SOHU: Gets downgraded at Deutsche Bank

Sohu.com-SOHU downgraded to Hold from Buy@DBAB
Deutsche Bank downgraded shares on valuation and expects 2009 growth to be modest. Target raised to $78 from $75

SOHU: Downgraded on valuation

SOHU Sohu.com downgraded to Perform at Oppenheimer; tgt raised to $73 (72.17 )

Oppenheimer downgrades SOHU to Perform from Outperform and raises their tgt to $73 from $66 noting on 4/28, SOHU reported better than expected 1Q results, driven by the success of its gaming division. However the firm says after the 39% rise in the shares YTD, they no longer see the valuation as compelling, and are downgrading their rating.

SOHU: Blowout quarter & guidance

Sohu.com beats by $0.18, beats on revs; guides Q2 EPS above consensus, revs above consensus (61.84 ) : Reports Q1 (Mar) GAAP earnings of $0.55 per share, includes share-based compensation, $0.18 better than the First Call consensus of $0.37; revenues rose 156.3% year/year to $84.8 mln vs the $69.3 mln consensus. Co issues upside guidance for Q2, sees Non-GAAP EPS of $0.72-0.75, excluding non-recurring items, vs. $0.44 consensus; sees Q2 revs of $93.0-96.0 mln vs. $77.43 mln consensus. Assuming no new grants of share-based awards, Sohu estimates share-based compensation expense for Q208 to be between $2.0-2.5 mln. The estimated impact of this expense is expected to reduce Sohu’s fully diluted EPS for Q208, under US GAAP, by $0.05 to $0.06.

Sohu.com-SOHU: Better quarter has positive read through for PWRD and SNDA@PACS
PacCrest says SOHU’s EPS beat for Q1 results would have been even better if the company had a lower tax rate in the quarter. PacCrest says their SOHU estimates are likely to go up on conservative guidance. They believe this has a positive read-through for the Chinese Game companies Perfect World (PWRD) and Shanda Interactive (SNDA)

GOOG: Post earnings comments

1)

07:32 GOOG Google upgraded to Buy at Jefferies & Co; tgt $600 (449.54 )

Jefferies & Co upgrades GOOG to Buy from Hold and sets target price at $600 saying defying economic headwinds, Google delivered in-line revenues and EBITDA while exceeding NEPS estimates for 1Q. The firm upgrades given impressive improvements in monetization, no signs of weakness from the economic downturn and upside potential from display, video and mobile over time.

2)

Google-GOOG: Growth is slowing, margins are pressured, maintain Hold@STFG
Stanford notes that the company’s revenue growth decelerated further in Q1, while its OIBDA margin fell versus 4Q07

3)

Google-GOOG: Confidence is restored ’somewhat’ after Q1 results@WBLR
William Blair has “somewhat” regained confidence in the stock after the strong quarter as they believe the company will continue to gain market share and benefit from its unmatched innovation and partnerships. They raised their estimates and maintain an Outperform rating.

4)

Google-GOOG target raised to $620 from $600, maintain Outperform@OPCO
After the company reported Q1 results Oppenheimer views as strong, the firm thinks Google’s shares will trend upwards, and they predict that investors will be attracted back to Google’s stock

GOOG: Google’s EPS Beat Aided By Lower-Than-Expected Taxes

While the early read from the Street on Google’s (GOOG) Q1 results is largely positive, it is worth noting that the better-than-expected results came in part from a lower tax rate than most analysts had expected.

Credit Suisse’s Heath Terry calculates that a lower tax rate lifted EPS by 23 cents; the company reported $4.84, 32 cents above the consensus view of $4.52. Goldman’s James Mitchell likewise notes that EPS was higher than expected “due primarily” to a tax rate of 23% versus an expected 26%.

On the other hand, the Street seems generally pleased that paid clicks were up 20% versus last year, which while less than the 30% growth in Q4 nonetheless is a lot better than the 1.8% suggested by the most recent ComScore data.

Source

IBM: Outlook for software stocks

11:51 IBM IBM: Digging deeper into IBM’s Q1 reveals not-so-great software results; potentially sluggish Q2 - Wedbush (123.36 +2.89) -Update-

Wedbush notes that IBM’s Q1 software revenue was $4.85 bln, up 14% from Q1 last year, but up only 6% on a constant currency basis, and notes that doing business overseas and a declining dollar gave IBM an 8% boost. Firm says that if the dollar bottoms out this quarter, that currency boost could be gone in Q2. Firm says if IBM struggled to grow software revenue organically in Q1, and ORCL also fell short of expectations, the possibility that SAP will buck the trend of its large-cap software brethren and post very good results on April 30th could be low, hence the reason the firm is neutral on the stock right now. Firm also says if Q2 is expected to be as sluggish as even the government is suggesting, then the Q2 reporting season could be even more volatile than in previous years.

My take: Some of the software stocks that I follow are SONE, SAPE, TIBX, CPWR, LWSN, NOVL. Software stocks have been weak following ORCL earnings and will likely remain range bound for the near term.

SIGM: Attractive valuation

Today:Defended at Deutsche Bank
Sigma Designs-SIGM: Believe competitive concerns are overblown@DBAB
Deutsche Bank found a competitor note not surprising as they always maintained a view that Broadcom would likely garner some share of IPTV set-top boxes in 2009. They believe yesterday’s weakness is overblown and maintain a Buy rating

Today:Defended at Roth Capital
Sigma Designs-SIGM: View yesterday’s sell-off as unwarranted@ROTH
Roth Capital believes the company’s position in IPTV remains secure as their checks indicate that Broadcom (BRCM) has yet to be designed into a single set top box that supports Microsoft (MSFT) Mediaroom software. They reiterate a Buy rating on the stock.

Yesterday’s note that caused decline:
Sigma Designs: Broadcom to ramp at Motorola in 2009, expect IPTV share loss at SIGM - Baird (19.42 -1.66) : Baird said their checks indicate BRCM has won MOT’s second-generation high-end IPTV set-top boxes (Microsoft’s Mediaroom platform), for launch in 2009. As a result, the firm expects SIGM to lose IPTV share at large telcos including AT&T, British Telecom, and KDDI starting next year. They also believe SIGM will lose market share at Samsung for Blu-ray players this 2H, due to pricing. Firm cuts their ests and their tgt to $26 from $30.

LightReading report:

My take: I’ll be looking to buy some Jan 2009 calls/shares in the coming days, because it has such a strong balance sheet and attractive valuation. Risk/Reward looks very attractive and I expect limited downside.

Further comments on SIGM at Barron’s

NVTL: Update

Novatel Wireless (NVTL) reduced its Q1 revenue guidance to $91M from $110M. Novatel now believes that its Q1 EPS will be 16c-18c, versus the consensus of 22c. Novatel reported that about $10M of the shortfall was caused by a delayed launch of its MC930D product with a major European carrier, and the company added that it had lower than expected sales of its MC727 USB products to one major customer. Novatel added that demand has shifted towards lower end products. Novatel CEO Peter Leparulo sounded a note of optimism. “We believe that our core market opportunity is attractive and growing, and we believe we have the right product introductions to lead the market in innovation (in 2H08),” he said. Nonetheless, two firms reacted to Novatel’s pre-announcement by downgrading the company’s stock. Oppenheimer downgraded the shares to Market Perform from Outperform, as they believe the company has been unable to capitalize on strong industry growth potential. Morgan Joseph lowered Novatel to Hold from Buy. The firm believes Novatel missed an opportunity to have its USB 727 modem promoted at retail Verizon (VZ) stores, and they think the company has a product cycle problem that may not be corrected until Q3.

SWIR: Expect weakness today

a)

SWIR Sierra Wireless: Expect stock to come under pressure following significant 1Q08 shortfall by NVTL; buy on weakness - Opco (17.59 ) -Update-

Oppenheimer expects SWIR to come under pressure following a significant 1Q08 shortfall in a pre-announcement by its main competitor NVTL. The firm believes the miss is specific to NVTL and not an indication that North American wireless broadband demand has fallen. They expect an in line or better quarter by SWIR with good sell through and visibility. They would be buyers on any weakness.

b)

SWIR Sierra Wireless: Picking up market share from Novatel - Jefferies (17.59 ) -Update-

Jefferies notes that SWIR competitor, NVTL preannounced significantly lower Q1 results, blaming poor execution and slower ramp of new products. Firm believes demand for 3G wireless modems are strong and SWIR may be gaining market share. Firm views SWIR as a pure play on the growth of 3G technology with its portfolio of cellular data modems. Also, they believe ongoing customer diversification and successful transition to next-gen cards are reducing SWIR’s risk profile.

My take: While NVTL has been hitting bumps in the last 2 quarters, SWIR has been executing really well in contrast. Many analysts feel that SWIR has been taking market share from NVTL. SWIR is cash rich and cheap.

Readers will find more details on SWIR at another blog site that I follow.

CPWR: Raises guidance

Compuware guides Q4 EPS and revs above consensus (6.99 -0.01) : Co issues upside guidance for Q4 (Mar), sees EPS of $0.23, before restructuring charges, vs. $0.19 First Call consensus; sees Q4 (Mar) revs of $337 mln vs. $319.84 mln consensus

My take: Software stocks have been weak following ORCL earnings and CPWR will likely see buying interest today and in the coming days. However, CPWR has had a series of hit and miss quarters of late and so the stock’s upside will likely be capped near term near 9$(if it gets there on market strength).

Management has used the strong balance sheet and significant cash low from operations to buyback a huge percentage of shares in the last few quarters.

CPWR is also considered a takeover target for the likes of IBM, HPQ etc.

Next Earnings date: May 15th.

Adding it to watchlist.