Sunday, February 03, 2008

Barron's Summary (CHKP, TXT, MOT)

Barrons’ “The Trader” column highlights CheckPoint Software (CHKP), which was among those to beat ests recently, but its pop was short-lived. Worries about a spending freeze have pared its mkt value by 20% since Oct. Yet Check Point remains a sound defensive bet. Computer security is no less a priority for most businesses even in tough economic times. With its conservative forecast, mgmt had chosen to play it safe and has factored softer demand into its rather beatable guidance. At about 21, shares trade at 11x forward earnings, and its debt-free balance sheet and suite of firewall products make Check Point a viable acquisition tgt should buying return to favor again.

Fund manager likes GLD, GDX, DNA, GILD, CELG, BMRN, ISRG, ALDN, PRGO, VDSI and DD.

Microsoft's (MSFT) offer is a great one for Yahoo (YHOO) shareholders. And it creates a buying opportunity for Microsoft stock, which could jump by a third.

If the electricity market tightens as expected, Dynegy (DYN) could see its stock, now 7, jump to 12 or more, 80% of the estimated replacement value of its power-generation assets.

Blackstone (BX) bulls think the stock is cheap at 18, or 12 times estimated earnings. But the shares could fall to 15 if several deals sour and cost Blackstone its incentive fees.

The shares of Vail Resorts (MTN), which have fallen sharply in the past three months, look poised to climb by 40% or more.

“The Trader” discusses Textron (TXT), whose shares have fallen 21% in Jan. While 4Q profits jumped 31% and beat ests, a tempered outlook sent the Street scrambling to cut projections. As a result, Textron shares are trading at 13.9x ‘08 earnings. Yet the combined backlog at Bell, Cessna and Textron Systems had grown from $12.9bn in ‘06 to $18.8bn at the end of last yr. Textron also benefits from the weak dlr and increasingly global demand for business jets and airplane equipment. Cessna, for example, is nearly sold out of business jets through ‘09. Commercial helicopter demand also is strong, with replacement orders and persistent interest from booming oil and gas, mining and utility industries, notes Citigroup analyst Jeffrey Sprague. Among other things, Sprague thinks a recent moderation of Textron's book-to-bill is driven less by waning demand than by limited supply available for delivery.

“Plugged In” column out saying that it's no secret that Motorola (MOT) was shopping the handset unit. But going public not only told the world there were no serious suitors, it also alerted the co's talented engineers to update their resumes and bail. If there's no buyer, there will be little to spin off. It might be the beginning of the end for that division, if not the entire co. Investment in the unit will get slashed and higher losses for the group are nearly certain. "Why work nights and weekends on a crash course to bring a company-saving new phone platform to mkt when a new boss will probably sack you or a new manager could kill your concept?" asks Charter Equity research analyst Ed Snyder. It's unlikely that any of the major handset makers will try to buy the business. There is so little value left in the unit that the major handset manufacturers are going to be thrilled to grab mkt share at little cost. The biggest winners are Samsung and LG. They're both strong in the American mkt and sell CDMA handsets, the more prevalent standard in N-America and Motorola's forte. Nokia (NOK), which is on fire, will benefit a tad. It sold only 8m CDMA handsets worldwide last yr and has relatively weak relationships in the US. Sony-Ericsson is also a small player in the US and doesn't concentrate on CDMA handsets. Motorola's CDMA handsets wouldn't overlap with Sony-Ericsson's products or geography, but that probably wouldn't be enough attraction for the co to buy damaged goods. Ericsson CEO Carl-Henric Svanberg said last wk that Ericsson "would take a very cautious view on such a thing b/c we do believe you are better off doing it on your own."

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