Monday, October 09, 2006

Calls of Note Part 6

- Goldman is adding AllianceBernstein (NYSE:AB) to the Americas Conviction Buy List. AB ought to benefit from exposure to both institutional assets and solid international fund flows, which we believe isn't fully reflected in consensus estimates or valuation. Recent data points affirm strength in international fund flows, AB's maximum exposure within the retail fund channel. Further, with a solid global institutional client base, which features a favorable asset mix shift and stickier (than retail) assets, AB's discount to the group is undeserved. Firm sees 20% potential upside to our ~$82 price target. Their 06/07 EPS estimates of $3.73 and $4.43 are above consensus.

Catalyst 1) AuM figures reported next week. Forecasting $650 bn in total AuM at 3Q-end, a +16% annualized increase. 2) 3Q EPS (reports late Oct.) ought to show signs of momentum in the institutional channel; expect earnings ahead of consensus. 3) As investors look into 2007 and 2008, $5 in earnings power is realistic given current trends and AuM levels, which would comfortably translate into a $90 stock by the end of 2008 and $82 12-months out. Investors may revisit AB during 4Q2006.

Notablecalls: Expect to see buy interest in AB. Think this one may have up to couple of pts in it over the next days.

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