The following list includes ratings changes and financial information for wireless companies announced this week by investment-banking and financial-services firms.
Carriers
Morgan Stanley updated its estimates on Verizon Communications following the close of its acquisition of MCI. Fourth-quarter 2005 EPS estimate moves to 62 cents from 63 cents, and 2006 EPS estimate moves to $2.41 from $2.46.
Bear Stearns downgraded its opinion on Leap Wireless from outperform to peer perform on valuation. The company’s stock is trading at $39 vs. Bear Stearns’ end-of-year 2006 price target of $40.
Morgan Stanley reduced long-term subscriber, ARPU, revenue and EPS estimates on Sprint Nextel Corp. to bring the company more in line with other carriers. The firm also noted the wireless industry faces slowing subscriber additions and smaller ARPU and adjusted its annual growth forecast to 9 percent in 2006 and 2.5 percent in 2010 from 11 percent today.
Infrastructure and Handset Vendors
Prudential Equity Group lowered its rating on L.M. Ericsson to neutral weight from overweight as the company’s share price approaches Prudential’s price target for the company. Prudential also said it expects growth for 2006 to be the same as or slightly less than 2005. The firm, however, said it continues to believe Ericsson is well-positioned to capitalize on third-generation infrastructure demand.
Piper Jaffray introduced 2007 estimates on Motorola Inc. of earnings per share of $1.40 on revenue of $42.6 billion. Piper Jaffray noted Motorola posted strong North American sell-through trends during December, with particularly strong demand for the company’s GSM Razr, the seasonal Black Razr available from Cingular and the seasonal Pink Razr available at T-Mobile. Piper Jaffray said the company’s CDMA version of the Razr phone had a strong start, although it appeared to cannibalize somewhat Motorola’s E815 EV-DO handset. Piper Jaffray cautioned that competitors are starting to close the gap on Motorola’s thin form factor advantage, but it said it expects the company to post strong-near term results. Goldman Sachs raised its estimates on Motorola to reflect an adjustment it made in its handset market estimates for 2006 and 2007. Its new estimates for fourth-quarter 2005 are 34 cents per share on revenues of $10.6 billion vs. previous estimates of 33 cents per share on revenues of $10.6 billion. For 2006, the firm predicts EPS of $1.29 on revenue of $42.7 billion rather than EPS of $1.27 on revenues of $42.1 billion. And for 2007, Goldman Sachs predicts EPS of $1.46 on revenues $47.6 billion vs. previous estimates of $1.43 on revenues of $47 billion.
Piper Jaffray raised its price target on Nokia Corp. from $21 to $25 and reiterated its outperform rating on the vendor, saying monthly channel checks indicate stronger trends for Nokia in North America. Piper Jaffray also raised its 2006 EPS estimate on the company from $1.18 to $1.19 and introduced a 2007 EPS estimate of $1.41. Prudential Equity Group raised its price target on Nokia from $20 to $22, saying it believes the company stands to benefit the most from its increased 2006 handset forecast of 887 million units. Prudential also raised its 2006 revenue and earnings forecast for Nokia.
International
RBC Capital Markets revised its 2005 earnings-per-share estimate on Rogers Communications Inc. from 31 cents to 24 cents after the company pre-released fourth-quarter 2005 subscriber results, which were below RBC’s expectations.
Other
Prudential Equity Group lowered its fiscal 2006 earnings-per-share estimate on RadioShack Corp. from $1.85 to $1.76 after the company reporting stronger-than-expected fourth-quarter sales. RadioShack warned it is likely to miss its fiscal 2005 earnings forecast of between $2.14 and $2.24 per diluted share. “Now that the transition from Verizon to Cingular is mostly complete, we continue to believe that RSH could benefit in 2006 from easy comps in wireless, its new wireless deals, and its overhaul of store operations, however, we would like to see more improved profitability,” said Prudential, which rates the company at neutral.
Avondale Partners increased its 2006 EPS estimate on NeuStar Inc. to 94 cents from 89 cents and raised its price target on the company from $34 to $40. The moves were based on a positive outlook on the company, including optimism about growth in wireless, VoIP adoption, consolidation and competitive pressure on carriers to reduce costs.
RBC Capital Markets lowered its estimates on InfoSpace Inc.’s mobile division due to increased market share of off-portal competitors like Jamster, as well as somewhat flat market sequentially for ringtones overall. RBC dropped its 2005 estimate on InfoSpace to $1.48 from $1.49. For 2006, the firm predicts EPS of 53 cents rather than 73 cents, and for 2007 it expects EPS of 37 cents rather than 75 cents.
Piper Jaffray lifted its rating on Advanced Micro Devices to outperform from market perform and raised its price target on the company to $45 from $26 on the likelihood of large contract with Dell.
Robert W. Baird raised estimates on OmniVision Technologies Inc., saying momentum is returning to the company. The firm raised its fiscal 2006 EPS estimate on the company from $1.50 to $1.56.
RBC Capital Markets raised its price targets on tower companies American Tower Corp. (from $28 to $31), Crown Castle International (from $24 to $27), Global Signal (from $47 to $54) and SBA Communications (from $18 to $21). The increases were made to reflect less-conservative terminal-year valuation assumptions. RBC noted it believes new site deployments this year should be similar to, if not higher than, 2005 levels, with an increasing contribution from regional and independent carriers.
Prudential Equity Group lowered its 2006 EPS estimate on Texas Instruments Inc., from $1.95 to $1.88, after the company announced plans to sell its sensors and controls business to Bain Capital. Prudential maintained its overweight rating and $39 price target on the company. Robert W. Baird analysts also slightly lowered EPS estimates on the company following the news.
Robert W. Baird raised its rating on Tektronix Inc. to outperform from neutral and raised its price target on the company to $34.
Piper Jaffray slightly raised its March quarter estimates on Qualcomm Inc. from EPS of 35 cents to 36 cents and its fiscal year 2006 estimate from $1.49 to $1.50. Piper Jaffray said its monthly channel checks indicate an improving mix of 1x EV-DO chipsets and higher handset ASPs in the North American handset market.
Piper Jaffray raised its fiscal year 2006 estimates on RF Micro Devices Inc. from 17 cents per share on revenues of $740 million to 18 cents per share on revenues of $743 million, and fiscal year 2007 estimates from 27 cents per share on revenues of $822 million from 28 cents per share on revenues of $860 million. It also introduced fiscal year 2008 estimates of 40 cents per share on revenues of $928 million. Piper Jaffray said its monthly channel checks indicate solid sell-through of RFMD’s Polaris design, particularly solid sales of the Motorola V.557 at Cingular and the Motorola V.360 at T-Mobile.
Robert W. Baird reiterated its outperform rating on Syniverse Holdings Inc. and raised its price target on the company from $20 to $26, saying business momentum remains strong and that investors will focus on 2007. The firm noted recent contract extensions with Alltel, Sprint and T-Mobile should encourage relative price stability over the next two or three years. Baird also said recent wins at Vodafone and Cingular, as well as more normalized wireless local number portability results, should bolster EPS and revenue growth in 2007. Syniverse will stop operating a call center for Sprint this year, which is expected to negatively impact 2006 WNP revenue by about $18 million, noted Baird.
