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Why Microsoft's Downgrade Doesn't Matter


Company won't feel the impact of going from "Conviction Buy" to "Buy."

That's two days in a row now that I've awakened with a wicked backache. You'll be calling me the Hunchback of Minyanville soon.

Asian stocks ended lower. The Hang Seng was closed on holiday, but the Nikkei was off 1.53%. European stocks were in slightly negative territory early this morning. And here in the US, we're currently trading lower.

Here's what I'm focused on this morning:

Microsoft (MSFT):
Justin Sharon points out in his article today that Goldman yanked Mister Softee down from Conviction Buy to Buy.

My two cents:

1. That's not a catastrophic downgrade, and I don't think it will have much of an impact.

2. I like the shares here. I don't think 15.3 times this year's estimate is beyond reason, given the company's footprint, reputation, prowess, management team, and cash horde.

3. A 52-week high may be just around the corner, which would be a nice positive as well.

4. The current-year estimate of $1.68 is light, and has a good shot of coming in better than that.

On Tuesday after the close, the restaurant company was out with its first-quarter numbers. Excluding items, it earned $0.67 and beat estimates by a penny. In the release, it indicated it's looking for $2.59 to $2.85 a share for fiscal 2010, which some probably won't think is as sizzling as one of the steaks at LongHorn because the Street was looking for $2.81 a share.

Some thoughts:

I've said it many times before, but I'm hipper on the fast foods. That said (again), in casual dining, I think this is a long-term play that could pan out nicely.

2. It trades at about 13.2 times the low end of the company's outlook, which isn't too bad.

3. The shares had a bit of a rough day yesterday, which could end up being an opportunity for a little nibble.
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No positions in stocks mentioned.

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