Let’s take a look at analysts’ morning notes.
- UBS: Strong despite Japan hits. The earthquake affected nearly 200 of the 900 stores in the market. Borders’, a Seattle’s Best Coffee partner, bankruptcy will also make a negative impact on F2Q earnings. While they will likely be included in estimates, we view these expenses as one-time items. We believe the underlying momentum of the Starbucks business remains strong and that U.S. same store sales momentum is on track to meet our 6% estimate.
- MORGAN STANLEY: Hostile bid from Valeant. The company acknowledged the bid and plans to respond during the week of April 4. Although other bidders may emerge, we note that Valeant has a low corporate tax rate in Barbados; hence CEPH’s earnings are worth more than Valeant than to most other companies.
- BARCLAYS: Valeant bid reduces risk. With significant fundamental risk to its current core business and impending patent cliff in 2012 we believe that the likelihood of competing bids or a price bump is relatively low and that with apparent resistance from CEPH management downside risk to a deal not being consummated is real.
- MORGAN STANLEY: Bullish. We reiterate our Overweight rating, increase our price target to $225 and believe our $290 bull case is starting to play out. The combination of Amazon’s logistics scale, customer-centricity, consumer habitat shift/recession, media digitization and smartphone proliferation will, in our view, continue to surprise vs. Amazon’s still small share of retail.
APOLLO GROUP (APOL):
- DEUTSCHE BANK: Buy. Despite the lower than expected FY12 guidance, we continue to like APOL due to the significant changes already made to their business model, and associated earnings reset particularly vs. peers, and attractive valuation for what we believe will be trough earnings.
- CITI: Risky. First quarter guidance suggests stabilisation is further away than previously anticipated. And, revenue pressure could come from two trends: lower retailer ad spend to offset inflationary pressures and lower auto dealer spend on production cuts. Text deep in the 10-k suggests that management thinks costs could increase in 2011.
- CITI: Strong stock. Although the spring selling season so far has fallen short of expectations, we think the key takeaway for investors is how well housing stocks have tolerated the recent spate of bad data. Although LEN strikes us as one of the best stories in homebuilding we don’t think the current valuation offers a compelling entry point.