Analysts’ Upgrades: GTO & CA up on earnings, MHI talks boost VWS

The European stocks were on top last week in terms of upgrades from analysts. Despite mixed stock market performance and weak macro numbers being published during the week, several European stocks did win catch analysts' favour and saw their targets increased.

Netherlands-based Digital security solution provider Gemalto N.V. (EPA:GTO) was awarded the highest target price revision for the week on back of its earnings. Gemalto, which is most famous for its security features on mobile phone SIM cards, increased its profit targets for the full 2012 year, expecting to reach EUR 300m in operating profits.  Increased demand for the company’s software for secure mobile banking and mobile payments is the key factor behind the guidance boost. The stock price gained 6.8 percent during the last week, and has now gained 88 percent for the past 12 months. After the 7.6 percent increase in target price last week, analysts’ have pushed Gemalto’s target up by 60 percent YTD.

Despite maintaining their ‘Hold’ recommendation, analysts did increase their target price for Carrefour by a handsome 4.9 percent during last week. Last Thursday, Carrefour (EPA:CA), one of Europe’s largest supermarket operators, reported 8.2 percent lower profits than previous year which was still better than analysts had expected. Declining demand within European markets, especially Spain and Italy, has left the company struggling for the past year. The company’s CEO, George Plassat, has laid out a restructuring plan, and while details have not been shared with investors, the plan is meant to get the company back on track. Carrefour is still a huge brand within the retail market, so the beaten-down stock might be in for a turnaround in the coming years. Such turnarounds do however not happen overnight, however, and might be of interest only for long-horizon investors. 

There is a first time for everything!  Last week, Vestas Wind System (CPH:VWS) saw its target price being pushed upwards by 3.1 percent, its first increase this year. The struggling Danish wind turbine producer traded at a two-month high last week after the company confirmed it is in talks with Mitsubishi Heavy Industries (MHI) over a strategic alliance. Over the past month the stock has surged roughly 50 percent in the market, and is now being traded well above analysts' target price. Analysts are therefore trailing the stock price and maintain their average ‘Hold’ rating on the stock. Whether Mitsubishi will become a key investor in Vestas still remains a question, but significant speculation has been surrounding the stock in recent weeks. It is clear that Vestas would benefit from a relationship with Mitsubishi as the Vestas strives to become profitable again.  On average analysts expect a full year losses of DKK 345m in 2012, and a profit of DKK 115m in 2013, giving a FY2 P/E of 73.

Several other stocks saw their targets pushed upwards. US retailers Macy’s, GAP and Nordstrom continue to be praised by analysts as sales outperform expectations (table 1).

For additional details about these stocks, take a look at Saxo Bank’s Equity Research offering here.

You can read about the past week's analyst downgrades in my second post, Analysts’ Downgrades: Bouygues and Joy Global cut on lower guidance.

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