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) ||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.