MOST NOTEWORTHY: Today's noteworthy initiations were Monolithic Power, Emergency Medical Services, Amsurg and EnergySolutions.
Monolithic Power (NASDAQ: MPWR) was initiated with a Buy at Am Tech, which predicted that Monolithic Power will have significant design win momentum that should result in stronger than expected revenue growth. The firm thinks the company will be able to grow 20% in its 2008, thanks to its new products and competitive prices.
Emergency Medical Services (NYSE: EMS) was initiated with a Sell, target $15 at Citigroup. Citigroup believes EMS's earnings contribution from insurance releases and prior period adjustments is not sustainable.
AMSurg (NASDAQ: AMSG) was initiated with a Buy, target $32 at Citigroup. Citigroup said it is positive on AMSurg given its history of FCF per share growth, low out of network exposure, little debt risk, and acquisition pipeline.
EnergySolutions (NYSE: ES) was initiated with a Market Perform, target $26 at FBRC. Friedman Billings expects EnergySolutions to trade at a slight discount to peers given its leverage balance sheet and perceived slower growth.
OTHER INITIATION:
VMWare (NYSE: VMW) initiated with a Market Weight at Thomas Weisel, based on valuation. Thomas Weisel believes VMWare is uniquely positioned to benefit from trends toward centralized IT resources, on-demand delivery and greater efficiency.
Citrix Systems (NASDAQ: CTXS) was initiated with an Overweight, target $37 at Thomas Weisel. Thomas Weisel believes Citrix Systems is uniquely positioned to benefit from trends toward centralized IT resources and on-demand delivery given its product line that targets the data center.
Citrix Systems (NASDAQ: CTXS), a top enterprise software player, is striving to supercharged growth with the marvels of virtualization (a technology that gets more firepower from existing resources). Yet, with the slowing economy, things are proving kind of difficult.
This week Citrix announced its Q1 results. Revenues increased 22% to $377 million and net income came to $34.4 million, up 8.5%. Yes, when trying to conquer new technology frontiers, there's a need to ramp expenses (especially for marketing and R&D).
Citrix has an expanding global footprint, which has muted the downturn in the US. Also, the company has a nice assortment of products, such as its GoToMeeting franchise (which is one of the top on-demand offerings in the marketplace).
Still, Citrix is betting heavily on its virtualization technology, which is part of last year's acquisition of XenSource. Indeed, traction, such as with distribution deals with Dell (NASDAQ: DELL) and HP (NYSE: HPQ) is evident. Citrix was also able to expand its alliance with Microsoft (NASDAQ: MSFT).
But there is still much to prove to the Street. After all, the marquee virtualization player, VMWare (NYSE: VMW), had a particularly strong Q1.
MOST NOTEWORTHY: The Managed Care sector, Keryx Biopharma and Citrix Systems were today's noteworthy downgrades:
Goldman downgraded the Managed Care sector to Neutral from Attractive following WellPoint's (NYSE: WLP) reduced 2008 outlook. The firm said WellPoint's issues reflect a company specific underwriting error but also industry-wide pricing pressures which increase the risk of a cyclical slowdown in managed care. WellPoint was also downgraded to Neutral from Overweight at JP Morgan.
Banc of America cut Keryx Biopharma (NASDAQ: KERX) to Neutral from Buy and lowered their target to $1.00 after Sulonex failed to meet its primary endpoint.
Jefferies downgraded shares of Citrix Systems (NASDAQ: CTXS) to Hold from Buy, as they believe the first half of 2008 will be a tough year for software and are increasingly worried about the macro environment.
OTHER DOWNGRADES:
Level 3 Comm (NASDAQ: LVLT) was downgraded to Underweight from Market Weight at Thomas Weisel.
MOST NOTEWORTHY: Suntech Power, Premier Exhibitions and the Homebuilders Sector were today's noteworthy initiations:
Citigroup named Suntech Power Holding (NYSE: STP) their top pick for China solar due to its leading scale and technology roadmap for higher cell efficiency, initiating shares with a Buy rating and $55 target.
Merriman believes Premier Exhibitions (NASDAQ: PRXI) can move to the $14.50-$17.00 through the continued monetization of the company's current tours, the launching of additional tours and the value of the Titanic artifacts on hand. The firm started shares with a Buy rating.
Virtualization is certainly a killer technology (essentially allowing for better utilization of software, servers, data centers and so on). It's also a big money maker, as seen with the performance of VMware (NYSE: VMW).
But Citrix is also ramping up on virtualization. It helps that the company has a robust technology platform. Hey, just look at the company's Q4 results. Revenues increased 25% to $399.6 million and profits went from $52.9 million, or $0.29 per share to $62.8 million, or $0.33 per share. License revenues increased a healthy 24% to $178 million.
There was strength across the board, such as with its Presentation Server (there were six deals with price tags over $1 million) and the online services division, which saw a 37% increase in revenues over the past year to $59 million.
But the big bet is on XenSource, a cutting-edge provider of virtualization technologies (Citrix recently purchased the company). It's still in the early stages but it looks like the growth may be explosive. For example, Citrix has key deals with Dell (NASDAQ: DELL), Hewlett-Packard (NYSE: HPQ) and Microsoft (NASDAQ: MSFT). The goal is to get to $50 million in revenues for 2008. And, keep in mind that – according to a study from ITC – the market for virtualization software and services is expected to reach $15 billion by 2011.
So far, investors seem to be excited. In today's trading, Citrix's shares increased 7.16% to $34.29.
MOST NOTEWORTHY: Vodafone, Citrix Systems, STMicroelectronics, Symmetricom and Smith International were today's noteworthy upgrades:
JP Morgan upgraded shares of Vodafone Group (NYSE: VOD) to Overweight from Neutral, as they believe the company is benefiting from increased data sales.
Citrix Systems (NASDAQ: CTXS) was upgraded to Outperform from Market Perform at Friedman Billings. The firm's checks indicate that its clear communication strategy and a stronger technology platform behind the Enterprise and Platinum editions is spurring top line growth.
Baird upgraded shares of STMicroelectronics (NYSE: STM) to Outperform from Neutral based on new product cycle, multiple design wins, valuation, and strong Q4 guidance.
Cantor upgraded shares of Symmetricom (NASDAQ: SYMM) to Buy from Hold as they find the valuation compelling and are comfortable with Q1 estimates.
Calyon Securities upgraded Smith International (NYSE: SII) to Add from Neutral following its Q3 report and guidance.
OTHER UPGRADES:
Shaw Group (NYSE: SGR) was upgraded to Neutral from Sell at Goldman Sachs.
RBC Capital upgraded QLogic Corporation (NASDAQ: QLGC) to Outperform from Sector Perform.
Credit Suisse upgraded Amgen (NASDAQ: AMGN) and Weatherford (NYSE: WFT) to Outperform from Neutral.
MOST NOTEWORTHY: Clearwire, Citrix Systems, Altria Group, Overstock.com and Interpublic Group were today's noteworthy upgrades:
Jefferies upgraded shares of Clearwire Corporation (NASDAQ: CLWR) to Buy from Hold on valuation as they believe the stock is trading as if the Sprint Nextel Corporation (NYSE: S) deal is off. Jefferies thinks the Sprint/Clearwire deal is still in the best interest of both companies.
Deutsche Bank upgraded shares of Citrix Systems (NASDAQ: CTXS) to Buy from Hold, as they believe the contribution from XenSource beginning in Q4 could be better than expected.
UBS upgraded shares of Altria Group (NYSE: MO) citing stronger Q3 International results and potential share repurchases. Shares were upgraded to Buy from Neutral.
Piper Jaffray raised shares of Overstock.com (NASDAQ: OSTK) to Market Perform from Underperform, as they are incrementally more positive on shares following the company's Q3 upside. They believe the company has turned the corner on profitability.
Bear Stearns upgraded shares of Interpublic Group (NYSE: IPG) to Outperform from Peer Perform on valuation and expectations for improved performance in 2008.
OTHER UPGRADES:
Morgan Stanley upgraded Walgreen (NYSE: WAG) to Overweight from Equal Weight.
Friedman Billings raised its rating on IMS Health (NYSE: RX) to Outperform from Market Perform.
JP Morgan upgraded Stericycle (NASDAQ: SRCL) to Overweight from Neutral.
MOST NOTEWORTHY: Viacom, Agilent, AudioCodes and Microsoft were today's noteworthy upgrades:
JP Morgan upgraded shares of Viacom (NYSE: VIA) to Overweight from Neutral as they believe contractual rate increases and distribution of the company's newer networks will drive higher earnings growth in 2008. The firm does not believe this growth is priced into shares.
JP Morgan also upgraded Agilent Technologies (NYSE: A) to Overweight from Neutral and added shares to its Focus List. Shares were upgraded based on its sum-of-the-parts valuation and sees further upside given that strategic buyers are back in the marketplace.
AudioCodes (NASDAQ: AUDC) was raised to Buy from Accumulate at Think Equities, as they expect the company to benefit from the newly acquired CTI squared business, the security gateway business, and traction in the SBC business, with Microsoft's OCS launch of a new driver today.
Goldman added Microsoft Corporation (NASDAQ: MSFT) to its Conviction Buy List, citing valuation and overwhelmingly negative sentiment, and expects shares to trade higher on a better Q1 report.
OTHER UPGRADES:
RBC Capital Markets upgraded Citrix Systems (NASDAQ: CTXS) to Outperform from Sector Perform.
Eaton Corporation (NYSE: ETN) was upgraded to Outperform from Market Perform at Friedman Billings.
MOST NOTEWORTHY: Southwest Airlines, AMR Corp, ConocoPhillips, Comcast and Time Warner Cable were today's noteworthy downgrades:
Citigroup downgraded shares on both Southwest Airlines (NYSE: LUV) and AMR Corp (NYSE: AMR) to Hold from Buy to reflect elevated risks from continued high fuel prices and relative valuations.
Deutsche Bank lowered shares of ConocoPhillips (NYSE: COP) to Sell from Hold on valuation noting that 13 out of the past 15 years, integrated oils have underperformed during the period October 1st to December 5th. They also believe the company's 3rd October trading statement could raise concerns over Q4. on valuation noting that 13 out of the past 15 years, integrated oils have underperformed during the period October 1st to December 5th. They also believe the company's 3rd October trading statement could raise concerns over Q4.
Soleil downgraded shares of Comcast Corporation (NASDAQ: CMCSA) and Time Warner Cable (NYSE: TWC) to Hold from Buy due to concerns about the company's prospects in a weakening economy.
With a market cap of $20+ billion, VMware (NYSE: VMW) has certainly caught the attention of the software world. The company is the dominant player in virtualization, which is a "must have" for a growing number of organizations. Basically, it allows much improved utilization -- and cost savings -- from servers.
Well, Citrix (NASDAQ: CTXS) is one of the first to make a bigger splash into the virtualization space. That is, yesterday the company announced that it will shell out a cool $500 million for XenSource.
No doubt, it was smart for the folks at XenSource to wait for the Vmware debut. I'm sure it added some points to the valuation. In fact, it looks like XenSource is posting about $3 million in revenues this year -- but that should be ramped quickly with Citrix's distribution platform.
XenSource is building sophisticated tools for Microsoft's (NASDAQ: MSFT) push into virtualization, which is supposed to hit the markets in late 2008 (but Mr. Softie always seems to miss release dates).
Keep in mind that Citrix has built a growing, profitable business by pigging-backing on Microsoft systems (and has had an extensive relationship with the software powerhouse for more than ten years).
In other words, it's still early in the game. But with billions and billions at stake, it looks like Citrix will make virtualization a critical priority -- and we'll likely see more and more competition for VMware.
Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
MOST NOTEWORTHY: St. Jude Medical (STJ), Juniper Networks (JNPR), Satyam Computer (SAY), Clearwire (CLWR) and Citrix Systems (CTXS) were today's noteworthy upgrades:
St. Jude Medical's (NYSE: STJ) upgrade to Outperform from Market Perform at Wachovia was based on signs of an ICD recovery and reasonable valuation.
Baird upgraded shares of Juniper (NASDAQ: JNPR) to Outperform from Neutral following better-than-expected guidance; Goldman upgraded Juniper to Buy from Neutral.
Satyam (NYSE: SAY) was upgraded to Positive from Neutral at Susquehanna citing better than expected growth.
Clearwire (NASDAQ: CLWR) was upgraded to Outperform from Peer Perform at Bear Stearns following the announcement that Sprint (S) and Clearwire will form a Nationwide 4G/Wimax Network.
Citrix (NASDAQ: CTXS) was upgraded at Jefferies to Buy from Hold as they believe the strong customer response to Presentation Server Platinum Edition and the pipeline buildup related to NetScaler 8.0 bode well for the second half of 2007...
OTHER UPGRADES:
Lehman raised DSW Inc (NYSE: DSW) to Overweight from Equal-Weight.
Goldman upgraded shares of Labor Ready (NYSE: LRW) to Neutral from Sell.
Rodman upgraded shares of Encysive Pharma (NASDAQ: ENCY) to Market Perform from Underperform.
MOST NOTEWORTHY: Google (GOOG), Yahoo! (YHOO), Apple (AAPL), Cash Systems (CKNN) and Citrix (CTXS) were today's noteworthy initiations:
Oppenheimer believes Google Inc (NASDAQ: GOOG) is the largest beneficiary of the secular growth trends in Internet advertising and transitioned coverage with a Buy rating and $625 target.
Oppenheimer also believes the current price of Yahoo! (NASDAQ: YHOO) is an attractive entry point given the company's number one position in display advertising and the recent successful launch of Panama. The firm transitioned coverage of Yahoo! with a Buy rating and $34 target.
RBC Capital sees continued upside for Apple Inc (NASDAQ: AAPL) based on achieving its 10M goal for iPhone, upside from Mac momentum and maintaining iPod/iTunes dominance helped by new products, and started shares with an Outperform rating and $160 target.
Merriman believes Cash Systems (NASDAQ: CKNN) is positioned to gain meaningful share in the casino cash access industry through the near-term introduction of powercash and started shares with a Buy rating.
Friedman Billings believes Citrix's (NASDAQ: CTXS) latest Presentation Server product release has some near-term risk given raised prices and initiated shares with a Market Perform rating and $35 target...
OTHER INITIATIONS:
ValueClick (NASDAQ: VCLK) was initiated at Oppenheimer with a Buy rating.
MOST NOTEWORTHY: MGM Mirage (MGM), KLA-Tencor Corp (KLAC), Raytheon Co (RTN) and four apartment REIT's were today's noteworthy upgrades:
Bear Stearns upgraded MGM Mirage (NYSE: MGM) to Outperform from Peer Perform following Kirk Kerkorian's intentions to purchase the Bellagio and City Center and also pursue strategic alternatives for the rest of the company.
Matrix raised KLA-Tencor (NASDAQ: KLAC) to Buy from Hold, believing that growing demand for memory chips used in computers is leading to increasing revenues and profits.
Cowen upgrade shares of Raytheon (NYSE: RTN) to Outperform from Neutral based on cash deployment potential from the RAC sale, pension EPS tailwind, foreign sales cycle, and strong execution.
The Wall Street Journal (subscription required) reported that Kohl's Corp (NYSE: KSS) may form a multi-year deal with Elle for an exclusive line of clothing.
The Journal also reported that Comcast Corp (NASDAQ: CMCSA) is expected to announce an online video deal with Facebook.
The Barron's Online (subscription required) "Weekday Trader" column highlighted Citrix Systems Inc (NASDAQ: CTXS), which it said could rise to $40 a share or more from its current $31. The company is a play on the success of Microsoft Corporation's (NASDAQ: MSFT) Vista Operating System.
OTHER PAPERS:
According to the BBC News, Vodafone Group ADR (NYSE: VOD) is offering News Corporation's (NYSE: NWS) MySpace in the UK through its subscribers' mobile phones.
The Economic Times wrote that EMC Corporation (NYSE: EMC) has bought India's privately-held enterprise data security company Valyd Software for an undisclosed sum.
The Chicago Tribune reported that Chicago real estate magnate Sam Zell has entered the bidding for the Tribune Company (NYSE: TRB).
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MOST NOTEWORTHY: Today's noteworthy initiations were Monolithic Power, Emergency Medical Services, Amsurg and EnergySolutions.
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