- Merrill Lynch is upping their estimates on Garmin (NASDAQ:GRMN) as the firm estimates that the market for personal navigation devices (PND) could grow over 40% (5 year CAGR) in the next five years. They continue to believe that PND growth will outpace growth in the OEM in-dash navigation systems. Firm currently estimates sthat PND growth in Europe will outpace the U.S. Forecasts 10.8 million units (U.S. and Europe) for 2006 growing to 17.7 million in 2007.
Raising 2006 EPS (before impact of FX) to $3.75 from $3.25. First Call mean is currently $3.57. They are also raising 2007E EPS to $4.50 from $4.15, which is above First Call mean of $4.09. Firm notes they are comfortable being above consensus as they do not think market is giving Garmin credit for greater potential upside in PNDs. Maintains Neutral due to valuation.
Notablecalls: 1) GRMN is a momentum stock 2) Merrill has one of the largest client bases on the Street 3) Their 2007 EPS est is now the highest on the Street. Actionable call.
- Stifel Nicolaus notes RealNetworks (NASDAQ:RNWK) hit a new multi-year high yesterday on no news. The shares have increased about $1.50 over the past week on no news other than an analyst upgrade, and about $3 over the past 2-3 months on little news and no change in guidance. The $1.50-$3.00 move doesn't sound that unusual for a technology stock, but because RNWK has $4.11 per share of net cash, the change has resulted in significant multiple expansion on measures of cash flow. For instance, on EBITDA, RNWK has gone from 15x at $8, to 24x at $9.20, to 36x at $10.83. 36x EBITDA is on the very high end of Internet Media peers and compares to an estimated 25% EBITDA growth rate in 2006 and 49% in 2007.
The analyst Kit Spring notes they can't recall such a large change in a stock's multiple in such a short time frame since the go-go days of the '90s. Firm's discipline of considering strong technical indicators and the potential for an earnings surprise keeps us from moving to a Sell rating, though from a short-term trading perspective they would be inclined to take profits at current levels, all else being equal. Maintains Hold.
Notablecalls: Note that Goldman Sachs is taking their rating down on RNWk to Underperform from In-line on valuation. Don't expect to see much of a bounce today.
- Two firms positive on Apple Computer (NASDAQ:AAPL) this morning:
*Piper Jaffray believes Mac market share is poised for growth for the following reasons: 1) Intel transition nearly complete, 2) improved availability of Macs, 3) expanding footprint of users of Apple products -- expect 85m iPods shipped by end of CY06, and 4) ability to run Windows on Mac.
Mac market share has been between 2.1%-2.5% over the last year. Firm is modeling for Mac market share to be 2.3% in CY06 and 2.4% in CY07. If Apple is able to grow market share to 3.0% in CY06 and 3.5% in CY07, it would add 10% and 17% to their EPS, respectively. Reits Outperform and $99 tgt.
*Morgan Stanley notes the Mac pilot at select Best Buy stores presents a meaningful growth opportunity in C2H06/2007. According to the firm, if one combines this with plans for International expansion, new product pipeline and an improving competitive position (full hardware + operating system updates by year-end), AAPL is well positioned to outperform the group over the next several quarters. Roughly 6 Best Buy stores initiated a pilot of Mac computers this Q. They continue to expect new Nano and Mac Pro (replaces PowerMac) product this Summer; video iPod and potentially an operating system upgrade cycle this Fall - all of which should help accelerate revenue momentum in C2H06. Maintains Overweight.
Notablecalls: Not exactly actionable but good to know.
Raising 2006 EPS (before impact of FX) to $3.75 from $3.25. First Call mean is currently $3.57. They are also raising 2007E EPS to $4.50 from $4.15, which is above First Call mean of $4.09. Firm notes they are comfortable being above consensus as they do not think market is giving Garmin credit for greater potential upside in PNDs. Maintains Neutral due to valuation.
Notablecalls: 1) GRMN is a momentum stock 2) Merrill has one of the largest client bases on the Street 3) Their 2007 EPS est is now the highest on the Street. Actionable call.
- Stifel Nicolaus notes RealNetworks (NASDAQ:RNWK) hit a new multi-year high yesterday on no news. The shares have increased about $1.50 over the past week on no news other than an analyst upgrade, and about $3 over the past 2-3 months on little news and no change in guidance. The $1.50-$3.00 move doesn't sound that unusual for a technology stock, but because RNWK has $4.11 per share of net cash, the change has resulted in significant multiple expansion on measures of cash flow. For instance, on EBITDA, RNWK has gone from 15x at $8, to 24x at $9.20, to 36x at $10.83. 36x EBITDA is on the very high end of Internet Media peers and compares to an estimated 25% EBITDA growth rate in 2006 and 49% in 2007.
The analyst Kit Spring notes they can't recall such a large change in a stock's multiple in such a short time frame since the go-go days of the '90s. Firm's discipline of considering strong technical indicators and the potential for an earnings surprise keeps us from moving to a Sell rating, though from a short-term trading perspective they would be inclined to take profits at current levels, all else being equal. Maintains Hold.
Notablecalls: Note that Goldman Sachs is taking their rating down on RNWk to Underperform from In-line on valuation. Don't expect to see much of a bounce today.
- Two firms positive on Apple Computer (NASDAQ:AAPL) this morning:
*Piper Jaffray believes Mac market share is poised for growth for the following reasons: 1) Intel transition nearly complete, 2) improved availability of Macs, 3) expanding footprint of users of Apple products -- expect 85m iPods shipped by end of CY06, and 4) ability to run Windows on Mac.
Mac market share has been between 2.1%-2.5% over the last year. Firm is modeling for Mac market share to be 2.3% in CY06 and 2.4% in CY07. If Apple is able to grow market share to 3.0% in CY06 and 3.5% in CY07, it would add 10% and 17% to their EPS, respectively. Reits Outperform and $99 tgt.
*Morgan Stanley notes the Mac pilot at select Best Buy stores presents a meaningful growth opportunity in C2H06/2007. According to the firm, if one combines this with plans for International expansion, new product pipeline and an improving competitive position (full hardware + operating system updates by year-end), AAPL is well positioned to outperform the group over the next several quarters. Roughly 6 Best Buy stores initiated a pilot of Mac computers this Q. They continue to expect new Nano and Mac Pro (replaces PowerMac) product this Summer; video iPod and potentially an operating system upgrade cycle this Fall - all of which should help accelerate revenue momentum in C2H06. Maintains Overweight.
Notablecalls: Not exactly actionable but good to know.
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