Good morning. Let’s take a look at some big calls.
Bank of America:
- WELLS FARGO CUTS EARNINGS: “Q1 EPS of $0.17 missed our $0.25 estimate and consensus of $0.26. BAC’s results remained messy and included approximately $4.4B of litigation, putback, foreclosure, and credit related charges (of which about $0.02 was non-core in our view) and larger reserve release than expected ($0.03) offset by outsized securities gains of $1.6B ($0.10). BAC’s “core ROTCE” in Q1 was approximately 8.7%, implying a price/TBV multiple of at least 1.4-1.5x vs. the current 0.9x – providing a floor on BAC’s share price near current levels, we think. Reflecting higher expected reps and warranties costs, continued foreclosure charges, higher share count, and a one-time UK-related tax hit, we are reducing our FY2011E and FY2012E EPS to $1.07 and $1.95 from $$1.40 and $2.05, respectively. As a result, our valuation range goes to $16-18 from $17-19.”
- CITI SAYS TO BUY GM AND LEAR: “Judging by the Auto sector’s YTD underperformance, one might not conclude that a strong Q1 reporting season is likely ahead of us on higher vehicle production, mix and FX. We’ve raised Q1 estimates modestly and regard GM and Lear as top names to own going into the quarter, followed by Magna and Goodyear. We also see an opportunity for a bounce in Ford (Hold-rated).”
- ELECTRIC BATTERY MAKER GETS HUGE UPGRADE FROM GOLDMAN: “We are upgrading AONE shares to Buy from Neutral given a better than 2:1 risk/reward and maintaining our $9 price target, offering 63% upside potential. We think the market is now discounting just the current chapter of the story, although specific catalysts that improve revenue visibility lie two-to-six months on the horizon. These proof points support the near-term stock opportunity back towards $9/share, with margin visibility needed to go higher. Also, a stronger balance sheet helps to de-risk the capacity expansion, improves A123’s competitive position, and thus, lends credibility to what we now view as a more realistic revenue ramp.”
- GOLDMAN BREAKS OUT THE KNIFE: “We downgrade GPS to Sell from Neutral, as: (1) GPS’ broad brand footprints (2x their largest peer) represent a structural hurdle: we believe their need to “be something to everyone” will continue to result in long-term comp sales declines as GPS loses share to more focused competitors, (2) We believe key near-term offsets to these long-term challenges have been exhausted, which should result in widening underperformance vs. peers in 2011, (3) probability of further non-fundamental catalysts is lower now that the company has announced a balance sheet recapitalization. Our new 6-m $20 price target implies 11% downside, compelling for a lower beta name like GPS.”
- SAME CALL FROM BOFA: “We are downgrading Gap Inc from Buy to Neutral and maintaining our $23 Price Objective. Sales trends have worsened in the company’s domestic business, and we see few upcoming catalysts for improvement. The company recently issued debt to fund more share repurchases, and now that the capital structure announcement is behind us, we expect attention to shift to sales trends. Comps have been hampered by inconsistency at Gap and a struggling marketing campaign at Old Navy. Growth prospects in the international business and e-commerce are encouraging, but are undermined by weakness in the US business. (Lorraine Hutchinson)”
- PACIFIC CREST LIKES IT: “Recent meeting with head of Creative & Interactive, IR was positive ADBE attractive at 13x P/E and we are buyers of the stockMarket position and pace of innovation continues to improve Mobile app development, HTML5 tools, digital publishing are opportunities CS subscriptions and annual releases should be LT positive for model We see little risk that negative impact from Japan is worse than expected.”
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