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phil
April 21st, 2014 at 10:49 am

As usual, Banksters love buyout rumors and upgrades to keep a rally alive for another day:



And, by the way, don't forget that the IBanks also control the timing of the M&A as well as the announcements – that way they can BUYBUYBUY on a Friday and sell into the upgrade excitement early in the week – isn't that clever? 

 

Gilead heads Citi's 20 best stocks in America

• Citi analysts post their list of 50 top Buy-rated stocks with a market cap of at least $3B, at least a top-three market share in a third of their businesses, and a global reach as measured by significant revenue outside of their home market; Business Insider highlights 20 according to estimated total return.
• Gilead Sciences (GILD) tops the list with a 45.4% ETR, and Citi believes GILD will generate a significant amount of cash and will buy back stock, engage in product and company acquisitions to grow its pipeline, and potentially start providing a dividend in 2-3 years.
• Rounding out the top 20: FB, BX, V, CERN, FLT, BA, MA, LVS, SBUX, MJN, GOOG, EBAY,BIIB, AXP, HOG, VFC, PII, VMC, FTI.

Pfizer has much to gain by acquiring AZN

• The most alluring aspect of AstraZeneca (AZN) for Pfizer (PFE) is the former's cancer franchise and pipeline of promising drugs, especially the immunotherapies. Pfizer's cancer pipeline is relatively weak other than its breast cancer candidate palbociclib.
• Cost savings is another significant benefit.
• Analysts perceive that a takeout price of a 25% premium funded by cash, cheap debt and stock would be immediately accretive to earnings.
• Pfizer needs to do something with its huge ex-U.S. cash horde of $70B.

WSJ: Square mulling sale, Google discussed an acquisition

• The WSJ reports mobile payments upstart Square, reported two months ago to have indefinitely postponed its IPO, has "discussed a possible sale to several deeper-pocketed rivals."
• The paper adds Google (GOOG) discussed buying Square this year, though it's not clear if talks are continuing. Apple and PayPal are said to have held informal talks that never progressed.
• Re/code and The Information previously reported Google has shown interest in Square, which processed over $20B worth of transactions last year (largely through its mobile card readers and related apps) and could provide Google with valuable data on offline purchase activity and ad effectiveness (previous). Google's own mobile/offline payments efforts haven't lived up to expectations.
• The WSJ's sources state Square had 2013 revenue of $550M, but only with a gross margin of 21% (down from 2012's 27%) after backing out processor payments and other fees. That led net loss to total ~$100M.
• Square has been hatching plans to up-sell merchants on value-added software and services, but it remains very dependent on transactions for now. The company has been valued at $5Bin private share sales, but public investors might now assign a lower valuation.

Will a P-E consortium buy Darden Restaurants?

• Darden Restaurants (DRI -0.8%) could be the target of a P-E buyout, speculates Restaurant Finance Monitor. The move might make sense with many activist investors pushing Darden on the same issues.
• If a consortium of private equity groups decided to make the move, the buyout would be the largest in restaurant industry history.
• Analysts note the divestiture of Red Lobster makes the company more attractive for a new buyer.

Blucora buying HowStuffWorks from Discovery

• HowStuffWorks, whose site and apps try to explain exactly what the company's name suggests, produces 38M unique visitors and 200M page views per month.
• Blucora (BCOR -0.1%) is acquiring the business from Discovery (DISCA -0.4%) for an undisclosed amount of cash, and adding it to its InfoSpace (white-label search) reporting unit. Discovery will have ongoing access to HowStuffWorks' video content.
• The acquisition comes a month after the WSJ reported Blucora is prepping an all-cash offer for electronics retailer Brookstone. The company's efforts to diversify follow a search/ad deal renewal with Google that doesn't cover Blucora's mobile users.

And it's great when they upgrade each other:   Morgan Stanley upgraded at Nomura

• Citing Morgan Stanley's (MS +0.4%) big Q1, Nomura upgrades the stock to a Buy with price target raised to $36 from $33. The bank's capital build and strength in investment banking and trading offset modest disappointment with wealth management results, says the team. Going forward, fixed income will remain a challenge, but look for "robust" revenue from institutional securities. An increased backlog in investment banking and "constructive" outlook for equities business are also positives.
• Morgan Stanley earnings coverage from last week

Buy on BB&T reiterated at Compass Point

• Noting a weak quarter driven by lower fee income thanks to slowing mortgage activity, as well as continued pressure on net interest margins, Compass Point's Kevin Barker nevertheless reiterates his Buy rating on BB& T (BBT), though lowering the price target by $1 to $42.
• Among positives still remaining: Further expense declines to come (management reiterated pledge to boost operating efficiency), and a pickup in loan activity in Q2. "The outlook for loan growth is improving and BB&T is prudently managing its expense base."

Home Depot higher in early action following Barron's piece

• Shares of Home Depot (HD) are higher in early trading after a favorable cover story article inBarron's pitched the stock as an undervalued gem.
• HD +1.5% to $78.21 premarket. Shares of the home improvement giant haven't crested the $80 mark since the middle of March.

Sizing up Chipotle

• Chipotle (CMG) is upgraded by JPMorgan to an Overweight rating from Neutral.
• Oppenheimer thinks investors should buy shares of the restaurant chain on any weakness.
• Last week, Chipotle reported sizzling comparable store sales growth in Q1, but also noted it was getting hit by higher food input costs.
• What to watch: An across-the-menu price increase from Chipotle is expected something this year.
• CMG +1.0% to $524.53 premarket

 

Coverage initiated on Ashford Hospitality Trust and spinoff at Deutsche

• Starting coverage on Ashford Hospitality Trust (AHT) and the recent spinoff of its upscale hotel business – Ashford Hospitality Prime (AHP) – Deutsche Bank rates AHT a Buy and AHP a Hold.
• Since the November spinoff AHT is up about 25%, while AHP is down a similar amount.

More buyout drama at Time Warner Cable?

• Brean Capital upgrades Time Warner Cable (TWC) to a Buy rating.
• The investment firm sets a $165 price target on TWC based on its view the buyout drama might not be over for the pay-TV concern.
• Shares of TWC closed at $135.33 last Thursday.

Micron continues rally following bullish Drexel Hamilton note

• Drexel Hamilton's Richard Whittington has upped his Micron (MU +3.1%) PT all the way to $50 from $30. He expects DRAM prices to keep rising this year and next thanks to a favorable supply/demand balance, and expects DRAM margins to eventually hit 50%.
• Micron had a Feb. quarter gross margin (covers both DRAM and NAND flash sales) of 34%. Shares rallied on Thursday following SanDisk's Q1 beat and margin guidance hike, and are once more close to a 52-week high of $25.68.

UBS upgrades Cornerstone OnDemand, praises cloud HR mindshare

• UBS has upgraded Cornerstone On Demand (CSOD +1%) to Buy, and set a $60 PT.
• The firm declares Cornerstone "continues to have leading mindshare with HR buyers as a pure-play [SaaS] talent management vendor," and thinks its recent selloff has yielded an attractive valuation for a company expected to grow sales by 45% or more in 2014.

Microsoft-Nokia deal closing on Friday; terms slightly adjusted

• Microsoft's (MSFT -0.5%) acquisition of Nokia's (NOK -0.1%) Devices & Services unit will close on April 25.
• Three changes have been made to the original deal: 1) Microsoft won't acquire Nokia's Korean manufacturing facility. 2) Microsoft will "manage" Nokia.com and Nokia social media sites for up to a year. 3) 21 Chinese employees of Nokia's Chief Technology Office will join Microsoft.
• Chinese government approval (provided two weeks ago) ended the last major regulatory hurdle for the deal, which was originally set to close in March. Nokia stands to reap a $7.5B cash windfall that it might direct towards a mixture of acquisitions – the company has said it'sfocusing on smaller deals – and capital returns.
• Microsoft, meanwhile, will have to get to work on turning around a business that posted a 29% Y/Y sales drop and a -7.3% non-IFRS op. margin in Q4, in large part due to plunging feature phone sales.