Keefe Bruyette upgraded shares of AllianceBernstein (NYSE: AB) to Outperform from Market Perform as they find AB's risk/reward attractive given its attractive long-term business model. Wachovia upgraded Watson Pharma (NYSE: WPI) and Teva Pharma (NASDAQ: TEVA) to Outperform from Market Perform citing valuations and positive drivers for generics that include patent expirations and market share expansion.
UBS raised Lloyds TSB Group (NYSE: LYG) to Neutral from Sell on expected pricing power following the HBOS (OTC: HBOOY) acquisition.
Otter Tail (NASDAQ: OTTR) was upgraded to Outperform from Neutral at Baird.
GFI Group (NASDAQ: GFIG) was upgraded at Citigroup to Hold from Sell.
Merrill upgraded Logitech (NASDAQ: LOGI) to Neutral from Underperform.
Analyst downgrades:
JP Morgan downgraded shares of Lloyds TSB Group to Underweight from Neutral on capital concerns and believes the HBOS acquisition is not in the best interest of shareholders.
Stephens downgraded Universal Truckload (NASDAQ: UACL) to Equal Weight from Overweight on valuation and concerns about a slowdown in the flatbed sector. The firm's target remains $28.
After hitting a one-year high of $33.84 last June, the stock hit a one-year low of $19.00 in March. This morning, NTAP opened at $23.48. So far today the stock has hit a low of $22.90 and a high of $23.88. As of 12:10, NTAP is trading at $23.85, down $0.11 (-0.4%). The chart for NTAP looks bullish but deteriorating, while S&P gives the stock a neutral 3 Stars (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in three and a half months as long as NTAP is below $30 at September expiration. NetApp would have to rise by more than 25% before we would start to lose money. Learn more about this type of trade here.
MOST NOTEWORTHY: UBS AG, KLA-Tencor and Level 3 Comm were today's noteworthy downgrades:
Keefe Bruyette downgraded shares of UBS (NYSE: UBS) to Underperform from Market Perform as they expect as they expect further write-downs to erase profits in 2008.
Oppenheimer downgraded shares of KLA-Tencor (NASDAQ: KLAC) to Underperform from Perform after checks indicated Intel (NASDAQ: INTC) has chosen Applied Materials' (NASDAQ: AMAT) reticle inspection tool for its entire 32nm node after a long period of evaluation against KLA-Tencor. Oppenheimer believes this represents a $300M shift from KLA-Tencor's dominant market share in reticle inspection.
Jefferies cut Level 3 Communications (NASDAQ: LVLT) to Hold from Buy as they see limited opportunity for near-term share appreciation given the company's integration challenges and the added uncertainty from recent management changes.
OTHER DOWNGRADES:
Keefe Bruyette downgraded Credit Suisse (NYSE: CS) to Market Perform from Outperform.
Kroger (NYSE: KR) was downgraded to Underweight from Neutral at JP Morgan.
Network Appliance (NASDAQ: NTAP), a provider of unified storage solutions, is recently up 84 cents to $22.94.
NTAP company sponsored analyst meeting is scheduled for March 13.
NTAP call option volume of 45,161 contracts compares to put volume of 16,854 contracts. NTAP March option implied volatility of 51 is above its 26-week average of 44 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
MOST NOTEWORTHY: UBS AG (UBS), Network Appliance (NTAP) and Semiconductors were today's noteworthy downgrades:
Deutsche Bank downgraded UBS AG (NYSE:UBS) to Hold from Buy following the company's earnings reports to reflect its large new risk exposures.
Citigroup lowered Network Appliance (NASDAQ:NTAP) to Hold from Buy, as they believe the company's lackluster outlook will weigh on shares in the near-term.
Semiconductors Micron Tech (NYSE:MU) and Novellus (NASDAQ:NVLS) were downgraded to Sell from Neutral at Goldman citing expectations of excess DRAM supply.
OTHER DOWNGRADES:
Goldman removed Intel (NASDAQ:INTC) from its Conviction Buy List.
JP Morgan lowered Knot Inc (NASDAQ:KNOT) to Neutral from Overweight.
Morgan Stanley lowered Boardwalk Pipeline (NYSE:BWP) to Equal Weight from Overweight.
Stock futures were higher this morning, indicating U.S. stocks could start this first week's session with gains, trying to stage a comeback of sorts from Friday's selloff. Now that the recession option has all but been digested and accepted, especially after the economists conference over the weekend, bargain hunters feel able to look for deals keeping that in mind. A higher chance for a Federal Reserve easing move could also be affecting markets now as well as lower oil prices.
On Friday, stocks dropped sharply after non-farm paryroll report showed very few job additions and a jump in the unemployment rate. The Dow industrials dropped 256 points, or 1.96%, the Nasdaq Composite lost 98 points, or 3.77%, and the S&P 500 fell 35 points, or 2.46%.
While there are no economic data due out today, more housing data is due out Tuesday. Also on Tuesday, Alcoa Inc. (NYSE: AA) will be the first of the 30 Dow Jones industrials to report fourth-quarter results, kicking off fourth quarter earnings season.
MOST NOTEWORTHY: Antofagasta plc, Merrill Lynch, Valueclick, Telmex and Network Appliance were today's noteworthy upgrades:
UBS upgraded shares of Antofagasta (OTC: ANFGY) to Neutral from Sell as they see a strong possibility of delays to copper supply due to an earthquake on Nov. 14 in northern Chile.
Credit Suisse is positive on the appointment of John Thain as Merrill Lynch (NYSE: MER)'s CEO and his ability to get the company back on track strategically. The firm upgraded shares of Merrill to Outperform from Neutral.
Valueclick (NASDAQ: VCLK) was upgraded to Buy from Hold at Citigroup on valuation, as they believe the recent sell-off provides a great entry point.
Citigroup also raised its rating on Telmex (NYSE: TMX) to Buy from Hold after the company announced the spin-off of its international businesses.
Bear Stearns upgraded Network Appliance (NASDAQ: NTAP) to Peer Perform from Underperform following its Q2 report and increased outlook.
OTHER UPGRADES:
RBC Capital upgraded Sciele Pharma (NASDAQ: SCRX) to Sector Perform from Underperform.
Lehman upgraded Amgen (NASDAQ: AMGN) to Overweight from Equal Weight.
W.W. Grainger (NYSE: GWW) was upgraded to Outperform from Market Perform at Morgan Keegan.
Merrill Lynch upgraded Weyerhaeuser (NYSE: WY) to Buy from Neutral.
MOST NOTEWORTHY: Caliper Life Sciences, Network Appliance, EMC Corp, Concur Tech and TechTarget were today's noteworthy initiations:
Caliper Life Sciences Inc (NASDAQ: CALP) was initiated at Piper Jaffray with an Outperform rating and $8 target. Piper believes the company's collection of acquisitions offers a diverse portfolio targeting a $1.2B segment of the life science tools market.
Credit Suisse resumed coverage of Network Appliance Inc (NASDAQ: NTAP) and EMC Corporation (NYSE: EMC) with Neutral ratings and a $28 target and $20 target, respectively, as they have concerns of near-term demand risk.
Concur Technologies (NASDAQ: CNQR) was started at Jefferies with a Buy rating and $40 target, as they believe the company is changing the landscape of employee expense management by integrating travel and expense reimbursement and feels shares deserve a premium valuation.
Oppenheimer sees limited upside from current levels at TechTarget Inc (NASDAQ: TTGT) and would consider an entry point in the low-to-mid teens. The firm started shares with a Neutral rating and $17 target.
OTHER INITIATIONS:
Banc of America initiated K Swiss Inc (NASDAQ: KSWS) with a Sell rating and $20 target.
The largest tech IPO since Google (NASDAQ: GOOG), VMware (NYSE: VMW), debuted at a huge premium to its pricing level (82%) and continues to climb from that level (another 14% today). Due to its huge stake in VMware, several of my favorite columnists and analysts now suggest that EMC (NYSE: EMC) is undervalued here. At around $19, is EMC undervalued? Is it a buy?
First, what is VMware worth on an per-EMC-share basis? Using yesterday's closing price for VMware, that is amounts roughly to $9 per EMC share. While there's certainly risk to using this very high figure, analysts remain very bullish on VMware's stock, and if the market remains robust, the stock stands to continue trading higher.
This leaves buying EMC's core business for about $10 per share. As a Caris & Co. analyst report notes, at $10 per share, the core business is fetching 16x earnings. With the data storage industry at 19x earnings, it certainly seems like there could be value.
MOST NOTEWORTHY: Commercial Metals (CMC), KKR Financial (KFN), Career Education (CECO), Ann Taylor (ANN) and Intel (INTC) were today's noteworthy upgrades:
CIBC upgraded Commercial Metals (NYSE: CMC) to Sector Outperformer from Sector Performer based on valuation.
KKR Financial (NYSE: KFN) was raised to Outperform from Market Perform at Friedman Billings, following managements detailed conference call and managements prudent and rapid actions to address the sale of its Rambus (RMBS) portfolio.
Bear Stearns upgraded Career Education (NASDAQ: CECO) to Outperform from Peer Perform based on valuation.
Ann Taylor (NYSE: ANN) was upgraded to Outperform from Market Perform at Piper Jaffray due to the upside at the company's LOFT division and the firm's belief that there is upside to their 2008/2009 estimates for Ann Taylor.
Credit Suisse upgraded shares of Intel (NASDAQ: INTC) to Outperform from Underperform based on expected margin expansion, a more benign competitive environment in the MPU sector, better positioning vs. AMD (AMD) at the high-end, and strong demand trends...
MOST NOTEWORTHY: JDSU (JDSU), MasterCard (MA), GlobalSanta Fe (GSF), Molson Coors (TAP) and TRW Inc (TRW) were today's notable upgrades:
BMO Capital upgraded JDSU (NASDAQ: JDSU) to Market Perform from Underperform based on valuation and good industry fundamentals.
AG Edwards considers MasterCard (NYSE: MA) a defensive payments play, upgraded shares to Buy from Hold, and would use weakness to build positions in the stock.
GlobalSanta Fe (NYSE: GSF) was upgraded at Bernstein to Market Perform from Underperform based on the merger with Transocean (RIG).
Molson Coors (NYSE: TAP) was upgraded to Buy from Neutral at Goldman based on valuation and potential increased free cash flow in 2008.
TRW Inc (NYSE: TRW) was upgraded to Buy from Sell at Goldman...
OTHER UPGRADES:
Thomas Weisel raised Network Appliance (NASDAQ: NTAP) to Overweight from Market Weight.
EMC Corp. (NYSE: EMC) opened at $16.13. So far today the stock has hit a low of $16.05 and a high of $16.85. As of 12:10, EMC is trading at $16.32, up $0.27 (1.7%).
EMC stumbled in after hours trading last night after competitor Network Appliance (NASDAQ: NTAP) cut its forecast for the next quarter, but a closer look at NTAP's earnings shows positive signs for EMC; profits were up for the company and EPS were in line with expectations. Now that EMC has broken resistance at $16, the stock is charging up the chart. Recent technical indicators for EMC have been bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $14 range. EMC hasn't been below $14 since March and has shown support around $15.40 recently. This trade could be risky if the technology sector weakens over the second half of this year, but even if that happens, EMC would have to fall by more than 15% before this position would be in trouble.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls a position in EMC or NTAP.
Micron Technology (NYSE: MU) -- calls active on Flat implied volatility on renewed Speculation. MU is engaged in the manufacturer and marketing of dynamic random access memory, flash memory, and complimentary metal-oxide semiconductor image sensors. MU is recently up $0.35 to $11.87 on renewed M&A chatter. MU has a market cap of $8.8 billion with long term debt of $640 million. MU call option volume of 19,606 contracts compares to put volume of 2,154 contracts. MU June option implied volatility of 34 is near its 26-week average according to Track Data, indicating non-directional risk.
Wendy's International (NYSE: WEN) -- volatility Elevated as Arbs expect deal on strategic options review. WEN is recently up $1.33 to $40.32 on unconfirmed chatter of a $49 cash private equity offer. WEN announced "formation of special committee of independent directors to review strategic options to enhance shareholder value on 4/26/07." WEN June option implied volatility is at 32 and June is at 29; above its 26-week average of 25 according to Track Data, suggesting larger risk.
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Analyst upgrades:
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Stock futures were higher this morning, indicating U.S. stocks could start this first week's session with gains, trying to stage a comeback of sorts from Friday's selloff. Now that the recession option has all but been digested and accepted, especially after the economists conference over the weekend, bargain hunters feel able to look for deals keeping that in mind. A higher chance for a Federal Reserve easing move could also be affecting markets now as well as lower oil prices.
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Micron Technology
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