Five Noteworthy Analyst Calls on Thursday

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

Sometimes an analyst issues a revised outlook or changes his/her rating, but does not inform investors of the reasons behind the call. These typically move stocks on the call alone -- the price target and outlook. However, some analysts provide detailed reasons, and these are the outlooks that should be noted and used as part of your fundamental research. Therefore, I am taking a look at such outlooks and determining the best way to use the information.

Company

Ticker

Firm

Call

Core Laboratories

(NYSE: CLB)

FBR Capital

Outperform

Fusion-io

(NYSE: FIO)

Lazard

Buy

Priceline

(NASDAQ: PCLN)

Morgan Stanley

Equal weight

Research in Motion

(NASDAQ: BBRY)

Credit Suisse

Sell

Regions Financial

(NYSE: RF)

Baird

Hold

Upgrades

After announcing very strong earnings, Core Laboratories is currently trading higher by 8.5% and was also upgraded by FBR Capital. The firm gave the stock a price target of $150 and cited its “very strong” earnings report as the primary driver. The firm believes that CLB’s trend of beating earnings and raising guidance will be beneficial in the coming months, and that investors waiting for a pullback could be left behind.

The company continues to have industry-best margins and returns on assets and equity, and performs exceptional in all aspects of its business. The stock is trading at 22.12 times next year’s earnings, meaning it’s not expensive, and I expect the stock to easily reach $150.

Here’s a contrarian view for you: Lazard upgrades Fusion-io after its disappointing earnings performance, a move you rarely see among analysts. The company beat earning expectations but guided far below the consensus for Q3, therefore traded lower by 15%. The firm said that “now is the time to buy” with expectations being lower and its valuation being attractive. While I would not consider Fusion-io a value stock by any measure, Lazard is right that it’s now presenting a better opportunity than it was yesterday.

Downgrades

Morgan Stanley’s Scott Devitt issued the harshest downgrade of the day, with his notes against Priceline. Devitt sees the company’s bookings falling from 46% to 19% over the next three years and for EBITDA margins to fall 220 basis points during this period. The firm also notes increased European competition, Google’s recent efforts in the space, rising search costs, and a shift to mobile as all potential problems.

The notes were well written as good points, causing a 2.5% decline. Of course the company has positives, but it’s hard to argue with those points made by Devitt as Priceline encounters a transition period.

Research in Motion fell another 3.5% after a “Sell” rating from Credit Suisse. Here lately, investors have suggested a potential buyout or a break-up of the company. However, the firm sees neither occurring at these prices, and believes the company’s worth is about 40% of its current market cap. For the last three months I have said that RIMM’s movement is due to speculation and not fundamentals. Therefore, I agree with Credit Suisse unless proven otherwise.

After a strong run higher, outperforming other regional banks, Baird believes that Regions will underperform its peers. The company recently posted a very strong earnings report, but has been trending lower over the last week. I completely disagree with this call. The stock is still cheap, and is fundamentally performing well.

Conclusion

A firm that offers reasons for their call is taken more seriously due to providing substance for their reasons. However, like all analyst calls, there are always two sides to a story; and for every bullish call there is someone else who is bearish. Therefore, use this information as part of your research, but it shouldn't dictate your investment decision. 


BrianNichols has no position in any stocks mentioned. The Motley Fool recommends Priceline.com. The Motley Fool owns shares of Priceline.com. 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!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure