Let’s take a look at analysts’ morning notes.
- MORGAN STANLEY: Strong stock. We’re raising our 2011 and 2012 EPS, although 2012 goes up by less than 2011 on our thesis of a saturated used equipment owner segment that should contribute to plateauing/declining sales in high margin U.S. agricultural equipment. Margins drove the beat with revenue of $5.5 billion, roughly in-line with consensus.
- MORGAN STANLEY: Very positive. Investor expectations will remain high as management set the expectation for an aggressive Q1 ramp in tablets and smartphones, Kal-El shipments into tablets this summer and Smart phones by EOY11 and a vision to drive penetration of Tegra into PCs over time. We expect consensus estimates to increase but the multiple to compress as high expectations for Tegra become difficult to trump.
- DEUTSCHE BANK: Hold because of little EPS leverage. Nvidia delivered in-line F4Q11 results as higher GPU and CPD revenue offset declines in PSB and MCPs. NVDA expects revenues to grow +6-8% quarter over quarter in F1Q12 which is in-line with seasonality, but well above the street’s consensus. However even as revenue and GM get a boost from royalty income, EPS leverage is limited due to higher share count and operating expenses.
- DEUTSCHE BANK: Buy. Due to its strong competitive position, share gains and product refresh, NTAP is a top pick to benefit from robust storage demand and virtualization driven datacenter upgrades. NTAP saw surprisingly strong demand for its refreshed product offering (fastest adoption in NTAP’s history).
- CITI: Downgrade to hold. The lowered rating is based primarily on valuation but we also believe EMC’s recent entry into the mid-range storage market with the unified VNX/VNXe could flatten NTAP’s share gain trajectory somewhat during the coming year. Year over year growth should also slow meaningfully in F4Q11 when NTAP comps the sharp uptick in product growth in the prior year, making it unlikely that the multiple will continue to expand, in our view. For the first time in almost a year we are not raising our estimates post-earnings and instead are revising our EPS estimates down on reduced operating leverage and higher share count assumptions.
ABERCROMBIE & FITCH (ANF):
- DEUTSCHE BANK: Very strong. Stores and distribution expanded as well as Merger & Acquisition exceeded expectation. For the tax rate, we were using 36.4% for 4Q but the actual 4Q rate came in at 35.5%. On our model, this helped 4Q by $0.02. Bumping PT, maintain hold, as current better trends, balanced by risks from high expectations and higher prices/sourcing costs.
- BARCLAYS: Strong year ahead. Entertainment and several key brands should drive revenue growth in 2011. In addition to three movie releases (Transformers, Thor and Captain America) and a full year of The Hub, we also expect Hasbro to benefit from the launch of its Sesame Street line in 2H11 and to see continued momentum in many core brands and licenses. Following weak consumer demand for board games late in the holiday season, retailers were left with excess inventories which could take at least one quarter to work through. Emerging markets are still a focus with Hasbro seeing the biggest opportunities in Brazil, China, Russia and India. Management expectations for 2011 were adjusted slightly downward.
VITAMIN SHOPPE (VSI):
- BARCLAYS: Still growing. We think VSI presents an attractive investment idea. This is a retailer that can leverage fixed costs and generate free cash flow. We continue to recommend shares of VSI and are raising our one-year forward price target to $40 from $31 as we believe investors will be willing to pay a bigger multiple for a high-growth retailer with strong industry trends and a very solid track record. We expect the company to be debt free by the beginning of 2013 and therefore in a position to return some cash to sharholders.
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