Top Analyst Calls for Thursday 12/27 and How to Play Them
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
An analyst’s opinion is by no means a make or break for the short or long-term direction of a stock, as analysts often disagree and provide contradicting opinions towards a particular company. However, these calls do often affect the performance of a stock during a specific session and provide investors with an outlook that should be considered as part of their due diligence. As a result, I am looking at the top four analyst calls on Thursday, and how I would play each call.
- Analyst Oliver Chen said that his checks indicate that Michael Kors is discounting its handbags and other merchandise more so than on Black Friday. The analyst reiterated his “Buy” rating but lowered his price target from $68 to $60 because of the discounting, as much as 30%-50% below retail. Investors should pay close attention to this note if in fact it turns out to be true. This is a company that has seen four consecutive years of increased margins, and the discounting could indicate either slowing demand or margins that have reached a ceiling. The stock is currently trading with a 2.5% loss; therefore with earnings that are expected to double over the next year I’d consider buying on the weakness.
- Shares of Domino’s Pizza were raised from $44 to $50 by Oppenheimer. The firm stated that the company is well-positioned for the year ahead, and that improving international results and product innovations will continue to benefit the company. The firm went on to say that Domino’s is a potential bright spot in a challenging restaurant environment. Personally, I agree with the firm. Despite Domino’s trading at new 52-week highs and seeing very moderate top-line growth, it still remains fairly valued. My only concern is that in an industry that is undervalued its price might become a concern. As I said, I agree with Oppenheimer, but I think there might be better plays elsewhere.
- Coinstar had bullish notes from firms Northland and B. Riley that suggest a rise in Redbox demand. Supposedly, rentals are up 9.6% month-over-month in December and because of high profile releases and the increased number of Redbox machines, both firms believe the outlook for Coinstar is positive. When compared to similar companies, Coinstar is very cheap. It is trading with a single digit forward P/E and a price/sales of just 0.70. I agree with the notes from both firms, and that Coinstar is a “buy” at these levels, if the company is in fact seeing this level of growth.
- The specialty chemical maker Chemtura is not a high profile company by any means, but it is a company with a number of catalysts and a “buy” rating from Longbow Research. The stock is currently trading with session gains of more than 4% after the firm said that it expects a positive outcome for the company’s acquisition of Solaris’ bromine assets. The firm also believes the company’s reinvigorating AgroSolutions pipeline and the divesture of its consumer products will bode well for its top and bottom line. The firm’s notes were all positive, but speculative nonetheless. The company needs a lot of moves to fall in place, and at this point I am not certain that it can meet high expectations. Either way, it’s still an under-the-radar company to monitor over the next year, one that has performed exceptionally well in 2012.
An investor’s best bet is to take the information provided by analysts and then compare those notes with other analysts to help aid in making an educated investment decision. Each analyst provided a valid reason for their position, but all other sides must be explored. Therefore, take some time to explore the potential of these companies, but do not make a decision off one firm’s opinion alone.
BrianNichols owns CSTR. The Motley Fool has no positions in the stocks mentioned above. 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!