Merriman upgraded shares of Netezza (NYSE: NZ) to Buy from Neutral following the company's solid Q2 results as they believe it is well-positioned for strong operating results heading into 2H09.
JP Morgan raised Cabot (NYS: CBT) to Overweight from Neutral. The firm expects 2009 to be a better year given lower raw material costs and higher contract prices.
JP Morgan also upgraded Royal Ahold (OTC: AHONY) to Overweight from Neutral on valuation.
BMO Capital upgraded Royal Bank (NYSE: RY) to Market Perform from Underperform and Bank of Montreal (NYSE: BMO) to Outperform from Market Perform.
Analyst downgrades:
Jefferies downgraded shares of Constellation Energy (NYSE: CEG) to Underperform on Hold on concerns the company will come under increasing pressure to issue equity. The firm lowered its target to $60 from $71.
Thomas Weisel downgraded Williams-Sonoma (NYSE: WSM) to Market Weight from Overweight citing continued macro pressures.
Wachovia has concerns that Kayne Anderson's (NYSE: KED) book value will be pressured by its investment in ProPetro Services, trading losses associated with SemGroup, and negative developments at Quest Midstream. The firm cut shares of Kayne to Market Perform from Outperform.
H&E Equipment (NASDAQ: HEES) was lowered at Credit Suisse to Neutral from Outperform.
Analyst initiations:
Morgan Stanley yesterday initiated Elan Corp (NYSE: ELN) with an Overweight rating. The firm sees a low-probability of a Tysabri withdrawal.
ThinkPanmure views On Semiconductor (NASDAQ: ONNN) as a nice turnaround story with opportunities for shares gains in notebooks and consumer gaming platforms. Shares were initiated with a Buy rating and $14 target.
Petrohawk Energy (NYSE: HK) was assumed with an Outperform rating at Morgan Keegan.
Regency Energy (NASDAQ: RGNC) was initiated at Merrill Lynch with a Neutral rating.
ON Semiconductor (NASDAQ: ONNN) designs and manufactures a wide variety of power and data management semiconductors for customers in the automotive, communications, computer, medical, industrial and military/aerospace markets. It operates a network of manufacturing facilities, sales offices and design centers in key markets throughout North America, Europe and the Asia Pacific region. Top clients include Nokia (NYSE: NOK) and Sony (NYSE: SNE). Texas Instruments (NYSE: TXN) is a major competitor.
The firm pleased investors last week, when it reported Q1 EPS of 21 cents and revenues of $421.9 million. Analysts had been looking for 14 cents and $386.9 million. Management also guided Q2 revenues to $545-$560 million ($400.6M consensus). Canaccord Adams subsequently upgraded the shares to "buy". Kaufman Brothers, Lehman Brothers and Wedbush Morgan reiterated their "buy" ratings.
MOST NOTEWORTHY: 1-800-Flowers.com, Ctrip.com International, 51job and Choice Hotels were today's noteworthy initiations:
Nollenberger started shares of 1-800-Flowers.com (NASDAQ: FLWS) with a Buy rating and $14 target and believes shares are undervalued at current levels given the company's compelling growth prospects, strong cash flow generation, and solid balance sheet.
Bear believes Ctrip.com (NASDAQ: CTRP) is the best positioned online travel company ahead of structural changes and consolidation in China's fragmented travel agency industry. The firm initiated shares with an Outperform rating and $80 target.
Bear expects 51job (NASDAQ: JOBS) to benefit from China's increasing Internet user base due to the internet's broadening reach among job seekers, resuming coverage with an Outperform rating and $28 target.
Goldman started Choice Hotels (NYSE: CHH) with a Buy rating and $45 target, as they are positive on the stock given unit growth and minimal capital needs, among other reasons.
OTHER INITIATIONS:
Thomas Weisel initiated On Semiconductor (NASDAQ: ONNN) with an Overweight rating and $15 target.
Broadpoint initiated Ariba (NASDAQ: ARBA) with a Buy rating and $15 target and Ultimate Software (NASDAQ: ULTI) with a Neutral rating.
MOST NOTEWORTHY: Lululemon, NaviSite, Research in Motion, Palm and Motorola were today's noteworthy initiations:
Lululemon Athletica (NASDAQ: LULU) was initiated with a Neutral rating and $42 target at Credit Suisse on valuation.
NaviSite Inc (NASDAQ: NAVI) was initiated with a Buy rating at Merriman after reporting solid Q4 results. Merriman expects the company's recent acquisitions to significantly increase margins.
Citigroup believes Research in Motion Limited (NASDAQ: RIMM) is not a pure momentum stock as fundamentals are driving share appreciation. They think the company's subscriber growth is beginning to hit critical mass and expect 15M subscribers within 12 months. The firm started shares with a Buy rating and $115 target.
Citigroup also initiated shares of Palm Inc (NASDAQ: PALM) with a Sell rating and $13.50 target, expecting the company's market share losses to continue to EPS to decline.
Citigroup started Motorola Inc (NYSE: MOT) with a Hold rating and $20 target, as they believe its recovery may take longer than expected, noting its new silicon platform does not come out until 2H08.
MOST NOTEWORTHY: National Grid, Shire Plc, On Semiconductor and Enbridge were today's noteworthy upgrades:
Deutsche Bank upgraded shares of National Grid (NYSE: NGG) to Buy from Hold as they believe the Keyspan deal will be positive for shareholders.
Goldman upgraded shares of Shire Plc (NASDAQ: SHPGY) to Buy from Neutral and added the stock to their Conviction Buy List on valuation and expected gains in the ADHD market.
On Semiconductor (NASDAQ: ONNN) was upgraded to Outperform from Market Perform at Wachovia on valuation.
Enbridge Inc (NYSE: ENB) was raised to Sector Outperformer from Sector Performer at CIBC World Markets, as the firm sees an attractive 3-year return potential as new projects come into service and expects the stock's relative underperformance to come to an end.
Valuation and debt levels pushed Unterberg to downgrade ON Semiconductor (NASDAQ: ONNN) to Market Perform from Buy.
William Blair downgraded shares of Amgen (NASDAQ: AMGN) to Market Perform from Outperform as they believe the CMS decision on ESA reimbursement guidelines is extremely restrictive regarding Aranesp use in oncology...
MOST NOTEWORTHY: Chico's FAS (CHS), MetroPCS (PCS), Federated Investors (FII) and Tibco (TIBX) were today's noteworthy initiations:
Roth Capital believes Chico's FAS (NYSE: CHS) growth will be back on track given the changes within the merchandise organization and recent infrastructure investments, and initiated shares with a Buy rating and $24 target.
Pacific Crest believes MetroPCS's (NYSE: PCS) low-cost business model creates opportunities and that its large market focus should drive outperformance, and initiated shares with an Outperform rating.
JMP Securities believes near-term upside in Federated Investors (NYSE: FII) could be seen with hurricane season and resumed coverage of Federated Investors with an Overweight rating and $178 target.
Pacific Crest believes 2007 is a transition year for Tibco (NASDAQ: TIBX) and started shares with a Sector Perform rating...
OTHER INITIATIONS:
BWS Financial initiated Rentrak (NASDAQ: RENT) with a Buy rating and $20 target.
HSBC started Lukoil (OTC: LUKOY) with an Overweight rating.
Pacific Crest started shares of On Semiconductor (NASDAQ: ONNN) with an Outperform rating and $16 target.
BMO Capital initiated Ares Capital (NASDAQ: ARCC) with an Outperform rating and $18 target.
We blogged late last fall about semiconductor stocks fundamentals rolling over. It appears semi management is beginning to whisper more and more of moderating results to analysts:
Lehman cuts Micron Technology Inc's (NYSE: MU) estimates and sees losses for the next three quarters. The increase in demand for memory chips due to Microsoft Corporation's (NASDAQ: MSFT) Vista demanding more memory is not happening.
Pacific Crest Securities wrote second quarter chip demand is underwhelming, with notebooks and the Nintendo (OTC: NTDOY) Wii the only bright spots.
J.P. Morgan wrote consensus expectations for both the second quarter and all of 2007 are too high and is trimming estimates, The more significant earnings misses could come from Advanced Micro Devices Inc (NYSE: AMD), Cypress Semiconductor Corporation (NYSE: CY), Intel Corporation (NASDAQ: INTC) and On Semiconductor Corporation (NASDAQ: ONNN); with smaller cuts for Texas Instrments Inc (NYSE: TXN), Broadcom Corporation (NASDAQ: BRCM), Altera Corporation (NASDAQ: ALTR), Xilinx Inc (NASDAQ: XLNX) and Fairchild Semiconductor International (NYSE: FCS).
We began blogging about a slowdown in semiconductor stocks in November. However, most of this slowdown could be coming to an end. It appears from both National Semiconductor Corporation (NYSE: NSM) and Texas Instruments recent earnings releases that both companies are seeing the industry downturn ending as inventories have been worked down and backlog is beginning to build again.
The other major points we have been making is that we are entering the seasonally weak period for these stocks. So be cautious about jumping in with both feet in the early Spring.
Most likely, the two drivers for these stocks is the Fed lowering rates or the typically seasonal pick up which occurs in late summer. Since the Fed is on hold, there appears to be no need to jump into these stocks yet. Let the bad news hit these stocks and then start bottom fishing.
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