Mosaic (NYSE:MOS): Mosaic Company Extreme Oversold Condition Changing Rating from Sell to Strong Buy with $60 Price Target - SISR

Strategic International Securities Research (SISR) is upgrading Mosaic (NYSE:MOS) to Strong Buy from Sell with a $60 price tgt (from $33). Firm is reversing their Sell rating on the stock to adding it to their recommended list.

Firm notes they are looking for current quarterly earnings to come in at $2.18, and full year estimate of $10.63 on revenues of $16.2 Billion. They believe that there will be a period of readjustment for Mosaic with both price declines and output reduced. Mosaic and the industry however are very effective at holding prices up by reducing output. SISR expects this to be the pattern for the coming months and even year or so as the price of these commodities adjusts to the international condition of a worldwide slowdown. Their projections are that output will be reduced by about 10% with prices declining by 20% to 30% over the next year. Given that price have increased by more than 400% this decline is relative by comparison.

Firm feels that given a historical PE of 12 for the industry their target is rather conservative with consensus currently being at $11.26 for 2009.

It is too early to make an extended forecasts but it is likely that just as on the upside this stock was overvalued, they believe it is currently undervalued.

Notablecalls: I bet most of you have never heard of Strategic International Securities Research (SISR) or their analyst Philip Miller covering Mosaic.

Yet, among the inst. side of the business, SISR carries weight. Why?

Just take a look at their recent track in MOS. They have played it almost perfectly:


These guys don't publish much. But when they do, you better take note.

Whole Foods (NASDAQ:WFMI): Downgraded to Underperform with a $9.50 tgt - Jefferies

Jefferies is out with a pretty significant negative call on Whole Foods (NASDAQ:WFMI) lowering their tgt to Underperform from Buy while lowering their tgt to $9.50 from $23.

The macro climate, always the greatest risk with WFMI, has worsened measurably in the five weeks since the firm launched coverage and now looks to be overwhelming the company's ability to drive even flat comps in 4Q08 and FY09. They have lowered their estimates, accordingly, as increased reliance on the macros (~50% correlation with employment) and near total lack of visibility on consumer spending or WFMI's demand elasticity leave them unable to recommend ownership of the shares.

Jeffco has lowered FY09 EPS estimate to $0.85, their prior worst-case scenario. They now forecast FY09 comps of -2.3% and 9 bps of margin contraction on related de-leveraging as they anticipate a steep fall off in spending by Whole Foods' consumers who are under mounting pressure from declining asset prices and falling disposable income.

The company's balance sheet is a growing concern, especially in the near term. Whole Foods had $25 million in cash-on-hand and approximately $135 million in availability on its credit lines as of 3Q. Firm notes they are unable to predict with accuracy the ability of Whole Foods to raise cash or reduce capital spending (lease adjustments/cancellations, supplier support etc.), but the issue, especially in a highly unsettled market and with no assurance from the company, is enough to make them negative on the stock, especially in the near-term.

Notablecalls: Jeffco's $9.50 tgt is bound to generate heavy selling interest in the name, I suspect.

I see the stock down 10%+ today.

Citigroup (NYSE:C): This is going to hurt

Hearing Goldman Sachs has reinstated coverage on Citigroup (NYSE:C) with a $11 tgt within 6 months; Also added to Conviction Sell list.

Notablecalls: This is going to hurt C

Mosaic (NYSE:MOS): Cargill Standstill Expires Wednesday October 22. Mosaic Buyout in the Offing? (Actionable Call Alert!)

Soleil's Gulley & Associates is out with a noteworthy call on Mosaic (NYSE:MOS) noting that Cargill's four-year standstill re Mosaic expires this Wednesday. The expiration sets up the possibility that Cargill could accept the gift that "Mr. Market" is presenting: accretively
increasing its ownership stake in Mosaic.

How accretive? Buyout of the 35% minority stake could boost Cargill earnings by more than 20%, given the fact that Mosaic is currently trading at just 2.7x consensus calendar 2009E EPS of $12.25.

Knowledgeable buyer. Given Cargill's extensive knowledge of the global grain markets, any action it takes with respect to its Mosaic ownership position will be closely watched. Cargill is a leading global grain processor and one of the largest private companies in the U.S., with F2008 sales of $120 billion and net income of $4 billion.

Mosaic shares are down 80% from the mid-June peak of $163, during which time the S&P 500 is down 30%. With Mosaic's equity market cap of just $15 billion, down from the peak of $72 billion, the 35% owned by the public is currently worth just $5 billion, down from the peak of $25 billion.

Mosaic currently accounts for roughly half of Cargill earnings:
- Cargill reported 1QF09 net profit of $1.5 billion
- Mosaic reported 1QF09 net earnings of $1.2 billion; 65% of which is $0.8 billion, approximately half of Cargill's $1.5 billion.

Quoting from Mosaic's F2008 10-K filing filed July 29, 2008:
"Standstill provisions in our Investor Rights Agreement with Cargill restrict Cargill from acquiring additional shares of our common stock from our public stockholders and taking other specified actions as a stockholder of Mosaic. These restrictions will expire on October 22, 2008. Following the expiration of the standstill period, Cargill will be free to increase its ownership interest in our common stock."

With Mosaic currently trading at a P/E of just 2.7x, Cargill's buyout of the minority interest it
doesn't own should be highly accretive to its net earnings. Firm ran twocases, at $50 and $82.5 per Mosaic share.

Maintains Buy and $127 tgt on MOS.

Notablecalls: This call sets up MOS as a short-term Actionable Call. I think the Cargill (65% owner of MOS) thing has gone unnoticed by the market here and will be in the spotlight as the standstill expires this week.

I think the stock could trade towards the $40 level as soon as today (with a little help from the market). I really think this comment can produce an explosive move in MOS this week as words starts spreading. Would be an ideal reason or a way to put some fire under the shorts.

Sunpower (NASDAQ:SPWRA): Downgraded at Citi and Merrill Lynch

Sunpower (NASDAQ:SPWRA) has some nasty comments from several tier-1 firms:

- Citigroup notes that following through on their call into what they thought would be the last good Q before big risk develops, they are downgrading SPWRA from Hold to Sell taking advantage of ~25% move post-earnings. The Street is already negative on this sector (firm highlighted ’09 supply shock back in May ’08), but this is a 100% stock-specific call. The bottom line here is that they think a big miss is coming in CQ1 as classic signs of inventory risk are developing in its components biz, while CQ4 should represent a multi-year peak in its margin structure. With respect to liquidity, it has access to cheap money through a term-loan but will continue to skate on thin ice as it looks unlikely to generate FCF through C2010. Risks to the call include potential for SPWRA to self-finance projects very near-term, which could mute some channel risk (albeit w/other ramifications). F09 (GAAP) from $2.29 to $1.92, F10 from $3.06 to $2.60. Target $55 to $30 on lower multiple on GAAP EPS.

- Merrill Lynch downgrades the stock to Neutral from Buy and are lowering their PO to $55 from $95, primarily on demand concerns in the U.S. residential solar market. They continue to think SPWR is one of the best positioned solar companies; however it’s difficult to ignore the current macroeconomic environment and the pressures it will put on consumer spending on capital intensive projects like solar. Firm's new PO reflects a 20x multiple on their ‘09 non-GAAP EPS (including options) and is supported by their return on operating capital model.

Though the ITC extension was a major milestone for the solar industry that should drive growth in the U.S. over the coming years, the firm is increasingly cautious on near-term residential solar demand given weakening economic and employment trends, falling home prices, and tightening credit. Sunpower has about 1/3rd exposure to the residential solar market and ~25% exposure to the U.S., which could put estimates at risk.

Sunpower’s component business exceeded expectations on both revenues and margins. Likewise, the company’s 4Q component business outlook was better than management’s prior forecast. However, the firm wonders how much of this is inventory stocking at dealers versus actual sell through given their concerns about residential related solar demand, particularly in the U.S.

- Goldman Sachs is lowering SPWRA tgt to $36 this morning.

Notablecalls: Citi's comments regarding a 'big miss' coming will kill the stock today. Short interest stands close to 40% so the action will be choppy.

Archer-Daniels-Midland (NYSE:ADM): Actionable Call Alert

- Merrill Lynch is upgrading Archer-Daniels-Midland (NYSE:ADM) to Buy from Neutral noting the recent ~40% correction in commodity prices has lowered ADM’s working capital needs and improved the company’s cash flow significantly. This improvement in cash flow has also allowed ADM to repay all the commercial paper ($2.2 billion) it had outstanding at fiscal year end (June). Firm expects commodity prices to continue to moderate, which should strengthen ADM’s balance sheet further.

Raising F2009 EPS estimate on LIFO gains: As crop prices rallied over the past few years, ADM’s earnings have been negatively impacted with nearly $800 million ($0.83 per share) in LIFO charges. With crop prices retreating, they are now estimating a sizable LIFO gain in F2009— $0.32 per share vs. previous $0.05 per share estimate.

Share repurchase possible given cash position: Given that ADM had roughly $2.8 billion in cash and cash equivalents on its balance sheet at F2008 year end (or approximately 25% of its current market cap), and considering the sell off in the stock over the last few months, the firm thinks the company will come under increasing pressure to repurchase shares. They would expect some movement on this front once the company has wrapped up its annual meetings with the rating agencies—scheduled to take place this month.

Notablecalls: I like this call.

- The shares have traded down ~60% over the last 6 months on a combination of factors, including: grain spikes early in the summer following widespread flooding in the Corn Belt; concerns about sustainability of earnings in the near term; concerns regarding demand destruction from higher crop prices, and more recently, concerns regarding the company’s balance sheet and its financial flexibility (MLCO comment)

The end-demand is still there, especially with prices now down. ADM stock has gotten hit along with the AG space but it's quite clear they stand to benefit from lower prices as the are merely processors.

- It's cheap, trading just 6.5x FY09 EPS estimate. Especially with MLCO upping their ests due to LIFO. Free Cash Flow yield stands at a whopping 30%+. Roughly 25% of their mkt cap is cash, so there are NO liquidity issues.

- ADM has managed to repay all the commercial paper ($2.2 billion).

- Catalysts ahead. Not huge ones but it would be nice to see ADM buying back stock here.

ADM's just so much better than the Ferts.

I suspect the stock will trade toward the $18 level today.

eBay (NASDAQ:EBAY): Merrill Lynch downgrades to Sell

Two firms quite negative on eBay (NASDAQ:EBAY) this morning:

- Merrill Lynch is downgrading ebay (NASDAQ:EBAY) from Neutral to Underperform with PO of $19 due to company specific issues and market share losses. They would expect eBay to Underperform the group if the sector rebounds. While their $1.87 EPS for ‘09 is only modestly below consensus at $1.90, with GMV on the threshold of declining, eBay faces an increasing need to restructure the high margin marketplace to drive growth given ongoing slowdown in transactions. A further restructuring of seller fees to attract larger sellers, or a tech. upgrade to better compete with other platforms (AMZN) could drive marketplace margins lower than current estimates. They don’t expect positive 3Q results or 4Q guidance.

- Deutsche Bank notes that while the good news last week was that eBay reaffirmed 3Q guidance (revs of $2.1-$2.15bnn; EPS of $0.39-$0.41), they think the bad news this week may be that the underlying metrics for 3Q and 4Q guidance may be a bit disappointing (owing to a consumer spending slowdown, forex headwinds and structural challenges). Simply put, they think ests could move lower in coming quarters, especially as recent seller checks indicate declining GMV activity. Hence, the firm reiterates their SELL investment rating, and believes that recent value-buyer interest may be a bit premature.

Notablecalls: I suspect EBAY will trade closer to $16 level today. MLCO negative call just ahead of the earnings release is pretty gutsy and usually works.

EBAY's a short above $17.

Apple (NASDAQ:AAPL): Upgraded to Overweight at JP Morgan

JP Morgan is upgrading Apple (NASDAQ:AAPL) to Overweight from Neutral. Apple’s model is far more diverse than previous vintages, and they think the staying power has been underappreciated. With its market share momentum likely intact, Apple in firm's view offers strong relative downside protection to the looming earnings reset that they expect to impact IT Hardware companies in coming weeks and again early next year.

- Diverse model provides staying power. There has been considerable investor concern lately over the Apple model losing steam, particularly if the consumer vertical rolls over. JPM estimates that the company’s total model exposure is about 70-75% consumer, but they think that Apple’s brand and market share momentum offer meaningful buffers to potential macro-driven pressures on the consumer.

- Retail expansion could sustain share gains and international momentum. JPM thinks a major force behind Apple’s growth story will be its diversifying revenue streams. They expect Apple’s penetration of the international markets to be measured in years and supported by the increasing build-out of the retail stores overseas.

- iPhone could lead to the enterprise or other content-rich devices. Firm thinks the iPhone could be a stepping stone to penetrating the enterprise. Also, they could envision the iPhone pushing Apple deeper into the set-top box market as the convergence of voice, web, data, and content continues.

- Expect numbers to come down across the sector, but Apple likely has a backstop beyond the first round. For Apple, they are revising their below-consensus revenue and EPS estimates. Looking to fiscal 2009, revenue and EPS estimates are $36.98 billion and $5.27, versus the Street consensus of $40.26 billion and $6.02.

- Apple trades at 18.8x JPM's calendar 2009 EPS estimate, versus the peer group average of 11.1x. With macro pressures showing no signs of dissipating, they believe it is time to play defense, and they think Apple can avoid having a major problem with the “E” in the price-to-earnings multiple moving through the coming year. Firm expects the company’s model to limit a series of major earnings cuts from unfolding in coming quarters, and they think this should support a valuation gap in Apple’s favor.

Notablecalls: Another valuation call. Things will be bad but Apple will be less bad than others. Does that really convince anyone?

Note that JPM is also upgrading IBM to Overweight with DELL, LXK and NTAP getting their ratings slashed.

Visa (NYSE:V): Upgraded at Piper and Morgan Keegan

Two firms are upgrading Visa (NYSE:V) today:

- Piper Jaffray upgrades V to Buy saying they believe this very high-quality franchise should be oninvestors' short list of stocks to own through this economic cycle. Firm is comfortable with Visa's earnings power through this cycle and over the long-term, despite financial/economic uncertainty in the markets and dollar strength; Visa's intrinsic value will continue to grow at a very attractive rate for many years to come.

Pullback in the share price, even with yesterday's recovery, has greatly improved the risk/reward, in our view, creating an attractive entry point for long-term investors; shares trading at 21x calendar '09 est. of $2.76.

Buffers against economic slowdown: debit (35% of pay. vol), non-U.S. & non-Europe pay. vol, new products, margin expansion on scale, op. leverage. Reducing fiscal '09/'10 EPS estimates from $2.77/$3.26 to $2.66/$3.22 on slower payments volume growth forecast.

Tgt is lowered to $72 from $81.

- Morgan Keegan upgrades V to Outperform noting the shares are down (36%) from highs on concern over economic sensitivity and technical selling pressures; Street 2009 op. EPS Consensus of $2.77 likely to be lower over coming weeks & technical factors could continue to weigh on stock.

They are modestly lowering 2008 & 2009 op. EPS to $2.19 (vs. $2.20 prev.) and $2.68 (vs. $2.76 prev.), factoring in softer global economic environment, currency headwinds, offset by positive pricing, and cost controls

Shares attractively valued at under 21x CY:09 op. EPS; Despite likelihood that US volumes have not yet bottomed & sequential card growth to remain negative in near-term – Morgan Keegan believes the long-term franchise value is highly attractive at current levels;

Notablecalls: Both are valuation calls. I see the stock hitting $62-63 today on these upgrades, if market holds up OK. Note that MoKe is upgrading MA as well on valuation basis.

Sovereign Bancorp (NYSE:SOV): Could a Deal with Santander be Imminent? - MSCO

Morgan Stanley has some interesting comments on Sovereign Bancorp (NYSE:SOV) noting the co is in late-stage talks topotentially be acquired by Banco Santander (already a 24.9% owner of SOV), according to an article published by the Wall Street Journal late Sunday evening. According to the WSJ, a deal could be announced as early as Monday with a deal price of roughly where SOV shares closed on Friday at $3.81. Neither company has commented on the potential transaction.

Selling out at the wrong time for the wrong price?

Firm's initial reaction is that they would be quite surprised if Sovereign management were to sell the company at the current stock price. Friday’s closing price is just 58% of its estimated 3Q08 tangible book value per share of $6.61, and well below where the overall midcap bank group is trading at 1.6x. Their view is that after disclosing and writing-off its poor-performing GSE and CDO investments, the company had put its most pressing problems behind it. Unless the company has not disclosed a material adverse item (which is possible), they see little reason why the stock should be trading substantially below its tangible book value.

Potential Treasury actions a near-term positive: In addition, if the Treasury were to announce a plan to guarantee bank deposits and liabilities through preferred equity, as suggested by MSCO chief US economist, in an effort to restore confidence in the US banking system, SOV’s closing price on Friday may prove to be much too low. Any improvement in confidence in the banking system could indirectly result in a much higher equity valuation for the SOV shares.

Reits Overweight, $9 tgt.

Notablecalls: Just fyi - not making a call ahead of a potential announcement.

Amusing:

10/10/02 - low in SPX and end of tech bear mkt
10/10/07 - all time high in SPX
10/10/08 - today

Apple (NASDAQ:AAPL): Another Bite of the Apple - BMO Capital

BMO Capital is out cautious on Apple (NASDAQ:AAPL) having recently visited or spoken with sales reps at 32 Apple and 30 AT&T stores in various parts of the US and the UK. Apple is not escaping the gravity of weakening consumer spending, in firm's view.

Negative – for the first time in years, store reps are indicating sales have slowed, in CPUs in particular. While the data was not universal, about onethird of sales reps they spoke with noticed some slowing, which is a significant change from past checks. Conversations with AT&T sales reps indicated no recent change in iPhone run rates, but the firm has elected to cut their FY2009 iPhone forecast nonetheless.

In recent visits to 32 stores across the country, 11 indicated that sales had slowed in the past 30 days, while 20 indicated that sales had stayed about the same, and one indicated that sales had improved. While store checks might not seem that negative, over the past five years of checking Apple stores, wthey have received consistently steady and/or improving sales comments. This is the first time they have heard store reps describe slowing sales since Apple began its stock run five years ago. In addition research provided by ChangeWave Research indicate slowing sales.

How Might Apple Guide for the Dec Q?

The question is not if Apple will guide below Street estimates, but how far will Apple guide
below Street estimates. For example, for the September quarter, the firm suggested that Apple would guide to $1.00 when Street estimates were approximately $1.30 – too great of a delta, and the stock sold off. For this quarter, with the inclusion of significant deferred revenues, they believe estimating quarterly guidance is more difficult.

BMO's analysis suggests that Apple would guide to around $10.0 billion in revenue vs. the Street at $10.8 billion and their $10.1 billion estimate. They also believe that Apple will guide EPS in the range of $1.45-$1.50, compared with current Street estimates of $1.71 and their $1.60.

Maintains Outperform on AAPL due to stock’s recent decline relative to their target price of $120.

Notablecalls: Not making a call here but letting you know it's out there.

Reluctant

I'm reluctant to put out any calls on the page in this environment. Don't think analyst calls get much attention.

NC

Early Morning Tid-bits:

- Goldman Sachs downgrades First Solar (NASDAQ:FSLR) to Sell and adds to their Conviction Sell List

NC: The stock will get hit today in a major way. There is little support for FSLR in this mkt. I would not be surprised to see the stock hit par in the coming months. Note that SPWR gets the boot from GSCO as well. Piper lowers FSLR tgt to $250 from $350.

- Morgan Stanley reits Overweight and $175 tgt on Monsanto (NYSE:MON) noting soft commodity price bearsare lurking around the wrong stock. While they do not foresee a $3 bushel of corn, the firm notes they have always modeled Monsanto's pricing power as if the farmer was only going to realize $3 corn (and $8 soybeans). The market appears to have a dispositive view (i.e., expecting $3 corn and for it to result in demand destruction for Monsanto’s products)

Firm believes that farmers will earn a 72% ROIC on the triple stack in F09 at $3 corn (and would still earn a 45% ROIC at $2 corn) and therefore see little risk of demand destruction should new crop corn prices decline further from their present position.

NC: I think MON should be on your bounce radar today.

- FBR is upgrading Freeport-McMoRan Copper & Gold, Inc. (NSYE:FCX) to Outperform with a $85 tgt with a view that the stock is oversold and that the risk/reward is now compelling. Valuation multiples have contracted significantly, and free cash generation is strong even if copper prices were to contract further.

NC: This is a major call in my opinion. When was the last time you saw this one upgraded? FBR has been skittish on the space for quite a while. FCX is trading around 5x 2008/2009 EPS. This one could reach $48-$50 level in a jiffy.

- RBC Capital is out with some positive comments on Research in Motion (NASDAQ:RIMM) saying the BlackBerry 9530 Storm, RIM's first widescreen/touchscreen Smartphone, is expected to be announced this week (possibly Wednesday in London) in a joint Verizon/Vodafone/RIM press conference. Launch still expected 1st week November; they expect 850k Storms shipped Q3/Q4, and 3-4M units FTM. Exclusively at Verizon/Vodafone (who do not carry the iPhone), Storm may be aggressively marketed by these carriers and RIM into the holidays.

Maintains Sector Perform and $90 tgt.

NC: I think you should add RIMM to your bounce list. The stock acted very nicely yesterday. We may get some follow-through today.


Hope it helps,

NC

Research in Motion (NASDAQ:RIMM): Deutsche Bank lowers tgt to $50 from $70

Deutsche Bank is lowering their price target on Research in Motion (NASDAQ:RIMM) from $70 to $50 on concerns that the Bold will not ship on time at AT&T, causing RIM to possibly miss its quarter. The transition to a consumer-facing company has proven more challenging for RIM than expected. Pricing and margins are likely to remain volatile, meriting a Sell rating.

Firm thinks AT&T is unlikely to finish testing the new 3G Blackberry before the end of October, which makes it likely that the Bold will not ship until November, later than the company expects. While the Storm seems to be shipping on time at Verizon, they do not expect it to be readily available until mid-November and it is unlikely to be sufficient to offset the delay in the Bold. This raises the probability, in firm's opinion, that RIM will miss their November quarter guidance.

They thinks RIM may have bitten off more than it can chew. The company is pushing up against its limits in developing a 3G stack and other software for its new devices. The shift to a consumer-centric model has also eroded gross margins, increased ad expense and leaves the company further exposed to product cycles.

Notablecalls: Ouch. Just letting you know it's out there.

Mosaic (NYSE:MOS): Bounce?

Several tier-1 firms defending Mosaic (NYSE:MOS) following results announced last night:

- Morgan Stanley notes the "miss” relative to expectations came on the COGS line, as Mosaic's revenue came in above our expectations despite lower than anticipated volume. Not surprisingly given the widely reported $100 decline in DAP prices over the past month (i.e., trade magazines have been reporting prices around $1,00 per tonne for several weeks now), Mosaic is choosing to protect price by reducing DAP production during what it believes will be a limited period of demand softness. Morgan Stanley expects this move to shore up recent DAP price weakness and continues to note that on a go forward basis lower sulfur production costs are largely offsetting the current reduction in DAP prices. Importantly, potash results were inline with firm's expectation and the company made no alterations to its potash production expectation. Finally, given the global economic environment, what should not be lost in all of this is that Mosaic now has ~$700 million of net cash - a substantial cushion that makes it more than capable of matching supply with demand to protect price.

Given the present equity market environment, investors will likely be overly disturbed by the "miss" and cast a more skeptical eye on the production cut (i.e., will it be enough to maintain status quo DAP price levels?). That said, with Mosaic shares trading down ~20% in the post-market to $55 per share, they believe that a near-worst case scenario is now priced in for the balance of F2009.

Maintains Overweight and $155 tgt

- Citigroup maintains their Buy and $150 tgt noting that combining the macro environment and guidance cut, MOS shares are likely to trade-off today, but farmer economics indicate underlying farm demand for fertilizers should remain strong over the full application season. In firm's opinion, the market will have a difficult time focusing on the expanding margins until phosphate prices stabilize, which is why they view the production curtailments as a positive, since this should shorten the inventory adjustment period and tighten the market for calendar 2009;

Notablecalls: I think MOS represents a bounce candidate for today. Note management conf call started today at 11:00 AM ET - suspect they will do their best to soften the hit.

Looking to buy in the $56-$59 range.


UPDATE: Merrill Lynch downgrades the Ferts:

Cheap stocks likely to get cheaper – downgrading fertilizers We continue to believe that low global grain inventories will create a favorable multi-year demand environment for input providers and that it will take several years for significant new capacity to come on line. While the stocks remain inexpensive they appear to be driven more by price and earnings momentum than by valuation. With phosphate prices falling, nitrogen prices peaking and potash prices rising less than expected there is considerable uncertainty surrounding the near-term earnings outlook as underscored by Mosaic’s earnings miss and downward guidance. The near-term fertilizer demand outlook has become more uncertain as the recent decline in corn prices has reduced the margin advantage over less fertilizer intensive soybeans. We are reducing our ratings from Buy to Underperform on Mosaic, Potash Corp., Agrium, Intrepid, CF, and Terra.

NC: I continue to view the space as a bounce play here. MLCO call is more of a sentiment call than based on any data. Takes a special (didn't say retarded!) person to downgrade a stock following a downside move of $160 -> $55.

Hartford’s (NYSE:HIG): Capital Concerns Look Significantly Overdone - Morgan Stanley

Morgan Stanley recommends investors take advantage of what they believe is unwarranted
pressure on Hartford’s (NYSE:HIG) stock reflecting escalating concerns over the company’s capital adequacy.

While there is little doubt the company has taken some substantial hits this quarter, they still arrive at the conclusion that its capital position is more than adequate to support its ratings.

Even if we were to see further market deterioration, driving the need for incremental capital, MSCO's bear-case would still suggest substantial upside in the stock from present levels.

Capital Concerns Appear Overblown… The outlook for Hartford’s financial strength ratings were reduced to negative from stable at Fitch, which triggered concerns among investors over whether it has sufficient capital. Analysis leads the firm to the conclusion that these concerns are largely unwarranted, with other companies such as Principal and Genworth, even Lincoln, likely to face capital challenges before Hartford.

Valuation now looks Compelling: Hartford is facing highly challenging credit and equity market conditions, which is leading the firm to reduce estimates for both 2008 and 2009. However, even after taking a conservative view on the fundamental outlook, the valuation looks compelling, trading at just 4.7 times 2009 estimate and 75% of Y/E 2009 expected reported book. To justify where the stock is presently trading, they estimate it would need to raise $7.0 billion of equity at price of $30, which illustrates just how far the stock is now trading away from view of its intrinsic value.

What’s next: Firm expects management will provide an update to investors on its capital position through a press release in the coming days. Beyond that, earnings are due to be released on October 29.

Notablecalls: Worth a bounce, no?

TARP Update -- Humpty Dumpty Is Dusting Himself Off - Keefe

Keefe Bruyette notes Tuesday was a relative quiet day in Washington but initial indications seem to confirm their belief contained in Tuesday morning's note that they believe that Congress will try to resuscitate the TARP later this week.

Negotiations on resurrecting the TARP were low key on Tuesday. However, the consistent theme of comments throughout the day was that Congress would try to bring the TARP bill back for another vote.

The pace of negotiations will likely pick up on Wednesday. One item that seems to have some traction and that may get added to the bill is increasing the deposit insurance cap from $100,000 to $250,000. That should make the bill more popular with several members as this idea is seen as a protection for Main Street. Both presidential candidates support the idea.

Businesses that could be affected if the credit markets continue to seize up have become more engaged and are pushing members who voted "no" to support the plan if it comes up for another vote. This is a very important move as it changes the focus of the TARP from a bailout of Wall Street to that of economic stabilization for the entire country and should help give political cover to members of Congress who have been wary of being seen as bailing out Wall Street.

There are also reports that phone calls to congressional offices in support of the plan picked up after the vote failed on Monday.

They think a vote on Thursday in the House is a little optimistic and even Friday is a stretch. They think it is more likely that a vote will come over the weekend or on Monday.

Notablecalls: Fyi

Apple (NASDAQ:AAPL): Pullback in Apple shares overdone – reiterate Buy - Goldman Sachs

Goldman Sachs is out defending Apple (NASDAQ:AAPL) noting broader Broader concerns about softer consumer demand will continue to cause Apple shares to be volatile in the near term. However, the recent sell off creates an opportunity as they think Apple will outperform the group through the end of the year, driven by iPhone unit upside and a strong product pipeline. Firm thinks yesterday’s -18% decline (underperforming S&P 500 by -910 bps) more than captures the concerns over Mac growth in a weakening spending environment, making Apple shares attractive at current levels. In the intermediate-term, they think Apple shares could move back to the $145 level, applying a 1x PEG multiple on calendar 2009 earnings estimate recognizing iPhone as current period revenue.

Implications
In the near term checks suggest that Apple will meet GSCO's 2.7M unit Mac estimate and probably show some upside to iPhone unit forecast of 4.26M. This, combined with favorable component prices, should drive solid gross margin and earnings at least in line with GAAP earnings estimate of $1.07. At the same time, they continue to expect Apple to roll out new products over the next several months, including a new line up of notebooks within the next few weeks. Valuation

Goldman's 12-month price target of $200 is based on target P/Es, growth-adjusted earnings multiples, cash flow metrics, and DCF.

Notablecalls: I suspect AAPL's due for a bounce here. It still has $6-$7 EPS power in the n-t and possibly $10 EPS power in the L-T.

TARP -- Putting Humpty Dumpty Back Together Again - Keefe

Keefe, Bruyette notes that on Monday, the House rejected legislation creating a Troubled Asset Relief Program, 205-228. In the wake of the vote, Congress is trying to pick up the pieces and pass the bill. Firm thinks it will take a few days to put a deal back together. In the end, they continue to believe that a bill will be passed.

Washington failed for several reasons to pass the TARP. However, Wall Street's reaction to the failure will, in Keefe's opinion, move Congress to finish the bill in several days.

Political leadership in both parties needs to do a better job of convincing voters of the need for the TARP and they think the market's reaction to the bill's failure will help them make that case.

Cooler heads will, in their opinion, prevail over the coming days. House members will need a few days to decompress but the firm continues to believe that a bill will pass in the coming week or two.

They think the biggest question is how Congress will pass a bill—what will it look like? Increased deposit insurance coverage could be part of a revised bill.

Notablecalls: Hence we are in green territory in the pre market.

My game plan for the open/pre mkt

I suspect we will get a nice bounce off the open:

- Wachovia (NYSE:WB) looks horrible but apart from that I see no real reason to be overly pessimistic here.

Whoever buys it will end up with a large mkt share. Bullish for the L-T. I wish it will be Wells buying WB. Citi has too many problems.

The only problematic area is tech with fin. exposure. So I'm not sure I will be buying Research in Motion (NASDAQ:RIMM) just yet. Although they have confessed already and got its beating.

Even Apple (NASDAQ:AAPL) is worth a nibble in the $115-$117 area. AAPL's not my call but coming from a heavy hitting tier-1 trader on NCN (Notable Calls Network).

Hope it helps,

fyi

Apple (NASDAQ:AAPL): Actionable Short Call

Apple (NASDAQ:AAPL) shareholders are going to bleed from their eyeballs today:

- Morgan Stanley is out with a downgrade to Equal Weight (from OW), lowering their tgt to $115 from $178 revising FY09 EPS growth to 6% (9% below the consensus forecast) on the back of several concerns. First, PC unit growth is decelerating and the remaining source of growth is increasingly in the sub-$1,000 market where AAPL does not play. Second, even in the best of scenarios AAPL’s EPS growth will decelerate meaningfully from June quarter levels. A combination of tough compares and investments in iPhone growth drive December quarter EPS to a decline of 8% YoY (down from +29% EPS growth June). Lastly, they believe multiples for high growth stocks will continue to compress in the current environment and in the context of 6% FY09 EPS growth assumption (and consensus estimate of 15.5%) they don’t believe AAPL is immune to this trend.

Firm continues to believe AAPL’s 2-3 year market share story is intact (but now more back-end loaded) and if the market is willing to look through near-term estimate reductions (and increasingly at cash flow), the stock could work from recently reduced levels.

- RBC Capital is downgrading AAPL to Sector Perform on: 1) reduced visibility to growth, margins; 2) elevated risks to valuation.

Sept RBC IQ/Changewave data (4,300) shows Mac purchase intentions suddenly moderating, with 29% intending to purchase a Mac laptop next 90 days, down from 34% Aug. 26% intend to purchase a Mac desktop, down from 30% Aug. These are the biggest declines in 2-1/2 years. In a separate survey, Sept RBC IQ/ Changewave data (4,100) shows 40% of consumers plan on spending less on electronics next 90 days, the weakest outlook ever seen.

While Mac momentum remains strong (16% Q/Q, 34% Y/Y) RBC Q4 Mac outlook becomes 2.9M (3M prior) and we see elevated risk for disappointing Q1 guidance, below street at $11B and $1.75. They still expect Apple's global PC share to rise to 4.1% CY09, from 2.9% CY07; F09/F10 iPod unit outlook drops to -3% Y/Y (prior 10-12%).

Notablecalls: I think AAPL could test the $120 level today and there could be risk to even lower levels. It's all about what RIMM had to say. Not to mention DELL's recent comments re: demand and pricing.

Actionable short anywhere above the $123 level.

These two were the biggest AAPL bulls.

Research in Motion (NASDAQ:RIMM): Colour on qtr

Research in Motion (NASDAQ:RIMM) in focus today.

Let's start with the downgrades:

- Deutsche Bank lowers their rating to Sell from Hold, lowering their tgt to $70 from $120. RIM has become more dependent on hardware sales with time. This means that they have to keep running to keep up with changes in consumer tastes and risk missing numbers if their products do not hit. The company stated they expect operating margins to improve as R&D spend decreases, but also seemed to indicate ad spending would continue to grow. The company guided Q3 gross margins to 47% and expect the margins to move into the mid 40s in FY10. This is well below DB's estimate of 50%. RIM pointed to a large number of new product lines for the cut. In part, the firm thinks this is indicative of their struggle with 3G technologies among other issues.

- RBC Capital is downgrading RIMM to Sector Perform from Outperform, lowering tgt to $90 from $165 for 2 reasons: 1) reduced visibility to recovering margins; 2) increased risks to growth from the macroeconomic environment.

RIM's strong fundamentals (great products, competitive advantages, execution) and momentum
from RIM's pending product cycle remains; However, RIM's thrust to invest in market share ('land grab') " pressuring GMs 370bps Q/Q and 670 bps F10 -- caught them/market by surprise, raising risks to valuation.

Reflecting a more conservative outlook, they are lowering F09/F10 outlook to $11.3B rev/$3.62 EPS ($11.4B, $3.84 prior) and F10 to $16.4B rev/$4.68 EPS ($17.5B, $6.00 prior).

The upgrades:

- Raymond James upgrades RIMM to Outperform from Mkt Perform while cutting their tgt to $110 from $140.

- CSFB is upgrading RIMM to Neutral from Underperform noting that following the company’s F2Q results, they are lowering their EPS estimates by 5%/2% for FY09/FY10 to $3.64/$4.58 and revising price target to $80; however, given that their margin concerns (now evident), are likely to force Street numbers toward their already below consensus estimates, they raise rating to Neutral.

Within a robust smartphone market (expect 2H08 and 2009 growth of 60%) they believe that RIM’s share will be flat globally at about 14%. This lack of share gains is in contrast to recent years and is driven by our expectations for share loss at AT&T in the U.S. (where they believe share is unsustainably high at around 70%) especially given the success of the 3G iPhone. Given this, the firm now projects FY09/FY10 volumes of 26.7mn/40.8mn and expect revenue growth to slow to 53% in FY10, structurally lower than the triple digit growth seen in recent times

On their new estimates, RIMM shares trade on a P/E of 17.5x which they believe is reasonable especially given that consensus expectations may now become more realistic.

The positives:

- UBS is keeping their Buy rating and $165 tgt unchanged noting gross margin pressure now make RIMM more of a top line conviction play.

- JP Morgan is keeping RIMM at Overweight saying that though they advised waiting until after the F2Q09 print before buying RIMM on potential weakness, they are disappointed that the weakness originates not in a temporary setback owing to a product transition but in a permanent step-down in gross margins. That said, they believe this pullback is an excellent entry point into a tremendous growth stock, with the multiple at a multiyear low, even using significantly lower FY10E EPS.

- TD Newcrest believes the company is making a bet on market share at the expense of gross margin. They understand the bet and think it is a smart move. But overall, the Street tends to be short sighted and this explains the slaughtering of the stock in after hours trading following the release of these results. Firm's updated forecast shows slightly lower EPS, but they think RIM could still grow faster than reflected in their estimates. At these prices, they are very bullish on the stock despite target price reduction to $140 from $170 previously.

Notablecalls: Well, RIMM's now below the $80 level I was talking about couple of days ago. Earnings power is still around $5-6 per share. I suggest you wait til Monday or even Tuesday to make some buys in the low $70's.

Corrections Corporation of America (NYSE:CXW): Bounce candidate following BofA defense?

Bank of America is out with an interesting defense on Corrections Corporation of America (NYSE:CXW) noting that over the past week, they have not come across any negative news items or concerns that would justify the -11.6% move in CXW’s stock (versus +0.3% for the S&P500).

Actually, to the contrary, siance its presentation at their conference (Sep 16), there have been several positive data points from CA that they believe provide incremental visibility into earnings over the next several quarters while also eliminating the CA overhang concerns from last quarter’s earnings call in early Aug.

Positive CA data points: 1) inmate re-ramp at Tallahatchie facility in sight (incremental EPS visibility into 4Q while eliminating overhang concerns from 2Q earnings call); 2) inmate transfers since Aug 1 running at levels that are in-line with 1H08 levels (which they believe is above management’s expectations); and 3) CA budget signed with no material changes to CDCR’s operating budget (versus January’s proposal).

Firm would use recent weakness, which they believe to be unfounded, as a buying opportunity. They believe the recent string of positive data points from CA point to greater earnings visibility through 2009 and highlight a CA-based catalyst roadmap through year-end.

Reits Buy and $32 tgt, offering potential 37% return.

Notablecalls: May get a bounce out of this one.

MEMC Elec (NYSE:WFR): Bounce play on RBC upgrade and lowered bar

RBC Capital upgrades MEMC Elec (NYSE:WFR) to Outperform from Sector Perform with a $53 tgt based on a likely renewal of demand growth in the solar sector led by pending passage of an 8-year extension and expansion of the U.S. solar tax credit program and a compelling valuation which they believe indicates over-pessimism baked into current share prices. Firm notes their upgrade is in conjunction with their macro report upgrading the entire solar sector, as they believe sector stocks are near a bottom. Their caution on WFR this year has been predicated on silicon oversupply risks in 2009 exacerbated by the company's execution issues. But they believe the fundamental headwinds in semi pricing, deterioration of spot poly prices in 2009 and a limited upside to Q3 #s from hurricane Ike impact is more than baked into the shares - trading at ~6x FY09E of $4.84. While FY09 sensitivity analysis is difficult given minimal mgmt biz unit disclosure, the firm believes current multiples reflect no growth, an unlikely prospect given oversupply timeframe likely shifted to 2H09 or 2010 on U.S. subsidy action and potential additional catalysts from even more robust U.S. energy policy with a new administration.

RBC highlights the company's $1.4B cash position, no debt, and ~$150M cash flow per qtr. A 6x forward multiple represents an historically low mark, even looking back to previous semi cycle downturns and large discount below the 9-11x multiple of comps such as Wacker Chemi and Shin-Etsu.

Q3 Outlook: they believe the shutdown of the Pasadena plant for Hurricane Ike soaked up the remaining buffer in mgmt's Q3 guidance. Although the plant was not damaged, raw material deliveries were delayed and the firm believes some labor was impacted as they took care of their families. They are adjusting their Q3 estimates to Rev/EPS of $573M / $1.06 from $603M / $1.13.

Notablecalls: Senate passed alt energy extension 90-2... the house will vote with the senate most likely.. Spain ups susidy to 500MW from 300MW... finally some relief for the solar names.

I spoke to one Solar watcher this morning who noted the only other sector he can compare Solar to is the mobile sector that took off in the 90s... it had its downturn in early 2000s (most names being cut down to 1/3 of their value) but eventually rebounded due to fast growth and M&A.

With WFR guiding today..I think it represents a nice potential bounce play. The bar has been lowered.

Research in Motion (NASDAQ:RIMM): FQ2 preview - JPM

JP Morgan is previewing Research in Motion (NASDAQ:RIMM) noting that at the threshold of a new product cycle, they would remain buyers of RIMM but the possibility of conservative F3Q guidance (associated with uncertain product timing) could present investors with a more attractive entry point. Firm believes the uncertainty will be resolved by the Feb. quarter, by which time, they believe RIM will be poised to capture percentage points of market share from incumbent handset OEMs, and demonstrate earnings leverage off a new level of operating expense.

JPM expects F2Q09 results to meet or beat expectations, owing to continued strength in Pearl and Curve sales and strong early adoption of the Bold, internationally. Firm looks for RIMM to report $0.85 GAAP EPS on sales of $2.95bn, which puts them slightly below consensus (but without strong conviction). They acknowledge cyclical headwinds but believe enterprise adoption remains solid, and consumer adoption is accelerating. Channel and end-market results reveal massive share gains. JPM looks for RIMM to ship 6.2m units, at a blended ASP of $349 and for 2.63m net subscriber additions. A massive 28% q/q increase in operating expense was signaled in prior guidance. They see modest risk to gross margins, offset by potential unit shipment upside.

They expect RIMM’s new product cycle to propel the firm into a leadership position in the global handset industry. There is, however, near-term risk relating to the timing of product introductions – which could lead RIM to issue cautious F3Q guidance. However, the firm believes the uncertainty will be fully resolved by F4Q09. They are looking for F3Q guidance to align with their forecast of $0.98 GAAP EPS on sales of $3.0bn, 7.3m units, $346 ASPs, 2.94m net subscriber additions.

Maintains Overweight RIMM is trading at 18.6 times FY10 PF EPS estimate of $5.25, in line with the mean of coverage, but a 41% discount to its two-year historical average of 31.5 times.

Notablecalls: RIMM's a niche player but growth is surely slowing. While everyone is still talking about the growth potential outside of US, it's becoming clear Bberry will not be as successful there. Also, now we have HTC, NOK and even GOOG coming out with similar QWERTY handsets.

I have been talking to one savvy RIMM watcher who thinks RIMM will need to hit $80 for him to become more positive on the name. I tend to agree with him here.

RIMM's a great trading vechicle but n-t risk is to the downside.

Hansen Natural (NASDAQ:HANS): Expect a deal of some sort between HANS and KO to happen by tomorrow - UBS

UBS telling clients they expect a deal of some sort between HANS and KO to happen by tomorrow.....thinks most likely scenario is a distribution deal with an equity stake of 30-40% in which case stock trades to mid to high 30's....thinks outright acquisition is still a possibility (worth $50)

Notablecalls: Fyi. Could fly.

PS: I was pinged on HANS saying this call was actually a rehash of UBS' last week note. So the comment it ripped out of context. Disregard. Sorry.

Apple (NASDAQ:AAPL): Piper Jaffray raising Sept qtr ests - fyi

Piper Jaffray is out positive on Apple (NASDAQ:AAPL) raising estimates for September to EPS of $1.17 vs. Street at $1.11, and revenue of $8.37b vs. Street at $8.07b.

This quarter the iPhone will, for the first time, account for a meaningful percentage of booked revenue. Last quarter (June) it was 4%, and this quarter (Sept) they are modeling for it to be 21%. Given iPhone should account for 21% of booked revenue in this quarter, they are also publishing a metric that assumes the entire iPhone sale is accounted for in the quarter the phone is sold. Firm is calling this booked EPS and revenue. New booked EPS is $1.60 and booked revenue is $10.15b in the Sept. quarter.

How They Arrive At 2.8m Macs. Through the first two months of the Sept. quarter (July and Aug.), Mac NPD data is up 32% y/y. In the month of July, NPD data was 43% y/y and in Aug. units were up 23% y/y. However, they note that Aug. was a tough comp, as a redesigned iMac was released in Aug-07. But even if one assumes continued y/y growth of 23% in the month of Sept. (which they believe is conservative), the overall y/y growth rate for the full quarter would come in at 29%, implying 2.8m Macs in the Sept. quarter.

Piper's $250 price target is based on 27.4x (from 27x) CY09 booked EPS of $9.14.

Notablecalls: Note that JMP Securities was out with some cautious comments on the Macbook Pro demand. Just a fyi. No call here.

The Pakistani example of banning short sales:

A smart hedgie pinged me with the following:

An extreme example comes from Pakistan where the local SEC responded to a stock slump last month by banning short selling and limiting daily price declines to 1% while allowing them to rise by 10%. The initial reaction was a massive 8.6% one day rally followed by 15 straight days of slumping prices amid extremely low turnover, the worst such period for that market in several years. As rioting investors stormed the Karachi Stock Exchange last week, the rules were rescinded."

Notablecalls: fyi

Morgan Stanley is going from bearish to bullish equities

Morgan Stanley is going from bearish to bullish equities. Firm's upside for the S&P 500 is 1300 by end 08 at a minimum, with scope to trade higher depending on the strength of policy action to stabilize the financial system.

This is not a call that the bear market is over, or even that we have seen the lows in the current cycle, but for the rest of the year they believe the improvement in risk tolerance will outweigh the downgrade cycle in earnings. Morgan Stanley believes the risk/reward profile of the market has changed due to the following factors:

Global policy makers have woken up to the severity of the financial crisis and are expected to continue to respond aggressively as growth and systemic risks
dominate inflation concerns.

The last strands of complacency have disappeared with severe declines in emerging and non-US equities, representing a capitulation on the unrealistic decoupling theme. This has also been reflected in the change in loss leadership within the US market, with global cyclicals underperforming.

Risk tolerance is at extremely low levels as reflected in collapsed Treasury yields, elevated VIX, and considerable widening in corporate and LIBOR spreads. Aggressive and concerted global policy action, especially specific to financials, could provoke a sizeable improvement in risk tolerance.

On their fair P/E for the S&P 500 of 15.2, the implied earnings for 2009 is $79. They see this as realistic, with moderate rather than substantial downside risk.

The speed of global consolidation (i.e., BAC/MER) within the financial sector, together with regulatory intervention, will help put a floor under solvency risk even though asset quality deterioration and deleveraging will take time to work through. Firm is moving overweight Financials from neutral while reducing Healthcare overweight. They are buying NOK, COH, GS and HIG and selling SGP, DIS, MSFT and AIG.

Notablecalls: fyi

Raising Banking Sector to Overweight -RBC Capital

RBC Capital is moving their rating on Banking Sector to Overweight:

Gathering of Powerful People: Thursday night Congressional Leaders, The Treasury Secretary and The Federal Reserve Chairman jointly announced a cooperative effort to get ahead of the credit crisis. The plan is expected to be delivered to Congress in the next 24 hrs:

Expected Key Components of Plan: 1) Create a mechanism that would take bad assets off the balance sheets of all financial companies 2) create federal insurance for investors in money-market funds 3) ban short selling of financial stocks through year end.

Resolution Trust Corporation (RTC) II: RBC anticipates a key component of the Treasury plan will be the creation of a govt. entity that will buy bad assets similar to the RTC in the late 80s-early 90s.

The Devil is In Details: The headlines are very appealing to bank stock investors but the critical information about the plan will be in the detail. Important details include determination of sales prices of bad assets, capitalization and funding of RTC II, what assets will qualify to be sold to
RTC II, and length of the ban on shorting financial stocks.

Short Sellers Run Out of Town: A key component on our group weighting change is the proposed ban on shorting bank stocks through yr end. Heavily shorted stocks will be targeted by aggressive buyers to squeeze the shorts, in firm's view

The expected plan by the govt. will lead to higher bank stock prices through the end of the year. High equity prices will allow companies with rising credit problems to raise additional equity to handle the expected higher charge-off levels. The ability to dump assets to the govt. will
enable companies to return to normality quicker than earlier anticipated.

RBC believes the US govt's plan will lead to an acceleration of M&A activity. They also believe since the US Govt. is creating new rules to solve this crisis, temporarily suspending purchase accounting for acquisitions could be implemented. Pooling of interests deals will allow big problem banks to be acquired by healthier bank.

Notablecalls: Money center banks (JPM, WFC maybe even BAC) look like the safest bets. If you want more risk, try some GS. High octance bets include WB and MS.

Constellation Energy (NYSE:CEG): Downgraded to Hold at Citi

- Citigroup's Greg Gordon deals a blow to Constellation Energy (NYSE:CEG) today after the co confirmed that its firm, underwritten $2Bn credit facility commitment announced on 8/27 remains in effect. However, S&P placed the company on CreditWatch, essentially giving CEG an ultimatum to raise $750mm-$1bn of cash through equity or asset sales, or sell the company outright. Absent action in the short term, S&P would lower CEG’s rating to subinvestment grade, which would put CEG out of business given the collateral requirements and lack of willing trading counterparties that would result.

What's Next — CEG has retained Morgan Stanley and UBS to evaluate strategic alternatives. CEG is in active discussions with potential strategic partners. The company is for sale either in part or in whole. Options range from issuing equity or convertible equity, selling off the more liquid positions in the trading book, selling merchant assets, or finding a merger partner for the entire company. They think CEG will choose its course of action in the next week or face the above-mentioned credit rating downgrade.

Conclusions — Firm's Buy rating was contingent on several factors, including CEG's navigating the ratings review process, avoiding a material ratings downgrade. CEG will now have to move to get the best deal available in a limited time frame, like Merrill Lynch did with BofA. They believe CEG’s assets are worth $50/share, but given the circumstances the company may dilute shareholders below our valuation, be sold at a discount to intrinsic value or not reach a deal at all. The firm is therefore lowering their rating from Buy to Hold with a $40 target.

Notablecalls: Well, Greg your clients must be thrilled. You downgrade the stock after sticking to your $95 tgt and Buy rating all the way down.

The best part?

Remember how CEG got murdered on Tuesday? The slide from $47 to $13 intraday. Greg wasn't in to answer customer inquiries. Gotta love it. Wonder how long you will be able to hold on to your job at Citi, really.

There is no question in my mind this downgrade will hurt the stock once more. The credit agencies have the power to put CEG out of business.

American Intl Group (NYSE:AIG): Colour on FED news - CSFB

CSFB comments on American Intl Group (NYSE:AIG) after the Federal Reserve announced that it was lending up to $85 billion to AIG, due mainly to the fact that the Federal Reserve Board determined that a disorderly failure of AIG would create too much turmoil to the global financial markets.

# This announcement raises several questions and/or observations specific to AIG:

# 1. The size of the credit facility suggests that the liquidity/capital needs at AIG may be substantially greater than we had estimated, implying that a considerable amount of the total value of AIG's businesses may not go to current debt or equity holders, but rather to repay the Fed's term loan.

# 2. The 11.3% interest rate of the term loan (if the entire facility is tapped), would shave about $2.00 per share off of EPS (before considering dilution from the Fed's new 80% stake), or about 50-60% of our prior EPS estimate. Combining the dilutive effects of the high cost debt plus the government's 80% stake in the equity would leave us with about 90% pro forma dilution for common shareholders (or about 30 to 40 cents in annual EPS).

# 3. The Fed's comment that AIG will pay off the $85 billion loan from proceeds from the sale of businesses, suggests that the majority of the company may be sold off in pieces. This is a staggering development, that the formerly largest global insurance company will potentially be unwound through a 1 to 2 year auction process.

# 4. What will the rating agency reaction be with the company operating with better liquidity but dramatically higher financial leverage assuming that it taps a large portion of the term facility? Both Moody's and S&P have the senior debt rated in the single A range, but there clearly is still risk that debt holders may not be made whole as the company sells businesses and pays down debt.

# 5. A fairly swift execution of sales of businesses will be important to avoid substantial erosion of franchise value, since customer lapse rates and withdrawals should remain elevated following the publicized difficulties at the company, and 6. Book value is likely to be hit hard by both bigger asset impairments and DAC charges associated with AIG likely moving to liquidation based valuation methodologies vs. the prior going concern asset valuations.

# With all of this in mind, CSFB's $3 price target for AIG common equity still seems reasonable though more of a best case scenario for the equity value in their view, if AIG does in fact look to sell off most or all of its businesses. With pro-forma EPS likely 30-40 cents, and pro-forma tangible book value in a $3 to $4 range, they would expect the stock to trade in a $1 to $4 range, toward the lower end if the debt fails to stage a significant rally, and toward the upper end if the debt and preferreds rally.

Notablecalls: Looks like my call to buy AIG in the $6's was only right for the first 60 mins of trading. This CSFB call gives a pretty good overview of the situation.

The FED did the only right thing they could do - bail out AIG. Otherwise it would have been pure exodus.

The stuff from LEH will hit the results of other players starting from Q3. I suspect we will continue to have wild swings in the fins until then. Goldman (NYSE:GS) continues to look like the best bet here. Risk is defined by book value, I think.

American Intl Group (NYSE:AIG): Reiterate Buy - UBS

UBS has some comments on American Intl Group (NYSE:AIG):

Press reports are that AIG is seeking $10-20B in equity from KKR, TPG, and JC Flowers, and plans to divest of ILFC and other holdings (estimates are worth$5B or >$20B including core assets). Assuming an equity raise at a depressed share price and more CDS and investment losses, they think AIG shares still seem to have upside potential. But near-term, AIG may trade down on this news and likely rating agency downgrades.

A liquidation of Lehman likely will put substantial pressure on MBS/CMBS/CDO other securities, resulting in sizable marks for AIG. Moody’s and S&P said earnings weakness could lead to a downgrade (1-to-3 notches) to AIG’s AA-minus holding company credit ratings. UBS now projects $(10)B in super-senior CDS losses (but, could be more) and $(5)B in realized inv portfolio losses in 3Q08.

Even post rating any agency downgrades, they think AIG has sufficient cash/collateral to meet
near-term liquidity/capital needs without raising equity. But, a reported $10-20B equity raise and $5-$20B in divestitures would offer a good cushion. Also, Hurricane Ike loss exposure seems manageable at $175-$475M.

Lowering 12-mo price target and EPS, but still rated Buy
a) Cutting ‘08 op and net EPS to $(2.63) and $(8.18), from $0.57 and $(2.96), largely to reflect further CDS and inv losses and an equity raise. Also reducing PT to a conservative $26 (from $41) per our P/B analysis, which assumes$10B equity raise and another $(30)B in CDS and inv losses through 1Q09.

Notablecalls: I continue to reiterate my view that AIG has ample value in the $6's.

Note that MLCO and Citi downgrade the stock to Neutral/Hold from Buy this morning.

Some early thoughts:

I don't think analyst calls will help you guys much this morning. So I'm going to tell you what I like this morning:

- Goldman Sachs (NYSE:GS) down 10+ pts, near the Bear Stearns low of $140 looks like a buy. GS's been the smartest operator around.

- American International Group (NYSE:AIG) may have some value here in the $6's and $7's. Tight stops.

- Wachovia (NYSE:WB) looks interesting as MSCO and GSCO are now hunting for a bank.

fyi,

NC

MEMC Elec (NYSE:WFR): Sell-Off offers entry, Reit Buy & $70 tgt - Merrill Lynch

Merrill Lynch is defending MEMC Elec (NYSE:WFR) this morning after the co announced they are anticipating a loss of 5 days of polysilicon production due to hurricane Ike. As management had already built in a 2 week buffer as part of their quarterly guidance, the disruption has not changed management’s outlook for the quarter.

On the mid-quarter update call management said if production in September was at the same level as August, they would be in the upper half of their guidance range. In August, hurricane Edouard plus maintenance on Unit 1 and Unit 2 resulted in 7 or more days of lost production by Merrill's estimate. If the estimate of 5 days of lost production due to Ike are correct, MEMC still has 2 or 3 more days of buffer to reach the high end of the forecast range for 3Q, making the overall range still reasonable.

Discount to peers, sell-off is a good entry point
The impact of the storm is a short term, risk from weakness in the semi wafer market is well known and MEMC is back to building in a buffer for normal execution risks. Firm's channel checks suggest solar demand and pricing should remain strong enough to make their 2009 estimates very achievable. MEMC now trades for 6x 2009 EPS estimate versus peers REC and Wacker Chemie at 10x and 16x consensus EPS estimates, with all three facing the same issues, excluding the hurricane, but with MEMC a lower cost, higher margin, pure play. As a result, MEMC should be bought for a recovery to a multiple at least at the average of its peers of 14x 2009 EPS estimate for a $70 price target.

Reiterates Buy.

Notablecalls: The decline in WFR stock has become ridiculous. Here you have a company that can't meet demand. Sure, they have had execution problems but it goes to show how difficult it is to produce poly meaning the chatter of more capacity coming online in the n-t is bollocks. If they have problems, the chinese will surely have even more problems.

Trading 6x 2009 EPS WFR looks like a springed coil ready to burst higher on ANYTHING positive.

Potash (NYSE:POT): Actionable Call Alert - Merrill Lynch

Merrill Lynch is out with a bullish Fertilizer call noting the recent sharp fall in fertilizer sector valuation multiples is unprecedented, with share prices down 44% since peaking in mid-June. Firm attributes most of the decline to investor fears that the commodity boom is over as the dollar has weakened and energy prices have declined sharply. While corn prices have declined 31% since their flood-induced late-June peaks, fears of demand destruction from high fertilizer prices appear overblown. US corn growers would still be profitable with fertilizer costs twice current levels, by firm's calculations.

For the last month they have been saying that fertilizer valuations indicate that the market believes that earnings will peak in 2009 and decline rapidly thereafter. With little new supply set to come on line before 2011-12 depending on the nutrient and with a likely multi-year grain cycle sustaining high demand levels they believe that peak earnings are still several years away. One potential catalyst for the sector could come post this fall’s harvest as investors once again focus on the need for growers to raise global grain production to rebuild grain inventories which are hovering at 35-year lows relative to demand.

Potash supplies have tightened even further with the month-long strike affecting 30% of Potash Corp.’s production. Firm is trimming their Q3 EPS estimate for POT by $0.10 to $3.65 due to lower potash shipments. They believe Canadian producer supplies are now at all-time record lows, likely leading to further price increases this fall. Firm expects China to settle its 2009 contract with Canadian and Russian producers prior to year-end at $900/mt cfr, which could prove to be low.

Merrill is raising their 2009 EPS estimates for the potash producers.

Potash Corp (NYSE:POT) 2009 EPS goes to $23 from $22 with 2010 EPS going to $25 from $23.50.

Notablecalls: I'm putting my foot down here - I think the Ferts are going to bounce today. Plus, I suspect the bounce will have some more legs than first 30 mins of trading.

Potash (NYSE:POT) is my fav.

PS: MLCO is also out with a bullish Steel call saying the export price and domestic price have fallen approximately 15%, US HRC is down 7%, but steel stocks are down 50%. They believe this is overdone. Firm is Buying NUE, STLD, and X, but see upside to all of steel stocks.

Why have I gotten more bullish on the names?

I think most of the hedge-fund panic selling is done here. We saw a relatively high volume bounce yesterday which to me is a big tell.

I suggest you use the early morning weakness as a buying oppy.

Merrill Lynch on Lehman (NYSE:LEH): Going to No Opinion

Merrill Lynch on Lehman (NYSE:LEH):

Firm is changing their opinion on LEH to "No Opinion" because Moody’s has stated definitively that LEH will be downgraded to Baa absent a strategic partner within an unspecified, but very short, time. In their view, this puts LEH in play. While the number of potential acquirers at this point is, they believe, very few (they cannot really name any with any degree of comfort), Moody’s action certainly raises specter of takeout, potentially at a very low price.

“Take-under” threat makes analytical valuation difficult

Firm estimates EPS potential in weak environment with LEH at Baa at $1.33 in ‘09, ROE of 4 - 5%. MLCO estimates "worst case" Book Value at $15.10, assuming another large net loss ($2.4bn), sale of Neuberger for no gain, and another dilutive capital raise to regain 13% Tier 1 ($3.8bn at $6/share). However, with potential for “take-under” amid rapidly unfolding events, it is very difficult to determine a price objective with any degree of confidence. For this reason, they are taking this "No opinion" action.

Notablecalls: Note that both Citigroup and Goldman Sachs are downgrading Lehman this AM

PS: Today is 911. We can't close in red, guys.

Texas Instruments (NYSE:TXN): Increasingly Missing Out on 3G Baseband Cycle - Baird

Baird has some harsh words for Texas Instruments (NYSE:TXN) noting that while reiterating the midpoint of its 3Q revenue/EPS guidances, they expect TI to lose 30-40% market share in low-end Nokia phones against Infineon, which they believe starts ramping within the next few months. Also, TI acknowledged it no longer expects 3G baseband wins to ramp at EMP in 2H09. Net, the firm believes TI is increasingly missing out on the 3G baseband cycle, while OEMs increasingly migrate to merchant solutions. Neutral rating.

TI does not have yet a 3G merchant solution, per Baird's checks. TI highlighted on the call yesterday a shift by mobile phone OEMs to merchant baseband solutions as they emphasize spending on software, applications, and user interface. Firm believes the ongoing shift to 3G merchant solutions will lead TI to lose further market share in 3G in 2009.

Firm expects a continuation of below-seasonal trends in wireless in 4Q, as their checks indicate slight order reductions late 3Q from tier-one mobile phone OEMs primarily impacting high-end phones (versus weakness primarily in low-end phones this 3Q).

They view is that TI's under-investments in 3G architecture development two yearsago are now leading the company to increasingly miss on the 3G baseband cycle, while 3G-based mobile phones are now ramping aggressively. TI's 3G baseband footprint will be mostly limited to Nokia, and possibly to Motorola, in 2009.

Notablecalls: Note that most other firms are positive on TXN this morning following guidance reit last night.

Google (NASDAQ:GOOG): Added to Piper Jaffray Alpha List with a $785 tgt

Piper Jaffray's Gene Munster is adding Google (NASDAQ:GOOG) to their Alpha List with $785 tgt:

There are two specific potential catalysts for the back half that encouraged them to add Google to the Alpha List:

1. September Quarter Expectations. Firm does not think that the September quarter will be as bad investors think (shares are down 18% in the last three weeks). While they are slightly reducing numbers, we expect the company to meet Street estimates for September, based on their belief that concerns over slowing organic UK growth, are overblown. A 10% miss in estimated UK organic growth equates to a 0.7% revenue miss and a 1% EPS miss to Google's overall numbers.

2. Increased Search Ad Market Share. Google has stated it expects the Yahoo! search deal to begin in October. We estimate the Yahoo! deal should add 12% to Google U.S. search ad market share, which PJ believes would bring Google to over 80% U.S. search ad market share. They believe it to ultimately pass DOJ scrutiny.

Historic Q4 Stock Strength. Firm notes that over the last three years, Google has returned an average of 30% from September 9 to December 31 (a range of 22% to 45%). If the stock were to perform in line with this historical trend, it would mean a share price of around $550 by year end.

Notablecalls: I think GOOG will at least bounce on this call. Gene Munster has been and continues to be the Axe in the space.

Fannie Mae & Freddie Mac (NYSE:FNM/FRE): Colour on news - Piper Jaffray

Piper Jaffray comments on Fannie Mae & Freddie Mac (NYSE:FNM/FRE) after the U.S. Gov't, led by Treasury Secretary Paulson, took control of co's yesterday, in an aggressive and bold move.

In exchange for a commitment to 1. provide capital to the GSE's to insure positive net worth, 2. a credit facility and 3. an MBS purchase program, Treasury will receive a $1 billion senior preferred stock issuance with a 10% coupon with warrants to purchase 79.9% of the company for a nominal price. Treasury could provide up to $100 billion in each GSE, if needed

Most importantly, the U.S. government takeover of FNM and FRE will ensure the last remaining significant source of liquidity to the U.S. mortgage markets will continue flowing. While the firm believes the market had already largely reached the conclusion that the government would not let the GSEs fail, this historic government action ensures a steady flow of liquidity to the mortgage market. Going forward, it is vital that the GSE organizations function smoothly from an operational standpoint, as they continue to work through significant mortgage credit challenges.

Treasury's action may provide a shot of adrenaline into the housing market through lower mortgage interest rates. To be sure, they do not believe that the government takeover of the GSEs will by itself bring an end to the current housing downturn. However, they believe Treasury's action could narrow mortgage spreads and reduce mortgage interest rates.

There might not be much left for current GSE common shareholders. Whether or not the government puts additional capital into the GSEs should be key to the final outcome. The preferred shareholders appear to have much more hope of retaining significant value over the long run.

Piper believes FAF, FNF, and NLY are stocks within their mortgage coverage universe that may respond positively to this historic government action.

Notablecalls: Not sure how to play this one. I suspect NLY etc. will be gapped up hard giving us zero chance to buy at decent levels. Same goes for the rest of the market.

So, we're gonna get spike & retrace. Will be looking for an entry after that happens. Overall risk premiums will fall, making stocks more attractive.

Note that Merrill Lynch is out with a broad mkt call saying US stocks are once again poised to outperform over the next 6-12 months.

PS: Congrats to FNM/FRE shorts. You made a killing.

Mark this date on your calander Oct 1, 2008 - fyi

A smart hedgie pinged me with the following:

Finally this homebuilder rally (XHB up 6% YTD) is making sense.

A buddy I know who is a seasoned real estate veteran says the down payment assistance program is creating quite a sense of urgency. BUT it expires on 10/1/2008. Consumer awareness that this program is going away in less than 30 days is causing alot of buyers to get in and get in NOW... They are pulling out all the stops to get these deals done. But outside of that... there really isn't any other demand in the pipeline.

I read an article recently that talked about the fact that 75% of the new home buyers in the Phoenix area are using this down payment assistance.

This is causing alot of current demand that is being mistaken for the real turn in real estate. Beware, because after Oct 1st... this demand will evaporate and the real decline will start, and it will be sharp. It wouldn't be outside the realm of possibility to see sales fall off a cliff this fall.

As anecdotal home sales data is being released over the next 30days the news will be good and the builders will likely go higher, and cramer can declare victory... so don't try to fight this... YET.

The easy money will be made on the other side.


Fyi

Potash (NYSE:POT): Very positive Fertilizer call from Morgan Stanley

Morgan Stanley is out with a very positive Fertilizer call saying they think the business model meltdown implied in fertilizer equities’ recent ~35% decline will prove unfounded. Firm believes that peak earnings are likely to come in 2011 (rather than in 2008, as implied by the equity market) and be substantially higher than the market discounts. Finally, they expect profits ultimately to trough above 2008 levels.

Fertilizer prices will stay higher for longer: i) A global economic slowdown is unlikely to affect fertilizer demand; ii) US farmers are still earning a ~60% ROIC on fertilizer purchases and are thus unlikely to reduce fertilizer application; iii) Emerging market farmers are very low on the yield response curve (i.e., increased application pays for itself); iv) NPK prices have yet to catch up to commodity prices (i.e., record US farmer profits despite higher NPK prices); and v) They believe capacity increases will simply meet underlying demand rather than flood the market and force lower prices.

Valuation extremely compelling: 2009e EV/EBITDA of 2-5x; FCF yields of 10% to 20%. Minimal balance sheet leverage (in some cases none) should allow for substantial share repurchases and dividend payments.

Potash (POT, $280) has the most leverage to potash, the nutrient with the greatest pricing power and barriers to entry. Mosaic (MOS, $155) is best positioned in phosphate and has not been properly credited for its potash assets. Agrium (AGU, $135) has exposure to all nutrients and a growing retail business. Monsanto (MON, $170 - NOT a fertilizer company) remains Morgan Stanley's top pick in Agriculture as they believe it is the best-positioned company in the value chain.

Notablecalls: We saw some bottoming action in several Fert names late yesterday, which may indicate the liquidation sellers are at least taking a break. Plus, we have CSFB out today upgrading MON.

Think the sector could be in for a bounce.

Notable Calls Network (NCN): UST Inc (NYSE:UST)

We caught another beautiful mover at Notable Calls Network (NCN) today.

Around 10:00 AM I started getting questions regarding strength UST Inc (NYSE:UST) was showing, up 4% in early trade. While at first I assumed it had something to do with a positive Tobacco call Morgan Stanley had put out in the morning regarding the Engle ruling, none of the other usual suspects (PM, RAI etc) showed any action.

It had to be related to UST (NYSE:UST).

Some 15 minutes later a rumor of UST pulling out of a Lehman conference emerged.

The logic behind buying a stock of a co that has pulled out of a industry/broker /etc conference is quite simplistic - a takeover may be coming & and acquirer does not want the current management to give any new comments before the deal is done. A quiet period of a sort.

So, in these cases what ones needs to find out is the real reason behind the pull-out. If it's due to a scheduling conflict for example & the stock is still up on takeover chatter, there is money to be made on the short side.

Around 10:26 Briefing.com put out the following comment:

UST Inc: Hearing catalyst behind the move is that co pulled out of a Lehman conference today, spurring takeover chatter; we are checking on the validity of this now (56.28 +2.24).

So, the race was on to find out the real reason behind the pull-out.

Around 10:37 a NCN member pinged me with the following:

"...CEO got sick in UST. Pulled out of conf because of that not takeover - fyi..."

This was coming from a top5 NCN member. A pro with almost 20 yrs of experience on the Street. No bullshit type.

So I quickly distributed the call to other 50+ NCN members. As you can see, this pretty much represented the top in UST today as the stock gave back all of its gains. One could have shorted any size for up to a $2.5 pt gain depending on one's entry/exit. Not bad for an intraday trade.


Oh and Briefing.com got their confirm too (20 minutes later, though):

04-Sep-08 10:57 ET UST Inc Update -- We just spoke to representative of UST; confirms UST will not appear at the conference today; cites scheduling conflict (56.73 +2.69) -Update :

This is how Notable Calls Network (NCN) works - sharing the flow. We catch them every day.

Want to be part of NCN?

It's easy. Just shoot me a brief email that includes a short description of yourself and your AOL nickname.

Please do note that contacts via IM are limited to people with:

- 3+ years of trading experience

- Access to quality research/analyst commentary

- Ability to generate and share (intraday) trading calls

I will not accept contacts from purely technically oriented traders, penny stock fans or people who have less than 3 years of experience in the field.

Bunge (NYSE:BG): Slowing Growth in Emerging Markets Pose Risk to '09 Outlook; Reducing Price Target to $95 from $130 - Citigroup

Citigroup is out negative on Bunge (NYSE:BG) saying that given what their Cir Emerging Markets Economist teamviews as the possible beginnings of a potential slowdown within the emerging markets, they believe that the risk of moderating demand growth has increased and thus future earnings at Bunge could come under pressure. This translates into a reduction in price target to $95 (from $130) on a reduced target PE multiple of 9.5x as they are becoming more concerned with the viability of '09 numbers at Bunge

Currently, CIR economist team is forecasting a slowdown in emerging market GDP growth to 6.3% in '08, down from 7.4% in '07, with growth expected to moderate further in '09 at 6.0%. This ties in with USDA projections for global soy demand over the next 12 months at 3.0%, down from the previous 10-yr CAGR of 4.8%.

Adding to the risk profile surrounding 2009 earnings at Bunge is the recent decline in commodity prices which has been led by crude oil, which is down approximately -25% from its July peaks. At this point they don't know for sure that events will unfold to reduce commodity demand and thus prices, but the signs seem to be forming, as several of firm's fellow analysts have reduced their price forecast for different commodities such as their commodities strategy analyst who on Monday reduced his forecast on aluminium, copper, and nickel prices by -10% to - 27%, due to concerns of a slowdown in industrial activity.

Notablecalls: BG will be in the casualty list today. Citi has been one of the more bullish firms covering the name. On the bright side, this is the 1st step towards capitulation.

I suspect BG will be down 5% on this.

US Steel Sector downgraded to Neutral at Goldman Sachs

Goldman Sachs is downgrading their view on US Steel Sector to Neutral from Attractive this morning:

They are transferring coverage of the steel sector to Sal Tharani from Aldo Mazzaferro. Firm is also downgrading their coverage view for the sector to Neutral from Attractive due to the re-emergence of various risks-both perceived and real, such as rising dollar, "China fear", weak economic data out of the developed and emerging markets, and softness in steel and scrap prices. They believe that negative news flow in the near term would keep multiples compressed, and wait for a better opportunity to get more constructive on the sector.

Nucor and US Steel remain Buy rated stocks. However, they are removing US Steel from Conviction Buy List and also upgrading STLD to Buy, replacing CMC, which is now rated Neutral. In the near term, the firm see smore upside in mini-mills due to a sharper drop in scrap prices than steel, which should expand their metal margins. Worthington and Gibraltar remain Sell rated stocks.

A sharp correction in steel equities, primarily driven by the macro concerns and decline in oil prices, has created selective investment opportunities. Valuations of some of these stocks reflect a doomsday scenario, which the firm believes is not what longer-term fundamentals suggest.

Goldman has lowered their steel price estimates by an average of 6% for 2H-2008 and 2009. Earnings estimates are now 1% and 7% lower than earlier estimates for 2008 and 2009, respectively. The biggest change they have made is in multiples which they are lowering to reflect near-term risk aversion by investors. Firm's target prices have been cut by an average of 18% across coverage universe.

Notablecalls: This looks like bottoming action to me. The bids wanted situation we saw yesterday will reverse itself as I feel the shorts have gotten somewhat ahead of themselves.

Early Morning Tid-bits:

- CSFB is lowering Goldman (NYSE:GS) ests FQ3/FY2008 for the second time in couple of weeks.

- RBC Capital is positive on Potash (NYSE:POT) reiterating their $375 tgt telling to look for sig. potash price increases in China.

- RBC Capital is positive on Apple (NASDAQ:AAPL) saying 4MM iPod announcement coming soon.

- Oppenheimer out positive on RF Micro (NASDAQ:RFMD) saying qtr is tracking better than consensus. Reits Outperform and $7 tgt.

- Lehman (NYSE:LEH) looks interesting as KDB's $5 bln offer for 25% stake shows there may be a premium to the story after all. Especially with HSBC also looking into buying the co.

- CIBC is upgrading US Steel (NYSE:X) to Outperform.

- Citigroup is defending Dell (NASDAQ:DELL)

Notablecalls: Hope it helps - fyi

Apple (NASDAQ:AAPL): Added to Piper Jaffray Alpha List with $250 tgt

- Piper Jaffray is adding Apple (NASDAQ:AAPL) to their Alpha List with $250 tgt.

They are reiterating their Buy rating and adding shares of AAPL to the PJC Alpha List based on 2H08 catalysts in each of the three major businesses: Mac, iPod, and iPhone.

1) Back-To-School Promo Positive For Macs & iPods. Firm believes the Mac and iPod units driven by Apple's Back-to-School promotion will be a catalyst for the stock when Apple reports its Sept. quarter. The promotion is widely understood by the Street, and while Apple has communicated its impact on margins, they believe its impact on Sept. Mac and iPod units is generally underestimated.

2) Expect Sept. Event; Historically A Catalyst. Although it has not yet been announced, PJ expects Apple to host a special event in early Sept. to announce new iPods and redesigned Mac portables. They have analyzed stock action around the Sept. events over the last 3 years. On average shares of AAPL have risen +4% from the week before to the week after the Sept. event and +47% from the week before to four months after (through the holidays).

3) iPhone 3G Int'l Rollout In Sept. & Dec. Quarters Will Be Positive. In Aug. Apple increased the iPhone's addressable subscriber base from 370m to 660m (+78%) by adding 34 new carriers in 21 new countries. They expect this rollout to drive upside to Sept. est. of 4.1m units. The potential addition of Russia in CY08 increases firm's confidence in our Dec. iPhone number (6.4m). In general, they believe the iPhone's international rollout is underappreciated by the Street.

Notablecalls: I believe AAPL could hit $180 level on this call in the s-t. This is the call the stock needed to move higher.