SanDisk Corporation (SNDK), Johnson & Johnson (JNJ), HollyFrontier Corp (HFC): Thursday’s Top Upgrades (and Downgrades)

Page 1 of 2

Johnson & Johnson (NYSE:JNJ)This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, as earnings season gets under way in earnest, analysts are busy tweaking their price targets to track changes in earnings and guidance. We’ll be taking a look at three such tweaks today, for popular stocks: SanDisk Corporation (NASDAQ:SNDK), Johnson & Johnson (NYSE:JNJ), and HollyFrontier Corp (NYSE:HFC).

Good news first
Let’s take these in order, beginning with SanDisk Corporation (NASDAQ:SNDK), which is up more than 2% today after reporting $1.06 per share in profits on $1.5 billion in revenues — beating analyst estimates on both counts. Speaking of counts, the number of analysts upping their price targets on the stock had reached five at last count, with Needham & Co. leading the pack with a projection of $80 a share.

That target is close to $20 above where the shares now trade, suggesting a potential 31% profit in the stock. But can investors realistically hope to capture those profits?

Yes, it very well might. SanDisk Corporation (NASDAQ:SNDK) turned in a truly magnificent quarter yesterday. Thanks to the beaucoup profits, the company’s P/E ratio now stands just a hair below 21 — versus the near-31 times earnings valuation still being shown on Yahoo! Finance’s key statistics page. If the company succeeds in hitting the 28% annualized, long-term growth estimate that analysts have it pegged for, 21 times earnings is an absolute steal of a deal on this stock. Plus, with trailing free cash flow now clocking in at $940 million — versus “only” $718 million in GAAP net earnings — this stock’s arguably even cheaper than it looks.

Fact is, at a price-to-free cash flow ratio of less than 16 today, I think SanDisk Corporation (NASDAQ:SNDK) will be a great bargain if the stock even posts growth in the upper teens over the next five years. If it gets into the 20-percent range, though, look out … above!

Paging Dr. Profit
In contrast, I’m less enthused about Johnson & Johnson (NYSE:JNJ), the buy rating Argus Research is still assigning it, and the new $104 price target Argus has suggested.

Don’t get me wrong. Johnson & Johnson (NYSE:JNJ)’s report yesterday was fully as good as SanDisk Corporation (NASDAQ:SNDK)’s with revenues ($17.9 billion) and per-share profit ($1.32) both beating expectations. My objections to this stock center less on the success of the business, and more on the price that investors are being asked to pay to own a piece of that business.

Simply put, Johnson & Johnson (NYSE:JNJ) shares cost too much. Based on the most recent data the company has provided us (which does not include free cash flow data, tsk, tsk), Johnson & Johnson shares now trade for nearly 20 times earnings. That’s quite a lot to pay for a company that few analysts see growing earnings at much more than a 6% annualized rate over the next five years.

In fact, even Johnson & Johnson (NYSE:JNJ)’s generous 2.9% dividend yield isn’t enough to entice me to buy these shares. As great a company it may be, Johnson & Johnson (NYSE:JNJ)’s stock price is a prescription for portfolio underperformance.

And speaking of underperformance…
One of the very few stocks getting hit with a reduction in price target today is oil refiner HollyFrontier Corp (NYSE:HFC). Over at Imperial Capital, analysts just cut $10 off their target price for Holly shares. (And Holly didn’t even report earnings yesterday).

Page 1 of 2

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!