Zacks Analyst Blog Highlights: Genentech, ImClone, Wipro and MAF Bancorp.
See the latest posts to the Analyst Blog by visiting: http://at.zacks.com/?id=2673
Here are highlights from Thursday's Analyst Blog:
Genentech with a Lofty Valuation
Genentech (NYSE: DNA) is one of the world's largest biotechnology companies. Genentech's core technology focus is in the area of oncology, but the company develops and markets products for the treatment of cardiovascular diseases, respiratory and endocrine disorders, inflammatory and immune problems, and neurological disorders. New product offerings should make DNA also one of the fastest growing biotechs on the market.
We recommend investors continue to hold the shares. The fundamentals are very solid, but valuation and lofty expectations are a concern. Our price target is $88 per share.
The true growth driver for DNA is blockbuster Avastin (bevacizumab). The drug received approval in early 2004 for the treatment of first-line metastatic colorectal cancer (CRC) in combination with intravenous 5-FU chemotherapy. Penetration in the first-line use is probably at or above 75%. Peak penetration rates are probably around 80%, leaving only modest upside in this use. In early January 2007, ImClone (Nasdaq: IMCL) presented positive data on Erbitux in first-line mCRC [metastatic colorectal carcinoma], so the competitive landscape may heat up in 2008 once ImClone gains approval for this use.
Wipro a Hold Ahead of Earnings
We expect Wipro, Ltd. (NYSE: WIT) to announce a solid fiscal fourth quarter when the company announces its earnings on April 20th. The current weakness in the Indian Rupee against the U.S. dollar (down 2.9% in the fourth quarter compared to the year-ago quarter) could help boost margins and earnings in the quarter, although we remain concerned with the high attrition rates and the company's move to hire less-skilled employees as a means to cut costs. We continue to rate shares of WIT a Hold, and have lowered our price target to $16.75, from our previous $18.50 target, over the next six months.
Wipro had a compounded annual growth rate (CAGR) of 25% over the last five years, exhibiting stability, profitability, and growth from its inception and through down markets for IT services. A solid growth strategy, strategic acquisitions, robust performance of the Global IT Services and Products segment, and a leading position in the Indian Outsourcing market are some of the strengths of Wipro. Wipro's strategy is to expand its range of services in potential growth areas and develop each of those areas as a separate business opportunity.
MAFB Upgraded from Sell to Hold
We are upgrading MAF Bancorp (Nasdaq: MAFB) to a Hold at this time, while lowering our price target by $2. The additional detail provided in the 10-K painted a less attractive picture of the Q4 average balance sheet than we had previously assumed, and our estimates are falling by another $0.03-0.04 per quarter (in addition to the decline that prompted our downgrade).
Pricing now looks much more reasonable relative to peers using either of our primary metrics, but the stock does not look cheap to us even after its significant fall. Peer multiples are likely to ebb and flow as much based on acquisition speculation as on fundamentals, however, which is one reason we have elected to upgrade the shares after a significant pull-back in the group.
MAFB currently trades at 13.3 times the consensus forward estimate (versus 14.1x at the time of our January 30 Note), an 8% premium to the peer group median, vs. a 3% premium at that time. On a price-to-book [P/B] basis, the shares trade at a 13% discount to the peer group median, vs. a 10% discount in late January.
See the latest posts to the Analyst Blog by visiting http://at.zacks.com/?id=2645
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|Date:||Apr 13, 2007|
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