BANC OF AMERICA UPGRADES INTEL, OTHER CHIP STOCKS
Banc of America analyst Sumit Dhanda raises his U.S. semiconductor group stance to overweight given favorable indications from two timing metrics that have historically presaged a bottom in chip stocks: 1) EPS estimates revision momentum and 2) the level and trajectory of supply chain inventories.
While the fate of the U.S. economy in 2008 continues to test investor confidence in the group, analysis suggest fears are worse than reality, with flat GDP growth in the U.S. largely priced in. He says the two best leading indicators for his stocks, one fundamental and one synthetic, are both signaling a bottom is near (if not in); his analysis suggests stocks reflect "most likely" U.S. recession scenario.
Dhanda upgrades Intel (INTC), Analog Devices (ADI), National Semiconductor (NSM), PMC-Sierra (PMCS), LSI Logic (LSI) and Semtech(SMTC).
JPMORGAN RAISES APPLE ESTIMATES ON STRONG MAC SALES
JPMorgan analyst Mark Moskowitz says he believes Apple (AAPL) will deliver stronger-than-expected MacBook shipments in the second quarter; he raises Mac shipments expectation to 2.11 million units from 1.97 million previously. He also raises revenue and margin assumptions owing to MacBook strength and favorable component prices.
Moskowitz increases $1.05 second quarter EPS estimate to $1.09 on revenue of $6.76 billion (from $6.65 billion). He notes Street consensus is currently at $1.06 EPS on $6.95 billion revenue. However, he says softer iPhone and iPod sales volumes could be a partial offset.
While he remains cautious on stock given macro concerns, thinks the shares present an attractive trading opportunity over next several weeks. He rates the stock neutral.
WILLIAM BLAIR DOWNGRADES PANTRY TO MARKET PERFORM FROM OUTPERFORM
William Blair analyst Mark Miller says he downgraded Pantry (PTRY) because the conundrum of rising oil prices in a weakening economy may limit the company's ability to improve retail gasoline margins this year.
He notes that blending ethanol should provide some gasoline margin support in 2008, and one-third of the company's 1,643 stores now blend ethanol, although the sustainability of this benefit is unclear. He understands that more petroleum refiners are moving to produce sub-octane gasoline to capture the $0.51/gallon that blenders credit themselves at the terminal.
While Miller expects Pantry to have significant leverage in negotiations with its suppliers, this development adds uncertainty to his forecast.