– Goldman Sachs is upgrading Celanese (NYSE:CE) to Buy from Neutral with a $62 price tag (prev. $45) ahead of its May 10 investor day and following recent meetings with management, very strong 1Q11 results and forward outlook, and recent stock weakness. They now expect 2011/12/13 EPS of $4.56/$5.31/$6.17 (vs. prior $4.04/$4.79/$5.50). Goldman’s based, 12-month $62 price target implies 32% upside from current levels, which they view as an attractive entry point. CE trades at only 8.8X their 2012 EPS estimate and the firm believes that CE warrants a higher multiple considering the evolution of its earnings mix shift to higher margin specialty chemicals and less from more commodity-like end markets.
Goldman views CE’s May 10 analyst day as a catalyst for: 1) management to revisit its 2013 segment EBITDA targets and/or introduce higher 2014 targets; and 2) investor awareness of the prospects for CE’s nascent ethanol opportunity, which they view as a “call option”. Beyond the investor day, the firm views CE as one of the best beat and raise stories in their coverage universe and they are currently 7% / 9% above consensus’ 2011/12 EPS estimates. They believe that consensus is overlooking recent moves in acetic acid prices, 2H11 strength from a major plant move/expansion, and CE’s exposure to the strong Euro.
Notablecalls: OK looking chart & a clear catalyst on the horizon. May see some interest. Note this is a dual call as the firm is downgrading Albemarle (NYSE:ALB).
– Merril Lynch/BofA is upgrading OpenTable (NASDAQ:OPEN) to Buy from Neutral with a $121 price target (prev. unch) nothing that while the stock could be volatile in near-term as Street digests the CEO change and the local deal (Spotlight) revenue opportunity reset, with OPEN down approx. 25% from its recent peak, they are upgrading to Buy with 35% potential upside to their target. The OpenTable penetration growth story remains intact based on solid N.A. restaurant adds in 1Q and Merrill’s new consumer survey results, and they estimate a $1bn revenue opportunity assuming 70% restaurant penetration, up from $147mn in 2011.
Thoughts on management change
CEO Jeff Jordan announced his resignation as CEO/President in conjunction with the 1Q earnings release, but he will remain as Chairman. Firm thinks the company is in good hands with Mr. Roberts in charge given his in-depth knowledge of the company’s operations and financials, and they expect Mr. Jordan to provide counsel as needed. They expect the shock value of the new CEO to fade quickly, plus solid 2Q U.S. restaurant counts, to benefit the stock.
Proprietary survey supports OpenTable value to restaurants
Merrill’s recently conducted a proprietary survey of ~400 consumers about their Internet usage habits, and their survey results support the value proposition of OpenTable. Roughly 40% of the respondents who use OpenTable indicated that they use the site to discover new restaurants, resulting in high incremental diners to restaurants on the site, $2,500 in estimated monthly incremental revenue, and a relatively high ROI for a restaurant on its OpenTable investment.
Maintain $121 price objective
OpenTable now trades near 32x Merrill’s ‘12E US EPS (backing out $33/share for int’l value plus cash) vs. a peak multiple of ~45x, which they see as attractive vs. their 45% avg. 3-year North America operating income growth rate. Firm’s $121 price objective is based on 50x our CY12 North America EPS estimate of $1.76 + $31 in int’l value, which represents 35% of the value of the North America business, plus $2 in cash. They see 35% potential upside to their target price.
Notablecalls: The name fell out of bed yesterday after the CEO announced his resignation to make time for his VC ops. I must say, it takes guts to upgrade this momo name here. Maybe the analyst is feeling good about himself for downgrading it back in April.
Nonetheless, I think OPEN is prone to bounce in the n-t. Short interest stands at 30%+