Cart (0)
business newsInvestors Wire Major Wealth MoneyGram's Way
By
Justin Sharon
Dec 20, 2010 5:10 pm
Shares surge by double digits after a bullish Buy initiation from Bank of America/Merrill Lynch this morning.
PRINT
 |
|
Cynics may say that the same firm rolled out the same rating on Knicks owner Madison Square Garden (MSG) on Friday, since eight wins in nine have been swiftly followed by back-to-back defeats for the basketball team, but no one can claim today’s analyst action is a similar kiss of death. This stock is a relatively under-followed name, certainly by bulge bracket brokerages. Thus when the equity research arm of what is still America’s biggest bank -- apologies to Wells Fargo (WFC) but I’m speaking strictly of assets -- rolls out such a rating it’s unquestionably a big deal.
MoneyGram, founded in 1926, is the number-two player in its industry behind Western Union (WU) and its core customer base, namely those who lack basic banking services, is only growing in this still-tepid economy. Merrill assigned a 12-month price objective of $3.40 on the equity, noting that new management has made good progress of late, especially in regard to debt drawdown. While it may be hard to imagine any Wall Street heavy hitters having a use for the company’s products, its potential client pool is enormous. Its network encompasses more than 200,000 agent locations and the World Bank estimates formal cross-border remittances to grow by some 5.5% in 2011. Potential for growth in a highly fragmented market is therefore good, and offered services are critically important to its recipients in many parts of the world. To take the example of Nicaragua, money transfers sent to that nation represent no less than 14% of its overall gross domestic product -- suffice to say, the 21-year-old Californian surfer Survivor who pocketed $1 million in the country last night was not the norm.
However, investors should be aware this small-cap stock certainly isn’t for widows and orphans. (Well, save maybe one widow who needs to quickly recoup some of that $7.2 billion she lost last week.) Shares, still under $3 even after today’s jump, once stood at $37 before almost expiring in the financial meltdown. It was saved by an act of benevolence from Goldman Sachs (GS), among others, but remains in Merrill’s warning words a “volatile” stock suitable only for “investors with high risk tolerance.”
Please see Western Union on Your Cell Phone? and Throwback Products We Love: Cash.
Though a warm-weather cruise is not without its appeal as I freeze in New York 24 hours ahead of winter’s longest day, I have to say sailing the high seas is not really my thing. Just observing the latest of a seemingly endless string of unnerving incidents on the open ocean is enough to put me off. As an investment, however, Carnival Corporation (CCL) is having no trouble keeping its head above water. Shares in our headline analyst initiation finished up almost 2% in taking their 12-month increase to over 34%.The Miami, Florida firm that dates to the 1970s Love Boat zenith is bigger than closest competitor Royal Caribbean (RCL), which was itself rated a new Neutral and has also performed well as consumer spending starts to pick up. Ben O’Toole of HSBC Global Research wrote in a note, “We are… optimistic that costs can be controlled and that, as both operators increase in size, further efficiencies can be achieved, leading to margin expansion.” Ahead of tomorrow’s earnings release, O’Toole assigned an Overweight rating and $51 price objective on Carnival, which also owns Princess, Holland America, and, in England, P&O Cruises and Cunard. (This latter line launched the ill-fated Lusitania, sunk by a German U-boat in 1915, although a 37.5 inch-long replica belonging to Malcolm Forbes just broke a toy boat record at auction.)
Carnival operates about 90 ships with capacity for roughly 180,000 passengers, and lays claim to assorted hotels, motor coaches, and rail cars. Having survived both a post-Katrina public relations black eye and, only last month, that Spam saga, investors clearly regard the stock as unsinkable at present.
One caveat on the horizon that could cause some seasickness -- the company does suffer from a relative paucity of fuel hedging.
Also check out Carnival Cruises Through Recession, A Better Way to Play Cruise Ships, and Cuba: Open for Business?
Today’s terror arrests in Britain bring back uncomfortable reminders of the nefarious uses to which disposable cell phones can be put to use, but mobile pay-as-you-go outfit MetroPCS Communications (PCS) is having a happier time of it. Shares ended up more than 5% after being raised to Outperform from Sector Perform by an analyst at RBC Capital Markets who also took his 12-month price target up to $16 from $12.
This wireless communications company, the second Texas outfit on our list today, provides assorted phone services and operates about 150 retail stores in major metropolitan areas. Researcher Jonathan Atkin at RBC said the recently agreed upon deal to decrease payroll taxes next year could afford their core clients more money to spend on its offerings. Decreasing customer losses was also cited as a stock price catalyst.
Competition remains intense however, and fifth-ranked MetroPCS is a comparatively niche player when compared with giants like AT&T (T) and Verizon Wireless (VZ).Read related content at Time to Bolt From Sprint Nextel and Sprint Can Still Have a Comeback.
RehabCare Group (RHB) fell more than 1% today after being assigned a new Neutral with a $25 price objective at JPMorgan. The 28-year-old St. Louis outfit doesn’t provide the sort of 12-step services LiLo and Charlie Sheen seem to constantly requite -- or those that Amy is always Whining about. Rather, they offer skilled nursing facilities, outpatient services, and other assorted long-term care for those victimized by medical infirmities including stroke, orthopedic conditions, and head injuries. The firm operates 35 long-term acute care and rehabilitation hospitals in 13 states. JPMorgan analyst Scott Hansen says “health-care reform will continue to put downward pressure on reimbursement,” while noting that at current valuation “shares reflect skilled nursing headwinds” and “uncertainties” surrounding the company’s recent acquisition of Triumph HealthCare.
Sign up for a free trial to Buzz & Banter to access the thoughts of David Dispennette on RehabCare here.
Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
