Mexican Grill, Vertex Pharmaceuticals and Cognos were today's noteworthy downgrades:
BigBand Networks Inc. (NASDAQ: BBND) was downgraded to Hold from Buy at Jefferies and to Market Perform from Outperform at Morgan Keegan on the company's negative Q2 pre-announcement to reflect decreased visibility.
Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) was downgraded to Neutral from Buy at Merrill Lynch, as they believe investor expectations are high into November's American Association for the Study of Liver Diseases meeting.
Soleil downgraded Cognos Inc. (NASDAQ: COGN) to Hold from Buy as they believe the strong Canadian dollar will depress operating margins and limit share upside.
OTHER DOWNGRADES:
Jefferies downgraded Spectra Energy Corp. (NYSE: SE) to Hold from Buy.
Goldman downgraded MeadWestvaco Corp. (NYSE: MWV) to Neutral from Buy and removed Crown Holdings Inc. (NYSE: CCK) from its Americas Conviction Buy List.
In my series on the top 25 stocks for the NEXT 25 years, I recommended Chipotle (NYSE: CMG) as one of the picks. The stock was at $82 per share on May 21 when I wrote about the company. The $82 price represented a market capitalization of $2.6 billion. Today the stock is at $114.65 with a market cap of $3.7 billion, up over 40% for investors who bought the stock.
But, I have to admit that short-term I am nervous about Chipotle. I still believe the concept is becoming the new rave in the fast food service sector. I still believe that Chipotle could take on McDonald's-like proportions in the years to come -- but I am nervous about the short-term prospects. Why?
I have two reasons. First, higher commodity prices: The price of wheat and dairy has gone up in the United States, which, I believe, could affect Chipotle's pricing structure and general margins. In this consumer-wary environment, restaurants are not about to raise menu prices and risk losing customers. Therefore, I think the food cost expenses for Chipotle's (and many other fast food chains) are going up and will stay high for a while. The second reason I am nervous is Chipotle is a domestic company with no international sales. It is purely reliant on American diners for its revenues.
The Barron's "Weekday Trader" article stated that after hitting an all-time high yesterday, the stock is due to fall. It cites two downgrades of Chipotle from earlier this summer, the rise in the prices of ingredients, and the fact that Americans are eating out less.
With as much market uncertainty as we are seeing, and the fear the uncertainty is causing among investors, stocks trading at such high multiples -- such as Chipotle's 54x 2007 P/E ratio, are due to fall. The only question now is -- how far?
Editor's Note: Special shout out to BloggingStocks' own Georges Yared, who is quoted in the Barron's article.
In my book about Baby Boomer investing I highlight what I feel are the five major growth industries going forward. The industries are health care, alternative energy, technology, communications and lifestyle. I also mention 42 companies within those industries that could be the leaders, the game changers. Since the book has been published, five of the 42 stocks I wrote about are being acquired!
As the 42 companies are down to 37, it causes some reflection for the future. Great, emerging companies will always be on the radar screen of larger, well-financed suitors. If growth cannot be internally generated through research and development efforts, larger companies will need to acquire growth and next generation products or technology. With interest rates still historically low, the borrowing necessary to buy these young, up-and-comers is not a significant issue. Investors will reward mature companies if they acquire intelligently and strategically.
As I explained here and here, I believed Chipotle Mexican Grill (NYSE: CMG) would be among the only restaurant stocks to deliver this quarter. So far, that thesis seems just about right. After the bell on Tuesday Chipotle reported an incredible quarter and the stock flew 12%. As you can see from the chart on the right, the stock is among the only restaurant stocks performing well recently.
But you want to know what to do now. If I were long the stock, I'd raise my stop closer to the current price to ensure I protect my profits.
While I do believe Chipotle is an incredible company, I think the stock is going to sell-off in the next several months as the news flow quiets and investors realize that the stock is trading for 70x earnings. I don't think that this valuation is justifiable when another solid earnings report is now three months away and monthly comp numbers are only so much of a catalyst.
Chipotle is not going anywhere but further as a company, however the stock is set to pull back after an incredible run in recent months following great news flows.
Although I hold a very negative short term view for the restaurant sector due to a wide variety of macroeconomic pressures, I think that Chipotle Mexican Grill Inc. (NYSE: CMG) is not going to disappoint the Street after the bell today -- a view I've held since my first post on troubles in the restaurant space.
My positive view on Chipotle is rather easy to understand. Basically, I think the company's results for the second quarter are going to be roughly in-line with what the Street is expecting, easily appeasing it. However, more importantly, I expect the company to reiterate its guidance of 25%+ long term EPS growth. This move, in my opinion, will please investors -- especially those who had been hesitant to buy the stock due to weakness of the restaurant sector as a whole.
How can the company fight the current macro pressures facing the entire dining industry? Essentially, I think the company has been, and will continue to, raise prices. This quarter the company rolled out its all natural strategy in Colorado -- a move which I believe will allow the company to raise prices in this state and other states as the move is mimicked. In addition, the company is actually cutting costs on the labor front as a result of G&A leverage. Even though the company will note higher commodity costs, I think Wall Street will be satisfied that the company is managing to operate very well even in this tough environment.
It's all about sentiment on Wall Street and I think Chipotle is going to deliver a report that keeps investors happy.
MOST NOTEWORTHY: The educational services industry, the Latin American airlines sector, Asta Funding Inc (NASDAQ: ASFI) and Chipotle Mexican Grill Inc (NYSE: CMG) were today's noteworthy initiations:
Goldman Sachs initiated coverage on Copa Holdings (NYSE: CPA) with a Buy rating and $88 target, GOL Linhas Aereas Inteligentes SA (NYSE: GOL) and TAM SA (NYSE: TAM) with Neutral ratings and Lan Airlines SA (NYSE: LFL) with a Sell rating and $93 target; Lan Airlines was also initiated at Morgan Stanley with an Overweight rating and $105 target.
Asta Funding was initiated at Kaufman Brothers with a Buy rating and $55 target. The firm believes the company should grow earnings at a midpoint of 20% over time, with near-term growth at 15% and longer-term growth at 20%-25%.
Citigroup initiated shares of Chipotle Mexican Grill with a Buy rating and $100 target, as the firm expects the company will see unit growth at a rate in the high-teens while experiencing above-average SSS and some margin expansion.
OTHER INITIATIONS:
BMO Capital initiated shares of CDC Corp (NASDAQ: CHINA) with a Market Perform rating and $11 target.
Jazz Technologies Inc (NYSE: JAZ) was initiated with a Buy rating and $5 target at Wedbush Morgan Securities.
Wachovia initiated shares of CB Richard Ellis with an Outperform rating, as it views CBG as a compelling investment opportunity giving its leading position in the top real estate markets and breadth of services.
Wachovia also initiated shares of Jones Lang LaSalle with an Outperform rating, as it expects JLL to benefit from international services given the increasing flow of real estate dollars across boarders and to less well developed regions of the globe.
OTHER INITIATIONS:
Citigroup initiated shares of GameStop Corp (NYSE: GME) with a Buy rating and $46 target.
MOST NOTEWORTHY: Research in Motion (RIMM) and Micron (MU) were the most noteworthy upgrades this morning:
Bear Stearns upgraded shares of Research in Motion Ltd. (NASDAQ:RIMM) to Outperform from Peer Perform, telling clients it sees further upside from new handset launches and continued expansion.
First Albany upgraded shares of Micron Technology Inc. (NYSE:MU) to Buy from Neutral following the company's first-quarter report; the firm told clients that a weak first-half of 2007 has already priced into the shares but a strong second-half of 2007 has not.
OTHER UPGRADES:
RBC Capital upgraded shares of Chipotle Mexican Grill Inc. (NYSE:CMG) to Outperform from Underperform, citing continued strong fundamentals and expectations that the company can meet or slightly beat first-quarter comp-store sales estimates.
Red Hat Inc. (NYSE:RHT) was upgraded to Buy from Neutral at First Albany; the firm told clients that the company's Q3 report validates its thesis that the impact from Oracle Corp. (NASDAQ:ORCL) will be minimal, continued growth in RHEL deployments is likely, and pricing power is sustainable. Red hat was also upgraded by Citigroup to Hold from Sell and raised the target to $21 from $13.50.
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MOST NOTEWORTHY: Ascent Solar, Xcorporeal and Chipotle Mexican Grill were today's noteworthy initiations. 
Chipotle
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In my series on the top 25 stocks for the NEXT 25 years, I recommended 
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Before the bell: Wall Street headed higher; automakers, retailers in focus
Waiting for the other shoe to drop: The looming credit crisis
Bet on T&A with J&J (JNJ)
