Analyst Upgrades

• JMP Securities upgraded Hewlett-Packard (HPQ) to outperform from market perform based on valuation and checks that indicate strength in enterprise PCs, high growth geographies and light laptops. The firm has a $50 target on the stock.
• RBC Capital upgraded Rio Tinto (RTP) to outperform from sector perform, citing the company's improving growth plans and attractive risk profile.
• Goldman upgraded FormFactor (FORM) to neutral from sell, but lowered its price target to $6 from $10. The firm cites valuation for the upgrade.
• MCG Capital (MCGC) was upgraded to outperform from market perform at FBR Capital.
• CRH (CRH) was upgraded to neutral from underweight at JPMorgan.
• Melco Crown (MPEL) was upgraded to overweight from equal weight at Morgan Stanley.

They don't all work out. The shares of high-risk play FormFactor Inc. (FORM), first discussed here on July 6, 2009 at a price of $19.90, have fallen off the table, and were stopped out at $13. The stock has since retreated further, to about $11.

Back in March, the calculation was that a strong increase in wafer probe card sales in 2010, propelled by the new DDR3 technology and other memory advances, would trigger a stock price uptrend. The play also counted on an increase in orders, as FORM's clients rebuilt inventories that were pared-back during the nearly two-year recession.

Tech play FormFactor (FORM), first discussed on July 6, 2009, at a price of $19.90, can now be put in the category of 'a bargain.'

Note of caution: I consider FormFactor to be a high-risk stock not suitable for low-risk/moderate-risk investors.

FORM offers an opportunity for bottom-fishers, due to the likely, strong increase in wafer probe card sales in 2010, propelled by the new DDR3 technology and other memory advances; orders are likely to increase as well, as FORM's clients rebuild inventories that were pared-back during the nearly two-year recession.

Here's one forecast for 2010 that's likely to be realized: The tech sector's recovery will continue, and that's a major reason I'm reiterating my buy rating for FormFactor Inc. (FORM), first recommended on July 6, 2009, at a price of $19.90.

One key qualifier, however: Don't invest in FormFactor, a designer and manufacturer of wafer probe cards for the semiconductor industry, if you can't tolerate high risk and volatility. FormFactor's stock chart mirrors a roller-coaster: A 20% plunge following a 30% rise can occur.

Analyst upgrades:

• Target (NYSE: TGT) was upgraded two ratings to Buy from Sell at Citigroup, and it raised its price estimate on shares to $61 from $44. The firm sees significant earnings upside as the company's same-store sales improve and finds the valuation attractive at current levels.
• Motorola (NYSE: MOT) was upgraded to Outperform from Sector Perform at RBC Capital citing valuation, new product launches, and expectations that the Mobile Devices division will be profitable. The price target is $11.
• AK Steel (NYSE: AKS) was upgraded to Buy from Hold at Citigroup as it believes the company's Q3 results were solid and the China steel market is stabilizing. The firm raised its target to $21 from $17.
• Ceradyne (NASDAQ: CRDN) was upgraded at Wells Fargo to Market Perform from Underperform. The firm thinks that earnings expectations for the company have now reached more reasonable levels, limiting risk.
• FormFactor (NASDAQ: FORM) was upgraded to Outperform from Market Perform at FBR Capital ahead of the company's Q3 results due to valuation as it views the risk/reward on shares compelling. The firm raised its price target to $25 from $19.
• Texas Instruments (NYSE: TXN) was upgraded at Goldman to Buy from Neutral, citing 2H10 margin expansion and analog share gains. Target was raised to $29 from $27.
• Barrett Business Services (NASDAQ: BBSI) was upgraded to Buy from Hold at Roth Capital as the firm thinks the company will benefit from a labor market recovery next year. Roth notes that the stock's valuation has lagged behind most of its peers in recent months and it set an $18 target.

I'm Reiterating my Buy rating for FormFactor Inc. (NASDAQ: FORM), first recommended on July 6, 2009 at a price of $19.90, but there are qualifiers.

One thing that hasn't changed: Don't invest in FormFactor, a designer and manufacturer of wafer probe cards for the semiconductor industry, if you can not tolerate high risk and volatility. FormFactor's stock price can rocket 30% higher, then plunge 25%, in the same month.

I'm issuing a Buy recommendation for FormFactor, Inc. (NASDAQ: FORM), but with a tight stop. Here's why:

FORM's revenue for FY2009 will probably decline another 30-40%, following a 55% revenue plunge in FY2008, but institutional investors are looking past current conditions, to likely corporate increases in tech spending in FY2010, driven by the transition to DDR3 technology in the memory segment.

Analyst upgrades:

• JPMorgan upgraded Franklin Resources (NYSE: BEN) to Overweight from Underweight to reflect performance and sales improvements, as well as benefits from the weakening U.S. dollar. The firm has a $94 target on the stock.
• Oppenheimer upgraded FormFactor (NASDAQ: FORM) to Outperform from Perform after channel checks indicated orders are recovering. The firm raised its target on shares to $30 from $22.
• KeyBanc upgraded Oshkosh (NYSE: OSK) to Buy from Hold citing the company's MRAP-ATV contract win, which they view as a "game changer." The firm has a $30 target on the stock.
• Novellus (NASDAQ: NVLS) was upgraded to Neutral from Underperform at Credit Suisse.
• Ternium (NYSE: TX) was upgraded to Buy from Neutral at Goldman.
• Cathay General (NASDAQ: CATY) was upgraded to Buy from Neutral at B. Riley.

MOST NOTEWORTHY: General Motors, Ford, Deutsche Bank and Credit Suisse were today's noteworthy downgrades:

• Bear downgraded General Motors Corporation (NYSE: GM) to Underperform from Peer Perform and Ford Motor Company (NYSE: F) to Peer Perform from Outperform citing deterioration in the automotive consumer's ability to purchase vehicles.
• ABN Amro downgrade Deutsche Bank AG (NYSE: DB) to Sell from Hold and Credit Suisse Group (NYSE: CS) to Hold from Buy on concerns of slowing revenue growth amid the subprime crisis.

OTHER DOWNGRADES:

• FormFactor Inc (NASDAQ: FORM) was lowered to Neutral from Buy at Broadpoint.
• National Financial Partners Corp (NYSE: NFP) was downgraded to Neutral from Buy at Merrill.
• Morgan Stanley lowered Expedia Inc (NASDAQ: EXPE) to Underweight from Equal Weight.

MOST NOTEWORTHY: FormFactor, Inc (FORM), Graco Inc (GGG), China Telecom (CHA), Sempra Energy (SRE) and Unica Corp (UNCA) were today's noteworthy downgrades:

• JP Morgan cut FormFactor (NASDAQ: FORM) to Underweight from Neutral citing expected competition from Micronics Japan, which has successfully ramped up production at its new advanced probe card factory.

• CIBC's checks suggest that challenges still remain in Graco's (NYSE: GGG) contractor segment and is likely to impact results, downgrading shares to Sector Performer from Sector Outperformer.

• Deutsche Bank downgraded shares of China Telecom (NYSE: CHA) to Hold from Buy to reflect slower user growth as the company added 77% fewer fixed-line customers in the first five months of 2007.

• Sempra Energy (NYSE: SRE) was cut to Outperform from its Top Pick rating at RBC Capital following the company's JV announcement with the Royal Bank of Scotland (RBSPY).

• Jefferies downgraded shares of Unica (NASDAQ: UNCA) to Hold from Buy after the company reported lower than expected Q3 licenses to reflect too much variance in execution...

OTHER DOWNGRADES:

• Linear Technology (NASDAQ: LLTC) was downgraded to Accumulate from Buy at ThinkEquity.

• Rackable Systems (NASDAQ: RACK) was downgraded to Sector Outperform at RBC Capital.

• Stanford cut Dobson (NASDAQ: DCEL) to Hold from Buy.

• Lehman assumed coverage of Extreme Networks (NASDAQ: EXTR) with an Equal Weight rating, downgrading shares from Overweight.

• Lazard downgraded First Solar (NASDAQ: FSLR) to Hold from Buy.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Palm, Inc (PALM), Reliant Energy, Inc (RRI) and Take-Two Interactive Software (TTWO) topped today's more notable downgrades:

• UBS cut Palm, Inc (NASDAQ: PALM) to Reduce from Neutral citing valuation. Bank of America downgraded shares to Neutral from Buy with an $18 target and considers the risk/reward less favorable at these levels.

• Bank of America also downgraded Reliant Energy (NYSE: RRI) to Sell from Neutral on valuation.

• Hillard Lyons cut Take-Two Interactive Software (NASDAQ: TTWO) to Neutral from Outperform.

OTHER DOWNGRADES:

• CIBC downgraded Jabil Circuit, Inc (NYSE: JBL) to Sector Performer from Outperformer following the company's disappointing outlook. Bear Stearns cut Jabil to Peer Perform from Outperform. BMO cut the company to Market Perform from Outperform.

• Friedman, Billings, Ramsey downgraded shares of FormFactor, Inc (NASDAQ: FORM) to Market Perform from Outperform to reflect increased risks in the logic market and long-term growth concerns.

• Matrix USA downgraded Knight Transportation (NYSE: KNX) to Hold from Buy.

• American Technology downgraded shares of Comverse Technology, Inc (NASDAQ: CMVT) to Neutral from Buy as the firm believes a retreat to the $17 range is likely given the company's disappointing margin trends.

• CL King cut Claire's Stores, Inc (NYSE: CLE) to Neutral from Strong Buy following the buyout offer.

• Goldman downgraded Atmos Energy Corp (NYSE: ATO) to Sell from Neutral and Liz Claiborne, Inc (NYSE: LIZ) to Neutral from Buy.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

MOST NOTEWORTHY: Johnson & Johnson (JNJ) led this morning's list of initiations.

• Goldman Sachs reinstated Johnson & Johnson (NYSE: JNJ) with a Buy rating and $75 target.

OTHER INITIATIONS:

• FormFactor Inc. (NASDAQ: FORM) was started at AG Edwards with a Buy rating and $50 target; the firm said FormFactor's advanced wafer probe cards offer semiconductor manufacturers a cost effective and yield enhancing solution for the wafer probe test process.

• Bank of America initiated Peabody Energy (NYSE: BTU) with a Buy rating and $53 target based on the company's large PRB operations and low production costs.

• Soleil initiated shares of Hess Corp (NYSE: HES) with a Buy rating and $62 target.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).