What I like this morning?

Believe it or not, I like Citigroup (NYSE:C) here, down 8%. I think it's going to bounce today.

I also like Morgan Stanley (NYSE:MS). The sub-prime losses have been written off and the valuation already reflects the slowdown.

PotashCorp (NYSE:POT) looks good for a buy as well.

NC

Garmin (NASDAQ:GRMN): US NPD a Modest Positive for GRMN as Share and Pricing Stabilized - MSCO

- Morgan Stanley is somewhat positive on Garmin (NASDAQ:GRMN) after NPD data indicated that Garmin increased its US market share from 29% in November to 42% in December while holding blended pricing flat m/m.

According to MSCO, NPD data should help to alleviate some near-term investor concerns about Garmin’s US market share and the PND pricing environment. December US NPD data on personal navigation device (PND) retail sales should be a modest positive for Garmin as the company regained market share following November losses, although spot shortages at TomTom in December likely accounted for a significant portion of the recovery. Strong market growth and December share recovery suggest potential upside to our PND unit forecast of 98% sequential growth for Garmin in C4Q07.

Firm remains Equal-weight-V GRMN but considers the stock oversold near-term at current levels. Believes that their long-term gross margin concerns are largely priced in the stock.

Notablecalls: Not making any calls here. Just letting you know it's out there.

Barron's Summary (URI, IHP, ESRX, SFLY, )

“Streetwise” section out saying that United Rentals (URI) is the kind of co that would be hurt by a recession. The stock has collapsed to around 16. Though much of that derives from the dissolution of a proposed buyout of UR by Cerberus Capital Magmt, the stock is down to ‘03 levels. What's odd is that even though analysts have cut ‘08 EPS ests, UR recently announced preliminary ‘08 guidance of $2.80-3.00. That's based on rental rev growth of 3%, to $2.71bn, and margin improvement that is more than double '07's rise. In a recession, that guidance may prove optimistic, but UR has $2 a share in cash, a decent balance sheet, and trades at a P/E of less than 6x. If its earnings were to fall 50%, it would trade at a P/E around 12. Short of a nasty recession, UR's stock drop may present a long-term opportunity.

Barron’s cover discusses bloodshed on the mkt. Among the few prescient Street seers is veteran Byron Wien, the chief investment strategist at Pequot Capital. At the start of ‘08, Wien predicted that the S&P 500 would drop 10% this yr, that earnings would decline and that the country's first recession since ‘01 would prompt the Fed to cut short-term rates to below 3%. "We're beginning to see some bottoming signs," he said Fri. "We've switched from complacency to concern but not to capitulation yet." Value-oriented investors are getting excited because there are now plenty of inexpensive stocks, measured either by earnings or book value. CB, ALL, TSO, SUN, JCP, M, LEH, MS, LEN, PHM, TOL, DHI, CTX, NVR, KBH, MDC, WB, WFC, BAC, C. JPMorgan (JPM), which has been relatively unscathed by credit problems, is one of few potential buyers of any size in the battered financial sector. That gives CEO Jamie Dimon plenty of leverage if he decides to pursue a deal. Potential targets include WaMu, SunTrust (STI) and even Bear Sterns (BSC).

Barrons’ Roundtable members picks include UPL, WFR, QCOM, FMCN, AMX, GFA, GLD, AEM, MHK, WHR, AEO, GPC, ENSI, DISH, DTV, CSG, GAP and TVL. Pair trade Long FXY – Short GBP. Short ideas include RIMM and AMZN.

MBIA's (MBI) shares were savaged anew last week, and now its stock looks cheap. It trades for about 8, well below a conservative liquidation value above $30 a share.

Acorda Therapeutics (ACOR), whose stock has been in the low 20s, could hit 28 in the next 12 months if clinical trials go well. And, ultimately, the company could be a takeover target.

“Sizing Up Small Caps” column highlights Shutterfly (SFLY), saying that pricing pressure in the digital photo-print business is clouding the picture at Shutterfly. Even at that level, the shares, up 45%+ in the past yr, sell at 96x trailing earnings and 35x ‘08 profit ests. Prudent investors should balk at paying up for this consumer play just as US economic growth is dimming. VistaPrint (VPRT), a fast-growing and profitable Internet printing and graphics-design services firm that some analysts consider a peer to Shutterfly, trades for 26x ‘08 earnings. Awarding Shutterfly a multiple of 28, a premium to VistaPrint's and to Street's avg est of its long-term profit-growth rate, would value Shutterfly at 16, about 20% below the current price. "We've differentiating ourselves through quality, ease of use, the breadth of our product and design," CEO Jeffrey Housenbold recently said. "If Ford cuts prices on slow-moving cars, Lexus doesn't need to respond." But Shutterfly did reduce prices in ‘05, and some analysts think the co, along with Kodak Gallery will do so again, perhaps by mid-yr.

“The Trader” column discusses Express Scripts (ESRX), saying that investors searching for a recession-resistant growth stock have bid the shares up 120% in the past yr, and at about 69, the stock trades at 24x ‘08 profits, compared with 23.7 times for the larger Medco (MHS) and 21x for other health-care-services co’s. ES pulled back last wk after Medco clinched a contract to provide mail-order drugs for HIP Health Plan. JPMorgan analyst Lisa Gill downgraded the stock, worried that certain contracts due to be renewed in mid-‘08 "could be at risk." The discounting of generic Protonix, for example, also may prove less dramatic, and the takeover premium in the stock may prove optimistic. The CEO of Walgreen (WAG), for one, recently said he has no plans to buy a pharmacy-benefits manager. ES' valuation also is a deterrent. So is its hefty debt load. Long-term debt is about 76% of capital, well above the 18% avg of its peers. Benefit-mgmt profits should grow, but upside for ES may take longer to arrive.

“Up And Down Wall Street” column discusses IHOP (IHP), whose stock is down 40% on continued weak Applebee's results and high costs for the debt. The co is really a financial and operational turnaround in progress, led by a CEO Julia Stewart. The co has a mkt value just under $800m, and took on $2bn in debt to buy Applebee's. The IHOP chain has performed well, showing steady SSS growth, following a menu and ad revamp. A similar plan is slated for Applebee's. There are 1,976 Applebee's locations worldwide, 510 owned by the co. The plan is to sell 475 of those to franchisees at a pace of about 40 per qrtr. That could yield $500m in the end. The co will also be selling and leasing-back Applebee's corporate HQ and other real estate, for perhaps $450m. All of this will pay down debt. Charles Kantor, of Neuberger Berman, points out that Stewart is beloved by Applebee's franchisees, which remain loyal to the brand, given still-decent single-store cash-flow dynamics. Kantor notes the dramatically positive benefits of reducing debt over the next several qrtrs in the form of FCF. Some buy-side ests peg FCF per share at more than $4 in ‘09, up from something more than $2 this yr, and then rising above $6 in 2010. This presumes no store expansion and nothing heroic on SSS results. Even a conservative multiple of 14 on next yr's FCF could place the stock at $60. A 15 multiple on a projected $3.91 in '09 earnings gets you to about the same place.

Palm (NASDAQ:PALM): Getting its act together? - Avian Securities

Avian's Tero Kuittinen comments on Palm (NASDAQ:PALM) following discussions with operator sources that indicate Palm is getting near to debuting Centro at AT&T and after that (somewhat surprisingly) T-Mobile. Centro's success at Sprint has caught the attention of rival operators and the 3-month exclusivity period is drawing to an end. The firm is unsure about the prospects of a Verizon launch of Centro - the Verizon relationship of Palm may be under some stress after the 4Q launch delay of Treo. In discussion with the Palm CFO, he naturally declined to discuss specific operator deals, but giggled a little when asked about T-Mobile. Centro demand at Sprint continues running above expectations of both Sprint and Palm.

The CFO sounded excited specifically about the new user interface, innovative application suite and software/hardware integration of the upcoming new Palm products. Avian expects Palm to get experimental with the look and feel of new devices, continuing down the path that Centro started. Its main goal here is drawing a clear distinction to rival models following the Blackberry-lookalike pattern and the iPhone/Voyager/Viewty approach. They think the emphasis on new look, feel and user experience of devices is crucial. Outside the Windows and Symbian OS systems, it is easier to explore novel methods of integrating software into hardware - a clear priority for the new product generation.

Palm seems to be focusing more on consumer-oriented devices with unusual look and feel, while continuing the business device development to hold onto core Treo user base. There is definitely room for smartphones that do not use the sprawling, relatively heavy Windows and Symbian operating systems that ensure smooth multitasking, but can overwhelm average consumers. Palm is aiming to develop products that make multimedia and entertainment applications easy to access - expect a completely new menu structure and an application selection that emphasizes video, music and game downloads in addition to photo/video processing and messaging. Making content downloads easy and intuitive is a laudable goal considering how cold Windows and Symbian leave many consumers regarding content delivery. Firm continues seeing Centro as a transitional model that points towards a new generation of smartphones that are lighter, cheaper and more consumer-oriented than most current mainstream smartphones. To some extent, both Windows and Symbian are held hostage by backward compatibility issues that Palm can to large degree sidestep - this is an exciting angle.

Notablecalls: Excellent color on Palm! Looks like the co is getting its act together.

Allegheny Tech (NYSE:ATI): Actionable Call Alert!

- Davenport is out on Allegheny Tech (NYSE:ATI) raising Q4 EPS estimate for Allegheny to $1.52/sh (from $1.36/sh) based on an unanticipated rebound in stainless products in Q4. Firm's estimate is now the highest within the consensus of $1.40/sh. Allegheny is scheduled to report Q4 earning on Wednesday (1/23) before the open. EPS were $1.63/sh in Q4'06 and $1.80/sh in Q3. Full-year estimate is now $7.33 (up from $7.17/sh).

Davenport notes their estimate for Q4 was influenced by the company's guidance on October 12. That's when the company gave Q4 guidance of $1.20 to $1.48. At the time they thought the guidance was overly conservative, although looking at the industry data we understand why the company guided to such a range. They think mill shipments of stainless products in the month of September were at the worst level in decades! Allegheny was likely stunned at how bad its book of business was in September and felt compelled to warn the Street, not only on Q3 but how bad Q4 would be if business stayed as bad as it was in September. Instead, business appears to have rebounded significantly from a horrible September, as customer orders have resumed with stabilization in nickel/stainless prices.

Firm recommends investors buy ATI aggressively and they can do so before the earnings report. Additionally, they think the stock is deeply undervalued and we are very bullish on the long-term earnings of the company. The stock is trading at an EV-to-EBITDA multiple of 3.9x on their '08 estimate. Thinks this stock should trade at 8.5x given the earnings growth driven partly by the strength in the aerospace market. Reiterates Strong Buy on ATI and price target of $145/sh.

Notablecalls: Actionable call alert! This stock will see strong upside today and over the next week or so. Buy aggressively!

Monsanto (NYSE:MON): Buy this stock now, or risk missing it again - MSCO

- Morgan Stanley is positive on Monsanto (NYSE:MON) this morning saying they believe this week’s share price weakness (i.e., down 20%+) is nothing but market noise and misperceptions and should be thought of as an outstanding buying opportunity. Firm believes that the fundamentals of Monsanto’s business have never been stronger and that the debate around the potential switch of corn acres back to soybean acres in the US has been entirely misconstrued. If one examines which corn acres the farmer will chose to switch back to soybeans, rather than simply assuming the farmer switches “average” acres, the informed conclusion is actually that a switch from corn to soybeans should actually be a good thing for Monsanto.

Put simply , they do not believe that US farmers will switch biotech corn acres to soybeans. Rather, the firm expects farmers to switch back non-biotech corn acres (of which there were approximately 20 million out of 93 million total planted corn acres last year).

MSCO reiterates their Overweight rating, their $142 price target, their Base Case F2008 EPS estimate of $2.90 and increasingly believes that the risk to that estimate is to the upside (i.e., Bull Case EPS estimate of $3.20).

Notablecalls: I like this call. A lot. Suspect MON stock will rebound considerably in the n-t.

Early morning tidbits:

- Citigroup upgrades Priceline.com (NASDAQ:PCLN) to Buy from Hold.

- Lehman is out in defense of Chicago Bridge & Iron (NYSE:CBI) noting the hares have fallen sharply recently (~27% since 1/1 vs. SPX's ~9% decline and the peer group's ~20% decline). Firm thinks investors worried about a U.S. recession should revisit CBI's key fundamentals and catalysts for '08 that remain unchanged since last quarter. Reits Overweight.

- Citigroup is calling a bottom in DRAM pricing saying the sector is showing signs of heading into cyclical recovery in late 1Q08E. Citi turned positive on the sector in Dec 2007, expecting a sharp slowdown in supply in 2008 to result in bottoming of the sector in 1Q08, not 2Q08.

- SunPower (NASAQ:SPWR): Raymond James reits OP; solar blue chip on sale, under 25x '09 EPS.

ISIS Pharma (NASDAQ:ISIS): Actionable Trading Call from Jefferies

- Jefferies is out with a good call on ISIS Pharma (NASDAQ:ISIS) saying they believe a number of near-term events should drive share appreciation in 1H08. Reits Buy and $30 target.

* Firm's ongoing due diligence suggests that a partnership, with a substantial upfront payment, spin-off or sale could materialize sooner than "Street" expectations for the diagnostic division, Ibis Biosciences.

* Mipomersen P3 heterozygous FH (HeFH) trial(s) likely to commence shortly: Jeffco believes that one of the key points of discussion with the FDA centers around finalizing the most appropriate definition of a HeFH patient. Their physician consultants have expressed a large degree of comfort with all of the mipomersen data presented to date. As a result, they believe that safety is not a road-block to initiating P3 trials in the broader FH population.

* 113715, a PTB-1B inhibitor for Type 2 diabetes, could represent a partnership opportunity in 2Q08.

Notablecalls: Take a look at ISIS' chart. The stock has given back most of the huge gain following the GENZ deal. Now we have Jeffy coming out saying they see multiple catalysts, several of which look to be largely unknown to the public.

You have to understand that stocks like ISIS only move in anticipation of catalysts.

You gotta buy ISIS here. Today!

Actionable Trading Call alert!

Agricultural Chemicals: A Small Chink in the Fertilizer Armor? - MSCO

- Morgan Stanley notes yesterday’s declines in fertilizer shares seem to be largely due to a somewhat surprising gain in potash inventory. While the bulls would argue that this inventory build is seasonal, the firm notes that historically inventory build generally starts in August or September and not in December. If the potash market is so strong, how could inventory have risen so sharply in the month of December? Firm believes the issue may go a bit deeper and may turn out to be a bit more ominous as customers may be over-ordering in light of tight supply and rapid price increases. This would distort what producers see as “demand.” While producers continue to maintain that they are unable to keep up with orders and sales are on allocation or some degree of restriction, the inventory gain may have shown otherwise. The potash inventory gain may only be a small “hiccup” in the perfect stream of data we have been seeing, but points to a certain degree of vulnerability in the shares if the data turns less buoyant.

Firm maintains Cautious industry stance but does not have enough data to call for a sustained downturn. Maintains Underweight rating on PotashCorp (NYSE:POT) and Agrium (NYSE:AGU) and are currently Equal-weight on Mosai (NYSE:MOS).

Notablecalls: Just so you know. Not making any calls here.

Paperstand (AAPL, TIF, DAL)

Barron’s Online out saying that Apple (AAPL) should pass economic stress test. If the US economy goes into a recession, any public co with an uncanny knack for generating outsize growth may find its shares highly prized by investors. One such co could be Apple, which despite sales of $24bn last year, sells just a fraction of the world's PCs and less than 1% of all cellphones. That tiny mkt share presents plenty of upside for Apple as it makes inroads in both fields. Apple's iPhone has quickly seized significant share of the small but fast-growing mkt for the most expensive phones, putting to shame cellular stalwarts Nokia and Motorola. And all indications are that Apple had a boffo holiday season in computer sales, which could give the shares some support when earnings are announced next week. On Tue, CEO Steve Jobs displayed the kind of chutzpah that keeps Apple in the papers and keeps pushing the co into new mkts, announcing the world's thinnest laptop, the "MacBook Air," and a revamped version of its computer for the living room, AppleTV. It's that doggedness with respect to emerging product categories that keeps adding new chapters to Apple's story as a growth stock. Sales and profit should both grow better than 20% next FY. At a recent price of $158, Apple shares have had a "20% off sale." "Apple's not immune to the cycles of PC buying, but they have a lot of room to grow, and they're doing a lot of things right," says Tony Ursillo, of Loomis Sayles. Ursillo expects Apple's Macintosh computer unit sales to rise 25% this yr, more than double the 11.6% rate of the PC industry overall projected by research firm Gartner. "The story with Apple continues to be how far ahead of their competitors the products are," says Glen Kacher, of Integral Capital Partners. "There is a multiyear path for Apple to gain mkt share in the PC business," says Kacher.

“Inside Scoop” section reprots that the famed activist investor, Nelson Peltz, bought 3.6m shares of Tiffany (TIF) on Tue and last Fri, jumping in after the jewelry retailer's stock tumbled 11% on disappointing holiday sales and a lowered ‘07 profit forecast. Peltz's Trian Fund Magmt now owns 7.9% of Tiffany, or 10.7m shares.

The WSJ’s “Heard on the Street” column discusses Delta Air (DAL) merger plans. As Delta pursues merger talks with Northwest (NWA) and UAL's (UAUA) United Airlines to form the world's largest passenger carrier, a potential linchpin is thousands of miles away in Paris: Air France-KLM. The European airline already is an ally of Delta and Northwest in SkyTeam, one of the 3 major international airline groupings. Air France-KLM also could provide strategic or financial backing in a Delta bid for Northwest, the airline most likely to emerge as Delta's preferred partner. Delta CEO Richard Anderson traveled to Paris after his meeting with Delta directors Fri, at which the board authorized him to formally begin merger talks with the No. 5 and No. 2 US airlines by passenger traffic.

Morgan Stanley upgrades Intel (NASDAQ:INTC)

MSCO is upgrading Intel (NASDAQ:INTC) to Equal Weight from Underweight ($24 tgt) this morning saying that based on INTC’s earnings report and 1Q08 outlook, they expect street estimates to move closer to their below consensus estimates, and based on aftermarket trading (down 16%) they believe that their cautious stance is getting baked-into the stock. MSCO's UW-V rating was based on concerns of double ordering of MPUs, peaking gross margins and peaking YoY revenue growth, which led them to model EPS that was $0.10 and $0.27 below consensus for 2008 and 2009 respectively. INTC traded to $19.50 in the aftermarket, which translates to a decline of 27% for 2008 YTD, below the 13% and 6% decline in the SOX and SPX.

INTC hasn’t seen signs of double ordering, and believes that the PC supply chain is healthy. MSCO remains concerned about the macro environment and supply chain inventories. They think order patterns after the lunar new-year (Feb 8) will provide visibility into these issues.

Notablecalls: Sub-$20 is too much for INTC here. I feel the stock will finish above $20 today.

Paperstand (BA, C, SNCR, CCIX)

The WSJ reports that Boeing (BA), already 6mo’s behind schedule on its 787 Dreamliner jet program, is close to announcing more delays that might hurt its ability to deliver as many planes as promised in the initial yr of production. The aircraft maker continues to experience problems on a variety of fronts. It has had difficulty getting the first plane ready to fly, and now the 787 may not make its first flight until June. Boeing also has made slow progress in overcoming parts shortages and other issues at suppliers' factories. An announcement that would include a new time schedule might come as soon as today. Further delays would likely make it impossible for Boeing to meet its goal of delivering 109 airplanes by the end of ‘09. If that occurs, the co may have to pay millions of dollars in penalties to airlines for missing delivery deadlines.

“Heard on the Street” column discusses financials, saying that Citigroup (C) now holds the distinction of sustaining the biggest hit of any bank or broker related to the mortgage mess and ensuing credit crunch, easily topping write-downs of $10bn at UBS and $9.4bn at Morgan Stanley. But bears say there is more bad news to come, meaning it is still too early to go bargain hunting among many financial stocks. Citigroup itself practically said so, these investors add, by going out and raising more capital than would be needed if the crisis were passing. "The financials aren't out of the woods yet," says Thomas Vandeventer, of Tocqueville Asset Mgmt. "Other than brief bear-market rallies, it doesn't look like there's a compelling reason to buy these stocks now."

The WSJ highlights Synchronoss Technologies (SNCR), which has seen its share price surge in the past yr on its connection to the Apple smartphone. But Synchronoss is looking beyond the iPhone toward its contracts with several wireless and Internet phone-service providers and the launch of its European operations to fuel long-term growth. "If you look at Synchronoss 2 yrs from now, you will say the iPhone was great," said Eric Kainer, of ThinkEquity. "It really helped the co's mkting efforts and proved what it could do for customers. However, it's not going to be a huge chunk of their business." Yet 25% of the stock's float is held by investors betting it will decline. And with a large portion of its rev coming from AT&T, concerns that the co is too reliant on one customer continue to weigh on its shares. "What brought us there was the completion of AT&T's merger with BellSouth and the launch of the iPhone," said Synchronoss Chmn and CEO Stephen Waldis, responding to critics. "Our business outside of AT&T remains strong."

“Inside Track” section reports that Jana Partners and 5 insiders bought a combined $2.73m in shares of Coleman Cable (CCIX), but co's stock is still just above its all-time low. Jonathan Moreland, of Thalmann Asset Mgmt, said the recent purchases constitute a "solidly bullish insider signal," but he cautioned that only investors with a long-term horizon should look to follow the insiders' lead. "Clearly, this is not something you have to jump into today," Mr. Moreland said. "But I think these are perfectly good indications of longer-term value: both a slew of insiders and a smart value investor."

China Fire & Security (NASDAQ:CFSG): Added to Piper Jaffray Alpha List

- Piper Jaffray is adding China Fire & Security (NASDAQ:CFSG) to the Piper Jaffray Alpha List as they believe the shares are poised to move higher in the coming months.

Healthy backlog provides excellent earnings visibility entering FY08, with potential for upside to estimates.

PJ believes that new contract wins will provide a positive catalyst for the shares, following the implementation of new fire protection codes in the iron/steel industry in China.

Mounting concerns around the state of the U.S. economy is drawing more investor interest in companies with China exposure, yet valuations remain attractive relative to growth.

Reits Buy and $18 tgt.

Notablecalls: A lovely call by PJ Michael Cox that should drive the stock higher in the n-t.

VMware (NYSE:VMW): Reiterate Buy and $129 tgt - Jefferies

- Jefferies is out with a positive call on VMware (NYSE:VMW) saying their checks indicate a strong pipeline of new and renewal activity, with a significant number of ELAs in process. In the past mgmt has said that 70% of revenue and orders are <$50k, but firm's sense is that there's a movement to sign customers to broader agreements, so this ratio could shift, given seasonality, the looming entry of Microsoft, and what appears to be early testing of virtualization for production-level applications.

VMW shares also appear very reasonably valued, currently trading at 40x 2009 pro-forma EPS of $2.03 and at a PEG ratio of 0.6, based on 3 year revenue CAGR of 63% through 2009.

Reits Buy and $129 tgt on VMW

Notablecalls: Is this call enough to generate buy interest in VMW? I think so!

Potash (NYSE:POT): Target upped to a new Street high at RBC Capital

- RBC Capital is upping their tgt on PotashCorp (NYSE:POT) to $195 from $155, reflecting an upward revision to their fertilizer price assumptions.

Firm continues to view PotashCorp as attractively valued given their view that there is potential for potash prices to move significantly higher. They also believe there is substantial value associated with the company's potash expansion projects. If they adjust PotashCorp's current share price for these projects, they estimate that PotashCorp is currently trading at an implied 2009E EV/EBITDA multiple of less than 8x. In comparison, the fertilizer peer group is currently trading at an average 2009E EV/EBITDA multiple of 10x.

Based on analysis, the firm has increased their realized potash price assumptions from $275/tonne to $300/ tonne for 2008 and from $300/tonne to $350/tonne for 2009. Notes assumptions could still be too conservative.

RBC has increased their 2008 and 2009 EPS estimates for PotashCorp from $5.40 and $6.18, respectively, to $6.50 and $8.24.

Notablecalls: This is the news Street high price tgt for POT. The chart is strong and I feel this one has upside today. Keep the other names (MOS, AGU) on your radar as well.

Paperstand (C, DAL, MBI, MER, CKR)

The WSJ reports that Citigroup (C) is expected to announce a sizable dividend cut, cash infusion of at least $10bn and write-down of as much as $20bn in mortgage-related investments as part of its 4Q earnings report. CEO Vikram Pandit also is expected to unveil a cost-cutting plan that is likely to include substantial job cuts. The moves are part of his push to shore up the co's finances, including replenishing its depleted capital. At a board meeting yesterday, Citigroup directors were poised to sign off on Mr. Pandit's recommendation to cut the bank's quarterly dividend payment. The size of the cut wasn't clear, but analysts and some investors have been bracing for it to get sliced roughly in half.

According to the WSJ, Delta Air (DAL) has opened merger negotiations with both UAL’s (UAUA) United Airlines and Northwest Airlines (NWA), and hopes to negotiate a merger agreement with one of the airlines over the next 2 wks. Delta's board gave permission to CEO Richard Anderson on Fri to begin simultaneous talks with both carriers. Either scenario would create the largest airline in the US. Delta execs, who completed a round of preliminary discussions with United and Northwest before seeking board permission for formal talks, plan to move swiftly and present the preferred partner to Delta directors when they next meet in early Feb. A deal could be announced as early as mid-Feb.

The WSJ reports that a unit of Japanese megabank Mizuho Financial will later today announce a ¥140bn ($1.3bn) investment in Merrill Lynch (MER). As part of the deal, Merrill will sell Mizuho Corporate Bank, the core unit of the Japanese banking group, preferred shares which will likely convert to common stock at some point in the future. The deal could close before the end of the month.

“Heard on the Street” column discusses MBIA (MBI), whose stock is up more than 50% from a 52w low hit just 5 days ago, investors should consider a few outstanding issues before getting too comfortable: mounting mortgage-related losses; soaring capital-raising costs; and a tougher playing field for its core business of insuring municipal bonds as well-capitalized newcomers, such as Warren Buffett's Berkshire Hathaway Assurance, line up new clients. Nobody knows where the bottom is for this credit cycle, or what the ultimate losses are going to be," says David Havens, of UBS. That isn't to say investors don't have some reason to cheer. MBIA, whose triple-A rating is under threat of downgrade by rating agencies, could squeak by with a clean bill of health after privately placing $1bn of bonds in a debt issue last week that MBIA says was oversubscribed, perhaps b/c of the 14% yield MBIA agreed to pay. Warburg Pincus says it is still firmly behind MBIA. "We have been and remain 100% committed to closing this deal," David Coulter, a Warburg managing director, said.

According to the Barron’s Online one fund manager likes GEO, CRN, BPHX, SNDA, CROX, KVA, CXW, ATHR and SUNH.

“Inside Scoop” section reports that GSO Capital Partners bought $3m worth of stock of CKE Restaurants (CKR). The hedge fund now owns 1.9m shares of the co, or approximately 3.4%. GSO director, Matthew Goldfarb, sits on the CKE board. Ben Silverman, of InsiderScore.com, says GSO's purchase has added weight thanks to Goldfarb's connection. The transaction is a "good sign of confidence not just from an institutional investor but from somebody with board representation," he says. Silverman adds that the firm's willingness to stray from its leveraged-finance focus also is of interest. "I think the investment is based on the fact that [Goldfarb] understands the co and has faith in the co."

Wet Seal (NASDAQ:WTSLA): Piper Jaffray adding to Alpha List

- Piper Jaffray is adding Wet Seal (NASDAQ:WTSLA) to their Alpha List with a $4 target. Firm notes that following the company's early-October appointment of a new CEO/CFO team and mid-November analyst day, they think this week's ICR Xchange conference presents the first public forum for new management, with now three and a half months under their belt, to detail more aggressive top-line growth and cost reduction initiatives. On balance, they think lack of credibility surrounding guidance and limited visibility into internal costs put pressure on WTSLA shares during 2007. Firm expects new management to maintain a posture of providing necessary granularity to the Street, in an effort to establish and maintain an improved sense of confidence in underlying growth potential.

PJ maintains a high degree of confidence in the leadership of Ed Thomas, having observed the successful operations he has established at prior posts.

Notablecalls: This is beautiful stuff from PJ's Jeffrey Klinefelter. I expect to see a nice from WTSLA today and over the coming days. Note that PJ has also added DECK to their Alpha List.

Piper Jaffray ups YGE tgt to $65 from $20 - Actionable.

Hearing Piper Jaffray has upped their tgt on Yingli Green (AMEX:YGE) to $65 from $20.

NCN's Solar guy on YGE: PJ's Jesse Pichel the axe in the space.

Notablecalls: I feel YGE will be a $38 stock today based on these comments. Going to call it Actionable Trading Call here.

Sigma Designs (NASDAQ:SIGM): UBS reits Buy and $75 target on SIGM

- UBS is positive on Sigma Designs (NASDAQ:SIGM) following meeting with management noting 1) competitiveconcerns regarding BRCM are overblown and impact is unlikely to be felt till 2009 2) The company is on track with its roadmap and cost reduction plans with multiple products planned for 2008, and 3) With IPTV/Blu-ray still in early phase of adoption, secular drivers are still strong enough to counter cyclical/seasonal factors.

The firm believe the current despite macro-economic backdrop, SIGM should be able to sustain its growth trajectory given consumers propensity to maintain spending on home entertainment. Remains confident of their estimates for SIGM and believes that at FY09 (end 1/09) PE of 14x, SIGM offers a compelling value.

Reits Buy and $75 tgt.

Notablecalls: As one NCN member said this morning: The market is sorely due for a rally. The news from IBM (NYSE:IBM) will likely give us one and SIGM looks like a good way to play it. Period.

Apple (NASDAQ:AAPL): 2 +1 equals what?

Apple's (NASDAQ:AAPL) all controversial this AM. On one hand we have two firms out with positive comments on results but on the other hand we have news of China Mobile pulling out of iPhone talks.

- Banc of America is raising their FQ108 and F2008 ests saying they note particular strength in CPU units, clearly benefiting from the introduction of Leopard. Firm raises revenue estimate to $9.6 billion from $9.3 billion (vs. consensus of $9.4 billion) and raises EPS estimate to $1.60 from $1.52 (vs. consensus of $1.59).

Maintains Buy rating and target price of $200

- RBC Capital notes fresh data from RBC's Technology Adoption Panel (4,600 respondents) and store checks suggests Apple saw massive Mac sales in the holiday quarter (Q1/08 end Dec, reporting Jan 22), despite concerns over consumer holiday spending growth. Firm estimates 2.5M Mac were shipped Q1 (2.4M prior), up 14% Q/Q and 54% Y/Y, breaking the record 2.2M Q4.

F08 ests become $32.8B and $5.11 EPS ($32.7B and $5.08 prior). F09 ests becomes $40.6B and $6.23 EPS ($40.4B and $6.19 prior).

RBC expects MacWorld to be somewhat less dramatic than 2007's MacWorld iPhone launch. Reits Outperform and $215 tgt.

- Lastly, via Reuters: Apple Inc and China Mobile have called off talks to launch the U.S. firm's popular iPhones in China, a spokeswoman for the Chinese company said on Monday, further dashing speculation the device will hit the country's store shelves soon.

A spokeswoman for listed China Mobile, the world's largest cellular operator, said its unlisted parent of the same name had "terminated" discussions with Apple, although she would not say why.

Experts said Apple's iPhone faced a spate of technical and fee issues unique to China, including a standard revenue-sharing agreement that China Mobile disliked.

Notablecalls: So, where from here? We have AAPL trading up 2 pts early this AM. This is probably due to overall positive tone of the mkts and positive analyst chatter from BAC and RBC.

Yet, the China news does not look good. iPhone's China arrival has been considered a pretty much sure thing but now it looks like it's not.

So, my question is: Does AAPL deserve to be up 2pts this morning?