WACHOVIA KEEPS OUTPERFORM ON GOLDMAN SACHS GROUP
Wachovia analyst Douglas Sipkin says Goldman Sachs Group (GS) announced a capital raise, as Berkshire Hathaway (BRKA) to buy $5 billion in perpetual preferreds (which will pay a 10% dividend) and the company plans to sell at least $2.5 billion in common equity.
Sipkin views the news as a positive development and another step to calm markets. He had noted in upgrade piece on Sept. 17 that GS had room to issue permanent equity hybrid or straight equity if market demanded it.
He thinks GS shares will react favorably to the news considering leverage is dramatically lowered, capital, liquidity are bolstered, and an endorsement of franchise from a distinguished long-term investor is garnered. He thinks GS should trade at approximately 1.5 times estimated fourth quarter book value, implying a $155-$160 valuation range.
NEEDHAM DOWNGRADES NATUS MEDICAL TO HOLD FROM BUY
Needham analyst Ed Shenkan encourages investors to take profits in Natus Medical (BABY) and not hold out for acquisition premium.
Shenkan notes that hospital capital spending is slowing; current valuation reflects anticipated acquisitions; and the timing of a sale of BABY is uncertain. He remains confident in CEO Jim Hawkins' ability to make accretive acquisitions; he notes previously, Hawkins successfully executed an acquisition strategy as CEO of Invivo and sold the company.
He believes the current share price reflects investor's certainty that BABY will successfully achieve its stated goal of $250 million revenue run rate exiting 2008, including future acquisitions. But he says the timing remains uncertain and integration risk remains for previous acquisitions.