Analyst revisions: Telecoms slashed; AMZN & WPI up double digits

Last week we saw most major indices trading upwards, with the US outperforming Europe. Nevertheless, analysts found a reason to reduce its target prices on several stocks, both in Europe and the US.

Here are a few downward revisions that stand out:

• The French cable maker, Nexans (NEXS), was the biggest loser this week, after analysts revised its target prices down 14.9 percent. Analysts from SocGen, Kepler Capital Markets and CA Cheuvreux lowered their target prices after the company announced its expectations of a drop in first-half earnings, mainly due to production delays in its submarine-cable plant in Norway. Furthermore, the company considers itself to be facing a volatile market, and has not provided full year guidance for the year.
• Reporting a Q1 loss and sales below estimates, France’s largest telecommunication equipment supplier Alcatel-Lucent (ALU), saw its target price being reduced by 10.4 percent last week. Seeing a five percent decrease in margins, ALU expects an improvement of its margins for the remainder of the year. Analysts also massively reduced their expectations for ALU’s next quarter EPS, currently expecting zero earnings per share next quarter.
• MetroPCS Communications (PCS), the US’ fifth largest wireless provider, has been slashed after delivering disappointing Q1 earnings. PCS’ first quarter earnings dropped by 63 percent and slower than expected subscriber additions. The news sent the stock down in the market, as it is currently trading at its 52 week low. Analysts’ reactions were harsh, as target price was revised downwards by 15.4 percent on average last week. PCS accelerated launch of smartphone offerings is done in response to declining customer growth, as the company hopes to boost its future average revenues.
• It’s nothing new that Netflix (NFLX) is troubled. Its shares are down roughly 65 percent the last 12 months, and analysts have continuously been lowering its expectations for the company. Even though Netflix beat analysts’ estimates in Q1 with lower-than-expected losses, many found the company’s subscriber growth disappointing (for more information on NFLX’s report, read our story on the Netflix earnings report by Matt Bolduc). During the last week, analysts downgraded expectations for the Netflix target price to 93.38, or by 4.5 percent.

Other stocks that were hit by analysts’ opinions were: Lexmark International (LXK), Hess Corp (HES), CSM NV (CSM), Banco Santander (SAN), AstraZeneca (AZN) and others.

Despite a few downward revisions by analysts, analysts were in fact more positive as significantly more stocks received ‘praise’ from analysts. As we have discussed previously on here on tradingfloor.com, the current earnings season has been among the best since 2001. As a result, analysts have a tendency to revise their outlook upwards once companies beat their estimates.

Here are a few upward revisions that stand out:

• Watson Pharmaceuticals (WPI) has been on a rally since company confirmed it was taking over Actavis, another large drug maker. Currently the stock is being traded near its 52 week high, and analysts seem to believe the acquisition will add further value to the company, as target prices have been revised upwards by 16.7 percent. WPI has just announced its earnings, seeing net income increase by 87 percent from last year’s first quarter. The company also adjusted its own full-year expectations; it wouldn’t surprise me if analysts keep on pushing their targets higher for this stock, so most likely we will see WPI again on the list next week.
• By crushing analysts’ EPS expectations for Q1, Amazon.com (AMZN) is powering ahead. Analysts’ feared the worst from Amazon this quarter with EPS expectations of only 6 cents, while the end result was 26 cents. Despite reporting almost 35 percent drop in net income YoY, analysts’ seem to be bullish on Amazon in the future and raised the stock’s average target price by 13.5 percent. Amazon is constantly developing its media strategy, transferring from physical to electronic delivery. This they have done successfully through its Kindle business. Other digital offerings, such as the Netflix-like video services are growing strong according and Amazon will continue to invest in these segments going forward. Based on Factset data, the stock now has an ‘Overweight’ rating, up from ‘Hold’ last week. However, Amazon doesn’t come cheap as its FY1 P/E is currently well above one hundred.
• Logitech International (LOGN) caught the attention last week when its shares jumped 17 percent after announcing it fourth quarter earnings. That is the biggest jump for the stock price in four years! With lack of growth being the company’s main problem, LOGN is aiming to simplify its business model in order to better respond to the fast moving technology markets. Analysts seemed to welcome such reports from the company as they revised the company’s target prices upwards by a handsome 15.5 percent on average.

Other stocks that saw its target prices boosted last week by analysts were: Coloplast A/S (COLOb), Zodiac Aerospace (ZC), Electrolux AB (ELUXb), Expedia Inc (EXPE), Citrix Systems (CTXS) and more.

Once again, on an overall sector level, analysts’ revisions were more positive for the US market. Divided by US sector, commercial services was on top with an average revision of 2 percent. In Europe the revisions were more dispersed, with seven out of 20 sectors being revised downwards on average.