Four Analyst Calls on Monday Worth Noting
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 behind the call; 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 utilize the information.
Shares of online social media company Angie’s List traded higher by almost 5% on Monday after Oppenheimer predicted that the company will benefit from a number of factors. The firm noted that a housing recovery, improving margins, and a low valuation relative to its peers will bode well for the company in 2013. Compared to its peers, Oppenheimer is correct, Angie’s List is cheap. However, this note comes just days ahead of the company’s Q4 report; and the stock has already seen a large move during the last three months. Therefore, I commend the analyst’s bravery but would wait for guidance and earnings before buying.
SolarCity is fast approaching its post-IPO highs after a positive report from GTM Research. The report predicts huge growth in residential solar leases and for SolarCity to benefit with its free/low-cost panel installations in exchange for electricity purchase commitments. GTM believes the market for residential solar could grow from $1.3 billion to $5.7 billion over the next three years and that SolarCity will successfully navigate the shift from commercial to residential. SolarCity is a company that is growing fast with $124 million in revenue, no profit, and a market cap of $1.15 billion. Therefore, it is expensive, but if growth occurs at the rate in GTM’s research notes, then SolarCity could in fact grow rapidly.
After Alere’s near 30% return over the last three months, Wedbush believes that it may be running out of steam. The company has had a history of recent disappointments following earnings, and this downgrade combined with the company set to report earnings on Thursday is most likely fueling the stock’s 5.5% loss. Personally, I agree with the analyst. The stock has run higher, and now with earnings on deck it might be a good time to at least take some profits off the table.
Amgen has traded higher by more than 25% over the last year, and after showing some weakness during its recent quarter, William Blair believes it may be time to pullback. The analyst specifically mentioned the company’s recent trend higher and combined the fact that it has no upcoming catalysts. As a result, the firm believes that upside is limited. The stock lost 1.5% of its value following this news; however Amgen is not an expensive stock. The company’s valuation is consistent with others in large pharma, with a price/sales under 4.0 and a forward P/E ratio of just 10.40. Amgen continues to grow by double digits during a time when other large pharma companies are losing revenue to the patent cliff. Therefore, I disagree with the analyst and believe the pullback is a good opportunity for investors.
In a previous article I wrote about analysts “following the leader” and how one upgrade/downgrade usually starts a chain effect that can dictate the trend of a stock. It is good to use this information as part of your research but you must ensure that you are assessing the stock and its valuation with your own due diligence. It is important not to make an emotional decision based on the performance of a stock, and if you refrain from making such a decision then large gains could follow.
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