Zacks.com announces the list of stocks featured in the Analyst Blog.
Every day the Zacks Equity Research analysts discuss the latest news and
events impacting stocks and the financial markets. Stocks recently
featured in the blog include: Hewlett-Packard (NYSE: HPQ),
Electronic Data Systems (NYSE: EDS),
Digital River (Nasdaq: DRIV),
Symantec (Nasdaq: SYMC)
and Millicom International Cellular (Nasdaq: MICC).
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Here are highlights from Thursday’s Analyst
Blog:
Upgrading EDS on H-P News
On May 13th, Hewlett-Packard (NYSE: HPQ)
announced that it would acquire Electronic Data Systems (NYSE: EDS)
for $25.00 per share in cash, or a total of $13.9 billion. The deal is
expected to close in the second half of 2008, and we do not expect any
anti-trust concerns given the fragmented nature of the IT services
industry.
With EDS currently trading at $24.34, slightly below the acquisition
price, we upgrade the shares to Hold and set a $25.00 price target as we
expect the transaction to close within the next six months. HP plans to
establish a new business group, to be branded EDS, an HP company, which
will be headquartered in EDS' existing executive office in Plano, Texas.
The transaction is expected to be accretive to fiscal 2009 non-GAAP EPS
and accretive to GAAP EPS in 2010.
We would be more positive on the stock if EDS is able to post a full
year of increased signings. Without continuing momentum in contract
signings, top-line growth will be difficult to sustain. Though the
company has made significant strides in cost cutting by shifting its
headcount to lower-cost geographies, gains on this front are likely to
slow as the company reaches the limit of jobs that can be shifted to
countries outside that of its customers.
Don’t Rush Into Digital River
Digital River (Nasdaq: DRIV)
reported revenues of $103.6 million in Q12008, up 13.1% from a year ago
and up 6.9% sequentially, and ahead of ours and the consensus estimate
of $99 million. Non-GAAP EPS of $0.50 beat our estimate by $0.02.
Revenue growth was mostly attributable to ongoing strength in the core
business, which grew 29% y/y, offset by weaker than expected sales to
Symantec (Nasdaq: SYMC).
Management slightly raised its guidance for 2008. Revenues are now
anticipated to come around $401 million, up from the earlier estimate of
$395 million on the back of strong revenues in Q1. We have adjusted our
revenues and EPS estimates accordingly for Q2 and FY2008. We are
maintaining our Hold rating on the stock with a target price of $39.
Fair Trade for Millicom Shares
We maintain our Hold rating and the same valuation target for Millicom
International Cellular (MICC),
a leading wireless service provider in various emerging markets.
Millicom's strategy, which entails substantial capital expenditures in
order to upgrade networks and service untapped markets, has paid off
with significant growth in its subscriber base.
In the fast-growing markets of Latin America and Central America,
Millicom is in the process of phasing out older TDMA and CDMA firmware
in order to add high-speed 3G data service capabilities. The company's
offerings in African and Asian markets also witness significant
subscriber additions. Millicom announced that the company will increase
capital expenditures through fiscal 2008, highlighting its expectation
of sustainable and profitable expansion over the long run.
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