Noteworthy and Impactful Analyst Calls that all Fools Should Know
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 makes a call on a stock it typically creates sizable gains or losses. Wednesday was no different, as analysts played a crucial role in the performance of several high-profile stocks. Therefore, I am looking at several of these stocks, the calls, and what it might mean.
Shares of Citrix Systems rallied 3% after Jefferies provided a detailed assessment of the company with a “Buy” rating. The firm said that its work indicates that the company’s PC virtualization projects continues to be a priority (investors had expressed concern for this segment). The firm also believes there is potential for greater growth in its data center and that its desktop business is expanding rapidly beyond its client/virtualization focus.
As an investor, I view myself as a fundamentalist, but do acknowledge that a nice cup-and-handle could be forming with this stock. Its trend looks attractive but its stock is somewhat expensive, even after the recent selloff. I’d research deeper into this company while incorporating the notes from Jefferies.
Healthcare Services reached all-time highs after Benchmark raised its expectations for earnings growth. The firm stated that better visibility on its dividend tax rate and the likelihood that the tax rate will garner the Worker Opportunity Tax Credit in 2013 should positively affect its earnings.
Healthcare Services is currently growing its top-line by more than 20% and is expected to see 25% bottom line growth, therefore Benchmark’s outlook is quite bullish. This is a stock that has performed exceptionally well over the last several years but is not overpriced compared to fundamentals and growth. Therefore, I’d say that it’s a stock to watch over the next year, and that if the mentioned catalysts become a reality then the stock should indeed be a “Buy”.
Level 3 opened the day lower by 3.5% but then trended higher throughout the day to close with a loss of 0.65%. The loss was a result of a downgrade where the firm cited valuation and flat sales as the main concern. The two segments in question are EMEA and wholesales, as Davidson believes that Q4 sales will be disappointing.
Strangely enough, this downgrade comes one day after the company won a CDN services deal with Apple regarding software downloads. The deal is not as significant as the one with Akamai, but still important in establishing a relationship with Apple. Therefore, with a price/sales of 0.84, I don’t think sales are necessarily important; I believe margins will be the most watched metric. And since the Global Crossing deal, Level 3 has greatly improved its margins and has shown progress in many operating measures. Therefore, I disagree with the analyst’s outlook but agree that sales might be flat; I simply don’t think flat sales will matter.
Bank of America
For the first time since April 2011 Bank of America was downgraded and the reaction was a stock that fell 4.59%. According to Credit Suisse, the stock has moved too fast and the 16% cut in expenses combined with the MSR sales won’t impact total costs until 2014. The analyst believes the market is discounting that these cost cutting measures may not reflect in the way that investors expect. Therefore, the firm believes there are better values in the sector, such as Citi and JPMorgan.
The issue of whether or not BofA is the best value depends on the metrics you are using to determine value. It’s still the cheapest relative to book value but has faced the largest number of lawsuits. Furthermore, no one really knows the true value of the company’s assets and despite the recent $10 billion settlement with Fannie Mae with large banks, U.S. Attorney Bhara made it clear that he will continue to aggressively attack BofA for its part in selling fraudulent loans. With that being said, I agree that BofA is a “Hold” and wouldn’t buy at these levels until these lawsuits are sorted.
My suggestion is to take the notes issued by analysts, perform additional due diligence, and then make your own investment decision. An analyst’s call is only an opinion, and for every stock you can always find two equally intelligent analysts who completely disagree with one another. It doesn’t mean that one’s wrong or right, but is a testament to what makes the market, and that is opinions.
BrianNichols has no position in any stocks mentioned. The Motley Fool owns shares of Bank of America. 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!