Monday, June 12, 2006

Calls of Note Part 2

- Banc of America is out on DIS saying they believe the $62.8 million debut of Cars this weekend was at or below the low end of the consensus range. While hardly a failure, they think it has a couple of negative implications for DIS shares. It raises questions about the rationale for the Pixar deal and, as a result, raises a central question about the Disney bull case. Moreover, with the next Pixar film slated to be released in June 2007, management won't be able to disprove these concerns for a year. With Cars released and its performance tracking to fall below expectations, investors may turn their attention back to the key earnings drivers, limiting the upside in the stock. Maintains Neutral.

Notablecalls: Expect DIS shares to take a hit today. Note that Citigroup is out downgrading the shares (Hold/Buy). Yet, considering the sell off last week I'd look for a bounce as shorts start covering. No sooner than 28 dollar level.

- Banc of America out on CMG raising their 2006 and 2007 estimates to $0.94 (52% growth) and $1.10 (18% gains) from 'old' estimates of $0.63 and $0.77, or up more than 40% in each case. Firm still believes their 2007 EPS will have an upward bias, but they don't believe it will be another 40%. Maintains Neutral due to valuation.

Notablcalls: Not actionable but good to know category.

- FBR notes that with MSFT at a historically low valuation (14.4x CY07 EPS estimate, 12.7x net of cash), they are updating their sum-of-the-parts analysis, which supports their belief that the company is undervalued. Firm's conservative assumptions yield a fair value of $31, a 40% premium to the current valuation. The shares have been under pressure, in part, due to the company's announcement of intent to invest more than initially modeled by the Street without articulating a detailed strategy, and due to the uncertainty regarding the Vista release. Firm concedes that clarity needs to be brought to these issues to drive the shares higher, but they expect this to occur over the balance of this year. Maintain Outperform rating and $32 price target.

Notablcalls: Not actionable but good to know category.

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