Fred and thread,
Not sure if the following has been posted already:
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ANALYST UPDATE: SOBERING UP AFTER A SELLOFF
By Peter D. Henig
Red Herring Online
August 7, 1998
Has the sudden snap in Wall Street's bullish binge sobered up analysts to long-term value? Could be.
Despite Federal Reserve Chairman Alan Greenspan's attempts at notching the bull market down 300 points or more, and an earnings season spiked with a hint of negative aftertaste, analysts are still willing to belly up to the bar and take a good long pull on the buy side.
Intel (INTC) has quickly become one of Wall Street's newest value-oriented darlings, while the marriage of GTE (GTE) and Bell Atlantic (BEL) has analysts toasting with upgrades. Tellabs (TLAB), too, got another round of supporters, while the new technology analyst recruits at First Boston are initiating coverage of a caseful of tech companies, while the old First Boston analysts clean out their desks.
Another round of chips
It started with a trickle, but then the upgrades really began to flow as Intel, once again, became the toast of Wall Street.
Mona Araiba, analyst with Gruntal & Co., first raised Intel from Hold to Buy, and then Michael Gumport with Lehman Bros., offered up a chaser on Friday with an upgrade on Intel from Neutral to Outperform.
"It's more of an industry play than anything else," said Mr. Gumport. "It seems like unit volumes are finally flattening and appear to have hit bottom in July."
And what does that mean for Intel? "It means that the Big Kahuna could actually move."
As large-caps recovered from the week's earlier 300-point slide, shares in Intel jumped nearly 8 points over the last three sessions to end the week at 86.94, after the company got another kick as Volpe Brown, -- and even Gruntal, again - reiterated their Buy recommendations in response to the market's recovery.
Another added bonus came from a Dean Witter Morgan Stanley upgrade on high-bandwidth chipmaker Broadcom (BRCM), and another related upgrade on Compaq (CPQ) by Goldman Sachs. Analysts Mark Edelstone and George Kelley with Morgan Stanley Dean Witter raised Broadcom from Neutral to Outperform, while Goldman placed Compaq on its prestigious "Priority List".
Because both companies play in the chip space, any related upgrades on their stock spell good news for a semiconductor market leader like Intel.
A potent telecom mixer
There's nothing like a good merger announcement to give Wall Street an excuse to party.
And the planned Bell Atlantic (BEL)-GTE alliance provided just the ticket for analysts to let the upgrades rip.
Eric Strumingher, analyst with Paine Webber, upgraded Bell Atlantic from Neutral to Buy based on the proposed merger with GTE. Mr. Strumingher initiated a new price target in the low 50s, just shortly after BancAmerica Robertsen Stephens raised its rating from Long Term Attractive to Buy.
Anthony Ferrugia, analyst with AG Edwards, also gave the deal the thumbs up. Mr. Ferrugia, favoring the GTE side, raised his rating from Maintain to Accumulate arguing that GTE and Bell Atlantic both traded at discounted values before the merger was announced.
"GTE was worth in the high 50s before the announcement, so when the stock traded down to 52 we were willing to buy whether there was a merger or not," said Mr. Ferrugia.
And what of the risk of the deal not passing regulatory muster? "If regulators deny the merger, there is still very minimal risk because, with GTE in low the 50s, it is an exceptionally good value as a stand alone."
AG Edwards has set a new price target on GTE of 62.5.
Simon Flannery, analyst with J.P. Morgan Securities, also upgraded GTE, raising it from Long Term Buy to Buy, based on the merger with Bell Atlantic. In fact, J.P. Morgan Securities was even more bullish than Mr. Ferrugia, estimating a future price target price of 69.
Can I dance with your date?
Was Ciena (CIEN) a good purchase for a Tellabs (TLAB), or a date it should never have taken home?
Beauty is obviously in the eye of the beholder, as Wall Street rated it both a keeper and a dog.
Punk Zeigel analyst Michael Davies picked up coverage with a Buy, as did Polina Ialamova, analyst with Madison Securities, while Soundview Financial Securities analyst Chandan Sarkar downgraded the stock from Buy to Short Term Hold, although keeping its long term Buy rating intact.
Ms. Ialamova, however, is hard pressed to find anything negative about the company or the merger.
"The company is well positioned in the emerging telecom equipment market," said the analyst. "They have that rare combination of financial stability, earnings predictability, strong management, and high institutional ownership of the stock." (Institutions own 76 percent of Tellabs' shares.)
Ms. Ialamova also notes that Tellabs' intended merger with Ciena will be good for both companies in terms of revenue and earnings growth, and will help Tellabs bring some of its multiplexer products to market two years ahead of time.
Out golfing, back on Monday
Were Credit Suisse First Boston's tech analysts as thrilled as Deutsche Morgan Grenfell's once they learned that 95 percent of DMG's technology staff was coming in the door with Frank Quattrone?
Not exactly.
We gave a call to CS First Boston to talk about the keg-full of coverage the new DMG analysts would be picking up in the semiconductor, e-commerce, and Internet space, and discovered that it was moving day at First Boston. In fact, the former DMG analysts were out golfing (literally) while CS First Boston's technology analysts were packing boxes.
"All of the [stock recommendation] coverage you are seeing has been rolled over by the analysts coming from DMG," said a source at First Boston.
Could he comment on any of those stock recommendations? "I can't, we're the guys who got fired. Today's our last day."
Oops. At any rate, whomever is picking up coverage at First Boston is picking up a lot of it.
In the semiconductor space, the firm has started Microchip Technology (MCHP), STMicroelectronics (STM), Linear Technology (LLTC) , Maxim Integrated Products (MXIM) and Xilinx (XLNX) with Strong Buy ratings, while initiating Buy recommendations on Lattice Semiconductor (LSCC), and Cypress Semiconductor (CY).
In the Internet and e-commerce sectors, First Boston's new analysts have rolled over coverage of E*Trade (EGRP), Sterling Commerce (SE), Ameritrade Holding (AMTD), Yahoo! (YHOO) Excite (XCIT), Earthlink (ELNK) and others with Buy recommendations.
With this many recommendations adding to the excitement, are First Boston's tech guys bummed that they got the toe?
"Nah. Financially, we're going to be better off than if we had stayed."
Sounds like a good party.
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Ibexx
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