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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 08 May 2012 at 9:04 GMT

Analysts’ Upgrades: Healthy groceries, vacations and credit cards

Partner - Senior Portfolio Manager / PP Capital Asset Management
Denmark

It has been a busy a week for analysts, following up on Q1 earnings reports. Despite generally negative equity markets last week, analysts increased their targets on several stocks.

Here are the highlights:

  • Since its IPO in December last year, Tripadvisor Inc’s (TRIP) shares have risen nearly 14 percent. I would call that a nice IPO story, certainly better than many of the IPOs we have seen recently within the social media/tech spectrum. The good price performance is of course partly due to a strong Q1 report last week. TRIP posted both earnings and revenues roughly 5 percent above analysts’ expectations. The company seems to be outperforming its online competitors as visitors grew much faster (35 percent) than at its main competitors Priceline (PCLN), Expedia (EXPE) and Orbitz (OWW). Analysts like this trend and sent their average target price of the stock up massively, 33.8 percent. However, be aware that TRIP is currently at a higher price than its competitors in the market.
  • Teradata Corp (TDC) beat both top and bottom lines in its Q1 release last week, lifting the stock to a new 52 week high. With the growth of internet surfing, shopping and socializing, data mining software producers like Teradata might be sitting on gold. The company claims itself to have the deepest portfolio in the market to crunch any data needs of any organization. Analysts seem to be buying into the case, supported by the company’s earnings beating their sales estimates by 4 percent, as they boosted their targets by 15 percent last week.
  • Organic groceries seem to be a hit this year! Whole Foods Market’s (WFM) same store sales jumped 8.7 percent in Q1 this year and a decent 9.5 percent in Q2. Delivering results 9 percent above analysts’ estimates, WFM’s CEO called this the best result in the company’s history! The company is growing fast and is on track to open 24 to 27 new stores in 2012 and 28 to 32 in 2013.
    WFM has now delivered 14 quarters in a row with positive earnings surprises. Last week analysts revised their EPS estimates for next quarter by 3.8 percent and its target price by little more than 10 percent. Analysts’ seem to believe there is more to come from WFM this year, but be aware that this growth doesn’t come cheap, as the stock is currently trading at a 2012 P/E of 36.6 significantly higher than most of its grocery competitors.
  • On the back of solid earnings reports, both MasterCard (MA) and Visa (V) saw target prices revised upwards last week. Card transactions grew 29 percent and 8 percent last quarter for the two companies respectively, signaling a spending recovery from consumers. Since both companies posted solid earnings beyond expectations, analysts revised stock price targets by 7.6 and 4.6 percent last week. MasterCard saw its profits significantly jump in the first quarter but pointed out that the 25 percent growth in profits would not be recurring for the coming quarters.

Several other stocks were put on analysts’ ‘nice list’ for the past week. Masco Corp (MAS), Beam Inc (BEAM), Allstate Corp (ALL), Actelion Ltd (ATLN) and GN Store Nord A/S (GN) all saw increases in their stocks target prices for the last week.

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