At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." The pinstripe-and-wingtip crowd is entitled to its opinions, but we have some pretty sharp stock pickers down here on Main Street, too. And we're not always impressed with how Wall Street does its job.
So perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about.
Today, we'll be taking a look at two or three new tech-recs from Cantor Fitzgerald and then move on to examine some good news for Amylin
EMC or NetApp? Heck, buy 'em both!
Coke or Pepsi? Ford or Chevy? The world's full of tough choices, but for Fools in a quandary over where to invest in tech, the folks at investment bank Cantor Fitzgerald have a solution: If two competing stocks are both cheap, just buy them both.
And so it is that this morning we saw Cantor recommending storage-tech experts EMC
At about 20 times earnings each, but with only mid-teens earnings growth projected over the next five years, neither stock looks terribly attractive on the surface. But if you dig into the companies' cash-flow statements, you'll quickly notice that all's not as it seems here. Pegged for only $2.6 billion in annual "profits," EMC actually generated more than $5.4 billion in free cash flow over the past year. Similarly, NetApp's $605 million in net income pale in comparison with the more than $1 billion in cash profit it generated. At approximately 10 times FCF each, both stocks look eminently buyable at today's prices.
Incidentally, Cantor is also recommending Brocade
Stay in Amylin! The water's fine (or is it?)
And speaking of bargains, analysts at MKM Partners are wondering whether Amylin Pharma might be worth more than it appears to be. Last we checked, MKM had a neutral rating on this stock and a $22 price target. But with Amylin shares surging more than 100% over the past year, that estimate is looking a bit conservative. Result: MKM upped its price target on the stock to $29 this morning.
Why the sudden change of heart? As StreeetInsider.com explains, new data out of Amylin and partner Alkermes
Let's hope so, because for the time being, neither Amylin nor Alkermes is having much success earning profits on their own. Hip-deep in debt, Amylin's $652 million in trailing revenues generated no profit last year, and analysts foresee further losses through at least fiscal 2014. Alkermes, for its part, is just as unprofitable as Amylin today, while its projected profit next year still has the stock trading for north of 700 times forward earnings. (On the plus side, by taking less risk on this project, Alkermes benefits from carrying a lighter debt load and is burning less cash. That's par for the course for this cautious biotech.)
So the best news for Bydureon backers today? There's more than one way to play this drug. If Amylin scares you, you can always take a look at Alkermes instead.
Whose advice should you take -- Rich's, or that of "professional" analysts like Cantor Fitzgerald and MKM? Check out Rich's track record on Motley Fool CAPS, and compare it with theirs. Decide for yourself whom to believe.
The Motley Fool owns shares of EMC, but Fool contributor Rich Smith does not own (or short) shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 324 out of more than 180,000 members. The Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.