August 14, 2008

Analyst Actions: Nvidia, Applied Materials, Tween Brands


Oppenheimer reiterates outperform

Nvidia posts second quarter EPS of 13 cents. Oppenheimer analyst Rick Schafer says the next couple of quarters are likely to be tough, but thinks that is well understood. He believes the companys near-term issues are not chronic, and would continue to be buyers in a still solid long-term story. He still sees Nvidias programmable single-chip solution as likely long-term winner, relegating rival ATI two-chip technology to the lower end of the market. Schafer views raised buyback amount as positive for shares. He trimmed his 85 cents calendar 2008 EPS estimate to 77 cents, and his $1.10 calendar 2009 forecast to $1.00. The analyst sees Nvidia as a compelling risk/reward play for fundamental investors heading into 2009. Schafer says the shares trade at a steep discount to historical averages and peers P/Es. He reiterates his $18 target price.


Needham ups estimate, but keeps hold

Applied Materials posted better-than-expected third-quarter results. Needham analyst Y. Edwin Mok says that AMAT, with a an in-line third quarter report, surprised the Street with strong silicon order guidance. Mok notes, while AMAT believes it has passed the trough of the semi-equipment cycle, it maintains a cautious view and expects a modest recovery in calendar 2009, which is in line with his sector view. He says display orders are falling off with the end of an investment cycle. In solar, previous acquisitions are starting to pay dividends with revenue growth. But while the business overall is gradually improving, he believes limited leverage prevents strong EPS growth. He increased his 76 cents fiscal 2008 [Oct.] EPS estimate to 78 cents. He maintains his hold opinion with a $20 price target.


Citigroup cuts to sell from hold

Tween Brands posted a second-quarter loss. Citigroup analyst Kimberly Greenberger says the second-quarter loss of 27 cents compares to her estimate for a loss of 2 cents and Wall Streets consnesu forecast of a 1-cent loss. Greenberger says the difference is due to an 8% decline in comparable-store sales, and worse gross margin and SG&A expense. She believes the companys plan for a full conversion from Limited Too stores to Justice could be an overreaction to the second-quarter miss. She thinks Tween could have captured more value by selling its Limited Too chain to strategic or private equity buyers instead of effectively closing the chain. Greenberger says she would have preferred a combination of selective conversion of Limited Too stores, additional Limited Too closures, and the ongoing operation of 200-400 Limited Too stores. She cut her $1.76 fiscal 2009 [Jan.] EPS estimate to 70 cents, her $2.10 fiscal 2010 forecast to 90 cents, and her $21 price target to $9.