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By
Justin Sharon
Sep 20, 2010 4:20 pm
Shares are surging more than 6% to a record high this afternoon.
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AT&T (T) is up sharply, almost reaching out and touching a new one-year high after an analyst upgrade at Credit Suisse this morning. Researcher Jonathan Chaplin also increased his price objective to $35 from $27 in taking the overall rating to Outperform from Neutral. Even assuming, as Chaplin does, that the interminable waiting-for-Godot exercise of competitor Verizon (VZ) starting to sell Apple‘s (AAPL) iPhone finally occurs in 2011, such a loss of AT&T’s smartphone “exclusivity should be substantially less than current valuations imply.” The Dow component has of course thus far enjoyed mobile monopolies with both iPhone and American Idol, although apparently each is a poisoned chalice. Father Time hasn’t always been kind to Ma Bell; its 1993 ads trumpeting that the company's technology would soon have us tucking in our babies “from a phone booth” became almost instantly anachronistic. But even allowing for its slightly lumbering and clunky reputation, a consensus may be emerging that the shares were overly punished earlier in the year. Credit Suisse concludes that AT&T is now not only less expensive than Verizon, but additional upside catalysts also exist in the form of stock buybacks and it has greater room to raise the dividend. Chaplin’s earnings estimates are above consensus at $2.63 for 2011 and $2.50 for 2012. Please see Why iPhone on Verizon May No Longer Be a Rumor and Will Apple, AT&T Be Sued $1 Billion for Dropped Calls?
Turning from a onetime monopoly to the maker of Monopoly, Hasbro Inc. (HAS) stands atop a fresh 52-week peak today. Shares have been on a tear for some time, boosted in part by ongoing talk of a private-equity takeover. It boasts an exemplary balance sheet, has managed to keep a tight control on costs, and received a boost out of blockbuster film tie-ins from its marquee GI Joe and Transformers franchises. The toy titan’s other brands include Cranium, Mr. Potato Head, My Little Pony, Play-Doh, Pokémon, and Star Wars. It also manufactured Cabbage Patch Kids at the tail end of their '80s heyday before passing the torch on to arch rival Mattel (MAT), which apparently turned the doll into some sort of hair devouring devil. Kids can be quite fickle -- Tickle Me Elmo and Furby are but two once-hot Hasbro items that now gather dust in attics across America -- hence there are always qualifications to owning anything in the toy space. Still it’s an Ebenezer Scrooge parent who scrimps on their children ahead of the holidays so this could be a good seasonal stock. Besides, it doesn’t take six figures to amass a team of action figures. Check out The Return of Toys and Is Mattel Going to the Dogs?Moving swiftly from the world’s largest maker of board games to an industry leader in containerboard, pulp, and packaging, International Paper (IP) is crying “Timber!” today as it tumbles more than 6% in a strong market. This as bored equity analysts at Goldman Sachs spent the past Saturday and Sunday reading the latest issue of Pulp & Paper Week from cover to cover, an unenviable undertaking that merits their stupendous salaries all by itself. As a result of their findings the whole space is being boxed into corner and IP, which, in common with AT&T was a Dow constituent until April of 2004, is being particularly hard hit. After perusing the trade publication, Goldman said it was “surprised and disappointed” by a report in its pages that customers are pushing back on a $40 a ton August containerboard price increase, to $680. Although researcher Richard Skidmore kept his Buy rating on the shares, he does now see downside risk to earnings estimates for this year and next. It should be noted that Goldman’s downtown neighbor Bank of America/Merrill Lynch is more constructive and would use weakness in the space to add to positions. In its view this is merely a “pause not a peak” in pricing and valuation is now back to recessionary lows. Forget Peak Oil, Peak Lumber Is Coming provides additional analysis.
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