Why Microsoft's Downgrade Doesn't Matter
Company won't feel the impact of going from "Conviction Buy" to "Buy."
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:
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.
1. 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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