Too Much Credit For Big Tech Analyst Call (ATVI, AMZN, ERTS, IACI, GOOG, EBAY, NFLX, VCLK, YHOO)

UBS made some key analyst initiations in the Internet and entertainment sector this morning.  As this is new coverage, they are not upgrades on a technical level.  These “Buy” ratings are also on a day where the market is back at near-term highs and during the week after we have a twelve consecutive day rally in the NASDAQ.  Today’s added strength this is helping is something that just seems too much based upon a new coverage call after the gains we have already seen in these stocks.   Below is a list of some of the stocks started as “Buy” and you will see the price targets as well.

• Activision Blizzard (NASDAQ: ATVI)
• Amazon.com Inc. (AMZN) up 2.3% at $86.30; price target was $105.00.
• Electronic Arts (NASDAQ: ERTS) up 3.8% at $21.55; price target was $27.00.
• IAC/Interactive (NASDAQ: IACI) up 3.3% at $18.60; price target was $21.00.
• Google Inc. (GOOG) up over 3% at $450.20; price target was $525.00.

Any time new coverage comes on this strong, it is not the fault of the firm or the analyst.  It is just the timing.  It is not as though the broad Internet and entertainment contains only “Buy” ratings.  Companies such as eBay (NASDAQ: EBAY), Netflix (NASDAQ: NFLX), ValueClick (NASDAQ: VCLK), and Yahoo! (NASDAQ: YHOO) were all started as Neutral ratings.  A neutral is no “sell” but it is also as far away from any positive endorsement as you can get.

This is also not meant to be a slap in the face.  It is just the new analyst sector coverage, and the issue here is that this sector call might be adding gains on top of many gains on a strong market day.  Most of the upsides here are a mere 15% upside for the Buy rated calls.  Based on the notion that these have all rallied so much from the lows, these targets might mean more had the market been down big rather than up big.

Jon C. Ogg
July 30, 2009