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Upgrades & Downgrades: Green Ink for Red Hat?


Maybe the experts know something we don't know.

Rising rates and falling snow sent stocks lower on light volume, as Ben Bernanke's testimony that tightening will happen "at some point" twinned with wintry weather for slim but broad based losses. America's biggest dairy producer Dean Foods (DF) cried over spilt milk, tumbling 13.89% to a new 52-week low after earnings, but there was better news for those who murder their banker spouses with milkshakes. (Don't get any ideas now, especially in this the week of romance.) Brown-nosing the bankers has never been the British prime minister's style either, and it now appears Brown knows another way to get rid of them.

Brisk sales of Sports Illustrated's swimsuit issue indicated great interest in seeing Decker outdoor, though this did nothing for the shares of Deckers Outdoor (DECK), which like much of the market barely budged. Activision Blizzard (ATVI), up 4.75% after hours, was a perfect meteorological match but the continued strength in Pacific Sunwear (PSUN), which surged another 4.46% and is apparently now the brand of choice for Iranian dictators, was harder to explain. And Wells Fargo (WFC), which once operated the Pony Express, posted a 1.76% gain to shame the postal service. Today sees earnings out of Alcatel-Lucent (ALU), AutoNation (AN), Buffalo Wild Wings (BWLD), Cheesecake Factory (CAKE), Chipotle Mexican Grill (CMG), Coinstar (CSTR), Credit Suisse (CS), McAfee (MFE), Panera Bread (PNRA), PepsiCo (PEP), Philip Morris International (PM), Renault, Rio Tinto (RTP), Rolls-Royce, Viacom (VIA), and World Wrestling Entertainment (WWE).


Red Hat (RHT): William Blair begins Red Hat at Outperform, based on its position as the established market leader with key partner relationships with IBM (IBM), Hewlett-Packard (HPQ), and many of the other large hardware vendors.

Xerox (XRX): JP Morgan resumes Xerox at a Neutral and establishes a price objective of $10.

Shanda Games (GAME): Deutsche Bank starts Shanda Games with a Buy sets a $11.90 price target, saying it boasts the lowest P/E in its Internet universe, and its organic growth from franchise games should deliver 23% EPS gains this year. See also Apple Lures Developers Away From Nintendo, Sony.

Mirant (MIR): Deutsche is less sanguine on Mirant, starting at Sell ($11 target) due to lower power prices from the roll-off of above-market hedges and higher coal costs.


Abercrombie & Fitch (ANF): The retailer is now Outperform from Perform with a $46 target at Oppenheimer, which cites catalysts including the upcoming earnings call, extremely easy comparisons and potential for store closings at both A&F and Hollister.

Sigma-Aldrich (SIAL): Saying they see signs of stabilization in end markets, Robert Baird boosts Sigma-Aldrich to Outperform from Neutral with a price objective of $60.

3M (MMM): Dow component 3M gets an Outperform-from-Market Perform increase at Sanford Bernstein.

Palm (PALM): Citigroup raises Palm to Hold from Sell.

Cablevision (CVC): Barclays boosts Cablevision Systems to Overweight from Equal-Weight and takes its target to $26 from $21.46. For a related story, see Comcast Profit Up but Its Customers Still Lose.

Illinois Tool Works (ITW): Bank of America/Merrill Lynch increases Illinois Tool Works, now Neutral from Underperform, and maintains its $48 target.

GlaxoSmithKline (GSK): Bank of America/Merrill Lynch also lifts European drug giant GlaxoSmithKline, now Neutral from Underperform. For more on this sector, see Dendreon Placing Its Final Bets on Provenge.

NVIDIA (NVDA): Roth upgrades NVIDIA (Buy from Hold; target up $6 to $21) based on the possibility of higher corporate margins as non-PC businesses grow, GPU profitability recovers, and low end chipsets fade.

Shanda Interactive Entertainment (SNDA): Deutsche Bank raises Shanda Interactive Entertainment to Hold from Sell (new $48 target) on a belief the company may have a better long-term growth outlook than previously expected.

Cardinal Health (CAH): Oppenheimer increases Cardinal Health (Outperform from Perform; $39 price objective) to reflect improving macro trends and believes the company is making significant progress on the turnaround plan.

Cameron International (CAM): HSBC hoists Cameron International, now Overweight from Neutral with an objective of $49, after its earnings beat.

Convergys (CVG): Stifel Nicolaus raises its recommendation on Convergys to Buy from Hold after the announcement its CEO will be replaced.

Exchange Stocks: IntercontinentalExchange (ICE) ($115 price target) and CME Group (CME) ($330) each get Outperform-from-Market Perform upgrades at Raymond James.


Silicon Laboratories (SLAB): Roth reduces Silicon Labs to Hold from Buy and trims its target $4 to $46, saying margins are very close to peak and near-term sales upside is limited.

Boston Scientific (BSX): Deutsche Bank downgrades Boston Scientific (Hold from Buy, $8.60 target maintained) due to various restructurings, a growth profile that will "remain anemic" for several quarters, and operating leverage that is likely a year away from fruition.

Dean Foods (DF): Deutsche Bank also cuts Dean Foods to Hold from Buy after yesterday's earnings miss.

Echelon (ELON): The stock gets lowered to Underweight from Neutral at Piper Jaffray.
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