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Three Noteworthy Analyst Calls on Wednesday: Research In Motion Ltd (BBRY), Kohl’s Corporation (KSS)

Sometimes an analyst issues a revised outlook or changes his/her rating, but does not inform investors of the reasons behind the call. These typically move stocks on the call alone; the price target and outlook. However, some analysts provide detailed reasons behind the call; these are the outlooks that should be noted and used as part of your fundamental research. Therefore, I am taking a look at such outlooks and determining the best way to utilize the information.

Kohl's Corporation (NYSE:KSS)

Company Ticker Firm Call
Kohl’s Corporation (NYSE:KSS)
BMO Note
Threshold Pharmaceuticals, Inc. (NASDAQ:THLD) Piper Jaffray Overweight
Research In Motion Ltd (NASDAQ:BBRY) Pac Crest Note

Acquisition Rumors May Unmask this Retailer’s True Value

Kohl’s initially traded higher by 2.5% on Wednesday, but then closed near flat after BMO issued a note to clients identifying the retailer as a potential buyout target. The firm cited strong cash flow and an attractive valuation as the leading contributors to the firm’s belief.

At first this “prediction” sounded ludicrous to me, as I could not comprehend a retailer or private equity firm having enough capital, or wanting to acquire Kohl’s. However, upon closer consideration, it may make sense.

A 30% premium would be slightly more than $18.5 billion, or 13 times earnings and less than one times sales to acquire Kohl’s. The company’s insiders control just over 2% of the company, meaning a messy takeover with outraged executives would be unlikely. Lastly, the company owns almost 40% of its stores, which is unusual for such stores, and allows a potential acquirer the ability to easily raise capital or refinance debt.

While I do not believe in chasing acquisition rumors — just look at what happened to Life Technologies Corp. (NASDAQ:LIFE) and Office Depot Inc (NYSE:ODP) today — I do believe that all of the potential reasons for an acquirer to buy also relate to the retail investor. This is a cheap stock with a lot of options. I would look hard at Kohl’s.

Analyst Provides a Major Vote of Confidence for this Small Biotech

It has been a volatile year for Threshold Pharmaceuticals, and on Wednesday the stock rallied 11% following a major upgrade and a price target of more than 100% its current price. Over the last 14 months, all eyes have been on the company’s lead product, a late phase product called TH-302, which is used to treat cancers.

Last year a partnership with Merck KGaA(ADR) (PINK:MKGAY) and a 63% upside in progression-free survival helped Threshold become one of the best performing stocks in the market. However, Piper Jaffray took a deeper look at the product, and the company, and is now saying  that TH-302 is superior to rivals when used for soft-tissue sarcoma. The analyst believes the company’s hypoxia-activation platform will be able to be used to treat a wide array of cancers, not just one or two, and sees massive potential down the road.