hueyone, I think the writer is manipulating things. Kraemer has been mostly clueless about valuations since he came on board yet the writer will mix-and-match and fabricate things to make his story meet his objectives. My concerns may differ from SB's.
Consider these statements:
And where does that put NetApp, whose price target Merrill had once
pegged at $85 a share? Kraemer came up with a fair value of $12.62 --
ironically, just 12 cents above the split-adjusted level at which Merrill priced
NetApp's 1999 stock offering. The stock closed Friday at $11.33.
Milunovich ascended to the lofty role of global tech strategist in September
2000, bequeathing his ebullient coverage of NetApp to Kraemer. At that time,
NetApp was buzzing around its all-time high of $150. Now, with the huge
demand created by the dot-com explosion having vanished, Kraemer has
been left with the dirty business of ratcheting down expectations. [emphasis added]
If NTAP was trading near $150 how is an $85 price target ebullient? In fact, Kraemer raised the price target from Milunovich's $109 to $185 when the stock was trading in the $130s. $185 might have been ebullient. $85 was not. The $185 came from Kraemer not Milunovich.
How much sense does it make to put your firm's highest rating on a stock whose price target implies a negative return. During Milunovich's coverage, his price targets were often well below where the stock price was and he raised price targets up and down depending on the stock price. (Merrill has a 20% upside threshold for Buy rated stocks)
Does ratchet down mean to raise one's price target from $109 to $185? The writer is full of it. In a short span earlier this year, Kraemer raised the price target of BRCD from $125 to $250 and then down to $65 without a change in ratings. Maybe the writer should check out BRCD.
If the writer wants to hold Kraemer's valuation system so dear, he should note that Kraemer's fair value of $12.62 implies that NTAP should be rated Accumulate below $11.47 and Buy below $10.52 in accordance with ML ratings guidelines. The writer probably doesn't know ML ratings guidelines. Additionally, based on a $11.33 close, Kraemer could have upgraded NTAP to Buy with a new price target as low as $13.60. |
