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VIDEOBig Brokerage House Likes Costco Warehouse
By
Justin Sharon
Sep 08, 2010 4:25 pm
Researcher Adrianne Shapira upgrades it to Buy, saying the stock unfairly trades at a discount compared to where it has historically traded.
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See also, Costco Cookies Recalled, Metal Shavings Accidentally Omitted From Ingredient Labels.
The Gray Lady is all green today, though whether it’s read or not is another matter entirely. “New York Times (NYT) Shares Up On Slim Speculation” runs today’s Reuters headline, and because "slim" is capitalized we can assume the news is indeed fit to print. That would be one Carlos Slim, Earth’s richest inhabitant and already a 6.9% owner of the company’s equity. The Mexican tycoon loaned the New York Times $250 million of senior unsecured notes at 14% interest 20 months ago in the depths of the credit crunch. Rumors are swirling he's about to increase his stake, sending the stock surging approximately 7%. Never say nunca, but with neither the newspaper nor Slim available for comment the probability of it occurring anytime soon must be slim. Evercore Partners analyst Doug Arthur -- a Buy-rated bull on the name -- sounds slightly jaded, for one. “Any time there is a spike, which there was this morning, the old Carlos Slim rumor comes back. That is kind of well worn. I don’t think there is much to it.” Admittedly, the overall sector has lately showed some slight signs of stabilization; such is the space’s beleaguered state that its recently reported 5.6% decline in business ads for the second quarter was heralded as some sort of triumph. However, Slim didn’t enter fat city by investing in dying industries, which is what these fading paper tigers have become. (See Who Needs Newspapers Anyway?) Their core business is in inexorable decline as customers increasingly move to digital media and the New York Times’ fee-based online rollout, coming in 2011, risks alienating an audience that has long become accustomed to accessing content for free. Furthermore, heightened competition for its upscale readership came on the scene when the Wall Street Journal (NWSA) recently introduced a section focused solely on the Big Apple. As the paper of record in an industry experiencing long-term secular slumps in circulation and advertising, it's tough to see today’s share price action as being anything but a dead cat bounce.
Check out Josh Lipton's take on previous Carlos Slim rumors here:
Visa (V) has tended to favor Bonds in its advertising, which is just as well because its stock is slumping to somewhere it doesn’t want to be today after a broker downgrade. The country’s first credit card to gain nationwide acceptance was a late 1958 creation by Bank of America (BAC). Ironic, then, that analysts at Bank of America/Merrill Lynch today take Visa from Neutral to Underperform (Wall Street’s favorite four-letter euphemism for "Sell".) Analyst James Kissane gives Visa the kiss-off, citing “debit regulation issues and growing structural concerns.” Onerous new rules for debit-card fees mandated by the recent financial reform legislation are seen as crimping profit margins by many in the analyst community. (Citigroup’s Donald Fandetti also writes today that Visa, as an industry leader, has more to lose than rival Mastercard (MA).) Although Merrill’s call is decidedly out of consensus -- of the 38 firms following Visa, it's now the sole Sell -- with sentiment on the sector so negative, shares could remain under pressure for some time. For additional content, see Mastercard Says Despite Anemic US Recovery, Global Growth Improving and Video: New Credit Card Rules, Feinberg Vows Generosity in BP Payouts.
A shock for jocks as Dick’s Sporting Goods (DKS) gets cut to Neutral from Buy by Goldman Sachs today. Analyst Michael Fassler also modestly trims his 12-month price objective by $1 to $30. Though he calls the company a “potent growth story,” Fassler feels “early challenges” in California could “raise questions” over its nationwide rollout strategy. The retailer, which entered the Fortune 500 for the first time this year, has been expanding at a breakneck pace but its shares aren’t inexpensive trading on an enterprise value/EBITDA basis of approximately 8x. The sporting-goods industry is, if not completely saturated, certainly mature, expanding at a modest 2% to 3% annual clip since 2000. Shares look fully valued at current levels. For more on the competitive landscape, check out Nike’s Earnings Run Into Problems.
No positions in stocks mentioned.
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