UBS FINANCIAL DOWNGRADES CISCO SYSTEMS TO NEUTRAL FROM BUY, MAINTAINS $27 TARGET
UBS Financial analyst Nikos Theodosopoulos says industry checks show orders are slowing, which gives him concern about Cisco Systems' (CSCO) July quarter. He says recent checks show, besides prior softness in the U.S., Europe is also slowing, and emerging markets are growing 25%-30%, not the 30%-40% target.
He cuts fiscal year 2008 (July) and fiscal year 2009 EPS estimates to $1.50 and $1.64 from $1.51 and $1.67.
Theodosopoulos says historical analysis of $40 billion-plus tech companies shows it's virtually impossible to grow 12%-17% without requiring acquisitions and compromising operating margins. He feels Cisco's aggressive target will require acquisitions, and the stock will have a hard time rallying if demand is slowing, acquisitions likely.
MORGAN KEEGAN RAISES ESTIMATES FOR RESEARCH IN MOTION
Morgan Keegan analyst Tavis McCourt says Research in Motion's (RIMM) $1.88 billion fourth quarter revenues were slightly above his $1.86 billion estimate, while $0.72 EPS was in line. He says results were largely aided by the $99 promotions at AT&T (T) and Verizon (VZ), as he expected.
McCourt adds that first quarter guidance was strong, given the lack of a new platform launch, driven by channel replenishment following the fourth quarter, with subscriber growth stabilizing after the promotional period.
He raises fiscal year 2009 (February) and fiscal year 2010 EPS estimates to $3.55 and $4.35 from $3.35 and $4.34, respectively. At present levels, he says the shares appear about fairly valued given the short-cycle nature of the handset business, and the numerous competitive risks RIMM faces. He maintains market perform opinion.
GOLDMAN UPGRADES MICRON TECHNOLOGY TO NEUTRAL FROM SELL
Goldman Sachs analyst James Covello says Micron Technology's (MU) calendar first quarter pro forma loss (including ESOs but excluding one-time items) were $0.44 vs. his $0.33 estimate, with downside driven primarily by lower-than-expected gross margin, higher R&D expense.
Covello widens his $1.22 fiscal year 2008 (August) loss per share estimate to $1.60 loss, driven by weaker-than-expected average selling prices (ASPs) and margins. While he expects memory ASPs to remain weak through most of 2008 driven by excess supply, he believes the stock should have some valuation support at 0.9 times 2008 tangible book value; he encourages investors to start covering shorts.
He adds it's becoming increasingly clear that DRAM capex is likely to be down in excess of 40% year-over-year, which should lead to improving DRAM fundamentals toward yearend.