Thursday, August 17, 2006

Calls of Note Part 1

- Citigroup notes that with Amgen (NASDAQ:AMGN)'s stock trading at only 15-16x firm's fiscal 2007 EPS est, they believe current levels represent an attractive buying opportunity. Firm expects several upcoming events this fall that may represent catalysts for the stock. These events include: the approval of Vectibix (previously, pmab) for advanced colorectal cancer (PDUFA date of 9/28/06); additional clinical data for Vectibix as well as other pipeline products; and developing legal activity surrounding the EPO patent infringement case against Roche. Despite the cautious FDA environment, they continue to believe Vectibix is positioned to gain FDA approval. Further, firm's legal consultant believes the Amgen v. Roche case could be accelerating in its path towards resolution since a court trial may be scheduled prior to approval of CERA (PDUFA date of 2/20/07). If Judge Young advances this case to trial, they believe this would be viewed favorably by investors as it would suggest a potential timely resolution.

Maintains Buy and $100 tgt.

Notablecalls: Semi-actionable. Nothing new here. Would not hold below $66.

- Citigroup has an interesting note on software space. Firm notes BEAS and CRM each threw us some rope last night, beating expectations and giving bullish guidance. INTU options investigation is complete. Whew. Sentiment has been very poor, but the + indicators are trickling in. With results showing decent demand, we could start to see a sector rotation into software. Heading into the fall, the firm would look to the small and mid-cap, higher growth names, CRM, ADBE, ADSK and RHAT, as well as the earnings leverage stories, INTU, BEAS and TIBX, as they expect these to show more upside in a rally than ORCL / MSFT, even though ORCL led off the turn with a strong Q4. Sentiment has not completely turned, but they expect to see seasonal improvement as the software universe benefits from: the Q4 budget flush, consolidation/M&A valuations, and performance in the newer technology areas such as SaaS, Open Source, and SOA. Firm believes the software upturn may start early this year - before Labor Day.

Firm notes that historical monthly price performance for a basket of 20 software names between January 1985 and June 2006 shows that over the past 20 years, July has been the worst month for software stock performance. Firm believes that this is due to a number of factors including the seasonally light second quarter performance for license generating companies, product cycles that tend to favor either the end of the year or the beginning of the year, and what they call the sentiment factor. October, November, and December are the months with the strongest performance across software stocks. With this in mind, they recommend that investors tee up for the fall and think about redeploying some of the cash into higher-growth, BUY rated names.

Notablecalls: Not actionable but good to know category.

No comments: