S&P REITERATES HOLD RECOMMENDATION ON SHARES OF YAHOO (YHOO; 21.90):
As we expected, following conclusion of deal discussions with Microsoft (MSFT; 29.34), YHOO announces a flexible and non-exclusive search-advertising agreement with Google (GOOG). Although the indicated annual revenue opportunity of $800 million is significant, we think shareholders are warranted in questioning a company that repeatedly resisted and rebuffed premium acquisition offers over past 1-1/2 years. Because we think MSFT has finally moved on, we are lowering our 12-month target price for YHOO to 27 from 33, based on revised peer and intrinsic analyses. -S. Kessler
S&P REITERATES HOLD OPINION ON SHARES OF GOOGLE (GOOG; 572.38):
Shares are up over 3% today, after yesterday's announced search-distribution deal with Yahoo. We believe the new agreement and the demise of YHOO merger talks with Microsoft are a major positive for GOOG, which will reduce competition in the search segment and deliver a material new revenue opportunity. We also believe GOOG is now more likely to win new content partners, since YHOO has acknowledged the significant value offered by AdSense and would not allow new clients to employ it. We wonder whether regulators will move to prevent the pact. -S. Kessler
S&P MAINTAINS HOLD RECOMMENDATION ON SHARES OF ANHEUSER-BUSCH COMPANIES (BUD; 61.86):
According to an unconfirmed WSJ report, BUD is in discussions with Mexican brewer Grupo Modelo about a possible combination in order to thwart yesterday's $46 billion bid from InBev. We still believe selling to InBev is the best means to realize shareholder value and we think BUD has limited options. While Grupo Modelo has a well-known U.S. import brand in Corona, shipments of the brand were down in 2007 for the first time in 15 years. Given the high family ownership at Grupo Modelo, we view an attractive transaction with BUD to be unlikely. We keep our 65 target price. -E. Kwon-CFA
S&P RAISES OPINION ON MOLSON COORS BREWING COMPANY TO STRONG BUY FROM BUY (TAP; 57.47):
With Anheuser-Bush and its distributor system likely distracted by its potential M&A activity, and with pending completion by TAP of its Miller Coors joint venture (JV) on June 30, we see the company's competitive position improving. We look for volume growth in mid-single-digits, above a low-single-digit domestic market overall, and we see JV as opportunity to at least offset rising cost pressures plaguing the industry. Also, we think TAP still has ample opportunity to add distributors. We raise our target price by 4 to 70 to reflect a slight p-e premium to recent average. -E. Kwon-CFA
S&P MAINTAINS HOLD OPINION ON RESEARCH IN MOTION SHARES (RIMM;129.59):
We believe smartphones are in focus, as a revamped iPhone and the Samsung Instinct are coming this summer. However, at the end of June, we believe RIMM will release strong May-quarter results and issue encouraging sequential guidance due to the success of its Blackberry lineup. For May-quarter, we see revenues of $2.27 billion and EPS of $0.84; our estimates for August-quarter results include revenues of $2.54 billion and EPS of $0.89. Even given increased R&D costs to offset competition, we believe RIMM's penetration of the consumer market across various carriers will support above-peers earnings growth. -T. Rosenbluth