Market Moving Calls on Friday that Could Spark Additional Movement Next Week

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

When an analyst provides a call it almost always creates short-term movement. Most of the time investors don’t even read the notes from the upgrade, they are simply buying because it was upgraded. However, sometimes an analyst call is more than just a headline on Yahoo! Finance, it provides substance and real catalysts that could create long-term movement. Therefore, I am looking at the top calls on Friday, all of which should be considered in the week ahead.

Company

Ticker

Firm

Call

PNC Financial Services

(NYSE: PNC)

SunTrust

Buy

Google

(NASDAQ: GOOG)

Goldman Sachs

N/A

U.S. Silica

(NYSE: SLCA)

Howard Weil

$19.00 PT

Gulfport Energy

(NASDAQ: GPOR)

Stifel Nicolaus

Hold

Freeport-McMoRan

(NYSE: FCX)

Moody’s

Stable

  • In an analyst note issued to shareholders, SunTrust initiated coverage with a “Buy” rating on PNC Financial including a $62 price target. The firm noted that PNC has severely lagged the rest of the banking sector and is therefore undervalued. PNC moved higher by 0.85% on the news but continues to trade with a 3% loss in 2012. If the stock was to hit the $62 price target, $6 off its current price, it would still be $5.89 lower than its current 52-week high. The stock is trading with a single digit forward P/E multiple, a yield of 2.87%, and double digit top-line growth. Therefore, I must agree with SunTrust, that this is one underperforming cheap stock that looks well-positioned to rally.
  •  Goldman Sachs did not issue a revised price target or an upgrade/downgrade but did point out several problems that contributed to Google’s 0.93% decline on Friday. According to Goldman, mobile is a problem for Google. The firm mentioned that 60% of web traffic comes from iOs, meaning that despite Android’s presence is larger that users are not as engaged. In addition, the company’s ad prices are just 30-50% of the prices it charges for PC ads, yet mobile is growing rapidly while PC falls. If all this is true, then Google might experience the same problems that Facebook encountered earlier this year. Advertising remains Google’s most important segment, and if the trends are this bad, then the company could face significant challenges that cause great pain to its stock.
  • U.S. Silica saw a big boost after receiving a $19 price target by Howard Weil, trading higher by 3.88% on Friday. The firm said that U.S. Silica has put into place a strong expansionary plan to address its more robust markets. Furthermore, that SCLA is the best investment in sand usage within the oil and gas industry, which is a growing space. This is a company that has seen significant top and bottom line growth. The analyst call suggests that growth is nowhere near its max potential, which has been a concern of investors.
  • Gulfport fell nearly 2% on Friday after being cut from “Buy” to “Hold” by Stifel Nicolaus. The analyst’s call was a result of expectations. The stock has returned a gain of more than 800% over the last four years due to strong results from its first seven Utica wells. The firm now believes that expectations are too high. Personally, I agree with this call. It’s not that Gulfport’s valuation is too high, but that expectations are too high, and the stock is due for a pullback.
  • After countless downgrades, an unexplainable set of acquisitions, and significant loss, Freeport-McMoRan rallied 2.89% on Friday after news that Moody’s was keeping its rating at Baa3. In the process, Moody’s did cut its outlook from “positive” to “stable,” but considering the bad news that has plagued this stock, investors must have viewed its credit rating as a positive. As an investor, you must see the negative side of this story. Freeport is now transitioning to oil, does not show a clear path to growth, has added even more debt to its balance sheet, and its credit rating is only three notches above “junk.” I don’t see much upside in this stock, and although the stock moved higher after keeping its rating, investors must realize that three notches above “junk” is not good.

The cases made by each analyst are appropriate in regards to the long-term direction of each stock. On Friday we saw movement from the calls above and each analyst did a good job at explaining their outlooks.  Now, you can take the information and with additional due diligence you can make your own decision and determine if any of these stocks are good long or short plays. 


BrianNichols has no positions in the stocks mentioned above. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold, Google, and PNC Financial Services. Motley Fool newsletter services recommend Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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